Private equity investment in health care has grown dramatically over the past decade, with firms spending hundreds of billions of dollars to acquire health care companies. This trend has prompted lawmakers to take a closer look at how these deals impact patient care and physician autonomy. Their concern is that profits could be prioritized over patients and that non-health care entities may exert undue influence over clinical decision-making.
In response, states are enacting laws that tighten oversight of health care transactions and reinforce restrictions on corporate ownership and control of professional entities, often through management services organizations (MSOs). California recently saw a significant update in this area with two laws passed in October:
- SB 351 codifies corporate practice of medicine doctrines, restricting interference with physicians’ clinical judgment and prohibiting certain non-compete clauses.
- AB 1415 expands California’s existing “mini-HSR” law to include private equity groups as entities subject to reporting requirements.
These developments have practical implications for health care providers considering transactions. It is critical to build timelines that accommodate any required state review or approval processes and to structure deals in a way that complies with corporate practice of medicine restrictions while preserving physician autonomy. Failure to comply can lead to enforcement actions, reputational harm, financial penalties, and even the unwinding of the transaction.
The bottom line: Private equity’s role in health care is under increasing scrutiny. Providers should work closely with experienced counsel to navigate these evolving laws and ensure compliance without compromising clinical integrity.
Hear more from Health Care practice co-chair Joy Hennessy in the videos below.
