What's Happening?
States are enacting legislation to increase scrutiny on private equity investments in healthcare, focusing on clinical autonomy, competition, and patient access. New regulations are expected to make deals
more complex and costly, with increased execution risk. States like California, Pennsylvania, and Oregon are implementing measures to ensure physician autonomy and limit investor influence. These regulations include expanded notice obligations, restrictions on management services organizations (MSOs), and enhanced oversight of healthcare transactions. The focus is on maintaining service lines, staffing levels, and governance that safeguards physician autonomy.
Why It's Important?
The increased scrutiny on healthcare private equity deals reflects growing concerns about the impact of investor influence on clinical decisions and patient care. These regulatory changes aim to protect clinical autonomy and ensure that healthcare providers remain in control of medical decisions. For investors, this means navigating a more complex regulatory landscape and demonstrating how their investments can enhance patient care. The focus on maintaining access, quality, and physician autonomy is crucial for ensuring that healthcare systems remain patient-centered and effective.
What's Next?
As states continue to implement stricter regulations, private equity firms will need to adapt their strategies to comply with new requirements. This includes structuring deals to ensure compliance with corporate practice of medicine (CPOM) laws and demonstrating improvements in access and quality of care. Investors may need to focus on building physician-led governance and narrowing the scope of MSOs to non-clinical functions. The ongoing regulatory changes are likely to influence the structure and execution of healthcare transactions in the coming years.
