Corporate Control of Health Care Providers: Latest Trends and Developments

Rachel Ludwig, Partner, DLA Piper, speaks with John Saran, Partner, Holland & Knight, Regan Parker, CEO, Association for Responsible Healthcare Investment, and Robbie Allen, CEO, U.S. Heart & Vascular, about the latest legal and regulatory developments related to corporate ownership of health care providers. They discuss the recent evolution of these laws and regulations at the state level, recurring trends, unintended consequences, and what the industry is doing to build trust and help shape the legal and regulatory landscape. From AHLA’s Business Law and Governance Practice Group.

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Transcript

SPEAKER_00 0:04

This episode of AHLA Speaking of Health Law is brought to you by AHLA members and donors like you. For more information, visit americanhealthlaw.org.

SPEAKER_03 0:16

Hi everyone, I'm Rachel Ludwig, a healthcare regulatory partner at DLA Piper in Washington, D.C., and a vice chair of the AHLA Business Law and Governance Practice Group. I'm excited to host this episode of AHLA's Speaking of Health Law podcasts, where my expert guests and I will discuss recent regulatory developments related to corporate ownership of healthcare providers and what balanced regulation might look like. These regulations are generally being implemented currently at the state level and take a variety of shapes and forms, including mini HSR or transaction review laws, corporate practice of medicine laws, and other types of laws that restrict or prohibit private equity or other corporate ownership of certain providers. Today we're going to talk about the recent evolution of these laws, recurring trends, unique current legislation, some unintended consequences, how to build trust, and what the industry is doing to participate and help shape these laws. Now I'll turn it over to our expert guests, John Regan, and Robbie, to introduce themselves and then we can jump in on the discussion.

SPEAKER_02 1:21

Thanks, Rachel. So John Seren, Healthcare Transactions Partner at Hall in a Night. I'm actually incoming vice chair for the business governance practice group. Very excited to join the AHLA family and looking forward to the uh upcoming annual at the end of June.

SPEAKER_04 1:42

And Regan Parker, I'm the CEO of the Association for Responsible Healthcare Investment. And we're an association focused on making sure that the narrative around private investment in healthcare is a balanced one and ensuring that regulations don't impact uh the industry negatively.

SPEAKER_01 1:59

And I'm Robbie Allen. I'm the CEO of a private equity backed healthcare provider services group called U.S. Heart and Vascular. That's mostly in the cardiovascular space. Um and part-time, I'm an operating partner in a venture fund that's focused on new healthcare technology called AIF.

SPEAKER_03 2:16

Great. Thanks, everybody. So to start the discussion, maybe each of you can talk a little bit about the origins and intent of these regulations and kind of how you've seen these regulations develop over the past couple of years.

SPEAKER_02 2:29

Yeah, I'm happy to just kick that off and then others jump in. I think you mentioned, right, state transaction reporting laws, corporate practice of medicine, uh non-compete restrictions, ownership disclosure. All of these components are not really new for healthcare generally. In some cases, right, corporate practice of medicine's been around for 100 years, depending on the state. Folks have been reporting transactions to the federal government for some time. You know, if you're if you're enrolled in in Medicare, Medicaid, uh, you know, or you use certain payers, you're you know, you are used to uh disclosing ownership or you know, giving that information. However, you know, if you look at sort of coming out of COVID, there was a you know a surge of of transactions that happened across the country. Um and there were several transactions that were involving uh physician practices or dental practices or certain health systems uh that just were not getting on state radars, whether it was because uh maybe that state didn't have a transaction reporting law, or it was it was such a small uh transaction, did not hit the federal threshold, or for whatever reason, uh it was not hitting state radars. And so you had a you know a large body of healthcare consolidation out there that was happening, and there were obvious obvious consequences to it over time, uh, that was not just getting on the state radars, and they weren't understanding sort of the effects that that consolidation had on cost, quality, access to care. Uh, and so roughly around you know 2022, Oregon came onto the scene, passed their state uh transaction reporting bill, and then it kind of went from there. But you know, interested in in uh the rest of the panel's thoughts as to sort of how this kind of came about in the you know around 21, 22.

SPEAKER_04 4:28

Well, I think part of um part of what you have to understand about like a surge in legislation, particularly when it starts to happen at the state level, is that often it can come from headlines, right? So there were some um some pretty large headlines around some hospital closures, you know, and of course, when that happens, patients and communities are are impacted. Um, there's harm being done, and so regulators will step up and try and solve that in a number of different ways. Um, so I think a lot of what we're seeing now is in response to some of those particularly awful outcomes and a response by states and the federal government to try and understand how do we wrap our arms around this so it doesn't happen again. Um they want to solve the problem, but I think what we've seen over the last few years is that um, you know, healthcare is incredibly complex. And so trying to find ways to regulate the actual issues that they're trying to solve has been a challenge, which is, I think, some of some of what we're seeing is this patchwork of red regulation across the country, um, because it is so so hard um to try and figure out the best way to solve these problems without impacting access to care and innovation.

SPEAKER_01 5:35

I I can't disagree with anything they've said. I I guess I view this in three buckets. Um, the one you just alluded to, Reagan, which the headline risk when these things go bad, particularly around facilities ownership and inside aggressive capital structures. Um when you think about private equity trying to move the dial quickly around facility utilization, that can go really bad really quickly. And you saw those headlines. The other bucket, though, is the consolidation effect that's happening and has been for 50 years, the payer provider system triangle. And, you know, that used to be any two of those could beat up the other. Now the only two that can beat each other up are systems and payers. The providers are the ones that historically, for the last 50 years, have been not big enough to fight. That's driving some of this, which is creating anxiety to look at these transactions that are happening in an ever more rapid cycle. And the third one that I think we all ignore often is the structure of the system itself is under enormous pressure to change rapidly around dollars. And that that's fueling transaction behavior and protective behavior from the incumbents, which is fueling some of the backdoor politics that drives some of the noise around these transactions.

SPEAKER_03 6:49

Yeah, I think these are all really great points. And um, you know, I think it would be helpful maybe for the audience to just spend a couple of minutes maybe talking about sort of the buckets of regulations that we're seeing. We've uh talked loosely about them, but just to kind of give give folks a sense of what the different types of regulations are that are out there, and maybe you know, the the sort of purpose or background um on some of those different ones and how they're intended, or uh, you know, the goals of them to sort of operate and in a regulatory context. So maybe John, you could talk a little bit about that.

SPEAKER_02 7:26

Yeah, I'll and I'll try to we could spend all day talking and I'll try to be brief and I'll you know turn it over to the you know the rest of the panel to talk about some specific states, but you mentioned the first one, right? Transaction reporting. And just to kind of go back to the triangle, I mean, if if you want to open a new hospital in most states, you have to go through certificate of need. If you if you buy or sell an insurance plan, you have to usually go through a process. That would that's not the case necessarily for every provider. And so the thought was okay, create a transaction reporting process. Uh, not necessarily require approval. Um, Oregon's one of the only states that that does require that approval, but at least uh you know, provide the attorney general or another health uh agency with advance notice of a transaction, give them time to ask questions and uh make sure they have all the information, disclosing intent, you know, intentions for operations in the state, ownership, who are the players, uh, and the and the uh projected effects uh on uh the healthcare uh market in that state. Uh and so that's been, I would say, you know, more than 50%, right? It that's been a large chunk of this. As it's progressed, uh it has kind of morphed into a resurgence of corporate practice of medicine. And it's not necessarily new um new, you know, new law, it's it's uh or new theories. It's more so just enforcing what's already sort of been out there uh and and you know, putting a little bit more teeth to it uh and and attacking it from that angle. And you're starting to see states bulk up their um, you know, their laws bulk up, you know, give more tools to the to the AGs and the in the and the enforcement agencies uh to actually take actions, not just against the clinicians, but the the management companies and their private equity backers. Uh, and then as well, turn healthcare businesses into essentially many many private companies when it comes to ongoing disclosures to the state, whether it be ownership, operational information, copies of documents, separate and apart from um you know, from any sort of transaction activity. Uh the last bucket uh is you you've seen this national trend, uh, and also in the states where uh there's a recognition that uh restrictions on providers to uh compete uh is a way to uh essentially you know ensure alignment with uh broader corporate structures. And so a renewed interest on limiting those uh and putting restrictions and has been sort of an ancillary uh part of this as well. And so you'll see these states, they'll do one, two, maybe all four of those types of components when they come out with a particular law.

SPEAKER_01 10:17

I mean, I look when I think about those buckets, John, the the chief challenges that we see on a state-by-state level, by the way, you know, I think you should point out this isn't coming from one side of the aisle. There are arguments to be made from every point of sale in the political spectrum to do these things, very often done in the same way that most regulation is by people who don't have any depth of understanding on kind of what the fallout of those regulations are. And so uh typically these result from a lack of federal authority to step in and kind of clear it up, because right now you're getting much more disparity between the desired outcomes in the healthcare system from all the different players in it. Everybody's being forced into corners for their own protective sake, and that's accelerating what I would call misguided um sort of bills that show up uh that started from a pure place of, hey, we don't know what the heck's going on in our state. Uh that's that's usually the origin point, but the chaos that gets created by that is also an inflection point for people to lobby their own agendas and begin to kind of accelerate outcomes. I think the piece you left off done is the cost piece. There's a bucket out there that's starting to be ginned up, and we should talk about where it comes from that oh, protecting and and knowing and keeping private equity, for example, out of the space is going to lower cost. Um, we can spend four hours on whether that's true or not. But those types of things are accelerating this discussion as well and accelerating legislation that's popping up in all these buckets around town.

SPEAKER_04 11:53

Yeah, and I think what's challenging is you, you know, there's such a perception around private equity as an investment vehicle itself, right? And so you're you're coming with that preconceived notion of what those practices are and the impacts of those practices, and then you're applying it to something like healthcare, which is deeply personal, deeply human, um, and again, very complex. And so, you know, as you said, Robbie, you're you're left with legislators who are trying trying to solve some, you know, core problems that they perceive about access to care and cost, but they don't really understand how best to do that. And then you've got a bunch of different interests coming in and lobbying and taking their own positions. Um, and it and it ends up leaving you with, again, this patchwork across these different states of laws that really oftentimes don't have the desired outcome when they're fully implemented. And we've seen that to some degree in Oregon, which is one state that passed a pretty strict set of laws and um you know almost immediately had another issue come up because the law, as written, didn't really solve the problem they were trying to solve.

SPEAKER_02 12:55

And that moratorium concept, and you're right, that's sort of a fifth bucket. Uh, it is more rare, but it is popping up. And it's not just private equity. I mean, insurance uh companies are being prohibited from investing in providers in certain states. And there's you're seeing that in some states and also on the federal level as well. Um, but it's interesting because like something will happen in another state, you know, from the thousands of miles away, and then legislators in, you know, will decide, oh, well, we don't want you know, PE or insurers to do that in our state. And so we're gonna put this moratorium in place. And maybe none of those businesses exist like today in that state. And so some some of it is sort of like to your point, uh Reagan, like reactionary to the headlines without thinking through. So like now we just cut off maybe the only potential you know source for capital or alignment or expansion, or maybe you know, 50%, right? Just right off the bat um for the future.

SPEAKER_04 13:58

Yeah, and some of what happens too that you know, we've we've tried to advocate when we have conversations with folks to think about like it investing in general. And like investors have choices and they can go anywhere they want to go. They don't have to invest in a business in your particular state. And if it becomes too complicated, too messy, too uncertain, too risky, if they have choices about where to build a business, they're not gonna go there. Um, you know, you have some markets like California and New York, they're huge, right? And so they have, you know, some of the more complex restrictive um regulations, but because the market's so big, people still go there. But for some of the smaller states, it is something to think through about, you know, do you want to try and attract investment? And how can you maybe refine these laws in a way that actually incentivizes responsible investment in healthcare?

SPEAKER_02 14:46

I mean, you're right. So in California, they just rolled out uh proposed regulations for the uh transaction reporting law, and it's centered on private equity transactions. And I mean, we could find ourselves, and this is a time for folks to get involved in those discussions, uh, we could be fine, you know, find ourselves where you have smaller transactions that don't hit HSR thresholds, but now we have to go through a very onerous and time-consuming California filing. Um and so to your point, right, it's they might choose other states.

SPEAKER_03 15:18

Yeah. Yeah, so maybe we can expand this conversation a little bit. We've talked a lot about how there's a lot of different types of laws um in this space and a lot of different attempts to regulate um sort of private investment in healthcare. But you know, are we seeing some trends as well across the states where um states are sort of doing very similar things or have model language that they're working from sort of as a starting point? And and what has the been the success of that and what are the challenges if if that's happening?

SPEAKER_04 15:52

Yeah, I mean, we we're certainly seeing that, right? There are certain organizations who have some draft model language um, you know, about how to how to regulate that that perhaps um don't fully understand the full scope of of how investment in healthcare actually works. Um, one of the things that we've talked about among this group quite a bit is do we do we set forth our own set of regulations that basically tells a state, look, if you want to regulate on this, this, or this piece, here's some language. And then being able to talk them through, you know, the this is the goal you're trying to solve. We're gonna help you get there without disincentivizing investment because the impact of that means that, you know, your communities have less less access, less innovation, higher costs. So let's make sure we don't do those things and scare everybody away. And let's make sure that that the um investments are responsible. And here's a structure to do that. So I do think that would be a great thing for the industry to start to rally behind is you know, what can we be for as opposed to always playing defense and being against what's being proposed?

SPEAKER_01 16:56

Cannot echo that enough, Reagan. We patients want access, affordability, and efficacy. I think the government or the municipality would probably add kind of innovation or agility and resilience to the needs of the broader community to that list of things. But that when you engage, there's there's a little bit of a different understanding that helps everybody get to those three things that people really want to measure. Um so prior to everybody intervening with their dollars, generally speaking, that's what the legislatures in the states that we've worked with have asked for. Look, I don't know anything. And that's where what Reagan's talking about is really helpful. Well, here's what I would think you'd want to know. Here's what I look for when I'm buying these companies. Um, you should probably know that too. By the way, you should know that for the health system down the street that's purchasing as the capital partner. You should know that as the corporate partner that's coming in. You should know that about anything that's getting big in this critical infrastructure for your municipality, your state, or your country.

SPEAKER_04 18:00

Yeah, I I think there's um, you know, there's such a focus on the form of investment, right? Whether it's private equity um or not. But it but that's been the big focus. And really these sets of sort of responsible regulations should apply to everybody in the space. I mean, it should be one common standard for transparency, for access, for reporting among all the players. I think singling out one specific type of investment, although you can understand where it came from, right? With the headlines and some of the bad outcomes, I think it just fails to understand that there are responsible ways to invest, at least in terms of private equity.

SPEAKER_02 18:36

And I think it's short-sighted. I mean, I say this all the time, you know, if you're only focused on your particular sliver of the industry and that's all you care about, and when you go to engage with legislators, I mean, if if you're operating in a certain state and they're focused on, let's say, real estate investment trusts or or insurer insurance-owned entities or whatever, in whatever framework is built, we're now seeing that framework then just copied and pasted into another state and not necessarily only limited to those two stakeholders, but then broad brought into everywhere else. And so we are seeing this recycling of uh you know frameworks. If it works in this state well and it was passed quickly without much participation or resistance, now let's try to emulate it. And I I I believe uh I think some of the testimony you gave in Oregon to they talked about what was happening in right. So they they certainly uh monitor sort of what works, what doesn't work across the board, um and and and kind of go from there. I mean, I think initially when the first wave of these state laws came out, uh there was not much participation by the industry. It was limited to the coasts, uh, and they were pretty successful in getting it passed. I would say late 24 and 25 and this year, uh, you started to see all stakeholders uh uh uh start to get involved. And not necessarily ending the legislation, but making sure that the voices were heard, and then you saw the legislators respond by making you know substantive amendments and you know things that would help independent practices operate. Like Indiana is a great example of that, where something was passed initially, they tried to then upgrade it, and independent medical providers and dental providers spoke up, and you know, the Indiana pivoted. Um, and so I think people are have to date been participating and sort of on a on an ad hoc basis has been providing feedback on responsible measures to legislatures. And to your point, there there potentially is a need for a formal organized counterpoint to what is currently out there, which is certainly advocating for for one side.

SPEAKER_01 20:57

Yeah, I think you have to ask who's gonna win. Um, a highly fractious provider network of small independent practices heavily benefits payers heavily, and that triumvirate that I just gave you. So they're heavily incented to not allow consolidation of any of the other legs of the table, which may or may not be good. Um the problem is everything else in the space is consolidated. We do treat healthcare as a business. It has all these other things attached to it, much like education is a reasonable proxy. And so when you think about regulating this, um the desired outcome really should be the front of the conversation, not the cascade of effect once we pass a bill that sounds good for a soundbite. Because non-competenes, for example, can create evaluations. If you remove all non-computes, any physician group that has built a lifetime of value around what they do, suddenly that value has been dropped by 75%. Um And so there may be reasons to retain aspects of these things, and getting in front of this with the end state in mind is really important here in this discussion.

SPEAKER_04 22:10

Yeah, and I think often that's just not where it starts, right? I mean, that's we we've seen that across the board. Is it it is it's the it's the sound bite, it's you know, legislators thinking about what does my district need? How do I get re-elected? This is a big hot topic, how do I address it? And again, I think as an industry going in with, you know, let's align on what the goals are, let's talk about um how do we do this responsibly, let us educate you on the pieces of this that you might not understand. Um, those conversations are always welcome and always productive. But but often the industry itself, private equity in particular, has just sort of put their head in the stand and been unwilling to talk about it, um, sort of with with the hope that maybe this blows over or or goes away. Um, but again, now it's become a clearly bipartisan issue, right? It is it is not limited to the coasts, it is not limited to democratic attacks. Um, and so, you know, that as a strategy won't work anymore. You have to start to step up and have those conversations and participate, um, or you get regulated out of business eventually.

SPEAKER_03 23:13

And so I think we've been talking a little bit, we've mentioned like unintended consequences, and that some stakeholders are, I would say, more targeted than others right now in these types of regulations. So maybe we could spend a few minutes just uh talking through kind of what that looks like and how the unintended consequences have come about. Are there real um you know consequences that are being seen that are being documented? Is that resonating with regulators to make changes, right? Um and maybe you know, just thinking about how the industry could leverage those types of unintended consequences to help um, you know, push the regulations towards a more responsible um set of requirements.

SPEAKER_01 23:59

I I think you're getting all kinds of unintended consequences. I I think factually where my personal engagement with multiple state legislatures has been interesting to watch the reaction on, unquestionably, when a health system acquires a private practice and brings them into the system, the cost of care goes up dramatically. That's just a fact. There's nobody disputing that. That is fact. Although for the legislature, that that's a new thing, that's a new piece of information because they will also then tell me, well, this health system is my primary employer in my district. You know, they are creating the jobs of all the people that are voting for me in this particular district. So just calling those things out to begin to say this transaction is going to increase cost of care, restrict access. We also see a fall-off in access in underserved areas when these consolidations happen. And so those are just facts. Calling those things out is a start, but there are political realities on a two-year election cycle that are also the unintended consequences of how these things are structured today. So we're in a bit of a system that is the too big to fail analogy comes to mind, right? Well, I mean, we can't do anything about this because they've already invested all this, and the bank in town that loaned in the Capitol to do the multi-billion dollar expansion for the group that employs all of my constituents can't fail. So we have to keep that in place. Is a is an unintended consequence of structure that you're trying to solve. And we see this time and time again. Um that's just one. I'll stop there. I could go on for several hours about the parade of unintended consequences of these things.

SPEAKER_04 25:49

But I think, I mean, that's that's such a great example of of how messy this process is often. Like people, I think, fail to understand that like state level, state and local level politics and elections and and legislating is wildly different in every state, right? The dynamics are different, every district is different, everybody's interest is different. And so often, you know, as you just explained, Robbie, you're not having a person coming to the table who's like, okay, let me just figure out how to, you know, get better access to healthcare in my district. It is, it's all these other interests that come into play that are going to impact how that particular legislator thinks about the issue. It's going to change their perspective and color where and how they're willing to go. And so I think for for us, often what becomes a way to support our overall strategy is to bring in some media, bring in some op-eds, bring in some other constituents to focus the issues really on like what is the outcome that you're trying to achieve? And it can it can stop some of the noise. But at the end of the day, these are people who are elected again, often on a two-year cycle. And, you know, they have they have different interests that color um how they see an issue. And that can just be an incredible challenge. And sometimes you can't get past it.

SPEAKER_01 27:06

I think that coupled with the fairly stunning lack of sort of federal standardization of a few of these things, allows this to continue to get worse. You know, Reagan's example, uh, the example following on the one I just gave, unintendedly will cause providers to get sold to hospitals because the focus will be on private equity and cost of care goes up, which is directly in opposition to what we actually want for the healthcare system. Um and the federal government is over here on the right, currently today, saying, look, no policy unless it's deflationary, no steps unless they're deflationary. And you're you're getting unintended actions by the states that are going in direct contravention to that.

SPEAKER_02 27:49

Yeah, and then you know, there's the obvious reaction whenever there's one of these new types of laws, or you know, there's there's there's generally concern and anxiety about uh increased administrative burden, increased enforcement, becoming and you know, being the next person that's in the headlines that's drawing the ire of of whatever little agency. And that can, you know, as someone said earlier, right? If you're deciding at three different targets, you may end up avoiding the one that you know has the greater regulatory scrutiny or the you know higher cost of doing business. Um there are other components of this too, and Illinois is a great example. There's a deadline coming up in January to uh restructure uh ABA uh businesses here. And you know, if you're a mid-size or a large-size provider, you probably have the funds and the means to, you know, hire a law firm, you know, like the two law firms that are on this phone call to help them through that. But if you're a small provider or you know, mid-sized, uh and you don't have six months to do it properly, that can have them, you know, you might close your doors. And and like in the last few weeks, there's been um a lot of headlines in in our in my state uh with with those providers closing their doors abruptly. And um, you know, that that's something that could that we actually could be facing here in the next uh you know few months as we get closer to that deadline. So and I don't think that was the intent of of the laws that were put into place. The intent of the laws that put into place was to safeguard uh you know control of clinical care and and you know all good intentions.

SPEAKER_04 29:42

Yeah, I think an another example around urgent care centers, you know, I I find um the impacts to rural communities particularly um unfortunate often because these are areas, again, where they don't have great access to care, there is no hospital, they're driving two hours. And so um what happens often is an urgent care center will pop up, and that's the first line of defense for a lot of these communities. Um, but those are often backed by private investment. And so if you've created an environment where they're disincentivized to go into a particular state, um, those communities are going to be directly impacted by the fact that they now have to drive three hours to get to the hospital. You know, for um, you know, for those communities who likely can't do that. And then what's the downstream impact of that? It's um, you know, that that I find particularly troubling and short-sighted.

SPEAKER_01 30:33

The other big unintended consequence that I don't think we should ignore is the states that have reach over clauses into other, you know, like I can I now can control the entirety of your national platform with my state laws. Those are really nasty propositions and not from a but and don't solve anything. Um unless they're exceptionally well written, which they generally are not, because you're allowing a small group of people to govern national policy at scale.

SPEAKER_03 31:05

So as a result of some of those, have we seen exits in the marketplace? And you know, are do we think that providers are, you know, sort of or potential investors are really um you know, deeply aligned and in understanding of these types of scenarios such that they are shifting their investment patterns because of it?

SPEAKER_04 31:30

I mean, I I've received direct questions about what does this particular state look like? What do you think the environment is? Should we consider this as an investment? I've had several of those conversations. Um, you know, and so I I think many of these laws are new, right? We've seen this resurgence over the last couple of years. I think there's gonna be a longer tail on it. I think it's gonna take a little bit to sort of see the real full downstream effects of that. Because, you know, this is the first time now that people are starting to have those conversations and think about like what's the next investment, what's the next transaction? Um, so I think it's gonna take a little bit to see the full force of it.

SPEAKER_01 32:05

We've absolutely not. We've walked away from numerous deals in states of contention already.

SPEAKER_03 32:13

What about if you're existing, you know, existing investments? Are we seeing any, you know, divestments or you know, just desire to get out of the marketplaces where um, you know, these laws are being passed?

SPEAKER_02 32:27

I haven't seen like a you know dive full divestment. Um, I've seen a let's pause on further expansion, right? Increasing our risk. I've seen uh we need to invest now more time and money into compliance, especially and let's just use the recent settlement in California, which had a large marketing focus, but also a large corporate practice focus, um, right, and provided a lot of sort of in the weeds operational type uh uh you know the parameters. Um, I've seen now just a renewed focus on all right, we're gonna just we're not getting any bigger, but we're gonna refine and really you know try to bolster our defenses uh in case we are the next person to uh draw that scrutiny.

SPEAKER_03 33:19

Great. So maybe with the last few minutes that we have, we could just talk a little bit about, you know, how does the industry start to build trust on these topics and um gain more um traction and leverage and lobbying and and having meaningful input into um, you know, how these laws continue to evolve in the future?

SPEAKER_04 33:41

I mean, I I think they have to start talking about it and talking about their investment and the good work that they do. I mean, that is that is the first baseline easiest that they can do is talk about how talk about the downstream impacts. What are the investments? How are they impacting communities? How are you involved in, you know, having transparency, increasing innovation, access to care, lowering costs, um, talking about those things, showing the data, telling the personal stories. I mean, that that's the the first and most important thing I think that anybody can do.

SPEAKER_01 34:13

Cannot agree with that loudly enough. We I think the not just the industry, the people that um we are invested in by private equity. I think we also need the the capital partners, the companies, the private equity funds, the venture funds, and the health systems. This is where I think you get disparate alignment. A health system is usually buying a provider to guard market, whereas a private equity group is generally trying to grow market share and do all the value creation, and corporations are usually kind of in between but have both aims. That just saying out loud what the things we're trying to drive with this investment are, what are the goals of this investment? Um, there are a lot of folks who are not going to want to say those out loud, and I think those are the kinds of investments we should be inherently suspicious of as a society, right? If you can't tell me why you're doing this investment, and sometimes it's just to make return, but let's make sure it's not damaging access, efficacy, and affordability, um, then good. Sounds fine to me. If it's damaging these three though, don't like that investment. We've got to talk about that. And we've got to lead the charge. Nobody is saying anything right now. And then that environment, nothing gets done productively.

SPEAKER_02 35:34

And I think we've seen the legislatures to want to hear directly from the stakeholders that are being targeted by the specific legislation. They don't want to hear from lobbyists, they don't want to hear hear from lawyers, they don't want to hear from you know industry, you know, whatever. So, right, if if they're looking at physician practices, you want to have a physician practice representative speak. If they are targeting private equity, to your point, have a private equity sponsor actually give testimony. Uh, if they're MSOs, you know, say like in Oregon, right? When with the Oregon CPOM bill, we had we had folks that were testifying, and the a lot of the reaction we got back was, well, do we have an MSO that operates in Oregon here right now to testify? And it was that was limited, right? And so I think for these next, for this next round, because we're sort of at the tail end of this year, and if if there's a neck, you know, sort of a next round of this legislature of the of these legislations, um, and also the rulemakings, I think these folks need to speak up.

SPEAKER_04 36:35

Yeah, I mean, I think the side the silence is um more damaging than anything. It's like when there's a refusal to participate or to talk or to be open about uh again, like what are you investing in and why and what are the outcomes, then people are inherently suspicious, right? So you're just feeding, in my opinion, you're feeding that narrative by staying silent. If you're willing to talk about it and willing to be asked hard questions, like you can start to navigate the conversation and build trust. But there regulators aren't and uh legislators aren't gonna, you know, not regulate you if you stay quiet. It's only by participating in the conversation and being willing to talk about these issues that that you can get anywhere.

SPEAKER_02 37:13

Well, and that void is being filled too, like from other parts of the discussion, right? So if someone's looking to understand what's going on and they're silent, but then they're gonna be immediately attracted to those bad headlines and uh you know those other uh you know one-off cases out there.

SPEAKER_04 37:30

Right. It's really well said. The silence just reinforces it, you know. It's like, oh God, these were terrible outcomes by you know, a private investment. And and where's the private investment? Where what are they saying about it? You know, that's that is the problem. The more we speak out and educate people and are willing to have even the tough conversations, I think the more trust can get built. And then these regulations ultimately um won't be as damaging and misguided ultimately to communities.

SPEAKER_01 37:58

I think this starting to happen, just to be crystal clear. I listened to Sam Hazen give testimony on Capitol Hill, where he's you know actively advocating site neutrality, not something that would have come out of his mouth nine months ago. Um, and so as you think about that, hard conversations are where you build trust and where you move the dial. And you gotta get the people at the table. We're gonna have a very different interest than the health system, and we need to talk about that. Which then leads to that public sector having a voice and saying we don't need 12 Cleveland clinics in the state of Texas. So I appreciate that's what your argument is, but that's counter to what we need. You know, that's where everybody gets to weigh in in their domain, and you move legislation forward in a way that is productive. I I think we all believe on this call that the information gap is a problem and should be a problem. As a voter, I think it's a problem. So, and the the approach of hey, no regulation, head in the sand isn't a good thing for me as a community member or my community. So I think we got to get people at the table willing to talk and recognize that the negotiations usually result in everybody leaving the table a little bit unhappy about certain things and okay with others.

SPEAKER_03 39:17

Do you all view that this is the type of regulation that's here to stay? Do you see more and more of this in the future or additional evolution at a federal level? Just maybe give me your future state thoughts here as we as we wrap up so that people can can take that away and think about, you know, how can they participate going forward based on what you all think the future might look like?

SPEAKER_04 39:45

I mean, I I think of course it's going to continue. Of course. You know, there is such a gap between what our healthcare system needs and what um you know the federal or state government can actually provide. Somebody has to fill that gap. That will always be private entities. And so this will continue to be a challenge. It'll continue to be an issue. Again, it's one of the rare bipartisan issues that exist right now. Every both sides can rally behind it and and regulate people, you know, in this lane. Um, so I think inevitably it's going to continue. And I and I think it's going to get more complicated.

SPEAKER_01 40:19

I yeah. I mean, I if I had to give you my crystal ball, it's a it's an industry in fear that represents nearly a third of the economy. And it's in fear of multiple disruption forces. Um all the way across the span. Uh for the first time you have a technology innovation that that could very well be very deflationary and at the same time incredibly fear-inducing because of the infrastructure that the country relies on for the economic engine to work. So this regulatory environment is going to get worse, is my um my prediction. I think it's going to continue to accelerate. I think it's going to shake out some unintended consequences. But it's it feels very durable.

SPEAKER_02 41:05

Yeah, I mean, I'm expecting another, I mean, at least another year or two of what we've seen the last three years on these laws on the state side. Uh every year, though, it's like getting harder and harder to pass legislation in a new state. So if you're if you're a state, and what I mean by that is like if you're a state that already has, you know, step one of these types of laws, it's easier to go to step two or step three versus you have nothing and you're adding some one of these for the first time. Uh we saw that in Texas, Colorado, you know, some of the states in the middle of the country that struggled to pass uh laws. Um, but I think we'll like we'll continue to see on the state side. On the federal side, uh, I mean, for the last three years or so, there's been multiple federal bills targeting private equity, targeting insurance uh consolidation with providers, targeting real estate investment trusts. None of it has gone forward. I think under the current, at least as of today before the elections, I don't see it passing Congress, don't see it being signed by the president. Now, obviously, if if things change in Congress or uh the you know the next administration changes, that might be a different story on the federal side, but at least for state, uh, I think states where the most activity is going to be.

SPEAKER_04 42:17

Yeah, I mean, legislation is hard to pass. It just inherently is really, really difficult. And so I think you're seeing that, you know, at both state and federal level. Like it's it's hard to actually get something through. With that said, I will say, you know, you're one big headline away from a resurgence. You know, it's correct.

SPEAKER_01 42:33

So, you know, we'll have to particularly with AI, right? I mean, AI coming in on the clinical application side, which it will do. Differential diagnosis is a problem made for AI. Um, we will not want our doctor to tell us what's wrong with us in five years, is my fairly bold prediction. You'll want him to tell you what to do about it. Um, because you're gonna want AI to have evaluated your DNA and all the specificities that go with you, but that can be done on your phone. Um and when you start thinking about those things that are powerfully deflationary and like access expanding, but also removing jobs, that's a that's gonna induce, I predict, a heavy wave of secondary regulation on who's driving that and protectionism and all the things you see with uh, like we saw with telehealth, candidly, uh in the early days of um the internet.

SPEAKER_03 43:26

Well, thank you guys so much for this excellent discussion. I think it was very insightful with a lot of important information for everybody to uh learn about and understand. So I appreciate you all joining us and uh hope the audience enjoyed this uh episode of the AHLA Speaking of Health Law Podcast.

SPEAKER_00 43:49

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