June 20, 2025 • 35 mins
Tom Donohoe, Shareholder, Hall Render Killian Heath & Lyman PC, Kelly Adams, Region General Counsel, Intermountain Health, and Barb Grandjean, Partner, Husch Blackwell LLP, discuss the various labor and employment considerations that are present in health care transactions, with a focus on the current M&A environment. They cover issues related to pre-due diligence, due diligence, the transaction itself, and integration. Tom, Kelly, and Barb wrote an AHLA Briefing and spoke on an AHLA webinar about this topic. From AHLA’s Labor and Employment Practice Group.
Watch this episode: https://www.youtube.com/watch?v=IGiHqDQ3FSk
Read the AHLA Briefing: https://www.americanhealthlaw.org/content-library/publications/briefings/d5f695e8-63f4-489a-8358-c2abe33ae0a0/Workforce-Issues-in-Health-Care-Transactions
Access the AHLA on-demand webinar: https://educate.americanhealthlaw.org/local/catalog/view/product.php?productid=1387
Learn more about AHLA’s Labor and Employment Practice Group: https://www.americanhealthlaw.org/practice-groups/practice-groups/labor-and-employment
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Episode Transcript
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SPEAKER_01 (00:00):
This episode of AHLA's Speaking of Health Law is
brought to you by AHLA membersand donors like you.
For more information, visitAmericanHealthLaw.org.
SPEAKER_00 (00:17):
Welcome everyone to this podcast titled Workforce
Issues in Healthcare Transactionthat is provided by the American
Health Law Association.
We are excited to be here tospeak to this topic today.
My name is Tom Donahoe and I ama shareholder at Hall Renderer
Killian Heath and Lyman in itsDenver office.
(00:38):
And I'm also a vice chair ofHLA's labor and employment
section.
My practice primarily focuses onstrategic transactions and So
the topic that we'll bediscussing today is of great
interest to the work that I doon a day-to-day basis.
With that, I'll turn it over toKelly to go ahead and introduce
herself.
SPEAKER_02 (00:56):
Hi, I'm Kelly Adams.
I'm the Region General Counselfor Intermountain Health, a
nonprofit healthcare systembased in the Intermountain West
with 32 hospitals and about 385clinics across its service
areas.
In my role, I oversee all thelegal work in the Peaks region,
which includes Intermountain'soperations in Colorado and
Montana, In my practice, Iprovide legal and strategic
(01:19):
advice on a wide range oftransactional, regulatory, and
operational matters with aspecialized focus on mergers,
acquisitions, dispositions,strategic growth transactions,
partnerships, affiliations, andjoint ventures.
I've been with Intermountainsince January of 2020.
Prior to that, I was in privatepractice with a law firm called
(01:40):
Ackerman.
Before starting my legal career,I worked in research and program
development for the Universityof Colorado Hospital, an
academic medical center.
It's great to be here.
SPEAKER_03 (01:49):
Okay, well, last but certainly not least is me.
I'm Barb Grandjean.
I am a partner in the Denveroffice of Hush Blackwell.
My specialty is labor andemployment, and I sit in our
healthcare strategic businessunit.
So some of the things that we'regoing to talk about today,
particularly on the duediligence front, are things that
(02:10):
I am doing frequently as part ofmy regular practice.
SPEAKER_00 (02:17):
Great.
Well, thanks, Barb.
Thanks, Kelly.
So today's podcast is afollow-up to a couple of
conversations and publicationswe have had on this topic
previously.
We gave a webinar back inNovember of 2024 titled Labor
and Employment Issues.
and healthcare transactions.
And then we also published anarticle earlier this year
(02:39):
through the Labor and EmploymentPractice Group titled Workforce
Issues and HealthcareTransactions, similar to this
podcast.
So if there's interest, pleasego ahead and read or listen to
those presentations andarticles.
But since we've really beentalking about and writing about
this topic, there has been a lotof developments in this space as
(03:01):
As one would imagine, as of thisyear, earlier this year and in
the last few months, there'sbeen a handful, well, there's
been a lot of healthcaretransactions and a few notable
ones just to highlight on thelarger scale and the hospital
health system space of theNorthwell.
Nuvon's merger closed earlierthis year.
(03:21):
You had Prime Healthcare whoacquired facilities from
Ascension Health in the Chicagoand Illinois area and then
Sanford Health and MarshfieldClinic clinic merged together.
So those are biggertransactions.
And like I said, there's been ahandful of other ones that have
proceeded and closed as well.
(03:42):
And others have fallen apart atthe same time.
So this continues to be anactive space.
And so the issues that we'lltalk about today, particularly
as it relates to laboremployment, no doubt have
continued to impact thosetransactions.
And then maybe more importantly,and certainly that weighs on
this space, we had a change ofadministration.
I hope everyone is aware of thatas of the beginning of this
(04:07):
year.
And with any change ofadministration comes a number of
new policies, obviously agencychanges, which we are all seeing
and in the middle of right now,and that is impacting a lot of
areas of the industry, but thereare some specific implications
to the labor and employmentspace as well.
(04:27):
So really with today'sdiscussion, we want to talk
through some of the things we'vespoken to and written about in
the webinar and in the article,but at the same time, want to
address and weave in some of thedevelopments that have taken
place over the last few months,and like I said, keep this topic
pretty fresh.
So with that, Kelly, love you sospoke and I know you contributed
(04:50):
to the article on pre-duediligence and some of the
important themes or topics thatshould be addressed in that
phase of a healthcaretransaction.
So we'd love to kind of hearyour thoughts around that area
and some of the things that ouraudience should be focusing on
(05:10):
there.
SPEAKER_02 (05:12):
Absolutely.
Yeah.
And maybe just to set the stagegenerally, right?
I think early multifaceted duediligence or prediligence, it
really helps the partiesidentify issues up front and
particularly in the climate thatyou described.
It's important to sort of get ahandle on those issues early on
and think through how that mightimpact how you approach or
(05:33):
decide to move forward with thedeal overall or inform the
integration process, which we'lltalk about a bit more later.
So Prediligence really should beshaped by the value proposition
and the drivers for the deal.
So is it about cost efficiency?
So you need sort of rigorousfinancial management and
operational discipline.
(05:53):
Is it about driving innovation?
Or is the target attractivebecause of talent capabilities?
I think those type of questionsreally help prioritize what
you're looking for.
And then specifically in thecontext of the labor and
employment context, I think inall of those scenarios,
especially the last, there'sreally a strong need to
understand and plan for how toretain key leaders and employees
(06:17):
and how to manage labor andemployment issues to
successfully execute on the dealand to integrate the
organizations and to reallycapitalize on the opportunities
to drive business objectives ofthe transaction.
And I think when you're thinkingabout healthcare M&A in
particular, culture andcompatibility are critically
important, especially in thecurrent environment.
(06:39):
And I think they are often stillunderestimated health systems,
hospitals, clinics, they'relabor-intensive and
people-driven.
And we're in a time wherethey're facing some pretty
significant headwindsfinancially on the reimbursement
front with threats to Medicaid.
And looking at the trends, youmentioned several transactions,
but if you look at the overalltrend in the first quarter of
(07:00):
2025, there's pretty lowactivity in the M&A space across
markets, including inhealthcare.
And I think Organizationsgenerally are hitting the brakes
with moving forward transactionsor exploring new opportunities.
And certainly I think overallmarket volatility, economic
uncertainty around policychanges from the new
(07:21):
administration that will affecthealthcare delivery.
That's certainly driving thattrend, I believe, but it also
highlights the need, I think, tobe really strategic in selecting
a partner and making sure youhave the right leadership, the
right workforce, the rightprocesses in place to help
weather that storm together.
(07:41):
So It's good to ensure, again,sort of the right tools and
processes during pre-diligenceto assess not only kind of the
standard issues like financials,but also organizational fit and
understanding sort of therespective mission and values
that come with the twoorganizations, the workplace
culture, management style,employee engagement.
(08:03):
I think from a legalperspective, misalignment on
some of these issues couldincrease the risk of
discrimination or harassmentclaims when you're combining
potentially two very differentworkplace practices or
organizational values beyond thetwo groups.
So I think beyond that too, on abroader level, those issues
(08:26):
could have a big bearing on theoverall success of the deal or
the merger.
I think too, thinking throughsort of from an operations
perspective to tie this themeback to some of the challenges
in the industry.
This last year in 2024, therewere a historic number of
healthcare transactionsinvolving financially distressed
organizations.
(08:46):
So I think those dealsrepresented about 30% of
healthcare M&A.
And I think that's reflective ofworkforce challenges across the
industry, things like high laborcosts, talent shortages,
clinical burnout.
And I think certainlyunderstanding those challenges
and how those are being managedwithin an organization is a key
thing to look at during aprediligence.
(09:08):
We've also seen a lot ofturnover on the leadership front
across hospitals and healthsystems, high number of CEO
exits this year.
So just identifying early on inthe process, you know, are there
flight risks that mightdestabilize the organization and
figuring out sort of how toaddress those proactively.
And I think, you know, we'lltalk in more detail around
(09:29):
integration, everyone's favoritetopic, but I think something to
look at during prediligence toois integration risk, right?
Are, are there are things aboutthe organizational structure or
the operations themselves thatare going to make it difficult
to fully integrate theorganizations.
Again, so how is leadershipretention being managed?
I think that one can maybe cutboth ways, right?
(09:51):
On one hand, it's important tostabilize leadership to help
enable a smoother integration,but keeping a leadership team
fully intact for bothorganizations for a protracted
period of time could stallintegration and drive the two
organizations to continue tooperate somewhat independently
rather than really truly fullycombining.
(10:12):
And along with the leadership,looking at the workforce
capabilities and the structure,right?
Is the reporting structure suchthat it'll be challenging to
combine the workforces?
Are there redundancies?
Do there need to be plannedreductions?
I think getting an inventory Anddoing some preliminary review of
HR systems and policies early oncan sort of help set the stage
(10:34):
and prepare for a smootherintegration process.
So those are just a fewdifferent aspects of
prediligence in the labor andemployment context and give you
a flavor of what are some of thethings you might dig into deeper
during diligence and thenultimately have to address as
you negotiate the transactionand manage the deal if it closes
and gets to the integrationphase.
SPEAKER_00 (10:56):
Those are great insights, Kelly.
As you're sharing your thoughts,I think the one variable that is
inevitable but sometimesundervalued is that humans run
healthcare.
At the end of the day, theseorganizations, their leaders,
the employees are reallyprobably the greatest asset.
(11:18):
as you get in, not just theprediligence, but I know we'll
talk about other parts or phasesof the transactions.
It's just so important to bemindful of that because how you
manage that, and again, I don'twant to commoditize people, but
that manage that asset couldhave significant bearing on
whether you will realize whatyou think you're going to
realize as part of thattransaction.
(11:40):
So I love some of those insightsand how some of those things
should be assessed up front.
And particularly in a slowmoving environment, it may be
that folks folks are learningfrom some of the transactions
that have occurred or that havenot occurred and maybe
evaluating some of these thingsa little bit more and maybe a
little bit slower to, inaddition to considering some of
(12:00):
the other factors you mentioned,jump into a big transaction
altogether.
So great insights.
Barb, I know you talked aboutkind of where folks should put
their efforts, focus in that duediligence.
As you get past the prediligencephase, done these assessments,
you think things are lookinggood.
(12:20):
Let's get to due diligence.
Let's spend the time andresources.
So love to hear your thoughtson, you know, where those
focuses, whether they should bein the same places we talked
about or wrote about previously,or what new things should be
considered giving some of thechanges that have been, that
have occurred over the last fewmonths.
SPEAKER_03 (12:39):
Yeah, Tom, thank you.
So when I'm advising andmanaging due diligence from the
legal perspective for ourclients, I'm trying to make sure
that we have enough informationabout the human assets and the
transaction that we know how todraft the documents, that we can
identify some of thoseintegration issues that Kelly
talked about.
(12:59):
And everybody has got their ownchecklist, but the way I think
about it is, okay, of thesehuman assets, who are the
employers?
Who are the possible employertype entities involved?
And what does that mean?
So I'm talking about staffingagencies, locums companies,
labor unions.
(13:20):
I'm also trying to figure outwho are the employees?
Who are those assets?
And what am I looking at interms of employment or
contractors?
Or are they just medical staffand not really employees?
And so you're trying to to lookat all the aspects of those
human assets.
(13:41):
Who are the employees and whereare they?
So in a remote workforce, yourclinical people are probably not
working remotely.
They might be, but you've got alot of administrative people in
health systems that are in factworking remotely.
And so from a state levelperspective, because that's
where it all is now, 50 states,50 different approaches, what
(14:02):
are you buying into in terms ofnew geographies, You know, what
do you need to understand aboutthat and how you try to
harmonize across the geography?
So where are these assets?
what limitations might be builtinto your ability to manage
these assets?
And I'm thinking there aboutthings like, do we have at-will
(14:23):
employees or do we talk aboutemployment agreements with
certain people?
Do we have limitations orrestrictions on how we can
manage some of these assets?
Is there a severance plan?
Are there other things that weneed to know that make us kind
of in a longer term relationshipwith any of these assets that we
might otherwise expect.
(14:44):
You're thinking about what toallocate in the deal in terms of
ongoing liabilities and thingsthat you could be inheriting
either knowingly or unknowingly.
So I'm thinking about verycomplicated wage and hour issues
in the healthcare space,misclassification of employees
versus contractors, overtimeissues, all those kinds of
(15:05):
things.
And we see healthcare systemsbeing sued over pay quite often.
And then some of the red flagswe're also looking for that
could impact integration thatKelly's going to discuss more
later.
And so it's things like equalpay laws, different paid time
off programs, state, again, kindof the multi-state issues, but
(15:29):
states requiring different typesof sick leave or insurance for
sick leave.
So you're trying to get anunderstanding of what you might
be biting off from a diligenceperspective.
Tom, you previewed at thebeginning, I think there are
some new things that start tohit the list now with the change
in administration and just someof the things that have been
(15:50):
going on across the country.
And a good example of that isrestrictive covenants.
And so we're always in diligencelooking at restrictive covenants
like non-competes andnon-solicitation agreements.
Many states have different rulesfor practitioners.
Those rules may or may not applyto the legal administrator
leadership.
(16:10):
So we are...
trying to understand what rulesapply, but then the rules are
constantly changing.
So three days ago in Colorado,the governor signed an amendment
to Colorado's non-compete law.
Traditionally in Colorado, youhaven't been able to prevent
physicians from practicingmedicine, but there's a
provision in our statute thatallows you to seek damages from
(16:34):
someone resulting fromcompetition that would include a
physician.
But as of three days ago, thisnew law says that that pay to
compete language has beenremoved from our statute.
So you were looking atnon-competes for the same types
of people in the same state thatare going to look different
depending on when theenforceability will be different
(16:56):
depending on when they weresigned.
So Kelly, I know you've had somerecent experience with
non-competes in Colorado andMontana.
Would you share some of thatwith us?
SPEAKER_02 (17:07):
Yeah, you bet, Barb.
So this is definitely a timelyand interesting issue that we've
been working through in myorganization.
And being multi-state in ourgeography, the laws on this
obviously vary state by state.
And we had a tough legislativesession, both in Colorado and in
Montana, with both statespassing laws that affect
non-competes.
(17:27):
And so we're working throughsort of the the implementation
of those statutory changes.
And while the laws are notretroactive, you know, you on
one hand need to be lookingthrough and updating contract
templates for new agreements andto remove the restrictive
covenants.
And then also, you know, havingto deal with sort of the
existing contracts, workingthrough whether the organization
(17:47):
wants to pursue a uniformapproach to non-competes and not
enforce any of them or continueto enforce non-competes in
contracts executed prior to theeffective date of the new laws,
which ultimately is reallyimpactful, I think, on culture.
And so I think understandingthese nuances and aligning with
the target, not only sort of onthe legal requirements, right,
as these laws are changing, butalso looking at their processes
(18:09):
and how they're managing thatmore broadly and what the
organizational approaches Ithink is also very relevant.
SPEAKER_03 (18:17):
Yeah.
So thank you.
I think that's right.
And it's more broad even than wecould do a whole webinar on
that.
It's more than just Colorado andMontana.
It's really a wave across thecountry.
And so that's an area that wesee a lot of change.
So I think just to wrap up kindof my diligence comments, in
addition to the changinglegislation around the country,
(18:39):
I think there are some otherthings that are hitting the list
a little bit differently maybethan they used to.
And one of those is going to bearound work authorizations and
immigration and recruitingvisas, all those areas are a
little bit more in flux thanthey have traditionally been.
And so I think that's somethingthat's important to understand
(19:02):
about the target and how that'sbeen managed.
I think you're also looking athow the target is is thinking
about work authorization andtheir workforce.
And so to just be perfectlyblunt, what happens when police
show up at the facility or ICEshows up at the facility?
(19:23):
How is the target handling thosekinds of very human issues?
And is that something thatyou're gonna be able to be
aligned with?
But I think that's something I'mnot sure I would have asked
about before, but it's certainlysomething I would put on the
list of things to consider.
And then finally, I think we'dbe looking at DEI as part of
(19:44):
diligence now.
I mean, again, traditionally, Ithink I would have just sort of
said, oh, great, they have that.
They know what it means.
And that's a good thing.
Now, you know, there's obviouslybeen a lot of challenges to
that.
Organizations are dropping it,changing it.
So I think I would want to knowmore about how they view their
DEI practices and policies.
(20:05):
Do they have any that need to bechanged?
Have they recently dropped somein a way that you're going to
want to understand that as wellfrom a workforce and culture
perspective.
So unless I've forgottenanything, that kind of wraps up
what I'm thinking about, Tom,with due diligence.
SPEAKER_00 (20:23):
Yeah, great.
Again, great insights as well,Barb.
And as you, again, sharing yourthoughts, a couple of things
came to mind on my end as well.
And one is, just from a in a duediligence standpoint, so much is
changing right now that ifyou're getting into a
(20:43):
transaction, it's so importantto understand through this
process, you know, whether,again, if you're the, let's say
you're the buyer or theacquirer, kind of where the
other organization is.
And that can present legal riskin some instances and others
not, but it's almost soimportant to understand these
(21:04):
issues and to understand wherethe risks exist so that as
things change, becauseorganizations just take a while
sometimes, right?
They may be addressing itprospectively, but there's a
whole bunch of legacy stuff thatneeds to be looked at to make
sure.
And I think about that in thenon-compete, right?
You could have updated all youremployment agreements going
forward, but you really don'thave a strategy.
And for example, in Colorado,you're you know there's
(21:25):
penalties if you try to enforcea unlawful restricted covenant
again there's some grant youknow there's some allowance for
renewals and things like thatbut just being attuned to it as
it evolves is important and thenbarb just on your other comments
i think they were great becauseyou know on dei immigration we
understand there may be legalimplications but sometimes we
don't really know kind of wherethings will ultimately end up
(21:48):
and just in diligence you canidentify these things so that
you can have the conversation soculturally you feel your lines.
And then going forward, youknow, you feel like from an
integration standpoint, it willbe easier to kind of get to
where you need to be as the dustsettles in some of these areas.
So great, great insight.
(22:08):
So, you know, I talked a littlebit about kind of the
transactions itself and whereare we addressing labor and
employment matters kind of inthe deal documents, in the
definitive agreement.
So again, you've gone throughthe The pre-diligence process,
you've done your diligence, andcertainly diligence is going to
inform what you include in thetransaction or the definitive
documents at the end of the day.
(22:29):
But I think there's also somekey areas, and not a lot of
this, I would say, would havechanged based on what we've seen
over the last few months, butstill kind of I think they're
important to highlight.
And Kelly mentioned kind of thefirst one in her comments, and
that will set the toneultimately for this and some of
the diligence as well as aroundleadership retention and
(22:50):
transition, right?
I mean, you'll have probablytalked about it as part of the
pre-diligence and even thediligence phase.
You'll kind of have anunderstanding as to what the
contracts say and other thingsfor your leaders so that you can
tee this up.
But really in the definitiveagreements, you should take all
that together and outline whatis going to occur from a
(23:12):
leadership to the extent youcan.
And there's some organizationsin a transaction that put this
off and that's certainly a wayto do it.
There's others that get ahead ofit pretty quick, understanding
that it may be better to makesome decisions around that early
on to dictate how thetransaction and ultimately the
integration will go.
So to the extent that is thedecision, hardwiring that to
(23:32):
some agreement withconsideration of the employment
agreements, the severance, thenon-competes, payouts, et
cetera, for certain leaders whomay be transitioning is a good
thing to do in the definitiveagreement.
Another big one is again, justgoing back to the thought around
how all of this affects theemployees at the end of the day.
And most of those employeesaren't at the table in these
(23:54):
negotiations, but they'rerelying on the leaders to
negotiate on their behalf.
They want to know what's goingto happen to my pay, what's
going to happen to my benefits,to my PTO, to my retirement at
the end of the day.
So I think it's really importantto to be concise, to have
thought through those issues, toarticulate with sufficient
detail in the definitiveagreements kind of what the
(24:16):
agreement will be around thoseitems.
Again, are you going to keep paypractices?
Are you going to merge paypractices?
You have to do some diligencearound retirement plans.
Well, how do those transitionover?
State law may dictate what youdo with PTOs.
So evaluating those is, again,part of the diligence process,
(24:36):
the transaction discussions.
and then memorializing it in thedefinitive agreements.
I think that's important.
So all the parties understandwhat the agreement is and so
that they can strategicallycommunicate that to employees
and others that'll be affectedas part of the transaction.
You know, going to the morenitty gritty a little bit, I
think some of the common repsand warranties you'll want to
(24:57):
see in the document still andwhy it's important and these
might seem like boilerplate tosome degree.
It's important because as youinsist on certain reps and
warranties, particularly aroundlabor and employment issues you
do a couple of things.
One, you drive disclosures onthings that you may want to know
about in the disclosureschedules to the transaction or
(25:18):
definitive documents.
And then you also may lead forthose things to get resolved,
depending on how they're seriousas well prior to closing.
And then finally, at the end ofthe day, if there is a breach or
something happenspost-transaction, obviously if
there's breaches or reps orwarranties tied to the indemnity
(25:39):
provisions, you'll have access,at least on the buyer side, to
recourse.
So that's why it's important tokind of think through and just
get to some of the most basicreps and warranties for labor
and employment issues.
And those typically, just aquick list, making sure you have
a rep and warranty that theseller has provided complete
information around labor andemployment matters, there's no
(26:00):
threatened labor and employmentclaims, the seller has been
compliant with labor andemployment laws, compliant with
benefit plans, ERISA, et cetera.
There's no retention agreements,bonus agreements, or
resignations with key employees.
And there may be, but again,you're driving some disclosure
schedule requirements there.
(26:21):
No employees are represented byunions.
So again, if there are, you'llget a disclosure around that.
And other things that can bedealt with, and I think are
related a little bit to whatBarb was speaking to, and have
been something to address, butprobably more so to be aware of,
and maybe address an differentway or I-9s, how those will
transition H-1B and other visatransitions, how those are going
(26:46):
to work.
And then you always have yourWARN Act notices, how those are
going to be provided, how laborunion matters will be addressed.
And then in a lot of cases, ifI'm the buyer, I'm wanting a
comprehensive disclaimer ofliabilities for employment
matters, either as a rep orwarranty or maybe as a covenant
(27:08):
or whatnot.
So again, those are things tocontinue to focus on in these
transactions that live more soin the labor and employment
space, but are really importantto making sure they're addressed
and then included in thedocuments themselves.
So Kelly, you mentioned, justwanted to transition a bit to
(27:28):
integration, right?
You, in your opening comments,obviously were in the pre
diligence phase, but probablyalready thinking about
integration because really, Ithink at the end of the day,
it's fun for the businesspeople, the lawyers to like put
the deal together, do duediligence, like burn the late
night oil, give high fives atthe end, have the closing
(27:49):
dinner.
But integration is really goingto determine whether the
transaction is successful andwhether the organizations can
use it as a springboard to dobetter things and realize their
missions and their purposes.
So I'd love to kind of hear yourthoughts again on integration
and kind of where the importantWhat points are there?
SPEAKER_02 (28:11):
Yeah, and I always joke, you know, after you sign
the deal, you can't just pop thechampagne, right?
You can't just give each otherhigh fives.
It's kind of when the real workstarts and you need to, you
know, come up with a plan toreally take action on what was
memorialized in the documentsthat you described and sort of
work through the operationalpieces and putting it all into
practice.
(28:31):
And, you know, being in-house,unlike you and Barb, I actually
live with the deals and see thison the day to day.
So, you know, I do think it'sjust a critical piece of of all
of this and just vital tounlocking the full potential of
the deal and also mitigatinglegal risk.
And I think I would maybe startby sort of centering on just the
(28:52):
proactive approach to the areasidentified in prediligence and
diligence of the phases thatBarb described, right?
At a high level, to the extentduring prediligence, you
identify there were gaps interms of the party's mission or
values.
I think that's important toaddress, just really aligning
the organizational culture andthe vision and the work just to
(29:15):
create a shared sense ofpurpose.
I think embracing that why andthe purpose behind the
organization and what it doesand how it delivers healthcare
services to patients andcommunities, that's what
ultimately drives employeeengagement.
And I think when you have a highlevel of engagement, you reduce
your legal risk by enhancingoperational efficiencies and
(29:38):
really fostering a more positivework culture.
And it's a tall order.
I think it's a challenge forhealthcare organizations to do
that.
But I think with strongleadership, that's really adept
in change management and astrong integration team that can
sort of focus on aligning theoperations, including HR
technology, data migration,employment policies, just to
(30:00):
make sure there's parity andequity, streamlining processes
and practices, and doing allthat in a timely manner.
I think ultimately,Organizations that have
different approaches to patientcare or clinical protocols and
maybe organizations that lackprocess to identify what might
be best practices, how toharmonize that work, that's a
(30:23):
place you tend to see a lot offriction.
And that can lead to increasedturnover or just a generally
frustrated or disengagedworkforce.
So I think putting a key eyetowards integration of the
workforce, making a plan,setting targets for a addressing
systems, for addressing benefitplans, redundant resources, how
(30:45):
to handle employment engagementissues and retention concerns,
how to address the human issuesthat Barb covered on DEI and
immigration issues.
you know, oftentimes on thelegal side where we see some of
this play out is on theharmonization of compensation
and benefits.
And when there are, you know,sort of the different categories
that Barb identified that comeinto play, how organizations
(31:07):
sort of manage those state lawdifferences and come up with a
plan that aligns the twoorganizations.
And I think maybe just a finalpoint on integration and
managing all these movingpieces.
And Tom, you alluded to it.
I think, you know, transparentcommunication is crucial.
And that means really reallyclear communication and setting
expectations with employeesregarding the changes to
(31:29):
policies, to compensation, tobenefits, and then creating an
engagement plan that reallyfosters trust and sort of
minimizes that potentialemployee uncertainty and helps
protect against environment thatreally could lend itself to
potential employment claims.
So I think integration is a longprocess.
It's ongoing and requires just alot of effort and ongoing
(31:56):
monitoring to ensure that it'ssuccessful.
SPEAKER_03 (32:00):
And I think, Kelly, I could add one point there.
We talk about an integrationthat's not smooth leading to the
risk of employee claims.
I would also add leading to arisk of labor union involvement
in your workplace, right?
So the unhappy or the uncertainemployees are the ones that are
more likely to listen to thelabor union.
(32:20):
And so if you don't want to bein a situation of having someone
else help you run your business,that's a big consideration as
well.
SPEAKER_00 (32:30):
Well, I think, Barb and Kelly, you point out just
this broader theme that Imentioned early on in the
discussion.
And that is if you say, Barb,poor integration or prolonged
integration or whatever it maybe, may result in labor unions.
But I mean, really, if we boilit down, the people are what,
(32:52):
you know, poorly executed orprolonged or protracted
integration affects at the endof the day, right?
If it's not executed well,they're the ones, right?
I love that you guys pointedthis out.
They're the ones that you knowwill be the ones to probably
look at what's going on and andif it's something that's you
know if the the pay practiceshaven't been integrated well
(33:14):
they're going to look at thatyou know my pay stub said you
said i was getting this but nowi'm getting this i'm going to
look into that and if there'sbeen some misstep there there's
risk of a claim right if Theyfeel like they're being treated
poorly.
They may think to unionize.
So there are all of thesedynamics and kind of reasons to
why, you know, just on paper,integration shouldn't just be a
(33:37):
good thing and be done well.
It can really result not just inthe work for, to your point,
Kelly, not working at the top ofits level, but also the risk of
a potential claim.
So I love it.
It's great.
SPEAKER_03 (33:51):
And then also impact on patient care, right?
The ultimate thing that thefacilities are thinking about is
the patient care and theunhappy, uncertain employees end
up impacting the ultimate goalof what you're trying to
accomplish as a healthcareemployer.
SPEAKER_00 (34:06):
Yeah.
UNKNOWN (34:07):
Yeah.
SPEAKER_00 (34:07):
And that is a great point to leave on, Barb, because
as we think about, well, why dothese things matter that we're
talking about?
Why is it important to beintentional about them?
Because sure, we want tomitigate, we want to put
together, you know, well thoughtout transactions that are
documented appropriately,they're integrated well, but The
(34:27):
more you do that, the more youcan deliver on your mission, the
more you can focus on patientcare and get back to that as
soon as possible, which isprobably the most important
thing, most of these at the endof the day.
So with that, we'll go ahead andwrap up.
Thank you all the attendeestoday who listened to our
(34:48):
discussion, to this podcast.
Again, we've put out apresentation.
We put out an article.
So if you're interested inseeking other content on this
topic, please look at the HLALabor and Employment Practice
Group's materials.
And with that, we will finishout and wish everyone a great
rest of their day.
SPEAKER_03 (35:07):
Thanks, guys.
It was fun.
Thank you.
SPEAKER_01 (35:16):
To subscribe and add this private podcast feed to
(35:42):
your podcast app, go toAmericanHealthLaw.org slash
Daily Podcast.
you
This episode of AHLA's Speaking of Health Law is
brought to you by AHLA membersand donors like you.
For more information, visitAmericanHealthLaw.org.
SPEAKER_00 (00:17):
Welcome everyone to this podcast titled Workforce
Issues in Healthcare Transactionthat is provided by the American
Health Law Association.
We are excited to be here tospeak to this topic today.
My name is Tom Donahoe and I ama shareholder at Hall Renderer
Killian Heath and Lyman in itsDenver office.
(00:38):
And I'm also a vice chair ofHLA's labor and employment
section.
My practice primarily focuses onstrategic transactions and So
the topic that we'll bediscussing today is of great
interest to the work that I doon a day-to-day basis.
With that, I'll turn it over toKelly to go ahead and introduce
herself.
SPEAKER_02 (00:56):
Hi, I'm Kelly Adams.
I'm the Region General Counselfor Intermountain Health, a
nonprofit healthcare systembased in the Intermountain West
with 32 hospitals and about 385clinics across its service
areas.
In my role, I oversee all thelegal work in the Peaks region,
which includes Intermountain'soperations in Colorado and
Montana, In my practice, Iprovide legal and strategic
(01:19):
advice on a wide range oftransactional, regulatory, and
operational matters with aspecialized focus on mergers,
acquisitions, dispositions,strategic growth transactions,
partnerships, affiliations, andjoint ventures.
I've been with Intermountainsince January of 2020.
Prior to that, I was in privatepractice with a law firm called
(01:40):
Ackerman.
Before starting my legal career,I worked in research and program
development for the Universityof Colorado Hospital, an
academic medical center.
It's great to be here.
SPEAKER_03 (01:49):
Okay, well, last but certainly not least is me.
I'm Barb Grandjean.
I am a partner in the Denveroffice of Hush Blackwell.
My specialty is labor andemployment, and I sit in our
healthcare strategic businessunit.
So some of the things that we'regoing to talk about today,
particularly on the duediligence front, are things that
(02:10):
I am doing frequently as part ofmy regular practice.
SPEAKER_00 (02:17):
Great.
Well, thanks, Barb.
Thanks, Kelly.
So today's podcast is afollow-up to a couple of
conversations and publicationswe have had on this topic
previously.
We gave a webinar back inNovember of 2024 titled Labor
and Employment Issues.
and healthcare transactions.
And then we also published anarticle earlier this year
(02:39):
through the Labor and EmploymentPractice Group titled Workforce
Issues and HealthcareTransactions, similar to this
podcast.
So if there's interest, pleasego ahead and read or listen to
those presentations andarticles.
But since we've really beentalking about and writing about
this topic, there has been a lotof developments in this space as
(03:01):
As one would imagine, as of thisyear, earlier this year and in
the last few months, there'sbeen a handful, well, there's
been a lot of healthcaretransactions and a few notable
ones just to highlight on thelarger scale and the hospital
health system space of theNorthwell.
Nuvon's merger closed earlierthis year.
(03:21):
You had Prime Healthcare whoacquired facilities from
Ascension Health in the Chicagoand Illinois area and then
Sanford Health and MarshfieldClinic clinic merged together.
So those are biggertransactions.
And like I said, there's been ahandful of other ones that have
proceeded and closed as well.
(03:42):
And others have fallen apart atthe same time.
So this continues to be anactive space.
And so the issues that we'lltalk about today, particularly
as it relates to laboremployment, no doubt have
continued to impact thosetransactions.
And then maybe more importantly,and certainly that weighs on
this space, we had a change ofadministration.
I hope everyone is aware of thatas of the beginning of this
(04:07):
year.
And with any change ofadministration comes a number of
new policies, obviously agencychanges, which we are all seeing
and in the middle of right now,and that is impacting a lot of
areas of the industry, but thereare some specific implications
to the labor and employmentspace as well.
(04:27):
So really with today'sdiscussion, we want to talk
through some of the things we'vespoken to and written about in
the webinar and in the article,but at the same time, want to
address and weave in some of thedevelopments that have taken
place over the last few months,and like I said, keep this topic
pretty fresh.
So with that, Kelly, love you sospoke and I know you contributed
(04:50):
to the article on pre-duediligence and some of the
important themes or topics thatshould be addressed in that
phase of a healthcaretransaction.
So we'd love to kind of hearyour thoughts around that area
and some of the things that ouraudience should be focusing on
(05:10):
there.
SPEAKER_02 (05:12):
Absolutely.
Yeah.
And maybe just to set the stagegenerally, right?
I think early multifaceted duediligence or prediligence, it
really helps the partiesidentify issues up front and
particularly in the climate thatyou described.
It's important to sort of get ahandle on those issues early on
and think through how that mightimpact how you approach or
(05:33):
decide to move forward with thedeal overall or inform the
integration process, which we'lltalk about a bit more later.
So Prediligence really should beshaped by the value proposition
and the drivers for the deal.
So is it about cost efficiency?
So you need sort of rigorousfinancial management and
operational discipline.
(05:53):
Is it about driving innovation?
Or is the target attractivebecause of talent capabilities?
I think those type of questionsreally help prioritize what
you're looking for.
And then specifically in thecontext of the labor and
employment context, I think inall of those scenarios,
especially the last, there'sreally a strong need to
understand and plan for how toretain key leaders and employees
(06:17):
and how to manage labor andemployment issues to
successfully execute on the dealand to integrate the
organizations and to reallycapitalize on the opportunities
to drive business objectives ofthe transaction.
And I think when you're thinkingabout healthcare M&A in
particular, culture andcompatibility are critically
important, especially in thecurrent environment.
(06:39):
And I think they are often stillunderestimated health systems,
hospitals, clinics, they'relabor-intensive and
people-driven.
And we're in a time wherethey're facing some pretty
significant headwindsfinancially on the reimbursement
front with threats to Medicaid.
And looking at the trends, youmentioned several transactions,
but if you look at the overalltrend in the first quarter of
(07:00):
2025, there's pretty lowactivity in the M&A space across
markets, including inhealthcare.
And I think Organizationsgenerally are hitting the brakes
with moving forward transactionsor exploring new opportunities.
And certainly I think overallmarket volatility, economic
uncertainty around policychanges from the new
(07:21):
administration that will affecthealthcare delivery.
That's certainly driving thattrend, I believe, but it also
highlights the need, I think, tobe really strategic in selecting
a partner and making sure youhave the right leadership, the
right workforce, the rightprocesses in place to help
weather that storm together.
(07:41):
So It's good to ensure, again,sort of the right tools and
processes during pre-diligenceto assess not only kind of the
standard issues like financials,but also organizational fit and
understanding sort of therespective mission and values
that come with the twoorganizations, the workplace
culture, management style,employee engagement.
(08:03):
I think from a legalperspective, misalignment on
some of these issues couldincrease the risk of
discrimination or harassmentclaims when you're combining
potentially two very differentworkplace practices or
organizational values beyond thetwo groups.
So I think beyond that too, on abroader level, those issues
(08:26):
could have a big bearing on theoverall success of the deal or
the merger.
I think too, thinking throughsort of from an operations
perspective to tie this themeback to some of the challenges
in the industry.
This last year in 2024, therewere a historic number of
healthcare transactionsinvolving financially distressed
organizations.
(08:46):
So I think those dealsrepresented about 30% of
healthcare M&A.
And I think that's reflective ofworkforce challenges across the
industry, things like high laborcosts, talent shortages,
clinical burnout.
And I think certainlyunderstanding those challenges
and how those are being managedwithin an organization is a key
thing to look at during aprediligence.
(09:08):
We've also seen a lot ofturnover on the leadership front
across hospitals and healthsystems, high number of CEO
exits this year.
So just identifying early on inthe process, you know, are there
flight risks that mightdestabilize the organization and
figuring out sort of how toaddress those proactively.
And I think, you know, we'lltalk in more detail around
(09:29):
integration, everyone's favoritetopic, but I think something to
look at during prediligence toois integration risk, right?
Are, are there are things aboutthe organizational structure or
the operations themselves thatare going to make it difficult
to fully integrate theorganizations.
Again, so how is leadershipretention being managed?
I think that one can maybe cutboth ways, right?
(09:51):
On one hand, it's important tostabilize leadership to help
enable a smoother integration,but keeping a leadership team
fully intact for bothorganizations for a protracted
period of time could stallintegration and drive the two
organizations to continue tooperate somewhat independently
rather than really truly fullycombining.
(10:12):
And along with the leadership,looking at the workforce
capabilities and the structure,right?
Is the reporting structure suchthat it'll be challenging to
combine the workforces?
Are there redundancies?
Do there need to be plannedreductions?
I think getting an inventory Anddoing some preliminary review of
HR systems and policies early oncan sort of help set the stage
(10:34):
and prepare for a smootherintegration process.
So those are just a fewdifferent aspects of
prediligence in the labor andemployment context and give you
a flavor of what are some of thethings you might dig into deeper
during diligence and thenultimately have to address as
you negotiate the transactionand manage the deal if it closes
and gets to the integrationphase.
SPEAKER_00 (10:56):
Those are great insights, Kelly.
As you're sharing your thoughts,I think the one variable that is
inevitable but sometimesundervalued is that humans run
healthcare.
At the end of the day, theseorganizations, their leaders,
the employees are reallyprobably the greatest asset.
(11:18):
as you get in, not just theprediligence, but I know we'll
talk about other parts or phasesof the transactions.
It's just so important to bemindful of that because how you
manage that, and again, I don'twant to commoditize people, but
that manage that asset couldhave significant bearing on
whether you will realize whatyou think you're going to
realize as part of thattransaction.
(11:40):
So I love some of those insightsand how some of those things
should be assessed up front.
And particularly in a slowmoving environment, it may be
that folks folks are learningfrom some of the transactions
that have occurred or that havenot occurred and maybe
evaluating some of these thingsa little bit more and maybe a
little bit slower to, inaddition to considering some of
(12:00):
the other factors you mentioned,jump into a big transaction
altogether.
So great insights.
Barb, I know you talked aboutkind of where folks should put
their efforts, focus in that duediligence.
As you get past the prediligencephase, done these assessments,
you think things are lookinggood.
(12:20):
Let's get to due diligence.
Let's spend the time andresources.
So love to hear your thoughtson, you know, where those
focuses, whether they should bein the same places we talked
about or wrote about previously,or what new things should be
considered giving some of thechanges that have been, that
have occurred over the last fewmonths.
SPEAKER_03 (12:39):
Yeah, Tom, thank you.
So when I'm advising andmanaging due diligence from the
legal perspective for ourclients, I'm trying to make sure
that we have enough informationabout the human assets and the
transaction that we know how todraft the documents, that we can
identify some of thoseintegration issues that Kelly
talked about.
(12:59):
And everybody has got their ownchecklist, but the way I think
about it is, okay, of thesehuman assets, who are the
employers?
Who are the possible employertype entities involved?
And what does that mean?
So I'm talking about staffingagencies, locums companies,
labor unions.
(13:20):
I'm also trying to figure outwho are the employees?
Who are those assets?
And what am I looking at interms of employment or
contractors?
Or are they just medical staffand not really employees?
And so you're trying to to lookat all the aspects of those
human assets.
(13:41):
Who are the employees and whereare they?
So in a remote workforce, yourclinical people are probably not
working remotely.
They might be, but you've got alot of administrative people in
health systems that are in factworking remotely.
And so from a state levelperspective, because that's
where it all is now, 50 states,50 different approaches, what
(14:02):
are you buying into in terms ofnew geographies, You know, what
do you need to understand aboutthat and how you try to
harmonize across the geography?
So where are these assets?
what limitations might be builtinto your ability to manage
these assets?
And I'm thinking there aboutthings like, do we have at-will
(14:23):
employees or do we talk aboutemployment agreements with
certain people?
Do we have limitations orrestrictions on how we can
manage some of these assets?
Is there a severance plan?
Are there other things that weneed to know that make us kind
of in a longer term relationshipwith any of these assets that we
might otherwise expect.
(14:44):
You're thinking about what toallocate in the deal in terms of
ongoing liabilities and thingsthat you could be inheriting
either knowingly or unknowingly.
So I'm thinking about verycomplicated wage and hour issues
in the healthcare space,misclassification of employees
versus contractors, overtimeissues, all those kinds of
(15:05):
things.
And we see healthcare systemsbeing sued over pay quite often.
And then some of the red flagswe're also looking for that
could impact integration thatKelly's going to discuss more
later.
And so it's things like equalpay laws, different paid time
off programs, state, again, kindof the multi-state issues, but
(15:29):
states requiring different typesof sick leave or insurance for
sick leave.
So you're trying to get anunderstanding of what you might
be biting off from a diligenceperspective.
Tom, you previewed at thebeginning, I think there are
some new things that start tohit the list now with the change
in administration and just someof the things that have been
(15:50):
going on across the country.
And a good example of that isrestrictive covenants.
And so we're always in diligencelooking at restrictive covenants
like non-competes andnon-solicitation agreements.
Many states have different rulesfor practitioners.
Those rules may or may not applyto the legal administrator
leadership.
(16:10):
So we are...
trying to understand what rulesapply, but then the rules are
constantly changing.
So three days ago in Colorado,the governor signed an amendment
to Colorado's non-compete law.
Traditionally in Colorado, youhaven't been able to prevent
physicians from practicingmedicine, but there's a
provision in our statute thatallows you to seek damages from
(16:34):
someone resulting fromcompetition that would include a
physician.
But as of three days ago, thisnew law says that that pay to
compete language has beenremoved from our statute.
So you were looking atnon-competes for the same types
of people in the same state thatare going to look different
depending on when theenforceability will be different
(16:56):
depending on when they weresigned.
So Kelly, I know you've had somerecent experience with
non-competes in Colorado andMontana.
Would you share some of thatwith us?
SPEAKER_02 (17:07):
Yeah, you bet, Barb.
So this is definitely a timelyand interesting issue that we've
been working through in myorganization.
And being multi-state in ourgeography, the laws on this
obviously vary state by state.
And we had a tough legislativesession, both in Colorado and in
Montana, with both statespassing laws that affect
non-competes.
(17:27):
And so we're working throughsort of the the implementation
of those statutory changes.
And while the laws are notretroactive, you know, you on
one hand need to be lookingthrough and updating contract
templates for new agreements andto remove the restrictive
covenants.
And then also, you know, havingto deal with sort of the
existing contracts, workingthrough whether the organization
(17:47):
wants to pursue a uniformapproach to non-competes and not
enforce any of them or continueto enforce non-competes in
contracts executed prior to theeffective date of the new laws,
which ultimately is reallyimpactful, I think, on culture.
And so I think understandingthese nuances and aligning with
the target, not only sort of onthe legal requirements, right,
as these laws are changing, butalso looking at their processes
(18:09):
and how they're managing thatmore broadly and what the
organizational approaches Ithink is also very relevant.
SPEAKER_03 (18:17):
Yeah.
So thank you.
I think that's right.
And it's more broad even than wecould do a whole webinar on
that.
It's more than just Colorado andMontana.
It's really a wave across thecountry.
And so that's an area that wesee a lot of change.
So I think just to wrap up kindof my diligence comments, in
addition to the changinglegislation around the country,
(18:39):
I think there are some otherthings that are hitting the list
a little bit differently maybethan they used to.
And one of those is going to bearound work authorizations and
immigration and recruitingvisas, all those areas are a
little bit more in flux thanthey have traditionally been.
And so I think that's somethingthat's important to understand
(19:02):
about the target and how that'sbeen managed.
I think you're also looking athow the target is is thinking
about work authorization andtheir workforce.
And so to just be perfectlyblunt, what happens when police
show up at the facility or ICEshows up at the facility?
(19:23):
How is the target handling thosekinds of very human issues?
And is that something thatyou're gonna be able to be
aligned with?
But I think that's something I'mnot sure I would have asked
about before, but it's certainlysomething I would put on the
list of things to consider.
And then finally, I think we'dbe looking at DEI as part of
(19:44):
diligence now.
I mean, again, traditionally, Ithink I would have just sort of
said, oh, great, they have that.
They know what it means.
And that's a good thing.
Now, you know, there's obviouslybeen a lot of challenges to
that.
Organizations are dropping it,changing it.
So I think I would want to knowmore about how they view their
DEI practices and policies.
(20:05):
Do they have any that need to bechanged?
Have they recently dropped somein a way that you're going to
want to understand that as wellfrom a workforce and culture
perspective.
So unless I've forgottenanything, that kind of wraps up
what I'm thinking about, Tom,with due diligence.
SPEAKER_00 (20:23):
Yeah, great.
Again, great insights as well,Barb.
And as you, again, sharing yourthoughts, a couple of things
came to mind on my end as well.
And one is, just from a in a duediligence standpoint, so much is
changing right now that ifyou're getting into a
(20:43):
transaction, it's so importantto understand through this
process, you know, whether,again, if you're the, let's say
you're the buyer or theacquirer, kind of where the
other organization is.
And that can present legal riskin some instances and others
not, but it's almost soimportant to understand these
(21:04):
issues and to understand wherethe risks exist so that as
things change, becauseorganizations just take a while
sometimes, right?
They may be addressing itprospectively, but there's a
whole bunch of legacy stuff thatneeds to be looked at to make
sure.
And I think about that in thenon-compete, right?
You could have updated all youremployment agreements going
forward, but you really don'thave a strategy.
And for example, in Colorado,you're you know there's
(21:25):
penalties if you try to enforcea unlawful restricted covenant
again there's some grant youknow there's some allowance for
renewals and things like thatbut just being attuned to it as
it evolves is important and thenbarb just on your other comments
i think they were great becauseyou know on dei immigration we
understand there may be legalimplications but sometimes we
don't really know kind of wherethings will ultimately end up
(21:48):
and just in diligence you canidentify these things so that
you can have the conversation soculturally you feel your lines.
And then going forward, youknow, you feel like from an
integration standpoint, it willbe easier to kind of get to
where you need to be as the dustsettles in some of these areas.
So great, great insight.
(22:08):
So, you know, I talked a littlebit about kind of the
transactions itself and whereare we addressing labor and
employment matters kind of inthe deal documents, in the
definitive agreement.
So again, you've gone throughthe The pre-diligence process,
you've done your diligence, andcertainly diligence is going to
inform what you include in thetransaction or the definitive
documents at the end of the day.
(22:29):
But I think there's also somekey areas, and not a lot of
this, I would say, would havechanged based on what we've seen
over the last few months, butstill kind of I think they're
important to highlight.
And Kelly mentioned kind of thefirst one in her comments, and
that will set the toneultimately for this and some of
the diligence as well as aroundleadership retention and
(22:50):
transition, right?
I mean, you'll have probablytalked about it as part of the
pre-diligence and even thediligence phase.
You'll kind of have anunderstanding as to what the
contracts say and other thingsfor your leaders so that you can
tee this up.
But really in the definitiveagreements, you should take all
that together and outline whatis going to occur from a
(23:12):
leadership to the extent youcan.
And there's some organizationsin a transaction that put this
off and that's certainly a wayto do it.
There's others that get ahead ofit pretty quick, understanding
that it may be better to makesome decisions around that early
on to dictate how thetransaction and ultimately the
integration will go.
So to the extent that is thedecision, hardwiring that to
(23:32):
some agreement withconsideration of the employment
agreements, the severance, thenon-competes, payouts, et
cetera, for certain leaders whomay be transitioning is a good
thing to do in the definitiveagreement.
Another big one is again, justgoing back to the thought around
how all of this affects theemployees at the end of the day.
And most of those employeesaren't at the table in these
(23:54):
negotiations, but they'rerelying on the leaders to
negotiate on their behalf.
They want to know what's goingto happen to my pay, what's
going to happen to my benefits,to my PTO, to my retirement at
the end of the day.
So I think it's really importantto to be concise, to have
thought through those issues, toarticulate with sufficient
detail in the definitiveagreements kind of what the
(24:16):
agreement will be around thoseitems.
Again, are you going to keep paypractices?
Are you going to merge paypractices?
You have to do some diligencearound retirement plans.
Well, how do those transitionover?
State law may dictate what youdo with PTOs.
So evaluating those is, again,part of the diligence process,
(24:36):
the transaction discussions.
and then memorializing it in thedefinitive agreements.
I think that's important.
So all the parties understandwhat the agreement is and so
that they can strategicallycommunicate that to employees
and others that'll be affectedas part of the transaction.
You know, going to the morenitty gritty a little bit, I
think some of the common repsand warranties you'll want to
(24:57):
see in the document still andwhy it's important and these
might seem like boilerplate tosome degree.
It's important because as youinsist on certain reps and
warranties, particularly aroundlabor and employment issues you
do a couple of things.
One, you drive disclosures onthings that you may want to know
about in the disclosureschedules to the transaction or
(25:18):
definitive documents.
And then you also may lead forthose things to get resolved,
depending on how they're seriousas well prior to closing.
And then finally, at the end ofthe day, if there is a breach or
something happenspost-transaction, obviously if
there's breaches or reps orwarranties tied to the indemnity
(25:39):
provisions, you'll have access,at least on the buyer side, to
recourse.
So that's why it's important tokind of think through and just
get to some of the most basicreps and warranties for labor
and employment issues.
And those typically, just aquick list, making sure you have
a rep and warranty that theseller has provided complete
information around labor andemployment matters, there's no
(26:00):
threatened labor and employmentclaims, the seller has been
compliant with labor andemployment laws, compliant with
benefit plans, ERISA, et cetera.
There's no retention agreements,bonus agreements, or
resignations with key employees.
And there may be, but again,you're driving some disclosure
schedule requirements there.
(26:21):
No employees are represented byunions.
So again, if there are, you'llget a disclosure around that.
And other things that can bedealt with, and I think are
related a little bit to whatBarb was speaking to, and have
been something to address, butprobably more so to be aware of,
and maybe address an differentway or I-9s, how those will
transition H-1B and other visatransitions, how those are going
(26:46):
to work.
And then you always have yourWARN Act notices, how those are
going to be provided, how laborunion matters will be addressed.
And then in a lot of cases, ifI'm the buyer, I'm wanting a
comprehensive disclaimer ofliabilities for employment
matters, either as a rep orwarranty or maybe as a covenant
(27:08):
or whatnot.
So again, those are things tocontinue to focus on in these
transactions that live more soin the labor and employment
space, but are really importantto making sure they're addressed
and then included in thedocuments themselves.
So Kelly, you mentioned, justwanted to transition a bit to
(27:28):
integration, right?
You, in your opening comments,obviously were in the pre
diligence phase, but probablyalready thinking about
integration because really, Ithink at the end of the day,
it's fun for the businesspeople, the lawyers to like put
the deal together, do duediligence, like burn the late
night oil, give high fives atthe end, have the closing
(27:49):
dinner.
But integration is really goingto determine whether the
transaction is successful andwhether the organizations can
use it as a springboard to dobetter things and realize their
missions and their purposes.
So I'd love to kind of hear yourthoughts again on integration
and kind of where the importantWhat points are there?
SPEAKER_02 (28:11):
Yeah, and I always joke, you know, after you sign
the deal, you can't just pop thechampagne, right?
You can't just give each otherhigh fives.
It's kind of when the real workstarts and you need to, you
know, come up with a plan toreally take action on what was
memorialized in the documentsthat you described and sort of
work through the operationalpieces and putting it all into
practice.
(28:31):
And, you know, being in-house,unlike you and Barb, I actually
live with the deals and see thison the day to day.
So, you know, I do think it'sjust a critical piece of of all
of this and just vital tounlocking the full potential of
the deal and also mitigatinglegal risk.
And I think I would maybe startby sort of centering on just the
(28:52):
proactive approach to the areasidentified in prediligence and
diligence of the phases thatBarb described, right?
At a high level, to the extentduring prediligence, you
identify there were gaps interms of the party's mission or
values.
I think that's important toaddress, just really aligning
the organizational culture andthe vision and the work just to
(29:15):
create a shared sense ofpurpose.
I think embracing that why andthe purpose behind the
organization and what it doesand how it delivers healthcare
services to patients andcommunities, that's what
ultimately drives employeeengagement.
And I think when you have a highlevel of engagement, you reduce
your legal risk by enhancingoperational efficiencies and
(29:38):
really fostering a more positivework culture.
And it's a tall order.
I think it's a challenge forhealthcare organizations to do
that.
But I think with strongleadership, that's really adept
in change management and astrong integration team that can
sort of focus on aligning theoperations, including HR
technology, data migration,employment policies, just to
(30:00):
make sure there's parity andequity, streamlining processes
and practices, and doing allthat in a timely manner.
I think ultimately,Organizations that have
different approaches to patientcare or clinical protocols and
maybe organizations that lackprocess to identify what might
be best practices, how toharmonize that work, that's a
(30:23):
place you tend to see a lot offriction.
And that can lead to increasedturnover or just a generally
frustrated or disengagedworkforce.
So I think putting a key eyetowards integration of the
workforce, making a plan,setting targets for a addressing
systems, for addressing benefitplans, redundant resources, how
(30:45):
to handle employment engagementissues and retention concerns,
how to address the human issuesthat Barb covered on DEI and
immigration issues.
you know, oftentimes on thelegal side where we see some of
this play out is on theharmonization of compensation
and benefits.
And when there are, you know,sort of the different categories
that Barb identified that comeinto play, how organizations
(31:07):
sort of manage those state lawdifferences and come up with a
plan that aligns the twoorganizations.
And I think maybe just a finalpoint on integration and
managing all these movingpieces.
And Tom, you alluded to it.
I think, you know, transparentcommunication is crucial.
And that means really reallyclear communication and setting
expectations with employeesregarding the changes to
(31:29):
policies, to compensation, tobenefits, and then creating an
engagement plan that reallyfosters trust and sort of
minimizes that potentialemployee uncertainty and helps
protect against environment thatreally could lend itself to
potential employment claims.
So I think integration is a longprocess.
It's ongoing and requires just alot of effort and ongoing
(31:56):
monitoring to ensure that it'ssuccessful.
SPEAKER_03 (32:00):
And I think, Kelly, I could add one point there.
We talk about an integrationthat's not smooth leading to the
risk of employee claims.
I would also add leading to arisk of labor union involvement
in your workplace, right?
So the unhappy or the uncertainemployees are the ones that are
more likely to listen to thelabor union.
(32:20):
And so if you don't want to bein a situation of having someone
else help you run your business,that's a big consideration as
well.
SPEAKER_00 (32:30):
Well, I think, Barb and Kelly, you point out just
this broader theme that Imentioned early on in the
discussion.
And that is if you say, Barb,poor integration or prolonged
integration or whatever it maybe, may result in labor unions.
But I mean, really, if we boilit down, the people are what,
(32:52):
you know, poorly executed orprolonged or protracted
integration affects at the endof the day, right?
If it's not executed well,they're the ones, right?
I love that you guys pointedthis out.
They're the ones that you knowwill be the ones to probably
look at what's going on and andif it's something that's you
know if the the pay practiceshaven't been integrated well
(33:14):
they're going to look at thatyou know my pay stub said you
said i was getting this but nowi'm getting this i'm going to
look into that and if there'sbeen some misstep there there's
risk of a claim right if Theyfeel like they're being treated
poorly.
They may think to unionize.
So there are all of thesedynamics and kind of reasons to
why, you know, just on paper,integration shouldn't just be a
(33:37):
good thing and be done well.
It can really result not just inthe work for, to your point,
Kelly, not working at the top ofits level, but also the risk of
a potential claim.
So I love it.
It's great.
SPEAKER_03 (33:51):
And then also impact on patient care, right?
The ultimate thing that thefacilities are thinking about is
the patient care and theunhappy, uncertain employees end
up impacting the ultimate goalof what you're trying to
accomplish as a healthcareemployer.
SPEAKER_00 (34:06):
Yeah.
UNKNOWN (34:07):
Yeah.
SPEAKER_00 (34:07):
And that is a great point to leave on, Barb, because
as we think about, well, why dothese things matter that we're
talking about?
Why is it important to beintentional about them?
Because sure, we want tomitigate, we want to put
together, you know, well thoughtout transactions that are
documented appropriately,they're integrated well, but The
(34:27):
more you do that, the more youcan deliver on your mission, the
more you can focus on patientcare and get back to that as
soon as possible, which isprobably the most important
thing, most of these at the endof the day.
So with that, we'll go ahead andwrap up.
Thank you all the attendeestoday who listened to our
(34:48):
discussion, to this podcast.
Again, we've put out apresentation.
We put out an article.
So if you're interested inseeking other content on this
topic, please look at the HLALabor and Employment Practice
Group's materials.
And with that, we will finishout and wish everyone a great
rest of their day.
SPEAKER_03 (35:07):
Thanks, guys.
It was fun.
Thank you.
SPEAKER_01 (35:16):
To subscribe and add this private podcast feed to
(35:42):
your podcast app, go toAmericanHealthLaw.org slash
Daily Podcast.
you
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