Proposals to limit private equity ownership of Connecticut hospitals are gaining bipartisan support in the state legislature, as Waterbury Hospital, Manchester Memorial, and Rockville General Hospital in Vernon struggle to find a buyer.
Those community hospitals are in dire straits after their owner, private equity-funded Prospect Medical, filed for bankruptcy in January, and a purchase agreement with Yale New Haven Health fell through.
State Sen. Dr. Saud Anwar, the Democratic co-chair of the state's Public Health Committee, said even though there are additional elements to work on, a raised senate bill discussed Friday is now “at a place” to move out of the Public Health Committee.
His push comes at a time when the state is still working to recover $106.5 million in taxes from the private-equity funded group Prospect Medical.
“They are expecting the taxpayers to bail them out, and we are not going to allow them to be here to begin with, and that would be one way to prevent this process [happening] again in our state,” Anwar said.
Gov. Ned Lamot had previously said he would not bail out the struggling hospitals with taxpayer money.
State Sen. Jeff Gordon, a Republican from Woodstock, agreed that the legislation was the way forward.
“The more we could do to be loud and clear that it's patient care over profits, it's patient care over business decisions that really are not benefiting patients, then the better it can be for the people of Connecticut,” he said.
Gordon said he was onboard with a revision made to the bill to prohibit private equity from interfering with clinical decisions made by health care workers, if those decisions clashed with their profit-seeking.
While the state Department of Health says it appreciates the intent of that section of the bill, Commissioner Dr. Manisha Juthani wrote in testimony to lawmakers that it could prohibit hospitals from taking action against practitioners who deviate from standards of care.
Senate President Martin Looney (D-New Haven), said he was in favor of limiting the role of private equity ownership of Connecticut hospitals. But he urged lawmakers to back a larger bill to increase oversight of equity-backed hospitals.
Simultaneously, House Bill 7224 also seeks to reign in the power of private equity in Connecticut.
The proposal would expand Connecticut’s False Claims Act liability to private equity firms owning entities that make false claims to the state. The bill would give private equity firms 60 days to self-report those false claims before they become liable for the claims themselves.
The bill also bans the licensing of health care entities that have engaged in sale-leaseback transactions involving a hospital.
At the heart of the local hospitals’ woes is the global real estate investment trust Medical Properties Trust (MPI), which owns land that once belonged to Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital. The land was sold by California-headquartered Prospect to MPI, saddling the local hospitals with monthly rent payments.
Critics say Prospect took millions of dollars from the MPI land sale to then pay its private equity shareholders Leonard Green & Partners hefty dividends.
State Rep. Matt Blumenthal (D-Stamford) said the bill was an effort to limit the ability of private equity firms to extract money from local hospitals before leaving them behind.
“These measures should prevent two of the most egregious practices identified as having likely happened in the Prospect Medical, Leonard Green & Partners fiasco,” Blumenthal wrote in an email. “And would make health care investing in the state unattractive to vulture capital investors in the future.”
