An act relating to clinical decision making

Entire new Chapter 226 added covering transaction limitations, corporate practice of medicine prohibition, MSO contract regulation, ownership transparency reporting, and enforcement. The bill title changed to 'An act relating to health care financial transactions and clinical decision making.'

Section 9525 prohibits five categories of transactions: giving ownership of essential community providers to outside parties; debt-financed acquisitions where debt becomes an obligation of the health care entity; debt-financed dividends or shareholder returns; unfair affiliated contracts not at fair market value; and transactions that would result in a health care entity not accepting or limiting Medicaid, original Medicare, or Medicare Advantage patients.

Section 9531 makes it unlawful for unlicensed entities to own a medical practice, employ licensees, or engage in the practice of medicine. Section 9532 permits certain entities (federally qualified health centers, rural health clinics, nonprofit hospitals, state-owned facilities, ambulatory surgical centers, school-based health clinics) to employ physicians if licensees hold majority voting shares, comprise a majority of directors, and serve as all officers except secretary and treasurer.

Section 9533 regulates contracts between medical practices and management services organizations, prohibiting straw ownership, dual ownership interests, stock transfer restriction agreements, noncompetition agreements (with a 25% ownership exception), nondisclosure and nondisparagement agreements with MSOs, and relinquishing control over clinical decision-making functions including hiring, scheduling, coding, pricing, and payer contracts.

Section 9534 protects employed licensees by voiding noncompetition agreements entirely and voiding nondisclosure/nondisparagement agreements with employers. It also prohibits controlling a licensee's clinical decisions regarding patient time, discharge timing, clinical status, diagnostic coding, available clinical orders, or other actions specified by rule.

Section 9541 requires health care entities to report ownership and control information to the Attorney General and Green Mountain Care Board at least every two years and upon material change transactions (defined as transactions involving entities with at least $1,000,000 in assets or revenues). Reporting includes organizational charts, financial statements, board member compensation, and identification of all owners, controllers, MSOs, and significant equity investors.

Section 9547 deems violations a violation of the Consumer Protection Act. Civil penalties are up to $10,000 per violation for clinical decision-making sections (9531, 9532, 9534) and not less than $100,000 per violation for transaction and MSO contract sections (9525, 9533). Section 9548 establishes the Transaction Oversight and Clinical Decision-Making Fund to house collected penalties for AG enforcement activities.

New definitions added including 'acquisition,' 'affiliate,' 'change of control,' 'control' (10% voting threshold), 'health care entity' (broader than just facilities, includes providers, PBM, and insurers), 'material change transaction' ($1M threshold), 'medical practice,' 'noncompetition agreement,' 'nondisclosure agreement,' 'nondisparagement agreement,' 'private equity fund,' and 'significant equity investor.'

The effective date of the act is set as July 1, 2026 (new Section 2). The initial ownership reporting deadline in the existing Chapter 233 appears to have been moved up from March 1, 2027 to July 1, 2026 based on the markup showing both dates.

The bill title changes from 'An act relating to clinical decision making' to 'An act relating to health care financial transactions and clinical decision making,' and the new chapter is titled 'Transaction Limitations and Clinical Decision Making' (Chapter 226 instead of Chapter 233).

A new Subchapter 2 (Section 9525) prohibits five categories of transactions: giving a party ownership of core business operations of an essential community provider; debt-financed acquisitions where the debt becomes an obligation of the health care entity; debt-financed dividends or shareholder returns; certain affiliated entity contracts that are not at fair market value; and transactions resulting in entities that do not accept or limit Medicaid, Medicare, or Medicare Advantage patients.

The reporting/transparency requirements are significantly expanded. The old version required only health care facilities and MSOs with private equity or hedge fund involvement to report once by July 1, 2026 and upon changes. The new version requires ALL health care entities to report biennially AND upon any material change transaction, and reports must be submitted to both the Attorney General and the Green Mountain Care Board (previously only GMCB).

The old Section 9772 targeted only private equity groups and hedge funds interfering with clinical decisions at health care facilities. The new framework applies more broadly to any unlicensed entity's relationship with medical practices and licensees, regardless of whether it is a private equity fund.

A new Subchapter 3 (Sections 9531-9534) establishes a corporate practice of medicine prohibition. It is unlawful for unlicensed entities to own a medical practice, employ licensees, or engage in the practice of medicine. Exceptions are carved out for federally qualified health centers, rural health clinics, free and referral clinics, nonprofit hospitals, state-owned facilities, ambulatory surgical centers, and school-based health clinics.

New Section 9533 regulates contracts between medical practices and management services organizations. It prohibits straw ownership (requiring 'meaningful ownership' by licensee owners), dual ownership of both the practice and its MSO, stock transfer restriction agreements, noncompetition agreements (void unless the licensee owns 25% or more of the other entity), nondisclosure and nondisparagement agreements between licensees and MSOs, advertising under a non-practice entity name, and relinquishing control over clinical or business operations.

New Section 9534 provides protections for employed licensees. Noncompetition agreements between a licensee and an employer are void and unenforceable. Nondisclosure and nondisparagement agreements between a licensee and an employer are also void (with exceptions for libel, slander, and tortious interference claims). The section also prohibits controlling clinical decisions through discipline, threats, adverse employment actions, or other means, including controlling patient time, discharge timing, clinical status, diagnostic coding, and available clinical orders.

The definition of 'private equity group' is replaced with 'private equity fund,' defined as a publicly traded or nonpublicly traded company that collects capital investments and purchases ownership or controlling interest in a health care entity. All definitions related to 'hedge fund' are removed entirely.

New definitions are added for: 'Acquisition' (direct or indirect purchase including by lease, transfer, joint venture, etc.), 'Affiliate' (control relationships and entities operating under management agreements), 'Change of control,' 'Control' (power to vote more than 10% of shares or direct actions/policies), 'Health care entity' (broadly defined to include providers, facilities, provider organizations, PBMs, and health insurers offering plans in-state), 'Licensee' (physicians, APRNs, and PAs authorized to diagnose and treat), 'Material change transaction' (with a $1,000,000 asset/revenue threshold), 'Medical practice,' 'Noncompetition agreement,' 'Nondisclosure agreement,' and 'Nondisparagement agreement.'

The old version specified civil penalties of up to $50 per day (capped at $10,000 per year) for failure to report and $25,000 per material misrepresentation. The new version removes these specific penalty amounts and instead relies on the Attorney General's enforcement authority and Consumer Protection Act violations, as indicated in the statement of purpose.

The bill's scope was narrowed from all 'health care entities' (including providers, facilities, provider organizations, PBMs, and insurers) to specifically 'health care facilities' and 'management services organizations' with private equity or hedge fund involvement. The chapter title changed from 'Transaction Limitations and Clinical Decision Making' to simply 'Clinical Decision Making.'

The entire Subchapter 2 on Prohibited Transactions was deleted, removing bans on debt-financed acquisitions of health care entities, dividends financed by entity debt, affiliated contracts lacking fair market value compensation, and transactions that would limit Medicaid or Medicare patient acceptance.

The clinical decision-making restrictions in section 9772 now apply specifically to private equity groups and hedge funds 'involved in any manner' with a health care facility, rather than applying broadly to all unlicensed entities. The prohibited actions include interfering with diagnostic test decisions, referrals, care plans, patient volume/hours, clinical standards, medical record content, hiring/firing based on clinical competency, payer contract parameters, pricing, coding/billing decisions, and equipment selection.

The entire corporate practice of medicine subchapter (former sections 9531-9534) was removed, including rules on who may employ physicians, straw ownership prohibitions, dual ownership restrictions, stock transfer restriction bans, noncompetition and nondisclosure agreement voiding, advertising limitations, and detailed rules on relinquishing control of medical practices.

New definitions for 'hedge fund' (with exclusions for passive contributors and debt financing entities like banks and credit unions) and 'private equity group' (replacing the broader 'private equity fund' definition) were added. The bill now specifically targets these two types of investors rather than all unlicensed entities.

A private right of action was added in section 9772(e), allowing any aggrieved health care provider to sue in Superior Court for equitable relief, actual damages, costs, and attorney's fees against a private equity group or hedge fund that violates the clinical decision-making limitations.

The reporting requirement was restructured with a specific deadline of July 1, 2026 for initial reporting. Entities must report if PE/hedge fund ownership exists as of June 1, 2026, or file an attestation of no such ownership. Ongoing reporting is triggered when new PE/hedge fund interests arise or existing ones are modified.

New exemptions from reporting were added for nursing homes, health care staffing companies, federally qualified health centers, and entities providing services exclusively through telehealth (including remote patient monitoring).

Entire Chapter 226 (Transaction Limitations and Clinical Decision Making) was removed, including prohibited transactions (debt-financed acquisitions, debt-financed dividends, affiliated entity contracts, Medicaid/Medicare acceptance limitations), the corporate practice of medicine prohibition, rules on which entities may employ physicians, MSO contract regulations (straw ownership, dual ownership, stock transfer restrictions, noncompetition and nondisclosure agreement bans, advertising limits, relinquishing control), protections for employed licensees, broad transparency reporting requirements, civil penalties ($10,000 and $100,000 per violation), and the Transaction Oversight and Clinical Decision-Making Fund.

The bill title was changed from 'An act relating to health care financial transactions and clinical decision making' to 'An act relating to clinical decision making,' reflecting the removal of all transaction-related provisions.

The initial reporting deadline for health care facilities and management services organizations with private equity or hedge fund ownership was changed from July 1, 2026 to March 1, 2027, giving entities an additional eight months to comply.

The enforcement section that deemed violations of the removed chapter as violations of the Consumer Protection Act, along with specific civil penalty amounts and a dedicated fund for the Attorney General to administer oversight, was entirely eliminated from the enacted version.