On February 22, 2024, legislation was introduced in Minnesota’s House of Representatives that would prohibit private equity companies or real estate investment trusts (REITs) from acquiring or increasing any direct or indirect ownership interest those entities have in a health care provider after August 1, 2024.

H.F. No. 4206, authored by state Rep. Jessica Hanson and referred to the Commerce, Finance, and Policy Committee, would also prohibit private equity or REITs from acquiring or increasing any operational or financial control those entities have over a provider, after August 1, 2024.

This legislation, and other bills like it 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, and decreased access to healthcare services.

If enacted, HF 4206 would:

• prohibit private equity sponsors and REITs from acquiring or increasing ownership interest in individuals or entities that provide healthcare services in Minnesota beginning on August 1, 2024.
• prohibit private equity sponsors and REITs from acquiring or increasing operational or financial control over individuals or entities that provide healthcare services in Minnesota, also effective August 1, 2024.

The attorneys at Epstein Becker Green are monitoring state and federal legislation closely and are ready to assist client in understanding this new regulatory landscape. 

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 clinicians.   

Whether Minnesota HF 4206 passes or not in 2024, it or similar laws will likely continue to be introduced. Providers and investors that may be impacted by this or other similar legislation should begin considering now how or if they could comply. In addition, many of these laws introduced in other states require notice or consent of transactions that require the acquirer to demonstrate that the proposed transaction will not have an adverse impact on the cost of, quality of, or access to healthcare services. Providers and sponsors should consider 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.