Preparing for a Civil Investigative Demand as a Healthcare Investor in Massachusetts

Massachusetts House Bill No. 5159 (HB 5159) was signed into law on Jan. 8, 2025, and gave the Massachusetts attorney general (AG) broader authority to investigate and monitor trends in the healthcare market, including specific authority to investigate healthcare investors. One of the AG's key investigatory tools is the Civil Investigative Demand (CID). Healthcare investors in Massachusetts that receive a CID will need to be prepared to disclose detailed information to the AG. This Holland & Knight alert provides some information for healthcare investors on how to prepare for a CID.

Anticipating a CID

When there is reasonable cause that a law has been violated, the AG can issue and serve a CID before bringing any civil or criminal actions. HB 5159 requires healthcare investors to provide information to the AG in connection with cost and market impact reviews and authorizes the AG to investigate whether investors or healthcare organizations have engaged in unfair competition or anti-competitive behavior. In connection with these activities, the AG may issue a CID. If an entity or individual receives a CID, it may be required to produce documents, answer specific questions (interrogatories), give testimony under oath or be subject to any combination of the above.

Receipt of a CID

If you are an investor or a healthcare organization and receive a CID, it is critical to acknowledge receipt immediately and provide a substantive response within the required time frame. Failing to respond to or comply with a CID can lead to fines of up to $5,000 or other enforcement actions. The recipient of a CID may attempt to modify or challenge the CID, but attempts at wholesale challenge to CIDs have historically been unsuccessful. CID recipients usually have greater chances of success in attempting to negotiate the scope of the requests.

A CID issued by the AG will lay out the specific documents to be produced and identify specific individuals who will be required to testify. CIDs are typically maintained as confidential and rarely made publicly available. With that said, this example illustrates the breadth and scope of the requests that may appear in a CID. The CID in this example was issued to an energy company in the context of an unfair or deceptive trade practices investigation by the AG.

What to Expect After Receiving a CID

Entities – including investors – that receive a CID should be prepared to 1) produce all documentation requested by the AG and 2) testify under oath before the AG. HB 5159 allows the AG to compel investors associated with a healthcare provider to testify about any of the following topics: health outcomes, prices charged to insurers and patients, staffing levels, clinical workflow, financial stability and ownership of an associated provider or provider organization, dividends paid to investors and compensation. Testifying individuals will also be subject to cross-examination. This wide array of topics will likely require investors to disclose information that may be considered confidential and/or proprietary in nature. Indeed, HB 5159 does not allow investors to refuse to provide information on the grounds that the information is proprietary or trade secret.

In summary, Massachusetts healthcare provider investors should be prepared for the possibility of making significant disclosures in the event they receive a CID. Holland & Knight's Healthcare Regulatory Compliance Team is closely monitoring enforcement on this issue. For questions related to this process, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.