The California Office of Health Care Affordability has published updated draft emergency regulations implementing AB 1415, introducing significant changes for health care investors and providers.
Released on September 11, the revised proposed emergency regulations govern material change transaction notices and cost and market impact reviews, known as CMIRs.
The September Draft retains many provisions from the earlier May 15 proposed regulations while introducing several notable departures that investors must carefully consider.
Private equity sponsors, hedge funds, management services organisations, and other investors in the California health care sector are among those most directly affected by the updated rules.
The overarching themes of the changes include an expansion of filing requirements and categories, a heightened focus on control over health care entities, and expanded disclosure requirements and production burdens.
Investors and providers who conducted prior analyses under the May Draft may find those assessments no longer sufficient given the scope of the revisions introduced in September.
Pending or anticipated transactions may require renewed assessment of notice obligations, timing, costs, and deal value as the regulations move through review by the Office of Administrative Law.
One notable structural change in the September Draft concerns the treatment of management services organisations, with the new version incorporating the statutory definition of an MSO directly rather than relying on the detailed regulatory definition used in the May Draft.
The May Draft had included criteria tied to hospital ownership, physician relationships, common directors or investors, and affiliations with other health care entities, all of which have now been restructured.
The regulations are open to public comment for a limited five-day period under emergency regulation procedures, and will be submitted to the Office of Administrative Law no earlier than five business days after the comment period closes.
Investors and providers are advised to revisit analyses prepared under the May Draft and monitor the development of these regulations closely throughout the OAL review process.
Any final changes to the regulations could have material implications for the structuring and valuation of future health care transactions across California.