On January 8, the governor of Massachusetts signed House Bill 5159 into law (Law). At a high level, the new Law expands Massachusetts’ existing health care transaction notice process and implements new reporting and oversight requirements on the health care sector, particularly in relation to private equity companies (PE companies), health care real estate investment trusts (REITs), management services organizations (MSOs), pharmaceutical manufacturing companies, and pharmacy benefit managers (PBMs).
The Law is the culmination of months of effort by the Massachusetts state legislature. The Massachusetts House of Representatives initially passed a predecessor bill, House Bill 4653, in May 2024. In July 2024, the Senate engrossed an amendment to the bill, Senate Bill 2881, which imposed additional, more arduous requirements. The two legislative houses were unable to reconcile the different versions of the bill before the end of the legislative session on July 31, 2024. However, on December 30, 2024, the conference committee assigned to House Bill 4653 reviewed the bill again and reported House Bill 5159, which eliminates certain provisions proposed by House Bill 4653 and Senate Bill 2881. Both the House of Representatives and the Senate voted to enact House Bill 5159 on the same day.
An overview of the key changes under the Law, which will go into effect on April 8, 2025, is provided below.
Expansion of the Notice of Material Change and Cost and Market Impact Review (CMIR) Process
The Law expands Massachusetts’ existing notice of material change and CMIR process by expanding the definition of material change to include, among other things, (1) significant expansions in a provider or provider organization’s capacity; (2) transactions involving a significant equity investor which result in a change of ownership or control of a provider or provider organization; and (3) significant acquisitions, sales or transfers of assets. In addition, the Law allows the Massachusetts Health Policy Commission to ask not only the provider or provider organization, but also significant equity investors and other associated parties, to submit documents and information in connection with a notice of material change or a CMIR, including detailed financial, ownership and management information.
Changes to the Health Policy Commission (HPC), Annual Cost Trends Reporting and Provider Organization Registration
The Law expands the scope of HPC’s existing annual cost trends report, which assesses growth in total health care expenditures, to include PE companies, REITs, MSOs, pharmaceutical manufacturing companies, and pharmacy benefit managers. Additionally, the Law specifies organizational charts provided to HPC by provider organizations as part of registration or renewal must include significant equity investors, REITs and MSOs.
Center for Health Information and Analysis (CHIA) Reporting Requirements
The Law expands the information that certain providers are required to report to CHIA. For institutional providers and their parent organizations, the Law allows CHIA to request information from significant equity investors, REITs and MSOs. For acute- and non-acute care hospitals, the Law allows CHIA to request audited financial statements of a parent organization’s out-of-state operations, significant equity investors, REITs and MSOs. The Law also adds additional reporting requirements for registered provider organizations, including reporting on all locations where services are provided, including through affiliates, comprehensive financial reporting, and reporting on any other assets and liabilities that may affect the organization’s financial condition. The Law makes any information reported to CHIA regarding significant equity investors, REITs, and MSOs available to the Office of Attorney General (OAG) for review and allows the OAG to request additional documentation and testimony from these entities. In addition, the Law increases the weekly fine for failing to meet CHIA reporting requirements from $1K to $25K and eliminates the $50K cap on fines.
Department of Public Health (DPH) Oversight
The law expands DPH’s oversight in the following key ways:
- Prohibiting DPH from granting or renewing a license for an acute-care hospital if the main campus of the acute-care hospital is leased from a REIT, unless the acute-care hospital began leasing its main campus from a REIT on or before April 1, 2024.
- Creating a licensure requirement and process administered by DPH for office-based surgical centers and urgent care centers, and revising the factors considered under DPH’s Determination of Need (DON) process.
- Requiring hospitals, ASCs, urgent care providers and others to report an any action or notice of impending action concerning repossession of medical equipment or supplies necessary for the provision of patient care no later than one calendar day after it occurs. Moreover, the Law prohibits facilities from entering into contracts that permit the lessor to repossess medical equipment or supplies necessary for patient care unless the lessor notifies the DPH at least 60-days prior to repossessing such medical equipment or supplies and voids any contracts that do not comply with this requirement.
State False Claims Act
The Law amends the state false claims statute’s “knowledge” standard, creating liability for entities with an “ownership or investment interest” in an entity that violates the false claims statute which knows of but fails to disclose such violation within 60 days. “Ownership and investment interest” is broadly defined to include: (1) direct or indirect possession of equity in the capital, stock or profits totaling more than 10% of an entity; (2) any interest held by an investor or group of investors who engages in the raising or returning of capital and who invests, develops or disposes of specified assets; or (3) any interest held by a pool of funds by investors, including a pool of funds managed or controlled by private limited partnerships, if those investors or the management of that pool or private limited partnership employ investment strategies of any kind to earn a return on that pool of funds.
The Law is part of a larger, ongoing trend toward increasing state oversight and regulation of health care transactions and investments in the health care industry. Bass, Berry & Sims is actively tracking these legislative trends via our interactive health care transactions map, available here. If you have any questions about Massachusetts House Bill 5159 or any other state health care transaction notice requirements, please contact the authors.