AB 1415 is intended to expand the scope of the current OHCA review process to apply more directly to private equity groups and hedge funds. Previous amendments to the bill removed MSOs from the definition of healthcare entity, which would make MSO sales less likely to be reportable to OHCA. AB 1415 then passed a vote in the California Assembly and was referred to the California Senate.
The June 27 amendment to the bill in the California Senate Health Committee includes the following material changes.
Stricter reporting requirements for MSO changes
The amended bill would again require notice to be provided to OHCA for transactions involving the sale of a material amount of assets or change of control of an MSO. Such notice would be submitted by the MSO undergoing the sale of assets or change of control, as well as any counterparties to the transaction if they are:
- A private equity group or hedge fund.
- A newly created business entity for the purpose of entering into agreements or transactions with a healthcare entity.
- An MSO.
- An entity that owns, operates, or controls a provider, regardless of whether the provider is currently operating, providing healthcare services, or has a pending or suspended license.
Updated definition of MSO
The prior versions of AB 1415 defined an MSO as “an entity that provides administrative services or support for a provider, not including the direct provision of health care services.” The amendment to AB 1415 now defines an MSO as “an entity that provides management and administrative services for a provider in support of the delivery of health care services.” The amended bill specifies that “management and administrative support services shall include provider rate negotiation, revenue cycle management, or both,” and may also include “utilization management, claims handling, customer service, or network development.”
Reversion to exhaustive list of “providers”
The initial iteration of AB 1415 changed the definition of provider from an exhaustive list (“any of the following that delivers or furnishes health care services”) to a more open-ended set of providers (“a private or public health care provider, including all of the following”). The most recent amendment would maintain the language currently set forth in the statute to clarify ambiguities about who is considered a “provider.”
Key takeaways
MSO acquisitions: Under the prior version of AB 1415, an MSO sale was unlikely to be reportable as long as no assets or control of another healthcare entity were transferred. Although this new amended version does not add MSOs back to the definition of “health care entity,” it would create a requirement wherein a sale of assets or change of control of the MSO itself would need to be reported to OHCA by the MSO and by other counterparties if they fall into certain definitions, including private equity groups and hedge funds. All submitters to OHCA would be required to provide a substantial amount of information regarding themselves and their operations. If the current version of AB 1415 becomes law, OHCA’s oversight of MSOs in California would significantly expand.
Definition of MSO: AB 1415’s initial definition of MSO was extremely broad and was likely to inadvertently capture entities that provide administrative services and lack the ability to substantially influence healthcare operations. Under the new definition of MSO, an MSO must be involved in either provider rate negotiation or revenue cycle management, or both. While this definition remains broad, it has narrowed from its initial iteration.
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