An updated version of a bill targeting transparency for private equity firms has removed assisted living from the mix of covered entities, but a tax code definition covering real estate investment trusts complicates the issue for the setting.
Thursday, Sen. Edward Markey (D-MA), chairman of the Health, Education, Labor and Pensions, HELP, Subcommittee on Primary Health and Retirement Security, and Rep. Pramila Jayapal (D-WA) introduced the long-anticipated Health Over Wealth Act. The legislation would require greater transparency for private equity firms and for-profit companies that own healthcare entities, including nursing homes, hospitals, and mental or behavioral health facilities.
The senior living industry pushed back on the inclusion of assisted living communities as covered entities when a discussion draft of the bill was first released in April. Industry advocates said the bill would have a “chilling effect” on future investment in assisted living and jeopardize access to the setting by subjecting the operators and private investment partners to significant scrutiny, extensive reporting, licensure and, in the case of REITs, an outright prohibition on ownership of assisted living properties.
Although assisted living has been removed from the list of “covered entities” in the latest version of the Health Over Wealth Act, that exemption is complicated by separate and “significant” provisions of the updated bill dealing with REITs, according to Jeanne McGlynn Delgado, vice president of government affairs for the American Seniors Housing Association.
The provisions includes language that alters the tax code relative to qualifying income, treating rent payments from healthcare facilities — as defined by the IRS — as non-qualifying REIT income. The IRS definition of healthcare facilities includes assisted living communities, which Delgado said creates a “significant problem” for REIT investment in the sector.
“Given the industry’s reliance on REIT investment, as well as those structured with private equity and REITs, this could present serious challenges,” Delgado said. “Whether a drafting error or intentional, ASHA will seek to address this provision of the bill, which is inconsistent with the removal of assisted living from the definition of healthcare facilities in the prior section of the bill.
“If this language is not amended, it could severely deter REIT investment in the assisted living industry and others.”
Fight to remove assisted living
ASHA and Argentum submitted a joint letter in May to Markey, raising concerns about the approach taken with his draft legislation. They said that, as worded, it would have “catastrophic consequences” for older adults and their families” and create “unnecessary restrictions and an overly burdensome regulatory process to reign in the partition of specific capital sources in certain for-profit healthcare entities.”
The American Health Care Association / National Center for Assisted Living similarly had submitted comments noting that the senior living and healthcare sectors need significant investments to expand access and support workforce, services and infrastructure.
The experts noted the private-pay nature of the assisted living business model and a lack of evidence suggesting that private investment in assisted living resulted in harm to residents.
The bill sponsors said that the legislation would put safeguards in place to protect workers, residents/patients and healthcare quality, access and safety; create stronger accountability measures; and close tax loopholes that benefit REITs.
“With the risk of bankruptcy associated with private equity ownership, the Health Over Wealth Act now includes additional provisions to prioritize workers in bankruptcy payouts and require bankruptcy courts to incorporate impacts on access to healthcare and health provider employment in its decision making,” Markey said Thursday in a statement.
Focus on private equity
Specifically, the act would require private equity-owned healthcare facilities to publicly report on their debt and executive pay, lobbying and political spending, healthcare costs and any reductions in services, wages or benefits. Private equity-owned firms also would be required to set up escrow accounts to cover five years of expenses to ensure continuity of care in the event of a closure or service reduction.
In addition, the bill would authorize the Department of Health and Human Services to revoke investment licenses from firms that price gouge, understaff facilities or create barriers to care access. A task force also would be created to review the role of private equity and consolidation in healthcare.
“Private equity firms and greedy corporate executives are using the healthcare system as a piggy bank,” Markey said in a statement, who said the “fight against corporate greed is growing.”
Argentum, however, said that private investment will be needed to meet the projected surge in demand for senior living, pointing to NIC MAP Vision’s most recent Senior Housing Outlook report, which highlighted a shortage of 550,000 senior living units by 2030 and a $275 billion investment shortage that will increase to $1 trillion by 2040.
“Argentum will continue to monitor the Health Over Wealth Act and similar legislation, and work with policymakers to ensure that efforts to limit private capital investment do not jeopardize the important investments needed to meet the needs of our aging population,” Argentum Senior Vice President of Public Affairs Maggie Elehwany said in a statement.
Not only effort
The Health Over Wealth Act is not the only effort targeting private equity investment in long-term care and other settings.
Last month, Markey joined Sen. Elizabeth Warren (D-MA) in introducing the Corporate Crimes Against Health Care Act of 2024 to “root out corporate greed and private equity abuse” in assisted living communities, nursing homes, home health agencies, hospices and other “healthcare entities.” The senators said their action was prompted by “private equity greed and mismanagement by Ralph de la Torre and top executives drove Steward Health Care (Steward) — which operates eight hospitals in the state — into bankruptcy” in their home state.
Earlier this spring, the Justice Department, Federal Trade Commission and HHS announced a joint investigation into private equity’s influence on healthcare.
A team of researchers, however, recently called on policymakers to take a breath before broadly applying regulations aimed at bad actors in other areas of healthcare. The team studied private equity investment in assisted living, calling it a misunderstood sector often mistakenly lumped in with other provider types.
