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| 3 minutes read

Pennsylvania legislators propose “baby HSR” law that would bring greater deal scrutiny and risk to health care merger activity in the state

Pennsylvania joins a growing number of states with legislators seeking to enact premerger notification laws modeled after the federal Hart-Scott-Rodino (HSR) Act. Under the HSR Act, parties to proposed transactions that meet certain thresholds must submit notification to the Federal Trade Commission (FTC) and Department of Justice (DOJ and, together with the FTC, the Agencies) and observe a 30-day waiting period before closing. In their HSR filings, the parties provide extensive disclosures and information about the transaction and their businesses. The Agencies use the waiting period to conduct a preliminary investigation into whether the deal may adversely affect competition. At the end of the waiting period, the Agencies can allow the transaction to close, or pursue a more fulsome investigation to determine whether to file suit to block the transaction.

In February of this year, a group of Pennsylvania representatives introduced House Bill No. 2012 (the Bill), a “baby HSR” or “mini HSR” law that, if enacted, would establish two premerger notification requirements in Pennsylvania. First, a “general notification” provision would require parties conducting business in Pennsylvania that are subject to federal HSR filing requirements to concurrently provide the same notice and documentation that the parties file with the Agencies to the Pennsylvania Office of Attorney General, regardless of the affected markets or industries. Second, a "health care notification” provision would require parties to certain transactions in health care markets to file notification with the Pennsylvania Office of Attorney General, even if the transactions do not meet federal HSR reporting thresholds.

The “health care notification” provision of the Bill would require premerger notification of health care transactions that result in a “material change,” defined as a merger, acquisition, or contracting affiliation between two or more health care facilities, health care facility systems, or provider organizations. If the material change is between a Pennsylvania entity and an out-of-state entity, the out-of-state entity must generate at least $10,000,000 in health care services revenue from patients residing in Pennsylvania to trigger the requirement. Notably, the Bill requires parties to file health care notifications at least 120 days prior to the expected closing date, after which the Office of Attorney General has 30 days to make a request for additional information from the parties.

The written notification to the Pennsylvania Attorney General for affected transactions not also subject to HSR Act includes the following information.

  • The names of the parties and their current business addresses;
  • Identification of all locations where health care services are currently provided by each party;
  • Identification of all health care practitioners who currently provide health care services for each party;
  • A brief description of the nature and purpose of the proposed material change; and
  • The anticipated effective date of the proposed material change.

As currently drafted, these proposed notification requirements appear to be significantly less burdensome than those required under the HSR Act. For example, unlike the HSR Act, the Bill would not require parties to submit as attachments to their filings certain transaction-related documents that aid in the Agencies’ analysis of the competitive aspects of the acquisition. If passed, the Bill would permit the Attorney General to conduct investigations and bring enforcement actions for violations of the Bill’s requirements.

Pennsylvania’s proposed law comes on the heels of a number of states that have already passed “baby HSR” or “mini HSR” legislation, including California, Colorado, Connecticut, Hawaii, Illinois, Massachusetts, Minnesota, Nevada, New Hampshire, New York, Oregon, Rhode Island, Vermont, and Washington, most of which also target transactions that affect the health care industry. 

In addition to the premerger notification provisions of the Bill, the Bill also proposes to create causes of action for both direct and indirect purchaser recovery, which would allow both private plaintiffs and the Attorney General to sue and seek treble damages for purported antitrust violations. Generally speaking, indirect purchasers do not have standing to sue for damages under federal antitrust law—known as the Illinois Brick rule—though more than 30 states have repealed Illinois Brick via statute of judicial statute for purposes of state law. If the Bill is enacted, Pennsylvania would join the majority of states with state-level antitrust laws on the books.

The Bill was referred to the House Judiciary Committee in February of this year. The Bill must still go through several steps before it could possibly become law, including making its way through the House Judiciary Committee, the full House, and the Senate. Governor Josh Shapiro will then decide whether to approve or veto the Bill. While Governor Shapiro has not publicly commented on the Bill itself, his record as Attorney General may indicate a willingness to sign the Bill. In his time as Pennsylvania’s Attorney General, he joined several efforts to oppose anticompetitive conduct, including challenging a merger of hospitals in New Jersey and crackdown on allegedly anticompetitive practices by big tech companies. 

Companies will need to consider the potential future impact of these rules when contemplating a transaction and implementing growth plans. Reed Smith continues to monitor baby HSR requirements and other developments in antitrust law in Pennsylvania and around the country. To learn more about what impact these laws might have on your company, please contact any of the authors or the Reed Smith lawyer with whom you regularly work. 

Authors:  Courtney Bedell Averbach, Christopher R. Brennan, Michelle A. Mantine, Stephan B. Johansen, Nicole L. Kaplan, Caitlyn M. Holsopple, Leah E. Hungerman, William J. Sheridan


antitrust, hsr, health care & life sciences