Health Law Advisor

California’s legislature recently passed AB 3129, and it is awaiting Governor Gavin Newsom’s signature. While AB 3129 impacts several different provider types, this article focuses on its impact on Management Service Organizations (MSOs) and Physician Practice Management Companies (PPMCs) as the historically accepted structure for purposes of complying with the prohibitions on the corporate practice of medicine (CPOM). In its initial drafts, AB 3129 seemed highly focused on MSOs and the Friendly PC models for PPMs in the state.

While much of the early language regarding MSOs seems to have been shed from the bill, some ambiguity remains regarding whether, and in what contexts, sponsored MSOs will need to give pre-transaction notice to, or obtain the consent of, the California Attorney General (AG).  A later section of the bill highlights what will likely be CPOM enforcement priorities and is worth the close attention of all MSOs operating in the state.

New from the Diagnosing Health Care Podcast: The game has changed—are you positioned to adapt? Over the past 12 months, the federal government has been heavily regulating private investment in health care entities.

Simultaneously, multiple states have enacted or introduced new laws restricting or requiring approval of such investments. The question arises: What do you do if you already have investments in these health care entities?

On this episode, Leslie Norwalk, Strategic Counsel at Epstein Becker Green (EBG), joins EBG attorneys Josh Freemire, Tim Murphy, and Ted Kennedy, Jr., to discuss how health care entities, investors, and board members should be responding to an evolving political and regulatory environment that has increased the scrutiny of private investment in health care entities.

On July 25, 2024, a federal “Health Over Wealth Act” was introduced in the U.S. Senate and House of Representatives. The bill would amend the Public Health Service Act, requiring the Secretary of Health and Human Services (HHS) to enforce certain transparency, accountability, and other requirements with respect to for-profit corporations that own health care systems.

S. 4804 was introduced by Senator Edward D. Markey (D-Mass), chair of the Health, Education, Labor, and Pensions Committee on Primary Health, and Retirement Security, before being referred to the Committee on Finance. H.R. 9156 was introduced by Representative Pramila Jayapal (WA-07), member of the House Judiciary Subcommittee on Health, Employment, Labor, and Pensions.

On June 11, 2024, U.S. Senators Ed Markey and Elizabeth Warren from Massachusetts, introduced proposed legislation titled The Corporate Crimes Against Health Care Act (“CCAHCA”), aimed at addressing a perceived “looting” of health care systems by for profit private equity investors. According to Sen. Warren, the bill was introduced to “root out corporate greed and private equity abuse in the health care system,” “prevent exploitative private equity practices,” and to specifically ensure that actions such as “looting” do not happen again by addressing trigger events and targeting real estate investment trusts.

The CCAHCA proposes to impose significant criminal penalties, compensation clawbacks, and civil penalties against executives of private equity firms and health care entities that are found to have contributed to the death or injury of a patient through a triggering event. Additionally, the bill imposes certain requirements that impact real estate investments funds (REITs) and would require annual reporting requirements for change of control transactions.

Recently, the California Legislature made a series of major revisions to Assembly Bill 3129 (“AB 3129” or “the Bill”), a highly anticipated piece of legislation expected to have a substantial impact on transactions in California’s healthcare space.  Although Epstein Becker Green has previously discussed the Bill (see original post here, as well as a first update here), this blog post will discuss the legislature’s most recent revisions on June 19 and June 27.

Why Assembly Bill 3129 Was Introduced

The Bill was introduced by Assembly Member Wood and is supported by Attorney General Bonta in response to growing concerns about the increasing involvement of private equity and hedge funds in California’s healthcare sector. As private equity firms have increasingly acquired healthcare facilities and provider groups, California’s legislature wants to strengthen oversight to ensure that these transactions are conducted in a transparent manner that protects patients, ensures access, and preserves affordability.

What the Bill Will Do

AB 3129 seeks to address these concerns by requiring private equity groups and hedge funds to provide written notice to, and obtain the written consent of, the Attorney General before engaging in any change of control or acquisition involving healthcare facilities, provider groups, or nonphysician providers. This includes changes of control, acquisitions, or agreements that may impact healthcare services or access.

In our ongoing series of blog posts, we examine key negotiating points for tenants in triple net health care leases. We also offer suggestions for certain lease provisions that will protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our first two blog posts, we considered the importance of negotiating initial terms and renewal ...

On March 13, 2024, Indiana Governor Eric J. Holcomb signed Senate Enrolled Act No. 9 (“SEA 9”) which will amend the Indiana Code with respect to notice of health care entity mergers and acquisitions.

The measure, effective July 1, 2024, adds a new Chapter 8.5 to the Indiana Code providing in Section 4(a) that “[a]n Indiana health care entity that is involved in a merger or acquisition with another health care entity with total assets, including combined entities and holdings, of at least ten million dollars ($10,000,000) shall, at least ninety (90) days prior to the merger or ...

On February 28, 2024, bipartisan legislation was introduced in the Connecticut General Assembly by the State Senate and House of Representatives that would require the executive director of the Office of Health Strategy to develop a plan concerning private equity firms acquiring or holding an ownership interest in health care facilities in the state.

Raised HB 5319, sponsored by Sen. Jeff Gordon (R) and Sen. Saud Anwar (D), was referred to the state’s Joint Committee on Public Health. A public hearing was held on March 6.

This legislation, and related bills around the country, are ...

On December 6, 2023, Senate Budget Committee Ranking Member Chuck Grassley (R-Iowa) and Chair Sheldon Whitehouse (D.-R.I.) announced a new bipartisan investigation into private equity ownership in hospitals—just ahead of a new plan by the Biden-Harris Administration to crack down on anticompetitive practices in health care.

Under the Biden plan, announced December 7, the Department of Justice (DOJ), the Federal Trade Commission (FTC), and Department of Health and Human Services (HHS) will seek input on how private equity is affecting the health care of Americans and the ...

An increasing number of states are requiring advance notice of health care transactions.  These requirements may delay transactions or result in confidential information becoming accessible to the public. Effective August 1, 2023, New York[1] enacted legislation that requires health care entities involved in material transaction(s) to provide written notice to the New York Department of Health at least 30 days prior to the closing of the transaction. In enacting the legislation, New York joined Connecticut[2], Massachusetts[3], Nevada[4], Oregon[5], Rhode Island[6], and ...