Beyond Private Equity Transaction Oversight: Mass. H.5159 Includes New Licensing Requirements

REGULATION OF DPH LICENSED FACILITIES

Under M.G.L. c. 111, DPH has the authority to license, regulate, and supervise certain healthcare facilities. Historically, these facilities included only hospitals, ambulatory surgical centers (ASCs), clinics, labs, and long-term care facilities. H.5159 authorizes DPH to regulate two new licensed facility types: office-based surgical centers and urgent care centers. It directs DPH to establish rules, regulations, and practice standards for these new licensure types by October 1, 2025.  H.5159 also expands DPH’s regulatory authority over acute care hospitals, specifically with regard to closures and real estate transactions. These changes signal the Commonwealth’s continued interest in regulating the provision of healthcare and maintaining oversight of quality, safety, and access.

New License Categories

As detailed further below, H.5159 outlines general licensure requirements, applicable to both office-based surgical centers and urgent care centers, and other provisions specific to each licensure type, including the procedures and services that can be provided at office-based surgical centers and at urgent care centers, respectively. H.5159’s description of the services and procedures that trigger the need for licensure is somewhat ambiguous, and there is potential for overlap with DPH’s existing licensure types (e.g., procedures that could be performed at either an ASC or an office-based surgical center), which, for example, may present an opportunity for providers performing in-office surgeries to seek licensure under a potentially less rigorous licensure scheme than DPH clinic licensure for ASCs.

Some physician practices have historically performed certain activities in an office setting that were exempt from facility licensure and should carefully assess their activities under these two new regimes to identify whether licensure is required.

Office-Based Surgical Centers

H.5159 includes an exemption from licensure for facilities that perform procedures that fall within the statutory definition of “office-based surgical services” but are otherwise licensed by DPH as hospitals, ASCs (licensed by DPH as clinics), or abortion clinics, under M.G.L. Ch. 122, § 12M. This exception for existing licensure indicates the Commonwealth’s intention to use the office-based surgical center license type to regulate a subset of moderately complex procedures, and to distinguish such procedures from those which must be performed at ASCs or hospitals.

Based on the definitions of “office-based surgical procedures” and “surgical services” in the ASC context, the Commonwealth is focused on the level of sedation administered in connection with the procedure. The sedation levels indicated in the “office-based surgical procedures” definition are slightly more precise than in the “surgical service” definition; however, certain overlapping elements of the definitions (e.g., general anesthesia appears in both definitions) create haziness as to which licensure type is appropriate.

• “Office-based surgical procedures” means procedures requiring general anesthesia, moderate sedation, or deep sedation. It includes all liposuction procedures, and excludes minor procedures and procedures requiring minimal sedation.
• “Surgical service” means providing diagnosis or care through endoscopic procedures or operative procedures requiring regional or general anesthesia (105 CMR 140.020).

The fact that office-based surgical procedures expressly include liposuction procedures regardless of sedation levels suggests that the new licensing scheme may be aimed at cosmetic surgery providers, whereas the ASC regulations specifically point to endoscopic procedures. DPH regulations and corresponding guidance likely will clarify the applicability of these licensure types.

DPH’s determination as to which procedures require office-based surgical center licensure will have implications for providers who perform in-office surgical procedures and have historically relied on the physician office exemption from DPH clinic licensure to do so.

The Massachusetts Medical Society (MMS) Office-Based Surgery Guidelines, which have been endorsed by the Massachusetts Board of Registration in Medicine, may provide insight into the practice standards that DPH will implement in regulations (e.g., transfer planning, professional supervision requirements, reporting of adverse events) and be a helpful reference for physician offices operating under a clinic licensure exemption. While these guidelines do not address specific procedures or types of procedures, they categorize office-based surgery into levels, primarily based on the sedation administered. The H.5159 definition of “office-based surgical procedures” appears to most closely align with MMS Level III Office Surgery, which includes procedures requiring use of deep sedation, general anesthesia, or analgesia.

Without DPH regulations and guidance on the new licensure type, it is unclear the extent to which physician office exemptions for office-based surgery will continue to exist; however, based on the definition of “office-based surgical procedures,” it seems clear that “minor procedures and procedures requiring minimal sedation” will fall outside the scope of licensure.

Physician offices performing office-based surgeries and new providers looking to enter the Massachusetts market should review H.5159 to determine if the services they provide may fall within the scope of licensure as an office-based surgical center.

Urgent Care Centers

H.5159 defines an urgent care center as a clinic owned and operated by an entity, that is unaffiliated with a licensed hospital and provides in-office urgent care services. “Urgent care services” are defined as a model of care for the diagnosis, treatment, management, or monitoring of acute or chronic disease or injury that includes each of the following elements:

• Intended to treat illness or injury that is immediate in nature but does not require emergency services;
• Provided on a walk-in basis without prior appointment;
• Available to the public during days and times when primary care provider offices are not customarily open; and
• Not intended to and should not replace preventative or routine care.

Based on this definition of urgent care center, the Commonwealth is concentrated on regulating entities that provide convenient and nonemergent care services. To avoid capturing physician offices that may provide simply “convenient after-hours care,” the law requires that all definitional elements of “urgent care services” be satisfied. H.5159 also intentionally limits the definition of “urgent care center” to facilities “owned and operated by an entity,” creating an implied exception to licensure for any physician practices owned and operated by one or more individual practitioners who provide urgent care services. Such an exemption is similar to that already existing inside the licensed clinic schema, as physician practices wholly owned or controlled by one or more practitioners have historically avoided regulation by DPH as “clinics” (M.G.L. c. 111 § 52). This intentional limitation further indicates the Commonwealth’s desire not to capture sole practitioners or group practices that may provide after-hours, walk-in care for their patients as a convenience, even though the services may otherwise fall into the definition of “urgent care services.”

In addition to the individual exemption, H.5159 expressly provides that urgent care centers do not include DPH-licensed hospitals, clinics, limited services clinics, or federally funded community health centers as defined by 42 U.S.C. 254b. Historically, given the lack of an established and tailored licensing regime, some urgent care centers have fallen under “clinic” licensure. Given the express exemption, these already-licensed facilities will not need to apply for additional or different licensure. With respect to office-based surgery, the exception for existing licensure indicates the Commonwealth’s intention to use the licensing of urgent care centers to regulate a subset of convenient care that has previously gone unregulated and to distinguish the nature of urgent care centers from other licensed facilities by focusing on lack of appointment structure and rigid business hours, rather than service-type as with office-based surgery.

New entrants into the urgent care market should closely review the H.5159 definitions described above and, when promulgated by DPH, the regulations governing urgent care centers to determine whether they may qualify as a DPH urgent care facility or licensed clinic, or whether they fall outside of the DPH license requirements altogether. Existing unlicensed facilities owned and operated by entities that provide care for nonemergent diseases or injuries on a walk-in basis outside standard business hours should similarly review these new rules to determine whether they will be subject to DPH regulation for the first time.

Requirements Applicable to Both Licensure Types

In promulgating the new regulations, DPH has the express discretion to include regulations that are currently applicable to ASCs (which are currently licensed as clinics and require a Determination of Need). DPH also has the authority to grant a one-time provisional license to a licensee that holds accreditation from certain specified accrediting bodies, is deemed to be in substantial compliance with the initial DPH regulations, and demonstrates potential for achieving full compliance within the provisional licensure period. Any person or entity that operates an office-based surgical center or urgent care center without obtaining licensure will face fines and other discipline.

The new license categories will also require that certain incidents (e.g., healthcare-associated infections, serious reportable events, serious adverse drug events, and financial delinquency, including repossession of medical equipment or supplies) be reported to DPH. Contract terms between these licensees and vendors that permit the repossession of medical or surgical equipment without prior notice to DPH are banned and considered void as against public policy.

Expansion of DPH Oversight Over Acute Care Hospitals; Prohibition Leasing of Main Campus from a REIT

H.5159 prohibits DPH from issuing or renewing an acute care hospital license if the main campus of the hospital is leased from an REIT. “Main campus” means the licensed premises within which the majority of inpatient beds are located. However, an exemption exists for any acute care hospital that leases its main campus from an REIT as of April 1, 2024. An exempt acute care hospital will maintain its exempt status after a transfer as long as the transferee otherwise satisfies all other requirements for licensure.

H.5159 also expands DPH’s oversight authority over the lifecycle of acute care hospitals in Massachusetts. DPH is prohibited from issuing an initial or renewal license to establish or maintain an acute care hospital unless the applicant is in compliance with the reporting requirements of the Center for Health Information and Analysis (CHIA). Before the closure of an acute care hospital or any essential service, DPH must seek an HPC impact analysis of the closure on the community. The law also requires DPH to hold a public hearing on the closure of the given hospital or essential service.

ADVANCE GUIDANCE FOR PROVIDERS AND PROVIDER ORGANIZATIONS UNDERGOING A MATERIAL CHANGE

In anticipation of the amendments to M.G.L. c. 6D, § 13 that took effect on April 8, 2025, the HPC issued a bulletin providing advance guidance to providers and provider organizations proposing to make a material change to their operations or governance structure, and published an updated form for reporting the material change. Below is a summary of the key points from the advance guidance, including the definition of “material change,” information requests to significant equity investors, and the updated notice of material change filing form. Apart from this advance guidance, existing regulations pertaining to the Notices of Material Change and Cost and Market Impact Reviews (958 CMR 7.00) will remain in effect until the HPC promulgates new regulations, which is expected to occur in the summer or fall of 2025.

Definition of “Material Change”

The amendment outlined four new types of material change that trigger the notice requirement, and HPC provided definitions for three out of those four, as follows:

• “Significant expansions in a Provider or Provider Organization’s capacity” include any increase to a provider or provider organization’s capacity that requires a DON Application for Substantial Capital Expenditure (as defined in 105 CMR 100).
• “Transactions involving a significant equity investor which result in a change of ownership or control of a Provider or Provider Organization” include any investment by an equity investor that will change the ownership of a provider or provider organization, and any investment in excess of $10 million that results in an equity investor having significant control over a provider or provider organization, such as the potential to appoint a board members or make key business decisions (e.g., hiring or terminating staff).
• “Significant acquisitions, sales, or transfer of assets including, but not limited to, real estate sale lease-back arrangements” include the sale of any licensed facility or the sale of real property assets where healthcare services are delivered for the purposes of a real estate lease-back arrangement.

The fourth type of material change involves the conversion of a provider or provider organization from a nonprofit entity to a for-profit entity, which the HPC has not further defined at this time. Existing law already outlines a process for attorney general review of conversion of nonprofit hospitals, as outlined in M.G.L. c. 180 § 8A. Written notice must be provided at least 90 days prior to the effective date of the proposed conversion and may be followed by a public hearing. In its review of each transaction, the attorney general must:

• Confirm that the proposed transaction complies with applicable nonprofit and charities law;
• Review transactional details;
• Conduct a fair market value analysis;
• Review conflicts of interests;
• Confirm that the proposed transaction is in the public interest;
• Determine charitable asset uses; and
• Engage an independent healthcare access analyst if needed.

The law also outlines the process for the sale of charitable assets, so any nonprofit entities undergoing this type of transaction should be prepared to navigate both processes.

Information Requests to Significant Equity Investors

Effective April 8, 2025, the HPC is authorized to request information from significant equity investors and other parties involved in a transaction. This information may include details about the investor’s capital structure, general financial condition, ownership and management structure, and audited financial statements. While this information does not need to be submitted publicly as part of the Material Change Notice form, it may be requested confidentially during the HPC’s review process. The HPC will maintain the confidentiality of all nonpublic information and documents obtained in connection with a Material Change Notice or CMIR, as requested by the parties.