On January 8, 2025, Governor Maura Healey signed into regulation H.B. 5159, “an Act enhancing the market assessment course of.” This new regulation guarantees sweeping reform to reshape how well being care companies function and develop. With stricter oversight, expanded reporting obligations, and new licensing necessities, the laws indicators an uptick in regulatory oversight of well being care transactions and operations in Massachusetts. These modifications have wide-ranging implications for stakeholders throughout the well being care area. Many provisions of the brand new regulation will change into efficient as soon as the relevant companies situation implementing rules. That is an expansive set of statutory modifications, and this weblog highlights just a few of the fabric provisions. Foley will present a number of issue-specific analyses within the coming weeks, together with implications for buyers.
Here’s what stakeholders have to know — and the best way to put together.
Key Modifications at a Look
- Elevated Oversight of Well being Care Transactions: The Massachusetts Legal professional Basic, the Well being Coverage Fee (HPC), and the Middle for Well being Info and Evaluation (CHIA), have better authority to scrutinize mergers, acquisitions, and different important market modifications. The HPC will now have oversight over quite a lot of different actors and actions within the native market, together with non-public fairness gamers, sale/leaseback transactions.
- New Licensing Classes: Workplace-based surgical facilities and pressing care facilities face stricter licensing necessities. Implementing rules have to be issued by October 1, 2025.
- Massachusetts False Claims Act: Imposes legal responsibility on house owners and buyers that learn about and fail to reveal violations of the Massachusetts False Claims Act.
- Required Assessments from Well being Care Entities: Non-hospital supplier organizations, pharmaceutical manufacturing firms and pharmacy profit managers are actually required to pay estimated bills of the HPC (along with acute hospitals and ambulatory surgical facilities).
- Expanded Reporting Obligations: Necessities to incorporate further data concerning non-public fairness (PE) buyers, administration companies organizations (MSOs) relationships, and actual property leaseback preparations in 2025 Supplier Group Registration Program renewals and registrations to reinforce market transparency all through the Commonwealth.
- Workplace for Well being Useful resource Planning: A brand new workplace will likely be established inside the HPC to develop a state well being useful resource plan. The workplace will likely be tasked with finding out many facets of the sector, together with “well being care assets”, that are expansively outlined to incorporate “any useful resource, whether or not private or institutional in nature and whether or not owned or operated by any individual, the commonwealth or political subdivision thereof, the principal function of which is to supply, or facilitate the availability of, companies for the prevention, detection, prognosis or remedy of these bodily and psychological situations, which normally are the results of, or end in, illness, damage, deformity or ache; offered, nevertheless, that the time period “remedy”, as used on this definition, shall embrace custodial and rehabilitative care incident to infirmity, developmental incapacity or outdated age.”
- Increasing Research on Well being Care: Establishes a major care process drive to deal with entry, supplier, and cost points within the major care setting that shall situation its first report back to legislature by September 15, 2025, and expands the scope of CHIA’s capabilities.
- Prohibitions on Hospitals Leasing its Essential Campus from an actual property funding belief (“REIT”). This exempts hospitals that had a major campus/REIT association previous to April 1, 2024.
These sections replicate the legislature’s efforts to steadiness the altering panorama of well being care and shopper safety, however in addition they create challenges for companies navigating this advanced regulatory setting.
HPC’s Expanded Function in Oversight Measures
For the previous decade, the HPC has overseen well being care transactions within the Commonwealth by way of the Discover of Materials Change course of. “Suppliers” or “Supplier Organizations” (together with organizations within the enterprise of well being care administration) that plan to endure “Materials Modifications” to their operations or governance construction should submit discover to the HPC 60 days previous to closing. “Materials Modifications” embrace:
- A Supplier or Supplier Group coming into right into a merger or affiliation, or acquisition of, by, or with a service or involving a hospital or hospital system;
- Another acquisition, merger, or affiliation of, by, or with one other Supplier or Supplier Group that may end in:
- a rise in annual Web Affected person Providers Income of the Supplier or Supplier Group of US$10 million {dollars} or extra, or
- the Supplier or Supplier Group having a near-majority of market share in a given service or area.
- A medical affiliation between two or extra Suppliers or Supplier Organizations that every had annual Web Affected person Service Income of US$25 million or extra within the previous fiscal 12 months; or
- Creating a corporation to manage contracts with carriers or third-party directors or carry out present or future contracting on behalf of a number of Suppliers or Supplier Organizations.
Upon receipt of a accomplished discover to the HPC, the HPC is required, inside 30 days, to conduct a preliminary assessment to establish whether or not the Materials Change could end in a “important affect” on the Commonwealth’s well being care price progress benchmark objectives, or on the aggressive market. If the HPC determines that there will likely be a major affect by the Materials Change on the well being care price progress benchmark, or in the marketplace, the HPC could provoke a value and market affect assessment.
The brand new regulation expands the scope of regulated transaction by revising “Supplies Modifications” to additionally embrace:
- Important expansions in supplier or supplier group’s capability;
- Transactions that contain a major fairness investor, which end in a change of possession or management of a Supplier or Supplier Group;
- Important acquisitions, gross sales, or transfers of property together with, however not restricted to, actual property sale lease-back preparations; and
- Conversion of a Supplier or Supplier Group from a non-profit entity to a for-profit entity.
Whereas the brand new regulation has not set thresholds for these new classes, we anticipate further readability in forthcoming steering and rules.
The HPC will likely be additionally searching for way more intrusive entry to the monetary and operational situations of great fairness buyers, together with however not restricted to “data concerning the numerous fairness investor’s capital construction, common monetary situation, possession and administration construction and audited monetary statements.”
Notably, the statute exempts from the definition of “important fairness investor” enterprise capital corporations “solely funding startups or different early-stage companies,” which phrases should not outlined.
The position of the HPC is increasing well-beyond the state legislature’s preliminary intent. Slightly than simply being an advisory assessment physique that appears at preliminary materials change transactions, it would now have ongoing oversight for a interval of 5 years following the completion of a cloth change, together with the suitable to request further documentation “to evaluate the post-transaction impacts of a cloth change.” Value and market affect evaluations are additionally being tasked to ask deeper questions than earlier than together with high quality of care and affected person expertise in addition to referral patterns. Equally, the statute empowers CHIA to require registered supplier organizations to supply further annual inner and monetary and operational data to the HPC.
Massachusetts False Claims Act Legal responsibility of Homeowners and Buyers
In a broad statutory problem to the historic protections of the company veil that insulates shareholders from underlying legal responsibility, the brand new regulation imposes legal responsibility beneath the state false claims act on shareholders with an possession or funding curiosity in a violating entity, who is aware of concerning the violation, and fail to reveal the violation to the Commonwealth inside 60 days of figuring out the violation. This variation is immediately associated to a high-profile case introduced by the Workplace of the Legal professional Basic leading to $25MM settlement paid by buyers in a behavioral well being firm in Massachusetts in 2021. Buyers will now have a extra direct danger of legal responsibility for the actions of their portfolio firms.
Licensing Modifications
The regulation additionally established two new license varieties: Workplace-Primarily based Surgical Facilities and Pressing Care Facilities. The regulation has delegated broad discretion to the Massachusetts Division of Public Well being (DPH) to create and implement particular licensure necessities for every of the brand new classes. Many medical practices traditionally provided pressing care beneath the historic exception to licensure for doctor practices. This new regulation would require physician-based pressing care facilities to undergo DPH regulatory and licensure oversight. As soon as rules are drafted and applied, any individual or entity that “advertises, proclaims, establishes, or maintains an office-based surgical middle [or urgent care center] and not using a license” will likely be topic to a high quality of as much as US$10,000.
(1) Workplace-Primarily based Surgical Facilities, which offer:
“ambulatory surgical or different invasive process requiring: (i) common anesthesia; (ii) reasonable sedation; or (iii) deep sedation and any liposuction process, excluding minor procedures and procedures requiring minimal sedation, the place such surgical or different invasive process or liposuction is carried out by a practitioner at an office- primarily based surgical middle.”
This class is distinct from ambulatory surgical facilities, that are already topic to clinic licensure by DPH and observe the federal definition.[1] Licensed hospitals are additionally exempt from acquiring an office-based surgical middle license, although their affiliated doctor organizations could have to be exempted by way of rulemaking.
(2) Pressing Care Facilities, that are clinics not affiliated with a licensed hospital that present pressing care companies:
“a mannequin of episodic take care of the prognosis, remedy, administration or monitoring of acute and persistent illness or damage that’s: (i) for the remedy of sickness or damage that’s speedy in nature however doesn’t require emergency companies; (ii) offered on a walk-in foundation and not using a prior appointment; (iii) obtainable to most of the people throughout occasions of the day, weekends or holidays when major care supplier places of work should not typically open; and (iv) isn’t supposed and shouldn’t be used for preventative or routine companies.”
Licensed hospitals (and entities “corporately affiliated with hospitals”), clinics, restricted service clinics, and group well being facilities receiving federal grants are exempt from acquiring an pressing care middle license. In different phrases, this new oversight is directed to pressing care facilities provided in a freestanding doctor workplace and “pleasant PC” setting.
Different Notable Provisions and Exclusions
It seems that the New Yr caused a spirit of compromise, as among the modifications previewed this summer time in S.B. 2881, “an Act enhancing the market assessment course of” mentioned in our prior weblog, “Massachusetts Well being Care Act Dies on the Finish of Legislative Session However Previews Sweeping Modifications for the Well being Care Trade,” have been excluded from the brand new regulation. Most notably, restrictions on (i) who can make use of registered practising clinicians (physicians, superior follow suppliers, psychiatric nurse psychological well being medical specialists, nurse anesthetists, nurse-midwives, psychologists, and licensed medical social employees) and (ii) the company follow of drugs have been excluded from the enacted model of the regulation.
Whereas the emphasis of the regulation expands the scope and scale of what stakeholders are topic to state oversight, the regulation additionally establishes and expands the Commonwealth’s capability to observe and examine major care companies, entry, supply, price, and cost, to call just a few.
What Occurs Subsequent?
Stakeholders ought to apprise themselves of those new necessities and be looking out for forthcoming rules as elevated governmental scrutiny has come to the Commonwealth. Foley will monitor company exercise within the Commonwealth to assist Massachusetts-based well being care organizations put together for implementing rules.
Foley is right here that can assist you deal with the quick and long-term impacts within the wake of regulatory modifications. We’ve the assets that can assist you navigate these and different essential authorized issues associated to enterprise operations and industry-specific points. Please attain out to the authors, your Foley relationship accomplice, or to our Well being Care Apply Group and Well being Care & Life Sciences Sector with any questions.
[1] 42 CFR 416.2 “Ambulatory surgical middle or ASC means any distinct entity that operates solely for the aim of offering surgical companies to sufferers not requiring hospitalization and wherein the anticipated length of companies wouldn’t exceed 24 hours following an admission. The entity should have an settlement with CMS to take part in Medicare as an ASC, and should meet the situations set forth in subparts B and C of this half.”
The publish Massachusetts: New Yr, New Legislation — Governor Indicators “An Act enhancing the market assessment course of” (Home Invoice No. 5159) appeared first on Foley & Lardner LLP.
