Minnesota Bill Aims to Ban Health Care Private Equity Firms

TL/DR –

Minnesota’s House of Representatives introduced legislation that would prevent private equity firms or real estate investment trusts from acquiring or increasing any ownership interest in a healthcare provider after August 1, 2024. The bill, H.F. No. 4206, would also prohibit these entities from acquiring or increasing any operational or financial control over a provider post the same date. This legislation is part of an increasing trend of regulatory scrutiny of healthcare transactions based on the perception that consolidation, especially involving for-profit or private equity sponsors, has led to higher costs, lower quality, and decreased access to healthcare services.

Minnesota Legislation Seeks to Limit Private Equity and REIT Ownership in Healthcare

Legislation introduced on February 22, 2024 in Minnesota’s House of Representatives, known as H.F. No. 4206, proposes restrictions on private equity firms and real estate investment trusts (REITs) acquiring or increasing their ownership stake in healthcare providers after August 1, 2024. Authored by Rep. Jessica Hanson and referred to the Commerce, Finance, and Policy Committee, the bill also seeks to prevent these entities from gaining operational or financial control over such providers.

This move comes amid a growing trend towards tighter regulatory control over healthcare transactions. There is a general perception that consolidation, especially involving private equity firms or for-profit entities, could potentially lead to increased healthcare costs, compromised quality, and limited healthcare access.

Key Provisions of HF 4206

If enacted, HF 4206 will have two main effects from August 1, 2024:

• It will prevent private equity sponsors and REITs from acquiring or increasing their ownership stake in healthcare providers in Minnesota.
• It will also restrict these entities from gaining or increasing operational or financial control over Minnesota’s healthcare providers.

The Epstein Becker Green legal team is closely monitoring such state and federal legislation, ready to provide guidance in navigating this evolving regulatory environment.

Implications of Increased Regulatory Scrutiny

This increased regulatory scrutiny of healthcare transactions stems from concerns that certain investors may adversely influence healthcare costs, quality, and accessibility. Whether HF 4206 is enacted or not, such legislation is likely to be proposed in the future. Hence, providers and investors potentially impacted by this or similar laws should start exploring their compliance options. Moreover, similar laws in other states require the acquirer to demonstrate that the proposed transaction will not negatively impact healthcare access, cost, or quality, necessitating early preparation of supporting data.

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