Contract analysis

I. Executive Summary This memorandum analyzes Certificate of Need ("CON") requirements and other state-level regulatory considerations applicable to ambulatory surgical centers ("ASCs") in the nine states where Pinnacle Health Systems, Inc. ("Pinnacle" or "PHS") currently operates: North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas. This analysis has been prepared at the r

II. Background: Transaction Overview A. Parties to the Transaction Ardent Capital Partners III LP ("Ardent Capital"), a Delaware limited partnership, proposes to acquire 100% of the outstanding equity of Pinnacle Health Systems, Inc. ("Pinnacle" or "PHS"), a Delaware corporation headquartered at 2200 Lakeshore Boulevard, Suite 500, Charlotte, North Carolina 28202. Pinnacle is the ultimate parent holding company for t

III. Overview of Certificate of Need Regulatory Framework A. Purpose and History of CON Programs Certificate of Need programs in the United States originated under the National Health Planning and Resources Development Act of 1974, Pub. L. No. 93-641, 88 Stat. 2225, which conditioned certain federal funding on state adoption of health planning programs, including CON requirements for healthcare facility construction

IV. State-by-State Analysis: CON States This section provides a detailed analysis of the CON requirements and change-of-ownership treatment in each of the six states where Pinnacle operates ASC facilities and where some form of CON or comparable regulatory requirement is applicable to ASCs. A. Virginia Governing Authority. Virginia Department of Health ("VDH"), Division of Certificate of Public Need ("COPN"). The COP

V. State-by-State Analysis: Non-CON States This section provides a brief analysis of the three states where Pinnacle operates ASC facilities and where no CON requirement is applicable to ASCs. Although these states do not impose CON requirements, they do require facility licensure and may impose change-of-ownership notification requirements that should be tracked for post-closing compliance purposes. A. South Carolin

VI. Summary of CON Implications Across All Nine States A. Summary Table The following table summarizes the CON status, transaction-specific CON implications, post-closing notification requirements, and barrier-to-entry characterization for each of the nine states where Pinnacle operates ASC facilities: As the table illustrates, the transaction does not trigger CON review in any of the nine states. In the six CON stat

VII. Other State Regulatory Considerations While the primary focus of this memorandum is on CON requirements and their relevance to the antitrust analysis, several other categories of state regulatory requirements are relevant to the transaction and are briefly summarized below. These additional regulatory considerations are primarily the responsibility of transaction counsel at Whitfield & Crane LLP and healthcare r