Apr 4, 2024 - Business

Sen. Markey offers bill to block private equity deals in health care

Illustration of the US Capitol building with a caduceus on top.

Illustration: Shoshana Gordon/Axios

Sen. Ed Markey (D-Mass.) wants increased transparency around private equity investment in health care services companies, such as hospitals, dialysis centers, and physician groups.

Zoom in: He also is proposing new federal abilities to stop those deals from ever happening.

Driving the news: Markey yesterday released draft legislation called the "Health Over Wealth Act," which is aimed at both private equity and other for-profit health services providers.

  • Both types of owners would be required to disclose a laundry list of financial and operational data, including around debt, political spending, wages, and the use of areas like hallways and waiting rooms for patient care.
  • They'd also need to create an escrow account to cover essential health services costs for five years in the event of a facility closure.

The biggest change would be vastly expanded powers for the Department of Health and Human Services:

  • Private equity firms would need to "obtain a license" from HHS to invest, either directly or indirectly, in a health care services firm. Were a firm to fail to qualify for such a license, it could be forced to divest existing portfolio companies.
  • HHS also could prohibit any deal, even from licensees, while it conducts a study into the impact of private equity on health care.
  • HHS also could block any sale-leaseback transaction that it believes "would lead to a long-term weakened financial status of the health care entity or place the public health at risk."

The big picture: Markey unveiled his proposal during a subcommittee field hearing in Boston, which mostly focused on the Cerberus/Steward Health situation Axios discussed last month.

  • Cerberus, which both Markey and Sen. Elizabeth Warren (D-Mass.) mispronounced during the hearing as "Cer-e-bus," wasn't asked to testify. Steward's CEO got an invite but ignored it.
  • The hearing didn't uncover much new information, since everyone was on the same page. It was at times confusing, however, particularly when private equity got seemingly blamed for changes as hospital giant HCA, even though those changes came a decade after HCA went public.

The other side: Drew Maloney, CEO of the American Investment Council, tells Axios:

"Private equity has a long history of strengthening U.S. health care and improving the lives of millions of Americans, including in Massachusetts. Unfortunately, headline-seeking politicians continue to place misguided blame on our industry instead of pursuing sound policymaking to address systemic challenges head-on."

What to watch: Warren, and to a lesser extent Markey, is gunning for DOJ or FTC to take a very hard look at Steward's recent agreement to sell its nationwide physician network to Optum, a subsidiary of UnitedHealth.

  • Also, Sen. Gary Peters (D-MI) is expressing concerns over private equity involvement with emergency rooms.

The bottom line: Markey's bill reads more aspirational than legislative, but it's part of growing Democratic Party pushback against private equity's involvement in health care. And the industry, which normally has plenty of D.C. support, is looking like it's on a bit of an island.

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