By Stacey Pogue and Kennah Watts
Massachusetts has demonstrated a long-standing dedication to growing transparency in its well being care system, constraining well being care value development, and fostering entry to high-quality, reasonably priced care. Final yr, Massachusetts was on the epicenter of Steward Well being Care’s collapse that stemmed, partly, from destabilizing private-equity ways. The disaster offered a stress check 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 price containment targets inside a interval of rising well being care corporatization and personal fairness management of well being care entities.
In recent times, personal fairness funding has considerably elevated within the well being care sector. This development, coupled with proof of high quality, entry, and price considerations following personal fairness acquisitions, has spurred scrutiny by policymakers, together with a latest bipartisan investigation and report from the U.S. Senate Price range Committee. Policymakers in a number of states have thought of approaches to overseeing personal fairness in well being care lately, although payments have solely made it throughout the end line in a handful of states. Massachusetts’ method could function a mannequin for different states in search of 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 lots of of hundreds of thousands of {dollars} in bills to maintain different struggling hospitals open, 1000’s of employees misplaced their jobs, and affected person entry plummeted.
Steward, which initially operated an 11-hospital system in Massachusetts underneath the possession of personal fairness agency Cerberus Capital Administration, exploited profit-driven ways to develop 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 fee offers instated on the newly Steward-owned hospitals. These offers had been unsustainable, because the services misplaced their land and facility belongings whereas paying more and more unaffordable hire. Whereas Medical Properties Belief helped Steward turn into the largest for-profit personal 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 income 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 hire, stopped funds to distributors, closed emergency departments, diminished workers, minimized medical gear purchases, and extra. In early 2024, Medical Properties Belief claimed Steward owed months of hire, 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 Regulation 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 Assessment Course of. The legislation is designed to shut loopholes that successfully exempted many personal entities–like personal fairness, REITs, and administration companies 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 info associated to non-public fairness, REITs, and MSOs, and will increase the penalties for failing to report info from $1,000 per week to $25,000 per week. As well as, hospitals that fail to report required info won’t be able to resume their state license to function.
The legislation additionally topics personal fairness corporations, REITs, MSOs, and sure related transactions to the states’ current oversight processes. For instance, these entities shall be required to take part within the state’s annual Well being Care Price Traits Listening to that examines the drivers of accelerating well being care prices. As well as, particular transactions – equivalent to personal fairness taking possession or management of a supplier group and a big switch of belongings, together with the sale and subsequent lease-back of a well being care supplier’s actual property – had been added to the state’s checklist of adjustments that require 60-days advance discover and set off state assessment of their anticipated affect on well being care prices, high quality, and entry. Shifting ahead, the legislation additionally prohibits the primary campus of a hospital from leasing from a REIT, although preparations in existence previous to April 2024 are grandfathered.
Different Provisions within the New Regulation
Along with updates centered on personal 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 customers and employers when reviewing medical health insurance charges, growing the Division’s authority to conduct “enhanced” fee assessment. 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 pressure to review and make suggestions for bettering major 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 companies and services, catalog current assets, and make suggestions to enhance the availability and distribution of well being care services and workforce over a five-year planning interval. The preliminary plan is due by January 1, 2027. Lastly, the legislation ensures the state’s Dedication of Want course of, which evaluates whether or not the growth of a well being care facility aligns with the state’s targets for entry and price containment, is knowledgeable by the brand new Well being Useful resource Plan and enter from state businesses that gather supplier monetary information, assessment well being care transactions, and monitor well being care value drivers.
Trying Forward
Non-public fairness practices that prioritize short-term income are sometimes at odds with the targets 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 forestall future catastrophes of this nature.
As personal funding in well being care markets grows, different states could take into account comparable motion to mitigate unfavorable outcomes and defend sufferers by means of elevated oversight and regulation of personal buyers. This can be very true in gentle of the chapter of the personal equity-backed well being system Prospect Medical Holdings, which operates in California, Rhode Island, Connecticut, and Pennsylvania. These states could have larger incentives to position further regulation on personal fairness and different buyers. States which are excited by larger oversight of personal fairness could take into account different states’ approaches or look to mannequin laws from the Nationwide Academy for State Well being Coverage (NASHP). Massachusetts now affords one further mannequin of a state response to non-public funding, and different states might experiment inside their very own regulatory and market contexts to finest defend customers from the dangers related to elevated corporatization and personal fairness funding.
