Attorney General Peter F. Neronha is looking to expand his office’s oversight of health care transactions with the aim of limiting private equity acquisitions and consolidation, but observers are split on how effective his proposal will be.
Under the proposed rule, Rhode Island doctor groups would have to notify Neronha’s office of any merger, consolidation or acquisition that meets one of three criteria: results in ownership or control by a private equity investor; involves a group of eight or more doctors, physician assistants or nurse practitioners; or creates a management services organization to handle the medical group’s contracts with third-parties or insurance carriers.
State and federal law already allows Neronha’s office to intervene in business transactions deemed anti-competitive, but many may not meet the reporting threshold and proceed without notice. The plan is to require those involved in a health care transaction to notify the R.I. Office of Attorney General 60 days ahead of time so state officials can investigate whether it is anti-competitive.
Neronha’s proposal comes as private equity firms are making more investments in medical groups nationwide with an eye toward increasing profitability through controversial strategies such as consolidation and cost-cutting.
The state’s second-largest health system, Care New England Health System, supports the rule change, according to spokesperson Doreen Gavigan.
Care New England said it shares Neronha’s concerns about rising costs and acknowledges private equity investments “have not always been beneficial” in health care, Gavigan said in a statement. And the rule change won’t change Care New England’s ability to provide care.
“We welcome the increased transparency that such a rule might offer in this complex health care landscape,” Gavigan said.
But Dr. Michael Fine, former R.I. Department of Health director, expressed concerns about adding administrative burdens to already overworked practices.
The proposed rule says practices would be required to file a “simple” form at least 60 days before the transaction is finalized. The form shouldn’t take more than 30 minutes to complete and would include a description of and reason for the proposed transaction, according to Neronha’s proposal.
If they don’t send the form, the practices could be charged $200 a day beginning 59 days before the transaction closes and $100,000 if no notice is given.
While Fine said he endorses the rule’s goal to limit what he calls a “noxious impact” that private equity firms have had on health care, he doesn’t like that even with a simple form, small practices may need to spend time and money hiring lawyers to ensure compliance.
A public hearing on the rule change has been scheduled for July 8. The R.I. Department of State will have the final say on whether it is approved.
Rhode Island’s largest health system, Brown University Health – which has also expressed interest in merging with physician organization Brown Physicians Inc. for a total of 1,371 physicians – has not taken a stance on the proposal as it has not yet reviewed it or “assessed its implications,” said spokesperson Jessica Wharton.
The Hospital Association of Rhode Island said it is still reviewing the matter.
“We need to ensure that this proposal doesn’t drive up administrative burdens in a health care environment that’s already under strain,” said Howard Dulude, HARI interim president. “Any expansion of oversight should be as clear, efficient, and cost-effective as possible.”
This is a one time fill out a form requirement. It’s not like it’s every three months etc. I don’t see what the huge burden is.