Federal Bill Takes Aim at Private Equity's Role in Healthcare

Healthcare Transactions attorney John Saran and Healthcare Senior Public Affairs Advisor Jordan Brossi were quoted in a Medscape Medical News article about a federal corporate practice of medicine (CPOM) bill that aims to restrict private equity involvement in the healthcare industry. Introduced by Sen. Elizabeth Warren (D-Mass.), the Stop Corporate Takeovers of Physicians Act would require medical practices to be majority owned and governed by physicians, prohibiting private equity investors and non-clinical entities from either owning practices outright or controlling them through management companies. It would also limit the use of noncompete agreements, curb corporate influence on staffing decisions and schedules, and ban nondisclosure agreements. Existing arrangements would have one year to come into compliance, with potential steps such as selling a practice or unwinding a contract.

Jordan told Medscape Medical News although the bill has little chance of passing, regardless of whether Democrats flip control of Congress in the midterms, it "plants a significant flag" by indicating where lawmakers want nationwide healthcare policy to go, either through investigations or via a larger legislative package. She cautioned, however, that because CPOM regulations have traditionally fallen under state purview, the act would likely face legal challenges if it cleared both chambers.

"Historically, corporate practice of medicine requirements have largely been creatures of state law, with states taking different approaches to physician ownership, management arrangements and clinical control," she said. "This legislation would establish a significant new federal role in an area traditionally regulated at the state level."

John commented on the broader trends surrounding the regulation of private equity in the healthcare sector as more and more states either propose or enact laws to increase oversight and introduce stricter controls on corporate influence on clinical decision-making. With federal legislators now making inroads, many are turning to Oregon's model, the most stringent in the country, as a guide for crafting their own rules.

"It is a federal override," he remarked. "These [federal] legislators think the Oregon model is what is needed right now...I would not be surprised if come 2027, we see a handful of states try to propose and pass Oregon-esque laws."

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