Summary: Model legislation for states to address the issues of corporate and private equity entry into health care markets, health care consolidation, and closures of key service lines or facilities. Key provisions include measures that (1) update definitions that reflect current market conditions; (2) extend health care market and transaction oversight to corporate changes of control of health care provider groups (including management services organizations, or MSOs), real estate sale-leasebacks involving health care entities, and planned closures of facility or service lines; (3) strengthen laws regulating the corporate practice of medicine and physician non-competes; and (4) require transparency of health care ownership and control structures. 

Definitions: As used in [this Act], the following words shall have the following meanings:

“Affiliate” means:

1. A person, entity, or organization that directly, indirectly, or through one or more intermediaries, controls, is controlled by, or is under common control or ownership of another person, entity, or organization;
2. A person whose business is operated under a lease, management, or operating agreement by another entity, or a person substantially all of whose property is operated under a management or operating agreement with that other entity; 
3. An entity that operates the business or substantially all the property of another entity under a lease, management, or operating agreement; or
4. Any out-of-state operations and corporate affiliates of an affiliate as defined in a, b, or c herein, including significant equity investors, health care real estate investment trusts and management services organizations.

“Control,” including the terms “controlling,” “controlled by,” and “under common control with,” means the direct or indirect power through ownership, contractual agreement, or otherwise:

1. to vote more than [10 percent] or more of any class of voting shares of a health care entity; or
2. to direct the actions or policies of the specified entity. 

“Health care entity” means a health care provider, health care facility, provider organization, pharmacy benefit manager as defined in [cite section of the state’s code], or carrier as defined in [cite to state insurance code section] that offers a health benefit plan in this state.

“Health care facility” means a licensed institution providing health care services or a health care setting, including, but not limited to, hospitals and other licensed inpatient facilities, health systems consisting of one or more health care entities that are jointly owned or managed, ambulatory surgical or treatment centers, skilled nursing facilities, residential treatment centers, diagnostic, laboratory and imaging centers, free-standing emergency facilities, outpatient clinics, and rehabilitation and other therapeutic health settings.

“Health care provider” means any person, corporation, partnership, governmental unit, state institution, medical practice, or any other entity qualified or licensed under state law to perform or provide health care services to persons in the state.

“Health care services” means services and payments for the care, prevention, diagnosis, treatment, cure, or relief of a medical, dental, or behavioral health (mental health or substance use disorder) condition, illness, injury, or disease, including but not limited to:

1. Inpatient, outpatient, habilitative, rehabilitative, dental, palliative, therapeutic, supportive, home health, or behavioral services provided by a health care entity;
2. Pharmacy, retail and specialty, including any drugs, devices, or medical supplies;
3. Performance of functions to refer, arrange, or coordinate care;
4. Equipment used such as durable medical equipment, diagnostic, surgical devices, or infusion; or
5. Technology associated with the provision of services or equipment in paragraphs a through d above, such as telehealth, electronic health records, software, claims processing, or utilization systems.

“Health care staffing company” means a person, firm, corporation, partnership, or other business entity engaged in the business of providing or procuring, for temporary employment or contracting by a health care facility, any health care personnel but does not include an individual who independently provides the individual’s own services on a temporary basis to health care facilities as an employee or contractor.

“Licensee” means an individual who is licensed in the state as a physician, a doctor of osteopathy, or a physician assistant or a nurse practitioner who is authorized to diagnose and treat in the applicable clinical setting.

[Note: States may define the scope of the definition of licensee based on laws in their states regarding individuals with autonomy on diagnosis and treatment.] 

“Management services organization” means any organization or entity that contracts with a provider or provider organization to perform management or administrative services relating to, supporting, or facilitating the provision of health care services.

“Material change transaction” means any of the following, occurring during a single transaction or in a series of related transactions [within a consecutive five-year period] involving a health care entity within the state that has total assets, annual revenues, or anticipated annual revenues for new entities, of at least $10 million, including both in-state and out-of-state assets and revenues:

1. A corporate merger including one or more health care entities;
2. An acquisition of one or more health care entities, including insolvent health care entities. For the purposes of [this Act], “acquisition” means the direct or indirect purchase in any manner, including, but not limited to, lease, transfer, exchange, option, receipt of a conveyance, creation of a joint venture, or any other manner of purchase, such as by a health care system, private equity group, hedge fund, publicly traded company, real estate investment trust, management services organization, insurance carrier, or any subsidiaries thereof, of a material amount of the assets or operations of a health care entity;

[Note: States may have a statutory definition of the word “material.” If not, policymakers may consider defining it in regulation. For example, material may include, without limitation, any changes to health care services or line of business that affects competition or access in one or more geographic region of a state.]

3. Any affiliation, arrangement, or contract that results in a change of control for a health care entity. For the purposes of [this Act], “change of control” means an arrangement in which any other person, corporation, partnership, or any other entity acquires direct or indirect control over the operations of a health care entity in whole or in substantial part. For purposes of this section, an “arrangement” shall include any agreement, association, partnership, joint venture, management services agreement, professional services agreement, health care staffing company agreement, or other arrangement that results in a change of governance or control of a health care entity or a department, subdivision, or subsidiary of a health care entity;

[Note: State authorities could define by regulation what it means to acquire direct or indirect control over a health care entity in whole or in substantial part.]

4. The formation of a partnership, joint venture, accountable care organization, parent organization, or management services organization for the purpose of administering contracts with carriers, third-party administrators, pharmacy benefit managers or providers;
5. A sale, purchase, lease, affiliation, or transfer of control of a board of directors or governing body of a health care entity;
6. A real estate sale or lease agreement involving a material amount of assets of a health care entity; or
7. The closure of a health care facility, or the closure, discontinuance, or significant reduction of any essential health service provided by a health care entity that is either a provider organization or health care facility or any new contracts, clinical or contractual affiliations that will eliminate or significantly reduce essential services. The [department] shall define by regulation what constitutes “a significant reduction” and “essential health services” for purposes of the Act. 

“Material change transaction” does not include any of the following:

1. A clinical affiliation of health care entities formed solely for the purpose of collaborating on clinical trials; or
2. Graduate medical education programs;
3. The mere offer of employment to, or hiring of, a single physician; or
4. Situations in which the health care entity directly, or indirectly through one or more intermediaries, already controls, is controlled by, or is under common control with, all other parties to the transaction, such as a corporate restructuring.

“Medical practice” means a corporate entity or partnership organized for the purpose of practicing medicine and permitted to practice medicine in the state, including, but not limited to, partnerships, professional corporations, limited liability companies, and limited liability partnerships.

[Note: Depending on the state’s scope of practice laws, the definition of medical practice, for these purposes, would apply where nurse practitioners are able to practice independently with their own practices.] 

“Noncompetition agreement” means a written agreement between a licensee and another person under which the licensee agrees that the licensee, either alone or as an employee, associate, or affiliate of a third person, will not compete with the other person in providing products, processes, or services that are similar to the other person’s products, processes, or services for a period of time or within a specified geographic area after termination of employment or termination of a contract under which the licensee supplied goods to or performed services for the other person.

“Nondisclosure agreement” means a written agreement under the terms of which a licensee must refrain from disclosing partially, fully, directly, or indirectly to any person, other than another party to the written agreement or to a person specified in the agreement as a third-party beneficiary of the agreement:

1. A policy or practice that a party to the agreement required the licensee to use, in patient care, other than individually identifiable health information that the licensee may not disclose under the Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, in effect on the effective date of this 2024 Act; 
2. A policy, practice, or other information about or associated with the licensee’s employment, conditions of employment, or rate or amount of pay or other compensation; or 
3. Any other information the licensee possesses or to which the licensee has access by reason of the licensee’s employment by, or provision of services for or on behalf of, a party to the agreement, other than information that is subject to protection under applicable law as a trade secret of, or as otherwise proprietary to, another party to the agreement or to a person specified in the agreement as a third-party beneficiary of the agreement.

“Nondisparagement agreement” means a written agreement under which a licensee must refrain from making to a third party a statement about another party to the agreement or about another person specified in the agreement as a third-party beneficiary of the agreement, the effect of which causes or threatens to cause harm to the other party’s or person’s reputation, business relations, or other economic interests.

“Ownership or investment interest” means any of the following:

1. Direct or indirect possession of equity in the capital, stock, or profits totaling more than [5 percent] of an entity;
2. Interest held by an investor or group of investors who engages in the raising or returning of capital and who invests, develops, or disposes on specified assets; or
3. Interest held by a pool of funds by investors, including a pool of funds managed or controlled by private limited partnerships, if those investors or the management of that pool or private limited partnership employ investment strategies of any kind to earn a return on that pool of funds.

“Private equity fund” means a publicly traded or non-publicly traded company that collects capital investments from individuals or entities and purchases a direct or indirect ownership share or controlling interest of a health care entity. 

“Significant equity investor” means:

1. Any private equity fund with a direct or indirect ownership or investment interest in a health care entity;
2. An investor, group of investors, or other entity with a direct or indirect possession of equity in the capital, stock, or profits totaling more than 10 percent of a provider or provider organization; or
3. Any private equity fund, investor, group of investors, or other entity with a direct or indirect controlling interest in a health care entity or that operates the business or substantially all the property of a health care entity under a lease, management, or operating agreement.

“Provider organization” means any corporation, partnership, business trust, association, or organized group of persons that is in the business of health care delivery or management, whether incorporated or not, that represents one or more health care providers in contracting with carriers for the payments of health care services; provided, that “provider organization” shall include, but not be limited to, physician organizations, physician-hospital organizations, independent practice associations, provider networks, accountable care organizations, management services organizations, and any other organization that contracts with carriers for payment for health care services.

Part I. Review of Proposed Material Change Transactions 

[Note: States may decide whether to require notice to the Attorney General; the Department of Health (or an office within the Department of Health); or a state oversight office or similar independent authority, or some combination of Attorney General + Department of Health/State Oversight Office. If two agencies participate in transaction oversight, generally, notice would go to both offices or allow sharing of notice between the offices. States may also want to bifurcate the responsibility to conduct the preliminary or comprehensive reviews — with both offices (Attorney General and Department of Health/State Oversight Office) conducting reviews in their respective areas of expertise (Attorney General = antitrust, nonprofit charitable trust; Department of Health/State Oversight Office = health care access, cost, quality, workforce, equity). Alternatively, the state may delegate the preliminary and comprehensive review to the Department of Health/State Oversight Office that then makes a referral report to the Attorney General’s Office for enforcement purposes. For discussion of the various models states have used, read “Models for Enhanced Health Care Market Oversight — State Attorneys General, Health Departments, and Independent Oversight Entities.”

Section 1: Notice.

(A) Any health care entity shall, before consummating any material change transaction, submit written notice to the [Attorney General/Department of Health/State Oversight Office] not fewer than [180 days] before the date of the proposed material change transaction.

(B) Written notice shall include and contain the information the [Attorney General/Department of Health/State Oversight Office] determines is required. The health care entity may include any additional information supporting the written notice of the material change transaction. Notice is complete when the [Attorney General/Department of Health/State Oversight Office] determines that all required information has been received. 

[Note: States may define what information is required for notice by regulation, including, for example, any information submitted by the parties to federal antitrust authorities under the Hart-Scott-Rodino Act. State market oversight authorities should retain some discretion to request additional information that is more specific to the particular transaction and necessary to assess the market impact.]

(C) All the information provided by the submitter as part of the notice shall be treated as a public record unless the submitter designates documents or information as confidential when submitting the notice and the [Attorney General/Department of Health/State Oversight Office] concur with the designation in accordance with a process specified by regulation. Information that is otherwise publicly available, or that has not been confidentially maintained by the source, shall be considered public information. The [Attorney General/Department of Health/State Oversight Office] shall maintain the confidentiality of all confidential information that are obtained in relation to a material change transaction, except that the [Attorney General/Department of Health/State Oversight Office] may share confidential information with each other to carry out their respective authorities under this Part and may disclose any information to an expert or consultant under contract with the [Attorney General/Department of Health/State Oversight Office], provided that the expert or consultant is bound by the same confidentiality requirements as the [Attorney General/Department of Health/State Oversight Office]. The confidential information and documents shall not be public records and shall be exempt from [state open records act].

(D) Within [10 days] of receiving written notice of a material change transaction, the [Attorney General/Department of Health/State Oversight Office] shall post on a publicly available website information about the material change transaction, including:

1. A summary of the proposed transaction, including the identity of the parties to the transaction;
2. An explanation of the groups or individuals likely to be impacted by the transaction;
3. Information about services currently provided by the health care entity, commitments by the health care entity to continue such services, and any services that will be reduced or eliminated;
4. Details about any public hearings and how to submit comments; and
5. Any other information from the notice and other materials submitted by the health care entity that the Attorney General or the [Department of Health/State Oversight Office] determines would be in the public interest, except for materials designated confidential under [paragraph 1(C), above].

(E) For purposes of calculating time periods in this Act, notice shall be considered received on the first business day after the [Attorney General/Department of Health/State Oversight Office] determines that notice is complete.

Section 2: Preliminary Review

(A) Within [30 days] after receiving a notice described in [Section 1 of this Part], the [Attorney General/Department of Health/State Oversight Office] shall do one of the following:

1. Approve the material change transaction and notify the health care entity in writing that a comprehensive review is not required for the material change transaction;
2. Approve the material change transaction subject to conditions set by the [Attorney General/ Department of Health/State Oversight Office] and notify the health care entity in writing of the conditions under which the transaction may be completed; or
3. Notify the health care entity in writing that the transaction is subject to a comprehensive review. The [Attorney General/Department of Health/State Oversight Office] may request additional information necessary to perform a comprehensive review under [Section 3 of this Part].

(B) A comprehensive review is required when any of the following apply to the material change transaction:

1. Will result in the transfer of assets valued above [$20 million];
2. Occurs in a highly consolidated market for any line of services offered by any party to the material change transaction;
3. Will cause a significant change in market share, such that any resulting health care entity possesses market power upon completion;
4. Will otherwise lessen competition, including effects of vertical or cross-market transactions among different product or geographic markets;
5. If either party to the material change transaction possesses market power prior to the transaction; or
6. If the [Attorney General/State Department of Health/State Oversight Office], at their sole discretion, determines that the material change transaction is likely to have a material impact on the cost, quality, equity, or access to health care services in any region in the state.

(C) For purposes of [this section], “market power” means possessing 30 percent or more market share in any line of service in the relevant geographic area or under other criteria that the Attorney General may define by regulation

[Note: Policymakers may need to define some of these terms and specify how they are to be calculated in regulation. States may also use regulation to specify additional criteria that trigger comprehensive review. Additionally, the market power thresholds may not capture vertical or cross-market mergers, so policymakers may want to specify when non-horizontal mergers should trigger comprehensive review in regulation based on market conditions in the state.]

(D) Nothing in this section limits or infringes upon the existing authority of any state agency including the Department of Health, Department of Insurance, [State Oversight Office], or the Attorney General to review any transactions.

[Note: This clause is intended to preserve existing review processes in a state by a Certificate of Need program, the Department of Health, and or by the Attorney General for transactions involving charitable trust concerns for non-profit transactions.]

Section 3: Comprehensive Review Process

(A) No later than [90 days] after determining a transaction is subject to a comprehensive review, the [Attorney General/Department of Health/State Oversight Office] shall conduct one or more public hearings or public meetings, one of which shall be in the county in which the health care entity is located, to hear comments from interested parties.

[Note: States can decide whom to authorize to conduct the Cost and Market Impact Review (CMIR). In states with a State Oversight Office, that is the natural entity to do so. Other states have an office within the Department of Health that conducts health market oversight or vest the authority entirely within the Attorney General’s Office. While the model does not prescribe which entity will conduct review, it has worked well in some states to vest CMIR review in a Department of Health/State Oversight Office and vest approval/disapproval/conditions either in the Department of Health/State Oversight Office, the Attorney General’s Office, or both.]

(B) The CMIR may examine factors relating to the proposed transaction, transacting parties, their relative market position, including, but not limited to:

1. The market share of any transacting party and the likely effects of the transaction on competition;
2. Any previous transaction involving either transacting party, including, but not limited to, acquisitions or mergers of similar health care providers, whether or not in the same state;
3. The prices charged by either of the transacting parties for services, including their relative prices compared to others’ prices for the same services in the same geographic area;
4. The quality of the services provided by any health care provider(s) party to the transaction, including patient experience;
5. The cost and cost trends of the health care entity in comparison to total health care expenditures statewide;
6. The availability and accessibility of services similar to those provided, or proposed to be provided, through the provider or provider organization within its primary service areas and dispersed service areas;
7. The impact of the material change transaction on competing options for the delivery of health care services within its primary service areas and dispersed service areas;
8. The role of the transacting parties in serving at-risk, underserved, and government payer patient populations;
9. The role of the transacting parties in providing low-margin or negative-margin services within its primary service areas and dispersed service areas;
10. Consumer concerns, including, but not limited to, complaints or other allegations that the provider or provider organization has engaged in any unfair method of competition or any unfair or deceptive act or practice; 
11. The parties’ compliance with prior conditions and legal requirements related to competitive conduct, including without limitation, compliance with corporate practice of medicine requirements under [Part II], reporting requirements regarding health care entity ownership and control under [Part III], [or restrictions on anticompetitive contracting provisions]; 
12. The impact of the transaction on the clinical workforce, including wages, staffing levels, supply, patient access, and continuity of patient-care relationships; 
13. The impact of a real estate sale or lease agreement on the financial condition of the health care entity and its ability to maintain patient care operations; 
14. In the case of a proposed closure or discontinuance of a health care facility or any essential health services, the impact of the closure on health care access, outcomes, costs, and equity for those in the health care facility’s service area, and the health care facility’s plan for ensuring equitable access, quality, affordability, and availability of essential health services within the service area; and
15. Any other factors that the [Attorney General/Department of Health/State Oversight Office] determines to be in the public interest.

[Note: This list of factors was adapted from the factors considered by the Health Policy Commission in Massachusetts when writing CMIR reports. Policymakers can choose whether to specify a non-exhaustive list of factors or create the list through regulation. For states without a cost commission, defining what factors a contracted expert should consider in a CMIR may be helpful to determine the legislative intent in what the scope of the report should entail. Additionally, some states may have a statutory definition of “public interest.” In those states, lawmakers may want to consider defining “public interest” in this section or using a different term.]

(C) The [Attorney General/Department of Health/State Oversight Office] may request additional information or documents from the transacting parties necessary to conduct a CMIR. Failure to respond or insufficient responses to requests for information by transacting parties may result in the extension of the deadline for the [Attorney General/Department of Health/State Oversight Office] to complete the CMIR, the imposition of conditions for approval, or the disapproval of the material change transaction.

(D) The [Attorney General/Department of Health/State Oversight Office] shall keep confidential all nonpublic information and documents obtained under [this section] and shall not disclose the confidential information or documents to any person without the consent of the party that produced the confidential information or documents, except that the [Attorney General/Department of Health/State Oversight Office] may disclose any information to an expert or consultant under contract with the [Attorney General/ Department of Health/State Oversight Office] to review the proposed transaction, provided that the expert or consultant is bound by the same confidentiality requirements as the office of the [Attorney General/Department of Health/State Oversight Office]. The confidential information and documents and work product of the [Attorney General/Department of Health/State Oversight Office] shall not be public records and shall be exempt from [state open records act].

(E) The [Attorney General/State Department of Health/State Oversight Office] may, in their sole discretion:

1. Contract with, consult, and receive advice from any state agency [including other offices of the Department of Health, Department of Insurance, or any other state agency] on those terms and conditions that the [Attorney General/Department of Health/State Oversight Office] deems appropriate.
2. Contract with experts or consultants to assist in reviewing the proposed agreement or transaction.

(F) Not more that [90 days] after determining that the transaction is subject to a comprehensive review under [Section 3 of this Part], the [Attorney General/Department of Health/State Oversight Office] shall produce a CMIR report, containing the findings and conclusions of the CMIR; provided that the health care entity has complied with the requests for information or documents pursuant [this section] within [21 days] of the request or by a later date set by mutual agreement of the health care entity and the [Attorney General/Department of Health/State Oversight Office]. The CMIR report shall be posted publicly and shall not disclose confidential information. 

[Note: Nothing in this section prevents policymakers from creating a streamlined process in regulation to conduct a smaller CMIR with reduced timelines to review smaller transactions with few competitive concerns or transactions involving a distressed provider in danger of closing. If such streamlined or expedited review is made available, it should not be a blanket exemption from all review or continued oversight, but merely an expedited process/timeline for review. Moreover, nothing prevents the authorities conducting the CMIR to produce a nonpublic report containing confidential information for internal enforcement and oversight purposes.]

(G) The [Attorney General/State Department of Health/State Oversight Office] shall be entitled to [charge costs to or receive reimbursement from] the transacting parties for all actual, reasonable, direct costs incurred in reviewing, evaluating, and making the determination referred to in [this section], including, without limitation, administrative costs and costs of contracted experts or consultants in [paragraph (E)].

[Note: Lawmakers should follow existing state law regarding procurement practices when drafting this section to determine whether the Attorney General/Department of Health/State Oversight Office should be reimbursed or whether the transacting parties should be billed directly. The Attorney General/Department of Health/State Oversight Office should maintain complete discretion in choosing consultants or experts to review the transaction.]

Section 4: Approval Authority

[Note: States may choose to vest approval authority in the Attorney General alone or in both the Attorney General and the Department of Health/State Oversight Office. The approval authority includes the authority to disapprove a transaction or place conditions upon a transaction without having to seek a court order to effectuate it. For a discussion of the considerations of the various approaches, read “Models for Enhanced Health Care Market Oversight — State Attorneys General, Health Departments, and Independent Oversight Entities.” 

(A) The [Attorney General/Department of Health/State Oversight Office shall have discretion to approve, conditionally approve, or disapprove of any material change transaction for which the [Attorney General/Department of Health/State Oversight Office] receives notice under [Section 1 of this Part]. Any conditions imposed pursuant to this Section shall specify a time period for compliance, an expiration date, or that the condition applies indefinitely. 

1. [Notwithstanding the foregoing, in the case of a material change transaction involving a carrier that is subject to review and approval by the [Department of Insurance], the [Department of Health/State Oversight Office] shall make a recommendation to the [Department of Insurance] based on the [Department of Health/State Oversight Office]’s review whether the transaction should be approved, disapproved, on conditionally approved.] 

[Note: If the state authorizes the Department of Health or State Oversight Office (as opposed to the Attorney General’s Office] to approve or disapprove of the transaction, there is an optional provision for communicating a recommendation with Department of Insurance (DOI) for insurance mergers subject to DOI review and approval. This would not be necessary if the Attorney General is the sole office with authority to approve transactions.]

(B) The [Attorney General/Department of Health/State Oversight Office] shall inform the health care entity of the determination within [30 days of notice under Section 1 of this Part], or in the case of comprehensive review, within [60 days of the completion of the CMIR]. No proposed material change transaction may be completed before the [Attorney General/Department of Health/State Oversight Office] has informed the health care entity of the determination. 

(C) In making the determination, the [Attorney General/Department of Health/State Oversight Office] may consider any factors that the [Attorney General/Department of Health/State Oversight Office] deems relevant, including, but not limited to:

1. The likely impact, as described in the CMIR report where applicable, of the material change transaction on:

1. Health care costs, prices, and affordability; 
2. The availability or accessibility of health care services to the affected community;
3. Provider cost trends and containment of total state health care spending;
4. Access to services in medically underserved areas;
5. Rectifying historical and contemporary factors contributing to a lack of health equities or access to services;
6. The functioning and competitiveness of the markets for health care and health insurance;
7. The potential effects of the transaction on health outcomes, quality, access, equity, or workforce for residents of this state; or
8. the potential loss or change in access to essential services.

2. Whether the material change transaction is contrary to or violates any applicable law, including, without limitation, [state antitrust laws, laws restricting the corporate practice of medicine, consumer protection laws];
3. Whether the benefits of the transaction are likely to outweigh the anticompetitive effects from the transaction;
4. Whether the transaction is in the public interest.

[Note: Lawmakers should tailor this non-exhaustive list of factors to state priorities. Lawmakers may want to list specific services in Section 4 (C)(i)(g) or choose to define “essential services” in regulation and to help define when transactions are in the public interest. As above, lawmakers should note if their state has a statutory definition of “public interest” and if that definition is appropriate here. If not in legislation, it may be worth defining the “public interest” in regulation and consider which policy goals best serve the public interest: preventing consolidation, preventing closures or loss of access, promoting equity, and improving affordability and how to balance these considerations when they conflict.]

(D) This section does not limit or alter any existing authority of the Attorney General or any state agency to enforce any other law, including state or federal antitrust law or to review non-profit transactions.

Section 5: Post-transaction Oversight

(A) Enforcement by the Attorney General. 

1. The Attorney General may subpoena any records necessary to enforce any provisions of [this Part] or to investigate suspected violations of any provisions of [this Part] or any conditions imposed by conditional approval pursuant to [Section 4]. 
2. The Attorney General may enforce any requirement of this [Part I] and any conditions imposed by a conditional approval pursuant to [Section 4] to the fullest extent provided by law, including damages. In addition to any legal remedies the Attorney General may have, the Attorney General shall be entitled to specific performance, injunctive relief, and other equitable remedies a court deems appropriate for any violations or imminent violation of any requirement of this [Part] or breach of any of the conditions and shall be entitled to recover its attorney’s fees and costs incurred in remedying each violation.
3. [In addition to the remedies set forth in paragraph (ii), the Attorney General may impose a statutory penalty of [$10,000 per day] for any violation of this Part or of any conditions imposed pursuant to a conditional approval [Section 4] and may rescind or deny approval for any other past, pending, or future material change transactions involving the health care entity or an affiliate.] 
4. Nothing in this subsection shall narrow, abrogate, or otherwise alter the authority of the Attorney General to prosecute violations of antitrust or consumer protection requirements.

(B) Enforcement by [Department of Health/State Oversight Office].

1. The [Department of Health/State Oversight Office] may audit the books, documents, records, and data of any entity that is subject to a conditional approval under Section [4] to monitor compliance with the conditions.
2. Any entity that violates any provision of this [Part], any rules adopted pursuant thereto, or any condition imposed pursuant to a conditional approval under [Section 4] shall be subject to an administrative penalty of [$10,000 per day] for any violation of this Part.
3. The [Department of Health/State Oversight Office] may refer any entity to the Attorney General to review for enforcement of any noncompliance with this Part and any conditions imposed by conditional approval pursuant to [Section 4]. 

(C) In order to monitor effectively ongoing compliance with the terms and conditions of any transaction subject to prior notice, approval, or conditional approval under this Part, the [Attorney General/Department of Health/State Oversight Office] may, in their sole discretion, conduct a review or audit and may contract with experts and consultants to assist in this regard.

(D) One year, two years, and five years following the completion of the material change transaction approved or conditionally approved by the [Attorney General/Department of Health/State Oversight Office] after a comprehensive review under [Section 3 of this Part], and upon future intervals determined at the discretion of [Attorney General/Department of Health/State Oversight Office] the health care entity or the person, corporation, partnership, or any other entity that acquired direct or indirect control over the health care entity shall submit reports to the [Attorney General/Department of Health/State Oversight Office] that:

1. Demonstrate compliance with conditions placed on the transaction, if any;
2. Analyze cost trends and cost growth trends of the parties to the transactions; and
3. Analyze any changes or effects of the transaction on patient access, availability of services, workforce, quality, or equity. 

(E) The [Attorney General/Department of Health/State Oversight Office] shall be entitled to charge costs to the transacting parties for all actual, reasonable, and direct costs incurred in monitoring ongoing compliance with the terms and conditions of the sale or transfer of assets, including contractor and administrative costs.

[Note: Lawmakers should follow existing state law regarding procurement practices when drafting this section to determine whether the Attorney General/Department of Health/State Oversight Office should be reimbursed or whether the transacting parties should be billed directly. The Attorney General should maintain complete discretion in choosing consultants or experts to review the transaction.]

Section 6: Regulations

(A) The [Attorney General/Department of Health/State Oversight Office] may adopt regulations as necessary to implement [this Part].

Part II. Strengthening the Ban on the Corporate Practice of Medicine 

Section 1: Prohibition on the Corporate Practice of Medicine (CPOM)

(A) It is unlawful for an individual, corporation, partnership, or any other entity without a license under [section on medical licensure] to own a medical practice, employ licensees, or otherwise engage in the practice of medicine. 

(B) Notwithstanding the foregoing, an individual, corporation, partnership, or any other entity without a license under [section on medical licensure] that is permitted to employ licensees under [Section 2 of this Part] shall not indirectly or directly interfere with, control, or otherwise direct the professional judgment or clinical decisions of a licensee.

[Note: (B) above is further defined in Section 4 of this Part.]

Section 2: Corporate Entities Permitted to Employ Physicians

(A) A medical practice organized for the purpose of practicing medicine may employ physicians and engage in the practice of medicine under the following conditions: 

1. Licensees who are licensed in this state to practice medicine must hold the majority of each class of shares that are entitled to vote. 
2. Licensees who are licensed in this state to practice medicine must be a majority of the directors. 
3. All officers except the secretary and treasurer, if any, must be licensees who are licensed in this state to practice medicine. The same person may hold any two or more offices.

[Note: It is common for states to have majority or exclusive licensee ownership requirements for professional corporations but not for other corporate forms, such as limited liability companies. States should consult their statutes to ascertain existing requirements for each corporate form and amend accordingly.]

(B) The following entities may employ physicians and engage in the practice of medicine: safety net clinics and public health care providers, including federally qualified health centers, rural health clinics, public hospitals, health and hospital districts, school-based health clinics, and tribal health clinics.             

[Note: States may be interested in exempting other types of entities from employing physicians, such as non-profit hospitals or certain facility-based providers.]

Section 3: Regulating Contracts Between Medical Practices and Management Services Organizations

[Note: As above, these provisions should apply to all corporate forms that enable for-profit practice of medicine, not only the “professional corporation” form.]

(A) Ban on Straw Ownership 

1. Licensee owners of a medical practice must exhibit meaningful ownership of the medical practice.
2. Meaningful ownership shall require that each licensee owner is duly licensed and present in the state and substantially engaged in delivering medical care or managing the medical practice.

(B) Ban on Dual Ownership or Interests

1. A shareholder, director, or officer of a medical practice may not: 

1. Own or control shares in, serve as a director or officer of, be an employee of or an independent contractor with, or otherwise participate in managing both the medical practice and a management services organization with which the medical practice has a contract; or
2. Receive substantial compensation or remuneration from a management services organization in return for ownership or management of the medical practice.

2. Subparagraph (i) of this paragraph does not apply to the shareholders, directors, or officers of a medical practice if the medical practice owns a majority of the interest in the management services organization or separate legal entity.

(C) Ban on Stock Transfer Restriction Agreements 

1. A medical practice shall not transfer or relinquish control over the sale, the restriction of the sale, or the encumbrance of the sale of the medical practice’s shares or assets.
2. A medical practice shall not transfer or relinquish control over the issuing of shares of stock in the medical practice, in a subsidiary of the medical practice or an entity affiliated with the medical practice, or the paying of dividends.

(D) Ban on Restrictive Covenants

1. Noncompetition Agreements

1. A noncompetition agreement between a licensee and another person is void and unenforceable.
2. A noncompetition agreement between a licensee and another person is valid and enforceable if the licensee is a shareholder or member of the other person or otherwise owns or controls an ownership or membership interest that is equivalent to 25 percent or more of the entire ownership or membership interest that exists in the other person.

2. Non-disclosure and Nondisparagement Agreements

1. A nondisclosure agreement or nondisparagement agreement between a licensee and a management services organization is void and unenforceable.
2. Paragraph (a) of this subsection does not limit or otherwise affect any cause of action that:
   1. A party to, or third-party beneficiary of, the agreement may have with respect to a statement of a licensee that constitutes libel, slander, a tortious interference with contractual relations, or another tort for which the party has a cause of action against the licensee; and
   2. Does not depend upon or derive from a breach or violation of an agreement described in paragraph (i) of this subsection.

(E) Ban on Advertising

1. It is unlawful for a management services organization or other legal entity that is not the medical practice to advertise the medical practice’s services under the name of the entity that is not the medical practice.

(F) Ban on Relinquishing Control of the Medical Practice 

1. A medical practice may not by means of a contract or other agreement or arrangement, by providing in the medical practice’s articles of incorporation or bylaws, by forming a subsidiary or affiliated entity or by other means, relinquish control over or otherwise transfer de facto control over any of the medical practice’s administrative, business or clinical operations that may affect clinical decision-making or the nature or quality of medical care that the medical practice delivers.
2. Conduct prohibited under paragraph (i) of this subsection includes, but is not limited to, relinquishing ultimate decision-making authority over: 

1. Hiring or terminating, setting work schedules and compensation, or otherwise specifying terms of employment of employees who are licensed to practice medicine in this state or who are licensed in this state as physician assistants or nurse practitioners; 
2. The disbursement of revenue generated from physician fees and other revenue generated by physician services.
3. Collaboration and negotiation with hospitals and other institutions in which the licensees of the medical practice may deliver clinical care, particularly with regard to controlling licensee schedules as a means of discipline. 
4. Setting staffing levels, or specifying the period of time a licensee may see a patient, for any location that serves patients; 
5. Making diagnostic coding decisions; 
6. Setting clinical standards or policies; 
7. Setting policies for patient, client, or customer billing and collection;
8. Setting the prices, rates, or amounts the medical practice charges for a licensee’s services; or 
9. Negotiating, executing, performing, enforcing, or terminating contracts with third-party payors or persons that are not employees of the medical practice. 

3. The conduct described in paragraph (ii) of this subsection do not prohibit: 

1. Collection of quality metrics as required by law or in accordance with an agreement to which the medical practice is a party; or
2. Setting criteria for reimbursement under a contract between the medical practice and an insurer or payer or entity that otherwise reimburses the medical practice for medical care.

4. Notwithstanding subparagraph (i) of this subsection, a medical practice may delegate administrative, business, or clinical operations described in subparagraph (ii) of this subsection to a managed services organization, provided that (a) the medical practice’s shareholder agreement bestows this delegation authority exclusively to the majority of shareholders who are licensee-owners, and (b) such delegation does not relinquish de facto control of the medical practice to non-licensees.

Section 4: Protections for Employed Licensees 

(A) The following provisions apply to [licensees] who are employed by, or who provide health care services under contract with, an unlicensed person, corporation, or other entity under [Section 2 of this Part]. 

(B) Ban on Restrictive Covenants

1. Noncompetition Agreements

1. A nondisclosure agreement or nondisparagement agreement between a licensee and an employer or another entity is void and unenforceable.

2. Non-disclosure and Nondisparagement Agreements

1. A nondisclosure agreement or nondisparagement agreement between a licensee and an employer or any other entity is void and unenforceable.
2. Paragraph (a) of this subsection does not limit or otherwise affect any cause of action that:
   1. A party to, or third-party beneficiary of, the agreement may have with respect to a statement of a licensee that constitutes libel, slander, a tortious interference with contractual relations, or another tort for which the party has a cause of action against the licensee; and
   2. Does not depend upon or derive from a breach or violation of an agreement described in paragraph (i) of this subsection.

(C) Ban on interfering with, controlling, or otherwise directing the professional judgment or clinical decisions of a licensee.

1. Conduct prohibited under Section 1(B) of this Part includes, but is not limited to, controlling, either directly or indirectly, through discipline, punishment, threats, adverse employment actions, coercion, retaliation, or excessive pressure, the following: 

1. The period of time a licensee may spend with a patient, including the time permitted for a licensee to triage patients in the emergency department or evaluate admitted patients; 
2. The period of time within which a licensee must discharge a patient;
3. The clinical status of the patient, including whether the patient should be admitted to inpatient status, whether the patient should be kept in observation status, whether the patient should receive palliative care, and whether and where the patient should be referred upon discharge, such as a skilled nursing facility; 
4. The diagnoses, diagnostic terminology, or codes that are entered into the medical record by the licensee;
5. The range of clinical orders available to licensees, including by configuring the medical record to prohibit or significantly limit the options available to the licensee;
6. Any other action specified by regulation to constitute impermissible interference or control over the clinical judgment and decision-making of a licensee.

Section 5: Enforcement 

(A) Attorney General Enforcement Authority

1. The Attorney General may subpoena any records necessary to enforce any provisions of [this Part] or to investigate suspected violations of any provisions of [this Part] or any conditions imposed by conditional approval pursuant to the material transactions review process. 
2. The Attorney General may enforce any requirement of [this Part] and any conditions imposed by a conditional approval pursuant to the material transactions review process to the fullest extent provided by law, including damages. In addition to any legal remedies the Attorney General may have, the Attorney General shall be entitled to specific performance, injunctive relief, and other equitable remedies a court deems appropriate for any violations or imminent violation of any requirement of this [Part] or any violations or breach of any of the conditions and shall be entitled to recover its attorney’s fees and costs incurred in remedying each violation.
3. In addition to the remedies set forth in paragraph (ii), the Attorney General may impose a statutory penalty of [$10,000 per day] for any violation of this Part or of any conditions imposed pursuant to a conditional approval and may rescind or deny approval for any other past, pending, or future material change transactions involving the health care entity or an affiliate.
4. Nothing in this subsection shall narrow, abrogate, or otherwise alter the authority of the Attorney General to prosecute violations of antitrust or consumer protection requirements

(B) Administrative Enforcement

1. Any entity that violates any provision of this [Part] or any rules adopted pursuant thereto shall be subject to an administrative penalty of [$10,000 per day] for any violation of this [Part];
2. The [Department of Health/State Oversight Office] engaged in market oversight may disapprove any transaction or agreement that violates this [Part];
3. The [Department of Health/State Oversight Office] may refer any entity to the Attorney General to review for enforcement of any noncompliance with this Part or regulations adopted pursuant thereto. 

(C) Private Right of Action

1. Any person aggrieved by a violation of this statute may file suit in any circuit court in the State of [insert], without regard to exhaustion of any alternative administrative remedies provided herein.
2. Upon application by a complainant and in such circumstances as the court may deem just, the court may appoint an attorney for such complainant and may authorize the commencement of the action.
3. If the court finds that the respondent has intentionally violated any provision of this chapter or any regulation under this chapter, it may award damages up to and including an amount equal to the amount of actual damages, or statutory damages of up to [$100,000] per plaintiff per violation, or other equitable relief.
4. Any civil action brought under this section shall be subject to appeal.

(D) General Rulemaking Authority

1. The [Attorney General/Department of Health/State Oversight Office/Medical Board] may adopt regulations as necessary to implement [this Part].

[Note: A state may choose to delegate rulemaking authority in Part II to a state’s medical board.] 

Part III. Creating Transparency in Ownership and Control of Health Care Entities

Section 1. Reporting of Ownership and Control of Health Care Entities. Each health care entity shall report to [Department of Health/State Oversight Office] on an [annual basis] and upon the consummation of a material change transaction involving the entity as defined in Part I, in a form and manner required by the [Department of Health/State Oversight Office] the following information:

[Note: Health care ownership transparency fits better within the Department of Health or State Oversight Office than the Attorney General because it is a regulatory function not an enforcement one. Indiana’s and Massachusetts’ would report to the Department of Health or Health Policy Commission). Another alternative would be the Secretary of the State, to the extent that office oversees business entities, but it has less expertise/oversight authority over the health care system. Timing can be expanded from annual to updating registration every two years, as is done by the Massachusetts provider registry.]

(A) Legal name of entity

(B) Business address of health care entity

(C) Locations of operations

(D) Business identification numbers of the entity, as applicable, including, 

1. Taxpayer identification number (TIN)
2. National provider identifier (NPI)
3. Employer identification number (EIN)
4. CMS certification number (CCN)
5. National Association of Insurance Commissioners (NAIC) identification number.
6. A personal identification number associated with a license issued by the department of insurance.
7. Pharmacy benefit manager identification number associated with a license or registration of the pharmacy benefit manager in this state.

(E) Name and contact information of a representative of the health care entity

(F) The name, business address, and business identification numbers listed in [subsection (D)] for each person or entity that, with respect to the relevant health care entity:

1. Has an ownership or investment interest;
2. Has a controlling interest; 
3. Is a management services organization; or
4. Is a significant equity investor; 

(G) A current organizational chart showing the business structure of the health care entity, including:

1. Any entity listed in [subsection (F)];
2. Affiliates, including entities that control or are under common control as the health care entity; and
3. Subsidiaries.

(H) For a health care entity that is a provider organization or a health care facility:

1. The affiliated health care providers identified by name, license type, specialty, NPI, and other applicable ID number listed in [subsection (D)]; the address of principal practice location; and whether the health care provider is employed or contracted by the entity; and
2. The name and address of affiliated health care facilities by license number, license type, and capacity in each major service area.

(I) The names, NPI (if applicable), and compensation of the members of the governing board, board of directors, or similar governance body for the health care entity; any entity that is owned or controlled by, affiliated with, under common control as the health care entity, and any entity listed in [Subsection (F)].

(J) Comprehensive financial reports of the health care entity and any ownership and control entities, including audited financial statements, cost reports, annual costs, annual receipts, realized capital gains and losses, accumulated surplus, and accumulated reserves.

Section 2. Exceptions. The following health care entities are exempt from the reporting requirements under [Section 1]:

(A) A health care entity that is an independent provider organization, without any ownership or control entities, consisting of two or fewer physicians, provided, however, that if such health care entity experiences a material change transaction under [Part I], the health care entity is subject to reporting under [Section 1] upon the consummation of the transaction. 

(B) A health care provider or provider organization that is owned or controlled by another health care entity, if the health care provider organization is shown in the organizational chart submitted under [Section 1.G] and the controlling health care entity reports all the information required under [Section 1] on behalf of the controlled or owned entity, provided, however, that health care facilities are not subject to this exception. 

Section 3. Regulatory Authorization

(A) The [Department of Health/State Oversight Office] shall promulgate regulations necessary to implement this [Part], specify the format and content of reports, and impose penalties for non-compliance. The [Department of Health/State Oversight Office] may require additional reporting of data or information that it determines is necessary to better protect the public’s interest in monitoring the financial conditions, organizational structure, business practices, and market share of each registered health care entity. 

(B) The [Department of Health/State Oversight Office] may assess administrative fees on health care entities in an amount to help defray the costs in overseeing and implementing this Part. 

Section 4. Sharing of Ownership Information to Improve Transparency

(A) Information provided under this section shall be public information and shall not be considered confidential, proprietary, or a trade secret, provided, however, that any individual health care provider’s taxpayer ID that is also their social security number shall be confidential. 

(B) Not later than [Date], and annually thereafter, the [Department of Health/State Oversight Office], shall post on a publicly available website a report with respect to the previous [one-year] period, including:

1. The number of health care entities reporting for such year, disaggregated by the business structure of each specified entity;
2. The names, addresses, business structure of any entities with an ownership or controlling interest in each health care entity;
3.  Any change in ownership or control for each health care entity;
4. Any change in the tax identification number of a health care entity;
5. As applicable, the name, address, tax identification number, and business structure of other affiliates under common control, subsidiaries, and management services entities the health care entity (including the business type and the tax identification number of each); and
6. An analysis of trends in horizontal and vertical consolidation, disaggregated by business structure and provider type.

(C) The [Department of Health/State Oversight Office] may share information reported under this [Part] with the State Attorney General, other state agencies, and other state officials, to reduce or avoid duplication in reporting requirements or to facilitate oversight or enforcement pursuant to the laws of the state, provided that any tax ID numbers that are individual Social Security numbers may be shared with the State Attorney General, other state agencies, or other state officials that agree to maintain the confidentiality of such information. The [Department of Health/State Oversight Office] may, in consultation with the relevant state agencies, merge similar reporting requirements where appropriate. 

Section 5. Enforcement

(A) Audit and inspection authority. The [Department of Health/State Oversight Office] is authorized to audit and inspect the records of any health care entity that has failed to submit complete information pursuant to this Part or if the [Department of Health/State Oversight Office] has reason to question the accuracy or completeness of the information submitted pursuant this Part. 

(B) Random audits. The [Department of Health/State Oversight Office] shall conduct annual audits of a random sample of health care entities to verify compliance with, accuracy, and completeness of the reported information pursuant to this Part.

(C) Penalty for Failure to Report. If a health care entity fails to provide a complete report under Section 1, or submits a report containing false information, such entity shall be subject to a civil penalty as follows:

1. Health care entities consisting of independent health care providers or provider organizations without any third-party ownership or control entities, with [10] or fewer physicians or less than [$10 million] in annual revenue, the penalty shall not exceed [$50,000] for each report not provided or containing false information.
2. For all other health care entities, the penalty shall not exceed [$500,000] for each report not provided or containing false information.