New Legislation Targets Private Equity in Health Care

Yesterday, Senators Elizabeth Warren (D-MA) and Ed Markey (D-MA) introduced S. 4503, the Corporate Crimes Against Health Care Act of 2024 to address alleged private equity and corporate abuse in health care (see bill text and summary). It was introduced in response to the Steward Health Care bankruptcy affecting 8 hospitals in Massachusetts.

The legislation primarily targets hospitals, certain physician practices and nursing homes, but also includes assisted living communities, hospice programs, and home health agencies among other specified entities subject to the legislation. The bill also provides the Secretary of the Department of Health the authority to add other entities that “furnish health care items and services” and imposes a number of criminal, civil and financial sanctions and requirements on private equity and similar entities as well as executives.

Provisions in the legislation include:

• Creates a new criminal penalty of up to 6 years in prison for executives who loot health care entities like nursing homes and hospitals, if that looting results in a patient’s death.
• Provides state attorneys general and the DOJ with the power to claw back all compensation, including salaries, issued to private equity and portfolio company executives within a 10-year period before or after an acquired health care firm experiences serious, avoidable financial difficulties due to that looting.
• Authorizes an associated civil penalty of up to 5 times the clawback amount.
• Prohibits payments from federal health programs to entities that sell assets or use assets for a loan collateral made to a REIT, with an exemption for current arrangements; repeal a rule in the Tax Code that allows taxable REIT subsidiaries to exert influence on the operations of health care entities; and remove the 20 percent pass-through deduction, passed in the 2017 Trump tax cuts, for all REIT investors.
• Requires health care providers receiving federal funding to publicly report mergers, acquisitions, changes in ownership and control, and financial data, including debt and debt-to-earnings ratios.
• Mandates an HHS OIG report to Congress on the harms of corporatization in health care.

Senator Warren's bill is separate and distinct from the Health Over Wealth Act, legislation expected to be introduced by Senator Markey in the coming weeks. That bill would also have significant negative impacts on private equity’s ability to finance health care and similar entities which also include assisted living communities. Argentum and ASHA submitted joint comments to Senator Markey last month outlining our concerns about including assisted living with clinical health care settings and specifically requested to be removed from the definition of health care entities. We believe that this legislation will be introduced sometime in July, although there is not a firm timetable.

See Argentum's statement on the Corporate Crimes Against Health Care Act here: https://www.argentum.org/argentum-statement-on-introduction-of-the-corporate-crimes-against-health-care-act/.