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HomeHealth LawThree suggestions for clear groups throughout due diligence

Three suggestions for clear groups throughout due diligence

Elevated consolidation within the well being care sector continues to attract media consideration and antitrust scrutiny from a wide range 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 programs that are contemplating mergers, acquisitions and different kinds of strategic partnerships or joint ventures ought to take steps to make sure that they don’t violate antitrust legal guidelines when sharing data concerning the enterprise case for a selected transaction and also needs to understand that failing to shut a transaction can flip a possible companion right into a better-informed competitor. Nevertheless, it isn’t at all times clear what data could also be shared, or with whom. Additionally it is troublesome to know when a typical non-disclosure settlement could fall in need of the specified protections. Generally, the very best 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 get together or a particular group of the client’s staff (a “Clear Crew”).  

Talking usually, a Clear Crew’s function is to filter and take away competitively delicate data from the stream of knowledge flowing from a vendor to a purchaser. A Clear Crew 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 prospects or suppliers, and future plans akin to expansions or different capital expenditures) from paperwork {that a} vendor supplies to a purchaser within the due diligence section of a transaction. A Clear Crew may mixture or roll-up sure data in order that it may be offered to the client in a abstract report or different method that doesn’t reveal competitively delicate particulars. The record under highlights three suggestions with respect to the institution and work of Clear Groups, however it isn’t meant to be an exhaustive record of potential antitrust issues.

1. Use non-competitively delicate data, if attainable

Whereas the change of sure competitively delicate data concerning the events to a possible transaction is a needed a part of the planning course of, regulators are involved that, if not completed rigorously and thoughtfully, the change of knowledge might give the events a chance 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, contemplate whether or not there’s any publicly out there 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 usually not thought of to be competitively delicate and is likely to be workable substitutes for sure competitively delicate data akin to present or future budgets or capital expenditure plans.

2. Select the appropriate crew

Cautious consideration ought to be given to the composition of the Clear Crew. Usually, it’s preferable to have a 3rd get together, akin to a purchaser’s outdoors authorized counsel, outdoors antitrust counsel or monetary advisers, function the Clear Crew. Any third get together chosen ought to enter into an settlement (the “Clear Crew Settlement”) with the client and vendor setting forth the third get together’s duties and tasks, together with the responsibility to take care of the confidentiality of any data supplied to it and to not share any competitively delicate data in an unredacted, disaggregated or in any other case unapproved kind with the client or its staff. Moreover, the identification of every worker or consultant of the third get together ought to be disclosed to the client and vendor and such worker or consultant ought to execute an acknowledgment of such individual’s obligations as a consultant of the third get together underneath the Clear Crew Settlement. Importantly, the Clear Crew Settlement acts as a complement to, and never a substitute of, the non-disclosure settlement that the client and vendor ought to have entered into on the very outset of their negotiations.

Nevertheless, it isn’t at all times attainable to interact a 3rd get together solely for the aim of serving as a clear crew. Hiring a 3rd get together could also be pricey and time consuming, and the popular third get together could not conform to serve in a Clear Crew capability for a given transaction. Due to this fact, the duty could also be left to sure staff of the client, which presents its personal challenges. Staff of the client could function members of a Clear Crew, supplied that such staff would not have (and should not moderately prone to have within the close to future) tasks regarding strategic planning, direct pricing, negotiating payor agreements, gross sales and advertising, 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 client. It may be troublesome to seek out the appropriate stability as a result of every worker ought to (1) be sufficiently educated concerning the potential transaction and their accountability to forestall the inappropriate disclosure of competitively delicate data, however (2) not have (and should not prone to have within the close to future) any job tasks which might allow such worker to behave in an anti-competitive method based mostly on the knowledge supplied to them pursuant to their Clear Crew duties. 

3. Set up a clear room

To facilitate the switch of knowledge 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 Crew, which can then evaluation such data and go it alongside to the client if applicable. Due to the big quantity of paperwork which can have to be reviewed, finest apply is to determine a separate digital information room by which all paperwork to be supplied by the vendor will be uploaded by the vendor and reviewed by the Clear Crew (the “Clear Room”). The customer and its staff and representatives that aren’t on the Clear Crew shouldn’t have entry to the Clear Room. The Clear Crew ought to then evaluation every doc supplied and log whether or not the doc incorporates any competitively delicate data. If the Clear Crew and antitrust counsel for the vendor concur {that a} doc incorporates no competitively delicate data, then the Clear Crew can then ship the doc on to a separate digital information room (the “Strange Knowledge Room”) which the client and its staff and representatives could entry. The Strange Knowledge Room and Clear Room ought to have an analogous file hierarchy for ease of use and they need to even have clearly distinguishable names with a purpose to be sure that a doc just isn’t mistakenly uploaded to the Strange Knowledge Room previous to evaluation by the Clear Crew. If a doc does comprise competitively delicate data, then the Clear Crew ought to observe procedures established by the events’ respective antitrust counsels for redacting or aggregating the knowledge earlier than sending to the Strange Knowledge Room, or withholding such data fully if applicable. 

Tyler Ash and Greg Mennerick are attorneys in Thompson Coburn’s Well being Care group.


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