Distinctive features of healthcare mergers and acquisitions

In recent years, mergers and acquisitions of private healthcare facilities (such as outpatient clinics, testing laboratories, pharmacies, diagnostic and home care centres) have been among the most common corporate transactions in the private healthcare sector.

What are the legal and technical aspects to be considered in corporate transactions involving the merger or acquisition of health facilities?

In addition to the typical elements to be considered in any corporate transaction, in the context of mergers or acquisitions of healthcare facilities, it is advisable to consider a number of specific aspects early in the due diligence process.

It is well known that the purpose of due diligence is to verify the current state of what is being acquired and, where appropriate, to obtain specific guarantees and assurances during the completion of the corporate transaction.

With regard to the acquisition of healthcare facilities, there is often insufficient research into

• the validity not only of the authorisation and/or accreditation measures granted to the specific healthcare facility of interest, but also whether the structural, organisational and technological requirements required by law to exercise the healthcare activity are maintained;
• the status of the distinctive features identifying a healthcare facility;
• certain compliance aspects such as the adoption of a so-called ‘Organisational Model 231’ (pursuant to Legislative Decree 231/2001) or the correct implementation of a personal data management system.

Let us take a closer look at these issues.

It is not sufficient to merely verify the validity of the healthcare authorisation or accreditation.

For the sake of clarity, healthcare authorisation and accreditation are respectively the administrative measures that authorise the healthcare facility (i) to provide healthcare under a private regime and (ii) also to provide healthcare services on behalf of the National Health Service.

Both measures in the context of a business acquisition must be transferred to the successor company, in accordance with the relevant regional regulations, by means of specific applications and administrative procedures, which in most cases require a preliminary assessment and approval by the competent Administration.

And it is precisely during the preliminary assessment that it becomes essential to have carried out a thorough due diligence on the facility in advance.

Healthcare authorisations often do not have an expiry date and can be updated every four or five years by the Administration with special inspections.

It cannot be ruled out that changes or variations to the structural, technological and organisational requirements relating to the exercise of the healthcare activity may have occurred in the meantime within a healthcare establishment, which could affect the authorisation itself and only become apparent during the inspection by the competent Administration. The Administration could therefore, following the ascertainment, impose specific investigative requirements, including certain technical works (such as those relating to the "structure" of the healthcare facility) that are necessary and preparatory to the renewal and/or the transfer of the authorisation, under penalty of the forfeiture of the latter, with the consequent interruption of the healthcare activity.

Although accreditation measures, unlike authorisations, are often subject to renewal conditions, a situation similar to that described above could affect the acquisition of an accredited healthcare facility (which, among other things, must always maintain the validity of the authorisation in order to obtain and confirm the accreditation).

In view of the above, it is therefore advisable to carry out, as early as the due diligence stage, a review of all the documentation that attests to the regularity, not only formal but also substantive (and current), of the healthcare facility that is to be acquired.

It is not enough to simply provide for the transfer of trade marks identifying a healthcare facility.

One of the essential functions of a trade mark is distinctiveness, i.e. enabling the consumer to associate the goods or services identified by the trademark with the company that produces or provides them.

In acquisition transactions, it is therefore essential to check that the trade mark which distinguishes a healthcare establishment and to which patients refer is correctly registered in the name of the company to be acquired and that the company has the full and exclusive ownership of that trade mark.

It will then be necessary to check whether the trade mark actually used and known to the public corresponds to the trade mark originally registered, as well as the territorial validity of the registration (national, EU or international). This could be the case, for example, of a trade mark registered exclusively at national level for which there are similar or confusingly similar trade marks in other countries for the same sector of reference (healthcare facilities), which could prevent the use and/or registration of the trade mark of the facility acquired in that country or display its distinctive sign.

Therefore, only a careful study of the distinctive signs will allow the new entity to use the well-known trade mark of an acquired healthcare facility without problems and to exploit its attractiveness to the public.

A thorough analysis of compliance systems is essential

The adoption of an organisational and management model in accordance with Legislative Decree 231/2001 is no longer just a tool to protect the organisation in the event of criminal proceedings, but an essential requirement for entering into agreements with Public Administrations.

Many Italian regions require the adoption of Organisational Model 231 in order to work with a Public Administration or to be accredited to provide services of public interest. But regardless of national and regional regulations, the healthcare sector is inherently exposed to a significant risk of offences.

Similarly, it also needs to be particularly vigilant about data protection because it processes sensitive personal data relating to patients' health.

Both the existing 231 Model and the Privacy Model need to undergo not only a formal but also a substantive analysis during the acquisition phase, in order to verify their effectiveness and resilience in the event of problematic situations.