Connecticut lawmakers are considering several proposals this session to better regulate private equity in health care, after similar legislation failed in the chamber last year.
The renewed push comes on the heels of Chapter 11 bankruptcy filings Jan. 11 by private equity-funded Prospect Medical Holdings (PMH), parent company of three financially struggling Connecticut hospitals: Waterbury Hospital, Manchester Memorial Hospital. and Rockville General Hospital.
“For years, my colleagues and I have warned about Prospect’s precarious financial and organizational issues that have impacted patient care,” State Sen. Saud Anwar, co-chair of the Public Health Committee, said in a statement. “Many of our concerns were legitimate and ... we can’t let this happen again.”
What the bills would do
- Senate Bill 469 seeks to prevent private equity ownership in health care, and would prohibit hospitals from selling their land to real estate investment trusts, similar to a new law in Massachusetts. If passed, the bill would also require medical groups and ambulatory surgical centers to be physician-owned.
- Senate Bill 489 would establish a task force to study private equity funding in radiology services and its impact on patient care and business.
- Senate Bill 567 would expand the authority of the state attorney general, seeking to grant the office more authority to regulate health care facilities owned by private equity. The proposal is similar to Rhode Island’s Hospitals Conversion Act (HCA).
The HCA, and Licensing of Health Care Facilities Act in Rhode Island, govern the transfer of ownership, assets or control of hospitals. Under the law, such moves require approval from the Rhode Island Department of Health and the state Attorney General.
In Connecticut, Attorney General William Tong previously stated that his office lacks the authority to regulate private equity in health care that attorneys general in Rhode Island and Massachusetts have.
“The authority and the power of the regulators in those states is different,” Tong said, speaking at the state Capitol Jan. 13. “That’s a conversation for the legislature to have now.”
A push from CT's governor to better regulate private equity
Gov. Ned Lamont also urged lawmakers Jan. 23 to update Connecticut’s laws by providing the attorney general’s office with more authority over health system transactions.
“We need to provide the state with the tools needed to protect our health care system from dangerous and destabilizing practices,” Lamont said.
Lamont is expected to present a bill to the legislature in the coming days containing the following items:
- Strengthen the existing “notice of material change” statute. Lamont said this change would grant state officials more insight into transactions that have the potential to negatively impact the health care system’s quality. Under current law, many transactions escape scrutiny.
- Establish an Office of the Attorney General/Office of Health Strategy review process to look for red flags in health care transactions.
- Allow the Office of the Attorney General to impose conditions on transactions to prevent harm to the health care system or refer the application to the Office of Health Strategy for further evaluation and action.
While some Connecticut lawmakers may fear regulation could slow health care investments, Mary Bugbee, health care director at the nonprofit Private Equity Stakeholder Project, said she doesn’t believe that’s true.
“Massachusetts’ health care industry was heavily regulated at the time that Cerberus Capital invested in Steward.” she said.
Following Cerberus’ investment, Steward Health Care later sold six hospitals and shut down two after it ran out of money to run them.
To guard against a similar scenario in Connecticut, Bugbee said state officials should close loopholes that allow private equity firms to extract wealth from community hospitals and saddle them with debt.
Reviving a dead bill
The policy push at the state Capitol this year comes on the heels of failed legislation in 2024 seeking to better regulate private equity in Connecticut hospitals.
Senate Bill 446, which turned into a substitute H.B. 5319, died in the legislative chamber last year after it passed along party lines in committee, with one exception, State Rep. Keith Denning, a Democrat, who voted 'no.' Denning did not seek re-election in 2024.
The bill would have required a hands-on plan from the Office of Health Strategy to study the impacts of private equity deals in health care organizations in Connecticut.
Though the item was moved to the House calendar, it was never called for a vote. The fiscal impact of that bill would have resulted in a one-time cost of $200,000 to the Office of Health Strategy to hire a consultant, according to the Office of Fiscal Analysis.
State Rep. Cristin McCarthy Vahey, co-chair of the Public Health Committee, acknowledged Jan. 22 to Connecticut Public Radio that the push to better reign in private equity fell short last legislative session.
“Last year, the Public Health Committee negotiated extensively with the Office of Health Strategy on a series of bills that would address both private and certificate of need [CON process],” she said.
The Certificate of Need Process is a set of regulations requiring hospitals to obtain state approval before making major changes to their health care systems. It was targeted for an overhaul last year, but several bills to address the problem fell short.
“In the end, we couldn’t get it across the finish line in time,” she said. “Too many competing priorities within the CON conversations, the volume and complexity of issues, and the time needed to meaningfully engage all stakeholders all contributed to the full proposal not being called.”
McCarthy Vahey said this session, the committee is focused on creating guardrails around the use of private equity in health care institutions.
“Nobody wants to see another Prospect situation in our state,” she said.
Connecticut Public’s Michayla Savitt contributed to this story.
