Since our recent updates, additional bills have been introduced that, if passed, will impact transactions across the healthcare industry. This alert contains an overview of legislation recently introduced in Connecticut and Maine, as well as further anticipated activity in Maine, continuing recent trends among state legislatures this year.
Connecticut
This month, the Connecticut General Assembly introduced two bills that would impact private equity (PE) investments in the health care industry.
Raised Senate Bill No. 1507
Raised Senate Bill No. 1507 proposes to prohibit private equity and real estate investment trust (REIT) ownership or control of certain health care providers, as well as codify corporate practice of medicine-related restrictions aimed at preserving the independent professional judgment and clinical decision-making of licensed professionals.
If enacted, beginning October 1, 2025, private equity companies and REITs would be prohibited from acquiring or increasing any direct or indirect ownership interest in, or financial or operational control over, a group practice, hospital or health system. The bill defines a “private equity company” as “a publicly traded or nonpublicly traded entity that collects capital investments from individuals or entities.”
The bill would also prohibit a management services organization, as well as any licensed health care facility, from interfering with, controlling, or otherwise directing the professional judgment or clinical decisions of a health care practice or clinician with independent practice authority. Prohibited conduct includes control over the amount of time spent with patients or the number of patients seen in a given time period, the time period within which a patient must be discharged, decisions involving the patient’s clinical status, diagnosis or diagnostic terminology/codes entered into the medical record, appropriate diagnostic tests, or any other conduct the Department of Public Health determines would interfere with, control or otherwise direct the professional judgment or clinical decision of a clinician with independent practice authority.
Raised Senate Bill No. 7224
Raised Senate Bill No. 7224 proposes amending and expanding liability under the State False Claims Act, as well as imposing additional requirements and restrictions related to hospital transactions involving REITs and lease-back arrangements.
Proposed amendments to the State False Claims Act would impose liability on a person with ownership or investment interest in an entity that violates the State False Claims Act if such person knows of and fails to report the violation to the state within 60 days. Under the proposed definitions, “ownership or investment interests” would include:
- Direct or indirect possession of equity in capital, stocks or profits over 10%;
- Interest held by an investor or group of investors who engage in the raising or returning of capital and who invests, develops or disposes of specified assets; or
- Interest held by a pool of funds by investors, including a pool of funds managed or controlled by private limited partnerships, if such investors or the management of such pool or private limited partnership employ investment strategies of any kind to earn a return on such pool of funds.
Proposed amendments impacting hospital transactions would require the parties to submit notice 30 days in advance of any transaction resulting in the lease of a hospital’s main campus from a REIT. Additionally, beginning October 1, 2025, the bill would prohibit the Commissioner of Public Health from issuing or renewing a nonprofit hospital’s license if the hospital’s main campus is leased from a REIT.
Maine
In previous legislative sessions, Maine introduced bills seeking to increase oversight of transactions involving healthcare entities in the state. Although still in the preliminary stages, it appears this legislative session may be no different. Maine legislators submitted a bill specifically focused on PE companies’ ownership of and influence over hospitals, and a draft bill is in the works that would implement a material change transaction review process in Maine.
Legislative Document No. 985
Lawmakers in Maine submitted LD 985, a bipartisan bill that would place a moratorium on PE companies and REIT ownership of or operational control over hospitals. If successful, the bill’s moratorium would stop PE firms and REITs from acquiring or increasing direct or indirect ownership interest in hospitals throughout the state until June 15, 2029.
The bill would also inhibit PE firms’ and REITs’ ability to exercise operational control over hospitals in which they already have an ownership interest. The bill broadly defines “operational control” to include influencing or directing the actions or policies of any part of a hospital, as well as choosing, appointing or terminating individuals or entities that participate in the operational oversight of the hospital.
Although Maine’s First Regular Session adjourned on Thursday, March 20, 2025, LD985 was carried over to the First Special Session, which began on Tuesday, March 25, 2025, in the same posture.
Material Change Transaction Review Legislation Potentially on the Horizon
The Office of Affordable Health Care (OAHC), an independent agency created by Maine’s legislature, is drafting a bill modeled after Oregon’s Health Care Market Oversight program that would create a new health care transaction notice process in Maine. The OAHC’s Meeting Agenda and Slides from March 5, 2025, reveal that the planned bill would significantly increase the wait time for transactions involving health care entities.
Currently, OAHC’s advisory board is proposing that all health care entities submit written notice of a material change transaction to the Division of Licensing and Certification DLC at least 180 days before the proposed transaction date.
The contemplated legislation would also grant approval authority to the DLC, which will review healthcare transactions with the assistance of the OAHC. The OAHC estimates that in full, the transaction review process for entities that are subject to comprehensive review will take about 270 days. It is unclear when an actual draft will be introduced, but activity at the OAHC suggests that a new bill on health care transaction oversight might be imminent.
Track Legislation Changes with Our Interactive Health Care Transactions Map
These proposed laws are 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, which is available here.
