New bill could curb private equity health care facility ownership
Private equity firms with hospitals would have to put five years of operating expenses in escrow accounts.
Democrats in Congress have reacted to the Steward Health Care hospital systems bankruptcy by proposing tough new requirements for private equity firms that own health care facilities.
Sen. Edward Markey, D-Mass., has introduced one version of the Health Over Wealth Act in the Senate, and Rep. Pramila Jayapal, D-Wash., has introduced a companion bill in the Senate.
The House version, H.R. 9156, has five cosponsors, and the Senate version, S. 4804, has eight cosponsors.
Most of the co-sponsors are Democrats. One co-sponsor of the Senate version, Sen. Bernie Sanders, is an independent who caucuses with the Democrats.
The bill would define “private equity fund” to include sovereign wealth funds and venture capital funds as well as asset managers that focus on serving institutional investors and sophisticated investors, according to a version posted on Markey’s Senate website.
To guard against the risk that a private equity fund buyer might shut down a hospital after buying it, the bill would require a private equity fund hospital buyer to put five years of hospital operating expenses in an escrow account.
The bill would also:
• Require private equity funds that own health care facilities to post public reports on their debt, executive pay, lobbying, patient care costs and moves to reduce services, wages or employee benefits.
• Authorize the U.S. Department of Health and Human Services to revoke investment licenses from private equity firms that understaff health care facilities or increase prices to unreasonable levels.
• Change tax rules that now encourage hospital owners to sell their buildings to investors and then rent the buildings from the investors.
The list of groups supporting the bill includes the American Federation of State, County and Municipal Employees and United Steelworkers.
The background
The bill comes in the wake of a move by the Senate Health, Education, Labor and Pensions Committee to investigate the Steward Health Care bankruptcy and issue a subpoena to compel testimony to Dr. Ralph de la Torre, the company’s chief executive officer.
Senate HELP members voted 20-1 for the investigation and 16-4 for the subpoena, with many Republican committee members voting with the Democratic members for both the investigation and the subpoena.
De la Torre has blamed the bankruptcy on COVID-19 turmoil, tight labor markets and low government plan reimbursement rates.
Sen. Bill Cassidy, R- Calif., the highest ranking Republican on the committee, said the Senate needs to find out what went wrong but argued that Cerberus Capital Management, a private equity firm, had poured money into Steward and was not to blame for the company’s problems.
But Democrats in Congress, including Sen. Bernie Sanders, the independent from Vermont who serves as the Senate HELP chairman, and Sen. Elizabeth Warren, D-Mass., have argued that the bankruptcy demonstrates the dangers of letting for-profit companies, including private equity companies, own hospitals.
After Steward closed a Massachusetts hospital and another health care facility in July, Warren issued a statement arguing that de la Torre and the entire Steward executive team should be stripped of their roles at the company.
The closures “are the direct consequence of looting by Steward executives, private equity investors and corporate landlords at the expensive of patients, health care workers and Massachusetts communities,” Warren said.
In California, legislators are considering Assembly Bill 3129, a bill that would give the state attorney general the authority to block some efforts by private equity firms to acquire health care facilities or health care provider groups.
A California Senate Appropriations Committee will hold a hearing on the California bill Aug. 5.
Massachusetts lawmakers appear to be getting close to final passage of a bill there that could impose new reporting obligations on for-profit owners of health care organizations and give the state’s Health Policy Commission more authority to require changes for health care deals that could increase health care costs.
What it means for benefits professionals
The Markey-Jayapal appears to have little chance to advance to either the House or Senate floor.
But Republicans in Congress have been almost as quick as their Democratic colleagues to attack Steward’s managers, health insurers and pharmaceutical benefit managers in recent years, and conditions may be ripe for passage of other, narrower bills that express lawmakers’ frustration.
Benefits advisors will have to keep a close eye on Washington and state capitals and may find that the health policy specialists working for local officials welcome insights about how health care finance and health care access really work in their communities.