By Stacey Pogue and Kennah Watts
Massachusetts has demonstrated a long-standing dedication to rising transparency in its well being care system, constraining well being care value development, and fostering entry to high-quality, reasonably priced care. Final 12 months, Massachusetts was on the epicenter of Steward Well being Care’s collapse that stemmed, partially, from destabilizing private-equity techniques. The disaster offered a stress take a look at for the state’s applications to observe its well being care system. In January of 2025, Massachusetts enacted a legislation that goals to deal with the blind spots uncovered by Steward’s collapse and higher equip the state to pursue its well being care entry and value containment objectives inside a interval of rising well being care corporatization and personal fairness management of well being care entities.
Lately, non-public fairness funding has considerably elevated within the well being care sector. This development, coupled with proof of high quality, entry, and value considerations following non-public fairness acquisitions, has spurred scrutiny by policymakers, together with a latest bipartisan investigation and report from the U.S. Senate Funds Committee. Policymakers in a number of states have thought-about approaches to overseeing non-public fairness in well being care in recent times, although payments have solely made it throughout the end line in a handful of states. Massachusetts’ strategy could function a mannequin for different states searching for to reinforce transparency and oversight of their well being care system on this quickly altering panorama.
Massachusetts Responded to Important Affected person, Employee, and Group Harms from Non-public Fairness Practices
Massachusetts’ legislative motion and elevated oversight of personal fairness come within the wake of the chapter of a significant well being system with private-equity ties, Steward Well being Care. Within the fallout from Steward’s collapse, two hospitals within the state closed, the state took on a whole bunch of hundreds of thousands of {dollars} in bills to maintain different struggling hospitals open, hundreds of staff misplaced their jobs, and affected person entry plummeted.
Steward, which initially operated an 11-hospital system in Massachusetts beneath the possession of personal fairness agency Cerberus Capital Administration, exploited profit-driven techniques to increase the well being system’s attain. Over the course of a decade, Steward partnered with Medical Properties Belief, an actual property funding belief (REIT), to finance hospital purchases throughout the nation, with lease again and mortgage cost offers instated on the newly Steward-owned hospitals. These offers have been unsustainable, because the amenities misplaced their land and facility belongings whereas paying more and more unaffordable lease. Whereas Medical Properties Belief helped Steward turn out to be the largest for-profit non-public hospital chain within the US, this growth was fueled by huge debt accumulation. In the meantime, Cerberus Capital Administration collected hundreds of thousands in dividends. In 2020, as Steward’s debt continued to climb and pandemic considerations rose, Medical Properties Belief financed a sale of Steward to the system’s medical doctors, and Cerberus exited the association with over $800 million in earnings from their decade of possession. The sale did little to enhance Steward’s monetary scenario. Stripped of its belongings and loaded with debt, the well being system struggled to pay lease, stopped funds to distributors, closed emergency departments, decreased employees, minimized medical gear purchases, and extra. In early 2024, Medical Properties Belief claimed Steward owed months of lease, and shortly thereafter, the well being system filed for chapter. On the time, Steward operated 33 hospitals throughout ten states, however Massachusetts, with eight Steward-owned hospitals, was significantly hard-hit by monetary shortcomings and mismanagement.
New Massachusetts Legislation Will increase Transparency and Oversight of Non-public Fairness in Well being Care
On January eighth, 2025, Governor Maura Healey signed into legislation Home Invoice 5159, An Act Enhancing the Market Overview Course of. The legislation is designed to shut loopholes that successfully exempted many non-public entities–like non-public fairness, REITs, and administration providers organizations (MSOs)–and their well being care-related transactions from the state’s long-standing infrastructure to observe and enhance its well being care system. The legislation expands annual supplier monetary and possession reporting necessities to incorporate new data associated to non-public fairness, REITs, and MSOs, and will increase the penalties for failing to report data from $1,000 per week to $25,000 per week. As well as, hospitals that fail to report required data will be unable to resume their state license to function.
The legislation additionally topics non-public fairness companies, REITs, MSOs, and sure related transactions to the states’ current oversight processes. For instance, these entities can be required to take part within the state’s annual Well being Care Value Tendencies Listening to that examines the drivers of accelerating well being care prices. As well as, particular transactions – akin to non-public fairness taking possession or management of a supplier group and a major switch of belongings, together with the sale and subsequent lease-back of a well being care supplier’s actual property – have been added to the state’s record of adjustments that require 60-days advance discover and set off state evaluation of their anticipated affect on well being care prices, high quality, and entry. Transferring ahead, the legislation additionally prohibits the principle campus of a hospital from leasing from a REIT, although preparations in existence previous to April 2024 are grandfathered.
Different Provisions within the New Legislation
Along with updates centered on non-public fairness, the brand new legislation takes a number of steps to reinforce entry to high-quality care whereas additionally constraining the drivers of well being care prices. It directs the state Division of Insurance coverage to contemplate affordability for shoppers and employers when reviewing medical health insurance charges, rising the Division’s authority to conduct “enhanced” price evaluation. The legislation additionally bolsters the state’s well being care useful resource planning in a number of methods. First, the legislation creates a brand new activity power to review and make suggestions for enhancing main care entry, supply, and funds. Second, the legislation expenses a brand new Workplace of Well being Assets Planning with creating a statewide Well being Useful resource Plan. The plan will forecast wants for well being care providers and amenities, catalog current assets, and make suggestions to enhance the availability and distribution of well being care amenities and workforce over a five-year planning interval. The preliminary plan is due by January 1, 2027. Lastly, the legislation ensures the state’s Willpower of Want course of, which evaluates whether or not the growth of a well being care facility aligns with the state’s objectives for entry and value containment, is knowledgeable by the brand new Well being Useful resource Plan and enter from state companies that acquire supplier monetary knowledge, evaluation well being care transactions, and monitor well being care value drivers.
Trying Forward
Non-public fairness practices that prioritize short-term earnings are sometimes at odds with the objectives of long-term well being care system stability, high quality care, and affected person entry, creating the necessity for checks and balances. As Steward illustrates, these practices can hurt sufferers and taxpayers as shareholders pocket hundreds of thousands of {dollars} in dividends. Massachusetts’ swift state motion is designed to stop future catastrophes of this nature.
As non-public funding in well being care markets grows, different states could think about related motion to mitigate adverse outcomes and shield sufferers by means of elevated oversight and regulation of non-public traders. This can be very true in mild of the chapter of the non-public equity-backed well being system Prospect Medical Holdings, which operates in California, Rhode Island, Connecticut, and Pennsylvania. These states could have larger incentives to put extra regulation on non-public fairness and different traders. States which are involved in larger oversight of personal fairness could think about different states’ approaches or look to mannequin laws from the Nationwide Academy for State Well being Coverage (NASHP). Massachusetts now gives one extra mannequin of a state response to non-public funding, and different states may experiment inside their very own regulatory and market contexts to finest shield shoppers from the dangers related to elevated corporatization and personal fairness funding.
