Home Health Law Three suggestions for clear groups throughout due diligence

Three suggestions for clear groups throughout due diligence

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Three suggestions for clear groups throughout due diligence

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Elevated consolidation within the well being care sector continues to attract media consideration and antitrust scrutiny from quite a lot of regulators together with the Federal Commerce Fee, the Antitrust Division of the Division of Justice and state attorneys normal. Consequently, well being care suppliers and hospital methods that are contemplating mergers, acquisitions and different varieties of strategic partnerships or joint ventures ought to take steps to make sure that they don’t violate antitrust legal guidelines when sharing data relating to the enterprise case for a selected transaction and also needs to take into account that failing to shut a transaction can flip a possible accomplice right into a better-informed competitor. Nonetheless, it’s not at all times clear what data could also be shared, or with whom. It is usually troublesome to know when a typical non-disclosure settlement could fall in need of the specified protections. Typically, the perfect apply is to determine guardrails across the diligence course of by delegating the accountability for reviewing documentation for competitively delicate data (and doubtlessly scrubbing such documentation to take away any competitively delicate data) to a 3rd occasion or a particular group of the customer’s workers (a “Clear Group”).  

Talking usually, a Clear Group’s function is to filter and take away competitively delicate data from the stream of data flowing from a vendor to a purchaser. A Clear Group could accomplish this by, amongst different issues, redacting sure data (together with, however not restricted to, strategic plans, enterprise valuations, doctor compensation insurance policies, payor charges, facility efficiency, contractual phrases for particular clients or suppliers, and future plans resembling expansions or different capital expenditures) from paperwork {that a} vendor supplies to a purchaser within the due diligence part of a transaction. A Clear Group may combination or roll-up sure data in order that it may be offered to the customer in a abstract report or different method that doesn’t reveal competitively delicate particulars. The listing under highlights three suggestions with respect to the institution and work of Clear Groups, however it’s not meant to be an exhaustive listing of potential antitrust concerns.

1. Use non-competitively delicate data, if doable

Whereas the alternate of sure competitively delicate data relating to the events to a possible transaction is a vital a part of the planning course of, regulators are involved that, if not completed rigorously and thoughtfully, the alternate of data may give the events a possibility to interact in present or future anticompetitive habits. Thus, the events ought to, earlier than responding to any request for competitively delicate data as a part of a due diligence request, take into account whether or not there’s any publicly obtainable or in any other case non-competitively delicate data which might fulfill the request. For instance, historic monetary statements, tax returns, and asset depreciation schedules are sometimes not thought of to be competitively delicate and is perhaps workable substitutes for sure competitively delicate data resembling present or future budgets or capital expenditure plans.

2. Select the fitting staff

Cautious consideration must be given to the composition of the Clear Group. Typically, it’s preferable to have a 3rd occasion, resembling a purchaser’s outdoors authorized counsel, outdoors antitrust counsel or monetary advisers, function the Clear Group. Any third occasion chosen ought to enter into an settlement (the “Clear Group Settlement”) with the customer and vendor setting forth the third occasion’s duties and obligations, together with the obligation to keep up the confidentiality of any data offered to it and to not share any competitively delicate data in an unredacted, disaggregated or in any other case unapproved type with the customer or its workers. Moreover, the identification of every worker or consultant of the third occasion must be disclosed to the customer and vendor and such worker or consultant ought to execute an acknowledgment of such particular person’s obligations as a consultant of the third occasion underneath the Clear Group Settlement. Importantly, the Clear Group Settlement acts as a complement to, and never a substitute of, the non-disclosure settlement that the customer and vendor ought to have entered into on the very outset of their negotiations.

Nonetheless, it’s not at all times doable to interact a 3rd occasion solely for the aim of serving as a clear staff. Hiring a 3rd occasion could also be expensive and time consuming, and the popular third occasion could not conform to serve in a Clear Group capability for a given transaction. Subsequently, the duty could also be left to sure workers of the customer, which presents its personal challenges. Workers of the customer could function members of a Clear Group, offered that such workers don’t have (and aren’t moderately more likely to have within the close to future) obligations regarding strategic planning, direct pricing, negotiating payor agreements, gross sales and advertising and marketing, doctor compensation or different duties which might permit them to make use of any competitively delicate data revealed to them in an anti-competitive method on behalf of the customer. It may be troublesome to search out the fitting steadiness as a result of every worker ought to (1) be sufficiently educated relating to the potential transaction and their accountability to forestall the inappropriate disclosure of competitively delicate data, however (2) not have (and aren’t more likely to have within the close to future) any job obligations which might allow such worker to behave in an anti-competitive method based mostly on the data offered to them pursuant to their Clear Group duties. 

3. Set up a clear room

To facilitate the switch of data between the events, the events want to determine a mechanism by which the vendor can present data which is doubtlessly competitively delicate to the Clear Group, which can then assessment such data and cross it alongside to the customer if applicable. Due to the massive quantity of paperwork which can have to be reviewed, greatest apply is to determine a separate digital information room by which all paperwork to be offered by the vendor may be uploaded by the vendor and reviewed by the Clear Group (the “Clear Room”). The customer and its workers and representatives that aren’t on the Clear Group mustn’t have entry to the Clear Room. The Clear Group ought to then assessment every doc offered and log whether or not the doc accommodates any competitively delicate data. If the Clear Group and antitrust counsel for the vendor concur {that a} doc accommodates no competitively delicate data, then the Clear Group can then ship the doc on to a separate digital information room (the “Peculiar Information Room”) which the customer and its workers and representatives could entry. The Peculiar Information Room and Clear Room ought to have an identical file hierarchy for ease of use and they need to even have clearly distinguishable names with a view to be certain that a doc shouldn’t be mistakenly uploaded to the Peculiar Information Room previous to assessment by the Clear Group. If a doc does include competitively delicate data, then the Clear Group ought to observe procedures established by the events’ respective antitrust counsels for redacting or aggregating the data earlier than sending to the Peculiar Information Room, or withholding such data fully if applicable. 

Greg Mennerick is an legal professional in Thompson Coburn’s Well being Care group.

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