An increasing number of states are looking at legislation related to private equity in healthcare, including long-term care, although “lawmakers’ concerns about its consequences for the cost, quality, and equity of health care services … has not yet translated widely into action,” David Blumenthal, former president of The Commonwealth Fund, said in a blog post published by the organization on Friday.
Private equity deals in healthcare are on the rise, and it looks as if regulating those deals primarily will fall to the states, at least for now, he said.
California, Indiana, Minnesota, New Mexico and Oregon currently have programs that directly or indirectly regulate healthcare private equity, and Massachusetts, New Jersey, New York, and Pennsylvania legislators are working on the issue. Except for Indiana, Blumenthal noted, states with passed or pending healthcare private equity legislation are controlled by Democrats.
Last month, however, as the McKnight’s Business Daily previously reported, California Gov. Gavin Newsom, a Democrat, vetoed a bill that would have required private equity firms and hedge fund organizations in the state to provide advance notice to the state’s attorney general of acquisitions or changes in control.
In vetoing the legislation, the governor noted that the state Office of Health Care Affordability already had the authority to review and evaluate healthcare consolidation transactions in the state — including mergers, acquisitions and corporate affiliations — so he said that it was appropriate for that office to oversee consolidation issues as well.
“Model legislation from the National Academy for State Health Policy (NASHP) emphasizes transparency about the ownership of healthcare facilities, state review of proposed health care acquisitions, and restrictions on the corporate practice of medicine — that is, preventing nonphysicians from controlling medical practice,” Blumenthal said.
Federal legislators recently have attempted to reform private equity investments, including transactions involving senior living and skilled nursing properties and operators. In April, for instance, Sen. Ed Markey (D-MA) solicited stakeholder comments on a draft of the Health Over Wealth Act, which targets transparency for private equity firms. An updated version of the bill introduced in July removed assisted living from the mix of proposed covered entities, although confusion remains due to bill language and IRS definitions. The bill still would apply to nursing homes, hospitals, and mental or behavioral health facilities.
But Blumenthal said that despite federal efforts, “Congress is unlikely to act on PE in healthcare anytime soon.” The outcome of next month’s presidential election could make a difference, he added, “though both parties share an interest in reducing the consolidation of healthcare providers.”
