Massachusetts: New Yr, New Regulation — Governor Indicators “An Act enhancing the market overview course of” (Home Invoice No. 5159)

On January 8, 2025, Governor Maura Healey signed into legislation H.B. 5159, “an Act enhancing the market overview course of.” This new legislation 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 adjustments have wide-ranging implications for stakeholders throughout the well being care area. Many provisions of the brand new legislation will change into efficient as soon as the relevant businesses subject implementing laws. That is an expansive set of statutory adjustments, and this weblog highlights only some of the fabric provisions. Foley will present a number of issue-specific analyses within the coming weeks, together with implications for traders.

Here’s what stakeholders have to know — and methods to put together.

Key Adjustments at a Look

• Elevated Oversight of Well being Care Transactions: The Massachusetts Legal professional Normal, the Well being Coverage Fee (HPC), and the Middle for Well being Data and Evaluation (CHIA), have better authority to scrutinize mergers, acquisitions, and different important market adjustments. 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 laws have to be issued by October 1, 2025.
• Massachusetts False Claims Act: Imposes legal responsibility on house owners and traders 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 at the moment are required to pay estimated bills of the HPC (along with acute hospitals and ambulatory surgical facilities).
• Expanded Reporting Obligations: Necessities to incorporate extra info concerning non-public fairness (PE) traders, administration companies organizations (MSOs) relationships, and actual property leaseback preparations in 2025 Supplier Group Registration Program renewals and registrations to boost market transparency all through the Commonwealth.
• Workplace for Well being Useful resource Planning: A brand new workplace will likely be established throughout the HPC to develop a state well being useful resource plan. The workplace will likely be tasked with learning 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 goal of which is to offer, or facilitate the supply of, companies for the prevention, detection, prognosis or remedy of these bodily and psychological circumstances, which normally are the results of, or end in, illness, damage, deformity or ache; supplied, nevertheless, that the time period “remedy”, as used on this definition, shall embody custodial and rehabilitative care incident to infirmity, developmental incapacity or previous age.”
• Increasing Research on Well being Care: Establishes a major care activity pressure to deal with entry, supplier, and cost points within the major care setting that shall subject its first report back to legislature by September 15, 2025, and expands the scope of CHIA’s features.
• Prohibitions on Hospitals Leasing its Predominant Campus from an actual property funding belief (“REIT”). This exempts hospitals that had a primary campus/REIT association previous to April 1, 2024.

These sections mirror the legislature’s efforts to stability the altering panorama of well being care and shopper safety, however additionally they create challenges for companies navigating this advanced regulatory surroundings.

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 bear “Materials Adjustments” to their operations or governance construction should submit discover to the HPC 60 days previous to closing. “Materials Adjustments” embody:

• 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;
• Every other acquisition, merger, or affiliation of, by, or with one other Supplier or Supplier Group that might end in:
  • a rise in annual Internet Affected person Companies 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 scientific affiliation between two or extra Suppliers or Supplier Organizations that every had annual Internet Affected person Service Income of US$25 million or extra within the previous fiscal yr; or
• Creating a company 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 overview to establish whether or not the Materials Change could end in a “important impression” on the Commonwealth’s well being care value progress benchmark objectives, or on the aggressive market. If the HPC determines that there will likely be a major impression by the Materials Change on the well being care value progress benchmark, or in the marketplace, the HPC could provoke a value and market impression overview.

The brand new legislation expands the scope of regulated transaction by revising “Supplies Adjustments” to additionally embody:

• Vital 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;
• Vital 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 legislation has not set thresholds for these new classes, we anticipate extra readability in forthcoming steerage and laws.

The HPC will likely be additionally in search of much more intrusive entry to the monetary and operational circumstances of great fairness traders, together with however not restricted to “info concerning the numerous fairness investor’s capital construction, normal monetary situation, possession and administration construction and audited monetary statements.” 

Notably, the statute exempts from the definition of “important fairness investor” enterprise capital companies “solely funding startups or different early-stage companies,” which phrases will not be outlined.

The position of the HPC is increasing well-beyond the state legislature’s preliminary intent. Moderately than simply being an advisory overview physique that appears at preliminary materials change transactions, it can now have ongoing oversight for a interval of 5 years following the completion of a fabric change, together with the best to request extra documentation “to evaluate the post-transaction impacts of a fabric change.” Value and market impression 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 offer extra annual inside and monetary and operational info to the HPC.

Massachusetts False Claims Act Legal responsibility of House owners 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 legislation imposes legal responsibility underneath the state false claims act on shareholders with an possession or funding curiosity in a violating entity, who is aware of in regards to the violation, and fail to reveal the violation to the Commonwealth inside 60 days of figuring out the violation. This transformation is straight associated to a high-profile case introduced by the Workplace of the Legal professional Normal leading to $25MM settlement paid by traders 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 Adjustments

The legislation additionally established two new license sorts: Workplace-Primarily based Surgical Facilities and Pressing Care Facilities. The legislation 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 underneath the historic exception to licensure for doctor practices. This new legislation would require physician-based pressing care facilities to undergo DPH regulatory and licensure oversight. As soon as laws are drafted and carried out, any individual or entity that “advertises, publicizes, establishes, or maintains an office-based surgical middle [or urgent care center] with out a license” will likely be topic to a wonderful of as much as US$10,000.

(1) Workplace-Primarily based Surgical Facilities, which give:

“ambulatory surgical or different invasive process requiring: (i) normal anesthesia; (ii) average 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- based mostly 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 should 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 continual illness or damage that’s: (i) for the remedy of sickness or damage that’s fast in nature however doesn’t require emergency companies; (ii) supplied on a walk-in foundation with out a prior appointment; (iii) out there to most of the people throughout occasions of the day, weekends or holidays when major care supplier workplaces will not be usually open; and (iv) just 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” surroundings.

Different Notable Provisions and Exclusions

It seems that the New Yr led to a spirit of compromise, as among the adjustments previewed this summer season in S.B. 2881, “an Act enhancing the market overview course of” mentioned in our prior weblog, “Massachusetts Well being Care Act Dies on the Finish of Legislative Session However Previews Sweeping Adjustments for the Well being Care Trade,” have been excluded from the brand new legislation. Most notably, restrictions on (i) who can make use of registered practising clinicians (physicians, superior observe suppliers, psychiatric nurse psychological well being scientific specialists, nurse anesthetists, nurse-midwives, psychologists, and licensed scientific social employees) and (ii) the company observe of drugs have been excluded from the enacted model of the legislation.

Whereas the emphasis of the legislation expands the scope and scale of what stakeholders are topic to state oversight, the legislation additionally establishes and expands the Commonwealth’s potential to observe and examine major care companies, entry, supply, value, and cost, to call a number of.

What Occurs Subsequent?

Stakeholders ought to apprise themselves of those new necessities and be looking out for forthcoming laws 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 laws.

Foley is right here that will help you deal with the brief and long-term impacts within the wake of regulatory adjustments. We’ve got the assets that will help you navigate these and different vital 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 Follow 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 period of companies wouldn’t exceed 24 hours following an admission. The entity will need to have an settlement with CMS to take part in Medicare as an ASC, and should meet the circumstances set forth in subparts B and C of this half.”