In a time when the role of private equity in healthcare is under intense scrutiny, Oregon’s recently signed law represents a significant regulatory shift aimed at preventing non-physician investments in medical practices. To unpack the complexities and implications of this law, we spoke with James Maitland, a renowned expert in healthcare automation and regulation.
Can you explain the key components of the new law signed by Oregon Gov. Tina Kotek regarding private equity in healthcare?
The new Oregon law is quite groundbreaking because it effectively prohibits non-physician investors from owning medical practices. This law is hailed as the most robust regulation at the state level targeting private equity’s influence in healthcare. It’s a clear move toward ensuring that those who own these practices are also those involved in patient care, potentially alleviating conflicts of interest that arise when investment priorities overshadow medical ethics.
How does the new law differ from the existing regulation that required physicians to own at least 51% of medical practices in Oregon?
Previously, Oregon mandated that physicians hold a controlling interest—at least 51%—in medical practices. However, corporations found ways to circumvent this by employing physicians, essentially making them nominal owners while the company wielded real control. The new law closes this loophole by outright preventing non-physician ownership, ensuring that decision-making stays with those directly involved in healthcare.
What loophole did the previous law have, and how does the new law close it?
The loophole in the former law allowed corporations to list physicians as owners while the actual ownership and operational control were in corporate hands. This legal workaround undermined the intent of having healthcare managed by healthcare providers. The new legislation straightforwardly prohibits such corporate ownership structures, making it harder for non-physician entities to exert control over medical practices.
How long is the adjustment period for clinics before the law is enforced, and why is this adjustment period necessary?
The law includes a three-year adjustment period for clinics. This grace period is essential as it provides sufficient time for current non-compliant ownership structures to transition into the new requirements without causing abrupt disruptions. It allows practices to reevaluate their business models gradually, thereby reducing potential financial losses and operational chaos.
Are there any exemptions in the new law for certain healthcare facilities or programs?
Yes, the law does consider certain exemptions. Specifically, hospitals, tribal health facilities, and behavioral health programs are not subject to the new ownership restrictions. These exemptions acknowledge the unique operational and funding contexts in which these entities operate, which might necessitate diverse investment strategies.
What impact do you anticipate this law will have on non-physician investors and private equity in Oregon’s healthcare market?
The law will likely reduce the attractiveness of Oregon’s healthcare market to private equity and non-physician investors. By cutting off the pathway for non-healthcare professionals to own medical practices, funds and entities that focused on acquiring these for profit maximization will have to seek opportunities elsewhere or alter their business models significantly to comply with the law.
Can you provide some insight into how private equity has affected healthcare practices like the Oregon Medical Group before this law was enacted?
The case of the Oregon Medical Group, acquired by UnitedHealth-owned Optum, is a telling example. After the acquisition, several physicians left, citing quality of care concerns and a focus on profit over patient needs. This led to a doctor shortage, making it clear how private equity can shift priorities away from healthcare provision to financial metrics, which this law seeks to prevent.
What specific events or developments in Oregon influenced lawmakers to advocate for this particular regulation?
Lawmakers were driven by instances where private equity’s control led to an emphasis on profit at the expense of healthcare quality and access. The Oregon Medical Group situation, where consolidation by private equity led to higher costs and reduced patient care access, served as a catalyst for this regulation, highlighting the need for checks on corporate ownership in healthcare.
How is the law expected to address issues like higher prices, lower quality of care, and decreased access to care?
The law aims to curb the trend of healthcare consolidation, which has been linked to higher costs and reduced service quality. By ensuring that practice ownership remains with healthcare providers, who prioritize patient outcomes over profits, the law seeks to maintain or improve care quality and access while potentially stabilizing or reducing costs.
How did the state nurse associations react to this law, and what reasons did they have for their support?
State nurse associations have largely supported the law, likely because they see it as a way to uphold care standards. Nurses, being frontline healthcare workers, understand the impact of profit-driven models on patient care quality. Their endorsement reflects a collective desire to ensure that patient well-being remains the primary focus of healthcare delivery.
Why did the Oregon Ambulatory Surgery Center Association express concerns about the new law, and what were their specific worries?
The Association voiced concerns because private investments traditionally played a pivotal role in sustaining their operations. They worry that without these investment avenues, clinics in financial distress may struggle to survive, especially in areas where there’s no hospital backup to support them, potentially leading to a reduction in available services.
How might this law affect clinics facing financial distress that typically rely on private investment?
Clinics under financial stress might find their options limited due to the new restrictions on non-physician ownership. They may have to explore alternative funding sources or restructure to align with the law, which could involve merging with physician-owned groups or even altering their service offerings to remain viable.
What parallels can be drawn between Oregon’s law and similar legislative efforts in states like Massachusetts, New Mexico, Indiana, and Washington this year?
These states are collectively moving toward greater oversight over healthcare deals, recognizing the potential drawbacks of unfettered private equity involvement. While specifics vary, the common thread is a desire to protect patient interests and maintain service quality by regulating who can control healthcare entities.
Why did Sen. Elizabeth Warren express her support for the law, and what further action does she advocate for on a national level?
Sen. Warren supports the law as it aligns with her broader critique of private equity’s role in healthcare. She advocates for nationwide reforms to limit corporate profiteering in patient care, suggesting that Congress takes similar steps to remove private equity from the healthcare equation altogether, reflecting her commitment to enhancing patient care assurance across the country.
What stance have law firms taken regarding Oregon’s law, and why do they consider it the “toughest state barrier” to private equity in healthcare?
Law firms view Oregon’s law as the most stringent obstacle to private equity in healthcare because it practically closes the door on their involvement in medical practice ownership. By legally restricting ownership to physicians, it fundamentally alters how these investments can be structured, hence earning its reputation as the “toughest state barrier.”
What is your forecast for healthcare regulation concerning private equity involvement?
As awareness grows about the potential negative impacts of private equity in healthcare, we can anticipate more states enacting similar legislation. There’s a growing trend toward prioritizing patient care standards and protecting healthcare systems from over-commercialization. This movement could eventually lead to comprehensive national policies aimed at rebalancing the healthcare ecosystem.
