Healthcare private equity reporting act signed into law by Mass. governor
A bill in Massachusetts that would require private equity firms and hedge funds investing in healthcare entities to provide regulators with audited financial statements and other disclosures has been signed into law.
The nameless “An Act enhancing the health care market review process” landed on Democratic Gov. Maura Healey’s desk just prior to the new year, after being passed by the state Senate. The law not only provides regulators with more oversight on the finances of healthcare entities owned by private equity firms, it also requires them to submit documentation on their ownership structure.
Proponents of the new law argued it will improve oversight to stop another downfall like Steward Health Care, whose messy bankruptcy left healthcare services in the state reeling from hospital closures.
However, the bill signed by Healey doesn’t do much beyond improving transparency. As the act wended through the Massachusetts legislature, the Senate Ways and Means Committee stripped provisions that would have banned certain private equity purchases and placed debt limits on medical providers and hospitals backed by investors.
For now, there are no such provisions in state law.
Meanwhile, Massachusetts Senators Ed Markey (D) and Elizabeth Warren (D) introduced the Corporate Crimes Against Health Care Act into the U.S. Senate last June. The bill would empower the U.S. Department of Justice to seek criminal charges against private equity investors if their business-related decisions lead to the death of a patient.
The bill has yet to gain noteworthy traction.
Healthcare lawyer comments on impact
John Saran, a healthcare attorney with Holland & Knight, told HealthExec the new Massachusetts law is different than those seen in other states, mainly a California law that would have given the state attorney general power to veto healthcare deals.
However, it’s still likely to have some impact on how private equity firms do business, and investors should take note of the new law.
“This bill differs from California’s vetoed private bill in that it raises the potential for transaction-based reporting, annual disclosures and the provision of testimony for [the Massachusetts] Health Policy Commission's annual hearings,” Saran said. “With this focus on private equity-backed platforms, private equity sponsors should look at their portfolio companies with a Massachusetts presence to see if the updated framework applies.”
“There is no corporate practice of medicine element in this bill, but providers supported by management services organizations (MSOs) and private equity-backed enterprises could be asked about their operations. Question remains whether MSOs can still be considered ‘provider organizations’ under the law,” he added.
“[The Massachusetts] Health Policy Commission has guidance on their website saying MSOs can be provider organizations, but the new bill separately accounted for MSOs throughout the revised requirements,” Saran said.
He also noted that provisions of the False Claims Act extend to MSOs, private equity firms and sponsors who knowingly violate new reporting requirements, adding that such organizations “could be liable if they become aware of a violation and fail to address it.”
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.