On February 28, 2024, bipartisan legislation was introduced in the Connecticut General Assembly by the State Senate and House of Representatives that would require the executive director of the Office of Health Strategy to develop a plan concerning private equity firms acquiring or holding an ownership interest in health care facilities in the state.

Raised HB 5319, sponsored by Sen. Jeff Gordon (R) and Sen. Saud Anwar (D), was referred to the state’s Joint Committee on Public Health. A public hearing was held on March 6.

This legislation, and related bills around the country, are part of a trend of increasing regulatory scrutiny of health care transactions based upon the perception that consolidation—particularly consolidation involving for-profit or private equity sponsors—has resulted in higher costs, lower quality, decreased access to healthcare services, and adverse impacts on the health care labor force.

If HB 5319 were enacted, it would require development of a plan that would include, but not be limited to:

• An assessment of whether a (A) certificate of need should be required for the acquisition of an ownership interest in a health care facility by a private equity firm, and (B) the feasibility of any other limitations on a private equity firm acquiring or holding an ownership interest in a health care facility;
• A recommendation for requirements for the disclosure of information by a health care facility if a private equity firm acquires or holds an ownership interest in the health care facility.

Requirements and Definitions

The executive director of the Office of Health Strategy is required, no later than January 1, 2025, to report to the Joint Standing Committee of the state’s General Assembly “having cognizance of matters relating to public health regarding the plan developed…and the executive director’s recommendations for any legislation necessary to implement such plan.”

“Health care facility” is defined in the bill as “an institution, defined in section 19a-490 of [Connecticut’s] general statutes, licensed under chapter 368v of the general statutes.” An institution, in turn, means a

• Hospital;
• Residential home care;
• Home health care agency;
• Homemaker-home health aide agency;
• Behavioral health facility;
• Clinical Laboratory
• Assisted Living Services Agency
• Outpatient Clinic
• Outpatient Dialysis Unit
• Hospice inpatient facility;
• Nursing home facility;
• Psychiatric Residential Treatment Facility
• Chronic Disease Hospital

The bulk of the testimony from the public hearing—which involved the participation of representatives from entities including the Connecticut Hospital Association; Connecticut Citizen Action Group; the State Long-Term Care Ombudsman, the Connecticut State Medical Society; and Office of the Healthcare Advocate as well as an internal medicine specialist—was in support of HB5319.[1] The president pro tempore of the state senate indicated that he is also working with the state’s attorney general “on language to beef up oversight of acquisitions and mergers including those involving private equity.”

Takeaways

Health care transactions are coming under increased scrutiny at the state and federal levels based upon perceptions that certain investors have a detrimental effect on the cost of, quality of, and access to healthcare services as well as perceived adverse impacts on the health care workforce.

The National Conference of State Legislatures reported that in 2023 (by October 2023), states enacted at least 36 bills across 24 states related to health system consolidation and competition, including policies related to health system merger and review. Some states would require, or may in the future require, notice or consent of transactions.[2] Such laws or proposed laws would require a potential acquirer to demonstrate that the proposed transaction will not have an adverse impact on the cost of, quality of, access to healthcare services, or adversely impact the health care workforce. Although there are still many procedural and substantive hurdles to be overcome before being voted into law, providers and sponsors should begin considering what data they would produce in the event of being required to file such a notice or consent application and begin gathering and tracking that supporting data now.

For additional information about the issues, or if you have any other questions or concerns about proposed legislation, please contact one of the authors or the Epstein Becker Green attorney who regularly handles your legal matters.

Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.

[1] While Connecticut’s Office of Health Strategy supports the broad goals of the legislation, it does not support implementation in its current form: “OHS believes that the Governor’s bill, An Act Promoting Hospital Financial Stability (SB 9), addresses many of the issues this bill would ask OHS to evaluate. Rather than focus on specific entities (like private equity firms), the governor’s bill focuses on specific potentially harmful practices that, while perhaps more frequently employed by private equity firms, could be used by other corporate entity types.”

[2] See e.g., Proposed CA Assembly Bill 3129: Notice & Consent for Private Equity, Hedge Funds Acquiring/Changing Control of Health Care Facilities, Provider Groups, Health Law Advisor (March 14, 2024); New York State Enacts New Notice Requirements Targeting Private Equity Health Care Transactions, Health Law Advisor (July 12, 2023);;Proposed Minnesota House Bill HF 4206 Would Prohibit Ownership Interests, Operational/Financial Control of Health Care Providers by Private Equity and REITS, Health Law Advisor (March 15, 2024); and Time Runs Out in the Oregon State Senate for HB 4130, but Will Likely Return in 2025, Health Law Advisor (March 12, 2024).