Contributions

Integrating Care but Increasing Liability? Mitigating Risk in Non-Profit Health System Acquisitions of For-Profit Management Services Organizations

By Vic­to­ria Ham­scho, Daniel Wein­stein, and Ryan Knox1

Intro­duc­tion

 The health­care mar­ket in the Unit­ed States is large and high­ly com­pet­i­tive. Health­care spend­ing con­sti­tutes over sev­en­teen per­cent of the gross domes­tic prod­uct, and this fig­ure con­tin­ues to grow.2 At the same time, the health­care sys­tem in the U.S. is under­go­ing reform. The Trump Admin­is­tra­tion con­tin­ues to sug­gest health­care reforms, with var­ied pub­lic response and lim­it­ed suc­cess.3

Uncer­tain­ty in the government’s over­sight and reg­u­la­tion of health­care enti­ties con­tin­ues to make expan­sion with­in the sec­tor a risky propo­si­tion.4 Many health­care providers are con­sol­i­dat­ing or merg­ing in order to stay com­pet­i­tive with lean­er, inte­grat­ed sys­tems of care deliv­ery.5 These con­sol­i­da­tions often spur reg­u­la­to­ry inves­ti­ga­tion and can lead to the acquir­ing com­pa­ny both incur­ring future lia­bil­i­ties and encoun­ter­ing greater risk of com­pli­ance vio­la­tions.6

Non-prof­it health­care sys­tems, which make up a major­i­ty of health­care sys­tems in the U.S., face sig­nif­i­cant risks in merg­ers and acqui­si­tions. These risks are mag­ni­fied when the acqui­si­tion cre­ates an inte­grat­ed care mod­el with a full range of ser­vices through a sin­gle deliv­ery sys­tem. Some health­care sys­tems are cre­at­ing inte­grat­ed deliv­ery sys­tems by acquir­ing man­age­ment ser­vices orga­ni­za­tions (MSOs), which are for-prof­it com­pa­nies that con­tract with var­i­ous gen­er­al and spe­cial­ty physi­cian prac­tices to assist in their billing and oth­er man­age­ment needs.8 Non-prof­it health­care sys­tems pur­chas­ing for-prof­it MSOs present addi­tion­al legal, reg­u­la­to­ry, and com­pli­ance risks. The due-dili­gence process can iden­ti­fy these risks, and health­care trans­ac­tion­al attor­neys should take these risks into account in struc­tur­ing the acqui­si­tion.

This Con­tri­bu­tion will call atten­tion to some sig­nif­i­cant risks non-prof­it health­care sys­tems face in acquir­ing for-prof­it man­age­ment ser­vices orga­ni­za­tions and sug­gest pos­si­ble means of mit­i­gat­ing these risks. Part I dis­cuss­es fraud and abuse con­cerns; Part II intro­duces cor­po­rate prac­tice of med­i­cine con­cerns; Part III dis­cuss­es antitrust risks; and Part IV explains tax con­sid­er­a­tions. Each sec­tion in turn also rec­om­mends meth­ods of mit­i­gat­ing these poten­tial lia­bil­i­ties.

I. Fraud and Abuse

When non-prof­it health­care sys­tems acquire for-prof­it MSOs to cre­ate a more inte­grat­ed care deliv­ery sys­tem, sig­nif­i­cant com­pli­ance and reg­u­la­to­ry issues include lia­bil­i­ty pre­sent­ed by the Anti-Kick­back Statute (“AKS”), Stark Law, and the False Claims Act (“FCA”). In addi­tion, sev­er­al states have laws that either mim­ic or sup­ple­ment AKS, Stark Law, and FCA. As a result, these state laws can pose fur­ther risks of lia­bil­i­ty for the health­care sys­tem. For pur­pos­es of this analy­sis, we also note that AKS and Stark Law vio­la­tions may be the base for FCA vio­la­tions.9 Thus, the vio­la­tions of AKS and Stark Law described below could present addi­tion­al FCA lia­bil­i­ty.

AKS is a crim­i­nal statute that pro­hibits any­one from know­ing­ly and will­ful­ly solic­it­ing, receiv­ing, offer­ing, or pay­ing any­thing of val­ue to any health­care actor to induce the vol­ume or val­ue of refer­rals for any item or ser­vice that is paid in whole or in part under a fed­er­al health­care pro­gram.10 Safe har­bors pro­tect cer­tain activ­i­ties, but fail­ure to com­ply with a safe har­bor does not nec­es­sar­i­ly con­sti­tute an AKS vio­la­tion. The gov­ern­ment must show that at least one pur­pose of the trans­ac­tion was to induce refer­rals.11 In addi­tion, the gov­ern­ment must show that the defen­dant “know­ing­ly and will­ful­ly” com­mit­ted the pro­hib­it­ed act.12 Poten­tial penal­ties include civ­il finan­cial penal­ties, crim­i­nal penal­ties and impris­on­ment, and in extreme cas­es exclu­sion from fed­er­al health care pro­grams.13

The Stark Law is a strict lia­bil­i­ty civ­il statute that pro­hibits physi­cians from mak­ing a refer­ral for des­ig­nat­ed health ser­vices (“DHS”) to an enti­ty with which the physi­cian or his/her imme­di­ate fam­i­ly has a finan­cial rela­tion­ship.14 Stark Law also pro­hibits such enti­ty from billing Medicare or any oth­er enti­ty for ser­vices pro­vid­ed as a result of an improp­er refer­ral.15 Safe har­bors pro­tect cer­tain activ­i­ties that are deemed low risk by the gov­ern­ment.16 Pro­hib­it­ed activ­i­ties not cov­ered under a safe har­bor con­sti­tute a vio­la­tion of the statute. Poten­tial penal­ties include denial of pay­ment, refunds of claims, civ­il mon­ey pay­ments, and exclu­sion from fed­er­al health care pro­grams.17 In addi­tion, Stark vio­la­tions con­sti­tute a false or fraud­u­lent claim under the FCA and may result in civ­il mon­ey penal­ties.18

Mov­ing towards an inte­grat­ed care deliv­ery sys­tem presents a height­ened risk of refer­rals and renu­mer­a­tions between the acquir­ing non-prof­it health­care sys­tem and the acquired for-prof­it tar­get MSO. The acquir­ing sys­tem could be liable under AKS, Stark Law, and FCA because its physi­cians would be in a posi­tion to refer patients to or receive refer­rals from the prac­tices con­tract­ing with the MSO. AKS is impli­cat­ed because the trans­ac­tion could be con­strued as a dis­guised kick­back to induce refer­rals. Although there is a safe har­bor for the sale of pro­fes­sion­al prac­tices, it is unlike­ly to apply because the provider would be in a posi­tion to gen­er­ate busi­ness for acquir­ing a health­care sys­tem.19 Lia­bil­i­ty is thus like­ly to depend on whether the gov­ern­ment can prove intent. Courts have main­tained that the mere hope of refer­rals does not con­sti­tute an ille­git­i­mate pur­pose if the agree­ment is oth­er­wise com­mer­cial­ly rea­son­able.20

Stark Law could also be impli­cat­ed because physi­cians could make refer­rals to an enti­ty with which they have a finan­cial rela­tion­ship. Stark Law allows physi­cians to engage in iso­lat­ed finan­cial trans­ac­tions.21 Whether this trans­ac­tion con­sti­tutes an iso­lat­ed trans­ac­tion depends on whether remu­ner­a­tion is based on fair mar­ket val­ue and does not take into account the vol­ume or val­ue of refer­rals.22 It would also depend on whether the agree­ment is com­mer­cial­ly rea­son­able, even if no refer­rals are made.23

To min­i­mize risk of future lia­bil­i­ty after acquir­ing the for-prof­it MSO, it is cru­cial that all of the arrange­ments are com­mer­cial­ly rea­son­able, reflect fair mar­ket val­ue, and do not take into account the vol­ume or val­ue of refer­rals gen­er­at­ed.24

II. Cor­po­rate Prac­tice of Med­i­cine

Cor­po­rate Prac­tice of Med­i­cine (“CPOM”) laws, which vary by state, present anoth­er obsta­cle to suc­cess­ful­ly con­sum­mat­ing the acqui­si­tion. State CPOM laws dif­fer in degree of restric­tive­ness, so health­care sys­tems may need to adjust agree­ments with providers to sat­is­fy the require­ments of each state in which it cur­rent­ly oper­ates or in which it intends to expand. Specif­i­cal­ly, health­care sys­tems may need to revise man­age­ment ser­vices agree­ments (MSAs) with mul­ti-state provider group cor­po­ra­tions. For exam­ple, some health­care com­pa­nies set fees as a per­cent­age of billings, a prac­tice known as “fee split­ting.”25 While express­ly per­mis­si­ble in states like Cal­i­for­nia, this arrange­ment is ille­gal in states like New York.27 If MSA’s do not con­form to applic­a­ble state CPOM laws and reg­u­la­tions, com­pa­nies risk incur­ring fed­er­al or state AKS and Stark lia­bil­i­ty for improp­er refer­ral arrange­ments.28 Non-com­pli­ance also risks prompt­ing state attor­neys gen­er­al inves­ti­ga­tions that could result in large set­tle­ments con­tin­gent upon assur­ances that enti­ties dis­con­tin­ue viola­tive prac­tices.29

Pre-con­sum­ma­tion, acquir­ing health­care sys­tems should insist on rep­re­sen­ta­tions and war­ranties that lim­it its lia­bil­i­ty for past infringe­ments of CPOM. These rep­re­sen­ta­tions and war­ranties should require the sell­ing com­pa­ny assert that its oper­a­tion of the tar­get for-prof­it MSO was prop­er. Fur­ther, health­care sys­tems should include indem­ni­fi­ca­tion agree­ments in the con­tract. Such agree­ments require the sell­ing com­pa­ny take lia­bil­i­ty for breach­es of the rep­re­sen­ta­tions and war­ranties, includ­ing vio­la­tions of CPOM laws. As part of the indem­ni­fi­ca­tion agree­ment, part of the pur­chase price – equiv­a­lent to esti­mat­ed poten­tial dam­ages from any vio­la­tions uncov­ered dur­ing due dili­gence – should be held in escrow to cov­er any unknown vio­la­tions until the statute of lim­i­ta­tions on poten­tial claims for CPOM tolls. The sell­ing enti­ty will remain liable, how­ev­er, for amounts in excess of the escrow funds.

Both dur­ing and after the due dili­gence phase, health­care sys­tems should com­plete com­pli­ance reviews of all CPOM issues and insti­tute com­pli­ance pro­grams to pre­vent vio­la­tions of AKS, Stark, and FCA post-con­sum­ma­tion.

III. Antitrust Con­cerns

To the extent that cre­at­ing the inte­grat­ed deliv­ery sys­tem impacts com­pe­ti­tion in the health­care mar­ket, the acqui­si­tion of a for-prof­it MSO by a non-prof­it health­care sys­tem could impli­cate antitrust laws. In the antitrust con­text, merg­ers are cat­e­go­rized as either ver­ti­cal or hor­i­zon­tal. Hor­i­zon­tal merg­ers are merg­ers between com­peti­tors, while ver­ti­cal merg­ers are trans­ac­tions among enti­ties sit­u­at­ed along the sup­ply chain.30 A non-prof­it health­care sys­tem pur­chas­ing a for-prof­it MSO in order to cre­ate a more inte­grat­ed deliv­ery care sys­tem would like­ly qual­i­fy as a ver­ti­cal merg­er rather than a hor­i­zon­tal merg­er.

While ver­ti­cal acqui­si­tions are not the over­whelm­ing focus of antitrust action, they present unique issues of lia­bil­i­ty: they typ­i­cal­ly lim­it com­pe­ti­tion for down­stream ser­vices. Such a merg­er could lim­it com­pe­ti­tion for refer­rals to oth­er health­care com­pa­nies31 and cause price increas­es due to the result­ing com­bined entity’s improved bar­gain­ing pow­er.32 How­ev­er, health-relat­ed antitrust actions based on ver­ti­cal the­o­ries are rare and have been spar­ing­ly applied over the past thir­ty years, almost exclu­sive­ly to hos­pi­tal-physi­cian group trans­ac­tions or phar­ma­ceu­ti­cal pric­ing.33

Health­care sys­tems can counter claims of prob­a­ble anti­com­pet­i­tive effects by assert­ing pro­com­pet­i­tive jus­ti­fi­ca­tions for the acqui­si­tion, such as being able to sub­se­quent­ly pro­vide more effi­cient care, more inte­grat­ed care, and improved patient out­comes.34 Health­care sys­tems must show that effi­cien­cies used as jus­ti­fi­ca­tion can only be achieved through this acqui­si­tion: essen­tial­ly, that there is no oth­er less restric­tive alter­na­tive to accom­plish­ing the pro­com­pet­i­tive goals. Fur­ther­more, the effi­cien­cies must not be vague or spec­u­la­tive and they must be cog­niz­able, not the result of pri­ma­ry anti­com­pet­i­tive effects.35 How­ev­er, this “effi­cien­cies defense” is incred­i­bly hard to prove and has yet to be suc­cess­ful in rebut­ting a pri­ma facie under Sec­tion 7 of the Clay­ton Act for non-phar­ma­ceu­ti­cal health­care acqui­si­tions.36 Com­pa­nies must “clear­ly demon­strate” how the acqui­si­tion “enhances rather than hin­ders com­pe­ti­tion” as a result of claimed effi­cien­cies, which must be “extra­or­di­nary” in order to off­set anti­com­pet­i­tive effects of the trans­ac­tion.37 The FTC looks more favor­ably on pro­com­pet­i­tive jus­ti­fi­ca­tions when they “improve the deliv­ery of care and pose no threat of increased prices.”38 A com­mit­ment to imple­ment­ing bun­dled pay­ments and clin­i­cal inte­gra­tion, shown through plans to adopt qual­i­ty met­rics, report­ing struc­tures, and joint elec­tron­ic med­ical records, among oth­er mech­a­nisms used to mon­i­tor pop­u­la­tion health, would show reg­u­la­tors that the health­care sys­tem intends to con­trol costs and use new­found lever­age to improve the deliv­ery of care, rather than raise prices.39 Fur­ther, the par­ties must show that these effi­cien­cies are unique to the con­sum­mat­ed trans­ac­tion and can­not be accom­plished by sim­ply con­tract­ing or cre­at­ing less restric­tive clin­i­cal­ly inte­grat­ed net­works.40

If antitrust vio­la­tions are found, fed­er­al author­i­ties could block the acqui­si­tion at its incip­i­en­cy, impose oth­er struc­tur­al changes post-con­sum­ma­tion through divesti­ture, or man­date con­duct require­ments in the form of orders that stip­u­late con­di­tions of the chal­lenged entity’s con­tin­ued exis­tence.41 While fed­er­al author­i­ties pre­fer struc­tur­al reme­dies, state attor­neys gen­er­al can also bring antitrust suits accord­ing to state antitrust laws and favor reg­u­la­to­ry reme­dies such as con­sent orders, arbi­tra­tion pro­ce­dures, or court ordered rate set­ting.42

IV. Tax Con­cerns

Non-prof­it health­care sys­tems are tax-exempt under Inter­nal Rev­enue Code § 501(c)(3).43 This pro­vides the com­pa­ny sig­nif­i­cant tax ben­e­fits as long as it main­tains its tax-exempt sta­tus.44 In order to main­tain tax-exempt sta­tus, non-prof­it orga­ni­za­tions, includ­ing non-prof­it health­care sys­tems, must (1) be orga­nized and oper­at­ed exclu­sive­ly for tax-exempt pur­pos­es; (2) not inure pri­vate share­hold­ers with the earn­ings of the non-prof­it orga­ni­za­tion; (3) not attempt to influ­ence leg­is­la­tion as a major part of its work; (4) not par­tic­i­pate in cam­paign activ­i­ties; and (5) com­ply with the fil­ing require­ments of the IRS.45 Require­ments for tax-exempt sta­tus rel­e­vant here46 that will be dis­cussed in fur­ther detail include being run for a tax-exempt pur­pose and receiv­ing only insub­stan­tial unre­lat­ed busi­ness income.

Tax-exempt orga­ni­za­tions must be run for a tax-exempt pur­pose.47 Unre­lat­ed busi­ness activ­i­ties can threat­en the acquir­ing non-prof­it health­care system’s tax-exempt sta­tus.48 Pro­mot­ing health, the pur­pose of health sys­tems, is accept­ed as a tax-exempt pur­pose.49 How­ev­er, non-prof­it orga­ni­za­tions are allowed to have some non-tax-exempt busi­ness oper­a­tions, as long as they are not the pri­ma­ry pur­pose of the orga­ni­za­tion.50 Income that a non-prof­it receives from busi­ness not relat­ed to its tax-exempt pur­pose is called unre­lat­ed-busi­ness income and is sub­ject to tax­a­tion.51 Non-prof­its must dis­close their unre­lat­ed busi­ness income.52 Unre­lat­ed busi­ness income is taxed at the cor­po­rate rate.53

If a non-prof­it orga­ni­za­tion receives a sub­stan­tial amount of unre­lat­ed busi­ness income, or con­ducts a “sub­stan­tial amount” of unre­lat­ed busi­ness activ­i­ty, it can lose its tax-exempt sta­tus.54 There is no firm guide­line as to what con­sti­tutes “sub­stan­tial,” but over fifty per­cent is def­i­nite­ly con­sid­ered sub­stan­tial and below twen­ty per­cent is gen­er­al­ly not con­sid­ered sub­stan­tial.55 While the income non-prof­its received from for-prof­it com­pa­nies is exclud­ed from the cal­cu­la­tion of unre­lat­ed busi­ness income and not sub­ject to tax­a­tion in some instances, debt-financed unre­lat­ed busi­ness income and unre­lat­ed busi­ness income when the non-prof­it has a con­trol­ling inter­est in the for-prof­it MSO are excep­tions to the exclu­sion.56 If the acqui­si­tion is debt-financed, as many of these acqui­si­tions are, non-prof­it acqui­si­tions like­ly receive tax­able unre­lat­ed busi­ness income after acquir­ing for-prof­it com­pa­nies.

If the acquired for-prof­it com­pa­ny has a non-tax-exempt pur­pose and the actions of the com­pa­ny are attrib­uted to the non-prof­it, the tax-exempt sta­tus of the acquir­ing com­pa­ny could be at risk. How­ev­er, the pur­pose of MSO is con­sult­ing and man­age­ment ser­vices, which are con­sid­ered per se pri­vate busi­ness pur­pos­es.57 Thus, when non-prof­it health­care sys­tems acquire for-prof­it MSOs or oth­er for-prof­it com­pa­nies with unre­lat­ed pur­pos­es, it is gen­er­al­ly best that they are placed in sub­sidiary cor­po­ra­tions.58 This pre­vents the for-prof­it activ­i­ties of the MSO from being attrib­uted to the non-prof­it health­care sys­tem, there­by pro­tect­ing its tax-exempt sta­tus. Even so, in order to main­tain its sta­tus as a non-prof­it, tax-exempt orga­ni­za­tion, non-prof­it health­care sys­tems acquir­ing for-prof­it MSOs must care­ful­ly track the income gen­er­at­ed from for-prof­it acqui­si­tion to make sure that it does not receive too much unre­lat­ed busi­ness income. For these rea­sons, tax­able cor­po­ra­tions are gen­er­al­ly prefer­able to house unre­lat­ed busi­ness activ­i­ties.59 This struc­ture pro­vides max­i­mal pro­tec­tion for tax-exempt sta­tus as long as the non-prof­it health sys­tem is not involved in the dai­ly man­age­ment of the for-prof­it MSO.60

Con­clu­sion

Non-prof­it health­care sys­tems find sig­nif­i­cant oppor­tu­ni­ties for growth and suc­cess in acquir­ing for-prof­it MSOs and cre­at­ing inte­grat­ed care deliv­ery sys­tems. How­ev­er, these acqui­si­tions often bring sig­nif­i­cant risks to the acquir­ing com­pa­ny in the form of past and future vio­la­tions of fraud, antitrust, and tax laws and med­ical prac­tice reg­u­la­tions. Health­care trans­ac­tion­al attor­neys must take into account poten­tial fraud and abuse con­cerns, cor­po­rate prac­tice of med­i­cine laws, antitrust vio­la­tions, and tax require­ments in struc­tur­ing these trans­ac­tions. As such, keep­ing a por­tion of the trans­ac­tion pur­chase price in escrow and obtain­ing rep­re­sen­ta­tions, war­ranties, and an indem­ni­fi­ca­tion agree­ment from the sell­ing com­pa­ny can pro­tect the acquir­ing non-prof­it health­care sys­tem from the con­cerns of future lit­i­ga­tion. Addi­tion­al terms and struc­tur­ing of the acqui­si­tion as a for-prof­it sub­sidiary cor­po­ra­tion can fur­ther pro­tect the inter­ests of the health­care sys­tem.

In this high­ly com­pet­i­tive health­care mar­ket, expand­ing into new prod­uct and geo­graph­ic mar­kets and fur­ther inte­grat­ing care enables new oppor­tu­ni­ties for growth and improved patient care. Even so, non-prof­it health­care sys­tems should be aware of these risks as they seek to inte­grate deliv­ery sys­tems through merg­ers and acqui­si­tions.

Notes:

1. Vic­to­ria Ham­scho, Daniel Wein­stein, and Ryan Knox are 3Ls at New York Uni­ver­si­ty School of Law. This piece is a com­men­tary on the 2018 Prob­lem at the L. Edward Bryant, Jr. Nation­al Health Law Trans­ac­tion­al Moot Court Com­pe­ti­tion host­ed by Loy­ola Uni­ver­si­ty Chica­go School of Law in Chica­go, Illi­nois. The prob­lem dealt with a non-prof­it, tax-exempt health system’s intend­ed acqui­si­tion of a for-prof­it man­age­ment ser­vices orga­ni­za­tions. The views expressed in this arti­cle do not nec­es­sar­i­ly rep­re­sent the views of the author on these areas of law nor do they intend to pro­vide legal advice to health care com­pa­nies. Rather, this arti­cle is a dis­til­la­tion of some of the rec­om­men­da­tions pre­sent­ed by the authors at the L. Edward Bryant, Jr. Nation­al Health Law Trans­ac­tion­al Moot Court Com­pe­ti­tion.
2. See Busi­ness Mon­i­tor Inter­na­tion­al, Unit­ed States Phar­ma­ceu­ti­cals & Health­care Report Q1 2018 15 (2017).
3. See, e.g., Com­pare Pro­pos­als to Replace The Afford­able Care Act, Kaiser Fam­i­ly Found., https://www.kff.org/interactive/proposals-to-replace-the-affordable-care-act/ (last updat­ed Sept. 25, 2017).
4. See Busi­ness Mon­i­tor Inter­na­tion­al, supra note 2, at 16.
5. See Gre­go­ry D. Ander­son & Emi­ly B. Grey, The MSO’s Prog­no­sis After the ACA: A Viable Inte­gra­tion Tool? 1 (2013), https://www.healthlawyers.org/Events/Programs/Materials/Documents/PHY13/B_anderson_grey.pdf.
6. Trans­ac­tions usu­al­ly come with suc­ces­sor lia­bil­i­ty. See Robert C. Threlkeld, Suc­ces­sor Lia­bil­i­ty in Hos­pi­tal M&A: Assess­ing and Mit­i­gat­ing Risk Expo­sure, Mor­ris Man­ning & Mar­tin LLP (Apr. 2, 2014), http://media.straffordpub.com/products/managing-the-impact-on-transaction-structure-allocating-risk-and-addressing-medicare-issues-2014–04-02/presentation.pdf. This includes suc­ces­sor lia­bil­i­ty for claims involv­ing Medicare, Med­ic­aid, Anti-Kick­back vio­la­tions, False Claims Act vio­la­tions, Stark Law vio­la­tions, among oth­ers. How­ev­er, there are ways to mit­i­gate this lia­bil­i­ty at the time of con­sum­ma­tion. See id.
7. More than half of U.S. hos­pi­tals are pri­vate, non­prof­it orga­ni­za­tions. See Gary J. Young, et al., Com­mu­ni­ty Ben­e­fit Spend­ing By Tax-Exempt Hos­pi­tals Changed Lit­tle After ACA, 37 Health Aff. 121, 121 (2018).
8. See Gre­go­ry D. Ander­son & Emi­ly B. Grey, The MSO’s Prog­no­sis After the ACA: A Viable Inte­gra­tion Tool? 2 (2013), https://www.healthlawyers.org/Events/Programs/Materials/Documents/PHY13/B_anderson_grey.pdf.
9. See, e.g., U.S. ex rel. Drake­ford v. Tuomey, 792 F.3d 364, 393 (4th Cir. 2015).
10. 42 U.S.C. §1320a-7b(b).
11. See Unit­ed States v. Gre­ber, 760 F.2d 68 (3d Cir. 1985), cert. denied, 474 U.S. 988 (1985).
12. See Han­lester Net­work v. Sha­lala, 51 F.3d 1390, 1400 (9th Cir. 1995).
13. 42 U.S.C. §§ 1320a-7b(b), 1320a-7.
14.  42 U.S.C. § 1395nn(a)(1)(A).
15. 42 U.S.C. § 1395nn(a)(1)(B).
16. 42 U.S.C. § 1395nn; 42 C.F.R. §§ 411.351 et seq.
17. 42 U.S.C. § 1395nn(g).
18. 42 U.S.C. § 1320a-7b(g).
19. 42 C.F.R. § 1001.952(e).
20. See, e.g., Unit­ed States v. LaHue et al., 261 F.3d 993 (10th Cir. 2001).
21. 42 C.F.R. § 411.357(f).
22. Id.
23. Id.
24. See, e.g., Unit­ed States ex rel. Drake­ford v. Tuomey. Health­care Sys­tem, Inc., 792 F.3d 364 (4th Cir. 2015).
25.  Cheryl Miller, Split­ting Fees or Split­ting Hairs?, 11 Vir­tu­al Men­tor: AM. Med. Ass’n J. Ethics 387, 387 (2009) (defin­ing fee-split­ting).
26. See Cor­po­rate Prac­tice of Med­i­cine, Med­ical Board of Cal­i­for­nia (Jan. 29, 2015), http://www.mbc.ca.gov/Licensees/Corporate_Practice.aspx; Cal. Bus. & Prof. Code § 650(b).
27. See Cor­po­rate Prac­tice of the Pro­fes­sions, N.Y. State Edu­ca­tion Depart­ment (1998), http://www.op.nysed.gov/corp/corppractice.htm; Andrew B. Roth & Kim­ber­ly J. Gold, Cor­po­rate Prac­tice of Med­i­cine; An Old Doc­trine Breath­ing New Life, N.Y. L. J. (June 25, 2014), http://www.nortonrosefulbright.com/files/20140625-corporate-practice-of-medicine-an-old-doctrine-breathing-new-life-124249.pdf.
28. See Health Care Reg­u­la­to­ry Primer: Man­age­ment Ser­vice Orga­ni­za­tions, Chap­man and Cut­ler LLP (Oct. 12, 2017), https://www.chapman.com/insights-publications-Health_Care_Management_Service_Organizations.html.
29. See Nili S. Yolin, Cor­po­rate Prac­tice Pro­hi­bi­tion in New York: What We Can Learn From the ADMI Set­tle­ment, The Nat’l L. Rev. (July 30, 2015), https://www.natlawreview.com/article/corporate-practice-prohibition-new-york-what-we-can-learn-admi-settlement.
30. See Ian Lin­ton, What is a Hor­i­zon­tal Merg­er and a Ver­ti­cal Merg­er, Chron, http://smallbusiness.chron.com/horizontal-merger-vertical-merger-60981.html.
31. See St. Luke’s Health Sys., 778 F.3d at 782 (St. Alphon­sus claims of ver­ti­cal antitrust issues and fore­clos­ing refer­rals).
32. Non-Hor­i­zon­tal Merg­er Guide­lines, Dep’t of Just. (last updat­ed June 25, 2015), https://www.justice.gov/atr/non-horizontal-merger-guidelines.
33.  See Deb­o­rah L. Fein­stein, Antitrust Enforce­ment in Health Care: Pro­scrip­tion, not Pre­scrip­tion, Fed. Trade Comm’n 8 n.26 (2014), https://www.ftc.gov/system/files/documents/public_statements/409481/140619_aco_speech.pdf.
34. For more pro­com­pet­i­tive jus­ti­fi­ca­tions, see gen­er­al­ly id.; Todd A. Rodriguez, Med­ical Prac­tice Merg­ers: Big­ger Can Be Bet­ter, Fox & Roth­schild (Oct. 2009), http://www.foxrothschild.com/publications/medical-practice-mergers-bigger-can-be-better/.
35. See Fein­stein, supra note 33, at 11.
36. Toby Singer, New Health Care Sym­po­sium: Unpack­ing The Issues Of Ver­ti­cal And Hor­i­zon­tal Consolidation—The St. Luke’s Case, Health Aff. Blog (Mar. 3, 2016), https://www.healthaffairs.org/do/10.1377/hblog20160303.053494/full/.
37. St. Alphon­sus Med. Ctr. v. St. Luke’s Health Sys., 778 F.3d 775, 790 (9th Cir. 2015).
38. See Jef­frey W. Bren­nan, et al., FTC and DOJ Host Work­shop Exam­in­ing Health Care Com­pe­ti­tion, McDer­mott Will & Emery (Mar. 3, 2015), https://www.mwe.com/en/thought-leadership/publications/2015/03/ftc-and-doj-host-workshop-examining-health-care-__.
39. See gen­er­al­ly David A. DeS­i­mone & John R. Wash­lick, The Resur­gence of MSOs in the Post-Merg­er Mania: A Vehi­cle to Herd Providers and Investors into Clin­i­cal­ly Inte­grat­ed Net­works, http://www.downloads.pbi.org/courses/9611/ChapterL.pdf.
40. St. Alphon­sus Med. Ctr. v. St. Luke’s Health Sys., 778 F.3d 775, 790 (9th Cir. 2015).
41. See David A. Ettinger, Cur­rent Antitrust Issues Relat­ing to Physi­cian Merg­ers, Acqui­si­tions and Com­bi­na­tions 21 (2012), https://www.healthlawyers.org/events/programs/materials/documents/phy12/papers/b_ettinger.pdf.
42. See id.
43. See New Require­ments for 501(c)(3) Hos­pi­tals Under the Afford­able Care Act, Inter­nal Rev­enue Ser­vice (last updat­ed Aug. 27, 2017), https://www.irs.gov/charities-non-profits/charitable-organizations/new-requirements-for-501c3-hospitals-under-the-affordable-care-act.
44. See id.
45. Exemp­tion Require­ments — 501(c)(3) Orga­ni­za­tions, Inter­nal Rev­enue Ser­vice (last updat­ed Dec. 28, 2017), https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-section-501c3-organizations.
46. While oth­er require­ments may also be of con­cern in var­i­ous acqui­si­tions, the con­cerns men­tioned here are the issues raised in the com­pe­ti­tion.
47. See Exemp­tion Require­ments — 501(c)(3) Orga­ni­za­tions, Inter­nal Rev­enue Ser­vice (last updat­ed Dec. 28, 2017), https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-section-501c3-organizations.
48. See id.
49. See, e.g., Inter­nal Rev­enue Ser­vice, The Con­cept of Char­i­ty 19 (1980), https://www.irs.gov/pub/irs-tege/eotopicb80.pdf.
50. See Jer­ald A. Jacobs, Et Al., 708 For-Prof­it Sub­sidiaries: Pro­tect­ing Assets While Expand­ing Access To Cap­i­tal 6 (2006), http://www.acc.com/vl/public/ProgramMaterial/loader.cfm?csModule=security/getfile&pageid=20086&title=untitle d&recorded=1.
51. See id. at 3.
52. See Unre­lat­ed Busi­ness Income Tax, Inter­nal Rev­enue Ser­vice (last updat­ed Aug. 27, 2017), https://www.irs.gov/charities-non-profits/unrelated-business-income-tax.
53. See id.
54. See id.
55. See, e.g., Paula Cozzi Goed­ert, Tax Issues for Exempt Orga­ni­za­tions: A Primer 10, http://www.ashe.org/chapters/pdfs/agreement/Tax_Issues_for_Exempt_Organizations.pdf; Los­ing tax-exempt sta­tus because of too much unre­lat­ed income, Reporters Com­mit­tee for Free­dom of the Press (accessed Feb. 16, 2018), https://www.rcfp.org/nonprofit-news-guide/taxation-unrelated-business-taxable-income/losing-tax-exempt-status-because-too.
56. See Unre­lat­ed Busi­ness Income Tax Excep­tions and Exclu­sions, Inter­nal Rev­enue Ser­vice (last updat­ed Aug. 4, 2017), https://www.irs.gov/charities-non-profits/charitable-organizations/unrelated-business-income-tax-exceptions-and-exclusions
57. See Jacobs, et al., supra note 50, at 1.
58. See David A. Levitt & Steven R. Chio­di­ni, Tak­ing Care of Busi­ness: Use of a For-Prof­it Sub­sidiary by a Non­prof­it Orga­ni­za­tion, Am. Bar Ass’n (June 2014), https://www.americanbar.org/publications/blt/2014/06/03_levitt.html.
59. See Unre­lat­ed Busi­ness Income Tax Excep­tions and Exclu­sions, Inter­nal Rev­enue Ser­vice (last updat­ed Aug. 4, 2017), https://www.irs.gov/charities-non-profits/charitable-organizations/unrelated-business-income-tax-exceptions-and-exclusions.
60. See id.