Disclosure Obligations Never Cease for California Healthcare Providers: A Roundup of Recent Legal Developments
Published: October 7, 2024
Corporate Transparency Act Updates as Compliance Deadline Looms; Longer Disclosure Period and Public Hearing Now Required for Maternity/Psych Unit Closures; and California Governor Vetoes Healthcare Transaction AG Approval Process for Private Equity Transactions
As we move into the fourth quarter of 2024, there are a flurry of breaking news items that relate to healthcare provider government disclosure obligations for healthcare providers. Weintraub shareholder Jeanne Vance outlines a few of them here.
Corporate Transparency Act
Compliance Deadline Approaches; FinCEN Clarifies Community Property, Principal Place of Business, and Personal Legal Name Change Matters in FAQs.
The Corporate Transparency Act (“CTA”) requires legal entities to report beneficial owners (and those with substantial control) to the federal Financial Crimes Enforcement Network (“FinCEN”). The CTA is a part of the Anti-Money Laundering Act of 2020 and is intended to provide law enforcement with information about small and shell companies to help control money laundering and terrorist financing activities. The big news here is that CTA reports filing deadline is fast approaching for entities that existed prior to January 1, 2024. These entities must file their beneficial interest owner reports no later than January 1, 2025. If you haven’t evaluated whether your organization(s) is exempt from filing, now is the time to perform this legal analysis. Penalties for failure to file are $500 per day up to $10,000 and imprisonment of up to two years for willful failure to report.
FinCEN provides interpretations on a regular basis by issuing “Frequently Asked Questions” or FAQs. FinCEN recently indicated in FAQs released October 3 that:
- Community property interests in an entity trigger CTA reporting obligations;
- For foreign companies that do not have a principal place of business in the United States, the company must report a U.S. office as a U.S. principal place of business. If there is not one, it may report any of its U.S. locations as the U.S. principal place of business; and
- If a person’s legal name changes and the name listed on their identification does not match their current legal name, he or she may still use the identification with the old name on it for FinCEN reports until the identification is updated. When the ID is updated, the new ID needs to be reported to FinCEN.
New California Law Requires Public Disclosure and Hearing Prior to Closing Hospital Maternity Ward or Psychiatric Units
Governor Newsom signed into law in September SB 1300, which extends from 90 to 120 days the notice that a hospital must provide of intended closures of hospital perinatal or inpatient psychiatric units. The new law is an effort to help communities plan for these service changes within their communities. Legislative history cited evidence that there has been a 20% drop in psychiatric beds in California since 1995. In addition, it indicated that 12 rural counties in California have no maternity services, and that hospital closures of perinatal units are a regular occurrence. The law requires that the hospital accept written comments from members of the public, and allow testimony from members of the local Board of Supervisors about the impact of the service elimination in the applicable community. The law will go into effect January 1, 2025. Earlier versions of the bill provided for an impact analysis from the California Department of Health Care Access and Information of these service reductions.
California Governor Vetoes Bill for Attorney General Approval of Private Equity/Hedge Fund Transactions
Governor Newsom recently vetoed AB 3129, a widely-watched piece of healthcare legislation that would require that the California Attorney General approve certain healthcare private equity and hedge fund transactions. The bill would add on to previously-enacted obligations under the California Health Care Quality and Affordability Act (see our previous post on the Health Care Blog about this here), which requires advance notice and the opportunity for a Cost and Market Impact Review by the California Office of Health Care Affordability (“OHCA”) within HCAI. In his veto message, the Governor indicated that he supported the author’s efforts to increase oversight over healthcare transactions, but that the functions of the bill would be more efficiently be performed by OHCA. Because AB 3129 passed by large legislative margins, it is possible that it will attempt to override the Governor’s veto. The Governor’s veto message and the high percentage of the California legislators who voted for the bill indicates that there is a friendly political appetite for additional regulation of healthcare transactions at least in the private equity space. We will continue to monitor developments in this area.