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In 2019, the Chair of the U.S. House Committee on Ways and Means (the “Committee”) asked the Medicare Payment Advisory Commission (“MedPAC”), an independent congressional agency established in 1997 to advise Congress on issues affecting the Medicare program, to examine the role that private equity (“PE”) plays in the Medicare program.  More specifically, MedPAC was asked to examine the following four issues related to PE investment:

  1. Gaps in Medicare data that make it difficult to track PE investments in Medicare-participating providers;
  2. Business models that PE firms use when they invest in the health care sector;
  3. The effects of PE ownership on Medicare costs, beneficiaries, and providers; and
  4. The extent of PE involvement in companies that participate in the Medicare Advantage (MA) program.[1]

In response to the Congressional request, MedPAC developed an analytical workplan that it presented during its September 2020 meeting.[2]  During its April 2021 meeting, MedPAC presented a status report (“April Presentation”) on its PE-related investigation and analysis and confirmed that it was on track to report its findings in its June 2021 report to Congress.[3]

In its April Presentation, MedPAC previewed some of its observations and analysis as to the issues enumerated above.  For example, MedPAC noted that there are significant gaps in Medicare data regarding provider ownership which, in turn, make it difficult to track PE investment in the Medicare provider world.  But why is there a gap?  Doesn’t the Medicare program already have access to provider ownership information? The answer is yes, but providers are not always reporting it.

Ownership information on Medicare providers and suppliers is reported on the Medicare Enrollment Applications including the Medicare Enrollment Application: Institutional Providers (CMS-855A) and the Medicare Enrollment Application: Clinics/Group Practices and Other Suppliers (CMS-855B).  By way of example, under the current enrollment reporting regime, CMS-855A and CMS-855B requires disclosure of information on all individuals and entities that have 5% or more (direct or indirect) ownership interest in the provider or supplier.  Providers and suppliers are also required to notify Medicare of any change in ownership or management control within thirty (30) days of such change.  However, Medicare does not condition the processing of the provider application, or change, on whether the information is accurate and does not ask for documentation, like copies of  owner governing documents or ownership ledgers.  As a result, it is likely that the information filed by many providers does not include all indirect owners “up the chain” of ownership.  This may change within Medicare’s increased interest in ownership transparency.

As some members of MedPAC have commented, getting more detailed information about the identity of owners of Medicare providers “up the chain” of ownership will improve MedPAC’s  ability to study the effects of PE ownership among various classes of providers and whether common ownership across providers and suppliers exists.   Will knowledge of this information result in any changes to reimbursement regimes or more informed policy decisions?  MedPAC Chair Michael Chernew commented, “We are not yet sure how far, in which directions, we will put work like this, but certainly understanding the changing and complex organization of the delivery system and how it’s financed in Medicare, in the healthcare system, is of importance to Medicare overall.”[4]  That leaves the side door open for possible changes.

The federal government’s focus on transparency of provider ownership is being mirrored at the state level.  As an example, the California Board of Pharmacy’s Community Pharmacy License Application for retail pharmacies (which must be filed also upon a change of control of a California licensed pharmacy) has extensive owner disclosure requirements.  Pharmacies must disclose all owners “up the chain,” which includes the identity of general partners, limited partners of PE fund owners, including the identity of the persons which control them.  Further, pharmacy license applicants must provide complete copies of all governing documents of its owners, as well as ownership tables, with the each owner “up the chain” identified until the ultimate owner (ie. a live person) is identified.   This is an extremely onerous task and invasive experience for PE funds, given that many funds have dozens of investors or limited partners, none of whom desire disclosure of their identity or ownership percentages in the fund.

In California, additional efforts to examine ownership of healthcare providers by PE investors occurred last year.  In 2020, the California legislature nearly passed SB 977, which would have required all hospitals and physician groups in California to obtain the approval of the State’s Attorney General of any change of control transaction involving a PE fund.[5]  The approval requirement would undoubtedly have required disclosure of the acquiror and presumably detailed information of entities and individuals that own and control the fund.   The legislation never made it to the Assembly floor in time for passage before the end of the year, but don’t rule out a repeat appearance in 2021.

The message for PE fund managers and limited partners is that more scrutiny related to their ownership of heath care providers to state and federal agencies will be forthcoming.

It will be important for funds and their advisors to closely monitor the reports issued by government in the coming months and years that analyze the impact PE ownership has on prices, competition, access and quality of care and be prepared to respond.

We will keep a close eye on the report from MedPAC when it comes out this June and will report on any revival of legislation coming out of California targeting PE ownership.


[1] MedPAC Meeting Presentation, “Congressional Request: Private Equity and Medicare,” by Eric Rollins, Rachel Schmidt, and Jeff Stensland (September 3, 2020) at

[2] Id.

[3] MedPAC Meeting Presentation, “Congressional Request: Private Equity and Medicare,” by Eric Rollins, Kathryn Linehan, Rachel Schmidt. Jeff Stensland, and Ariel Winter (April 2, 2021) at

[4]MedPAC: Transparency of Health Care Ownership Should be Examined,” (April 6, 2021).

[5] For a good summary of the proposed scope and impact of SB 977 on private equity, see “What SB Could Mean for PE Firms Investing in California’s Healthcare Industry,” (August 27, 2020).