Lawmakers, governor can't agree on how to regulate private equity ownership of hospitals

Lawmakers and Gov. Ned Lamont are regrouping after they failed to agree on a bill to regulate private equity ownership of hospitals and healthcare networks.

A bipartisan group of members of the legislature’s Public Health Committee said they were negotiating with Lamont (D-Connecticut) right up until the last day of session last Wednesday, but couldn’t reach an agreement.

“I think we have to because this problem is not getting better, our hospitals have been decimated by this,” Sen. Jeff Gordon (R-Woodstock) said about his interest in continuing talks.

All sides agreed the issue was a priority after Prospect Medical Holdings filed for bankruptcy in January.

The for-profit chain owns three Connecticut hospitals – Waterbury, Manchester Memorial and Rockville General.

That same month, the U.S. Senate issued a report detailing how some companies, including Prospect, raked in profits as patient care declined.

Lamont said he, too, was disappointed that no vote occurred.

“I was really surprised. I mean, everybody was really hostile to private equity,” Lamont said.

The largest disagreement seemed to center around whether to restrict private equity’s ability to own parts of the healthcare system.

Lamont wanted no restrictions, instead increasing transparency and allowing the state to take action whenever a private equity firm is prioritizing profits over patient care.

“Our plan said, ‘Office of Health Strategy, we can weigh in and see how private equity might impact the operations of a private hospital,’” Lamont said. “And I think that was a very important thing. We don’t have that power right now.”

Lawmakers wanted more restrictions, specifically barring private equity firms from owning any part of a hospital’s main campus.

Sen. Saud Anwar (D-South Windsor) said the proposal would only allow private equity firms to own a minority stake in other joint ventures.

The plan would also bar those firms from having any input in operational decisions.

Additionally, he wanted to give the state power to help healthcare networks to break so-called leaseback agreements – where private equity firms lease property back to their subsidiaries – in cases where data showed those practices were hurting medical offices.

“In the state of Connecticut, we had one of the worst healthcare disasters because of private equity,” Anwar said.

Some, including Lamont, have concerns about driving away potential private equity investors.

The Connecticut Hospital Association has maintained that several hospitals are struggling financially, and private investors could provide an influx of cash.

Still, CHA Senior Vice President of Policy Paul Kidwell agrees the state needs to ensure those investors can’t drive other healthcare networks into bankruptcy.

He agrees with lawmakers on the idea that a hospital’s main campus be protected, but still has concerns that parts of their proposal will scare away investors.

At the same time, he’s worried Lamont’s idea could become burdensome.

The bill envisioned a new Certificate of New process – the approval mechanism for hospital transfers and other transactions – within the attorney general's office.

CHA has been critical of the current CON process, though, and Kidwell said the bill didn’t address any of their concerns.

Kidwell also expressed concern that none of the proposals did anything to address hospitals’ needs, including further increase Medicaid reimbursement rates.

“It can't just be about understanding financial challenges and why private equity might be attractive,” he said. “It also has to be about ‘Well, what are we going to do about?'”