Governor Gavin Newsom has signed a new piece of legislation that codifies restrictions on private equity firms and hedge funds from influencing the decision-making of physicians in California, JD Supra reported Oct. 9.
Here are five things to know about the new law:
1. The law specifies that private equity firms, hedge funds and their affiliates may not interfere with the professional judgement of healthcare professionals in clinical decision-making, contractually or otherwise. This includes decisions about diagnostic tests, treatment options, patient volume or referral requirements.
2. It also prohibits these corporate entities from exercising control over or having power over: medical records; hiring or firing decisions involving providers; the parameters of physicians or practices entering payer contracts; billing and coding decisions; the approval or selection of medical equipment and supplies for practices.
3. It also bans management contracts involving PE groups or hedge funds from including clauses in contracts that would restrict or prohibit providers in the practice from competing with the practice in the event of the provider’s termination or resignation or disparaging or commenting on the practice in any manner as it relates to quality of care, utilization, ethical or professional challenges in the practice or revenue-increasing strategies used by the PE group or hedge fund.
4.This provision does not affect the validity of otherwise valid and enforcement sale of business noncompetes or other valid prohibitions on the disclosure of material nonpublic information about the PE group or hedge fund.
5. The law notably does not contain a proposed mandatory state pre-approval process for PE-backed transaction in healthcare, which was included in a previous version of the bill that was vetoed last year.
