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 price 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, partially, from destabilizing private-equity ways. The disaster supplied a stress check for the state’s packages to watch 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 Finances Committee. Policymakers in a number of states have thought of approaches to overseeing personal fairness in well being care in recent times, although payments have solely made it throughout the end line in a handful of states. Massachusetts’ method could function a mannequin for different states looking for to boost 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 serious 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 tens of millions 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 broaden 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 property whereas paying more and more unaffordable lease. Whereas Medical Properties Belief helped Steward develop into the largest for-profit personal hospital chain within the US, this enlargement was fueled by large debt accumulation. In the meantime, Cerberus Capital Administration collected tens of millions 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 docs, 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 property 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 notably 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 Evaluation Course of. The legislation is designed to shut loopholes that successfully exempted many personal entities–like personal fairness, REITs, and administration providers organizations (MSOs)–and their well being care-related transactions from the state’s long-standing infrastructure to watch and enhance its well being care system. The legislation expands annual supplier monetary and possession reporting necessities to incorporate new info associated to personal 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 will be unable to resume their state license to function.
The legislation additionally topics personal fairness companies, REITs, MSOs, and sure related transactions to the states’ present oversight processes. For instance, these entities can be required to take part within the state’s annual Well being Care Price Developments Listening to that examines the drivers of accelerating well being care prices. As well as, particular transactions – resembling personal fairness taking possession or management of a supplier group and a major switch of property, together with the sale and subsequent lease-back of a well being care supplier’s actual property – have been added to the state’s listing of adjustments that require 60-days advance discover and set off state overview 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 targeted on personal fairness, the brand new legislation takes a number of steps to boost entry to high-quality care whereas additionally constraining the drivers of well being care prices. It directs the state Division of Insurance coverage to think about affordability for shoppers and employers when reviewing medical health insurance charges, growing the Division’s authority to conduct “enhanced” fee overview. 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 job 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 growing a statewide Well being Useful resource Plan. The plan will forecast wants for well being care providers and amenities, catalog present 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 Dedication of Want course of, which evaluates whether or not the enlargement 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 accumulate supplier monetary information, overview well being care transactions, and monitor well being care price drivers.
Trying Forward
Non-public fairness practices that prioritize short-term earnings 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 tens of millions 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 think about comparable motion to mitigate unfavourable outcomes and shield sufferers by 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 better incentives to put extra regulation on personal fairness and different buyers. States which are desirous about better 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 presents one extra mannequin of a state response to personal 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.
