Private equity’s entrance into health care since 2000 has been dramatic. Both the number of private equity (PE) deals and annual PE investments in health care increased tenfold between 2001 and 2020, and peaked in 2021.
Until now, lax corporate transparency and accountability regulations meant that there was nothing anyone could do when corporate owners of health care companies enriched themselves and their investors while driving the companies they owned to financial disaster. They got away with their ill-gotten gains while the hospitals’ stakeholders and communities paid the price. But that is about to change.
Senator Elizabeth Warren (D-MA) announced the Corporate Crimes Against Health Care Bill. This new legislation will empower state Attorneys General and the U.S. Attorney General to claw back funds and impose civil and, in the case where a patient dies, criminal penalties on a PE firm and related financial actors whose financial engineering activities drove the health care organization to financial ruin.
Senator Warren’s Corporate Crimes Against Health Care bill will curb the use of financial engineering strategies that endanger the integrity of the U.S. health system. It will curb abuses that I and other researchers investigating the financialization of America’s health system have identified. It will protect the right of patients to the best care possible, of professionals and frontline workers to adequate staffing and time with patients, and of communities to accessible health care.
In the case where looting the hospital results in a patient’s death, the Corporate Crimes Against Health Care bill mandates that executives of the PE firm and the failing health care company will be subject to a new criminal penalty of up to six years in prison.
Regulators — state attorneys general and the U.S. attorney general — will be able to claw back all compensation paid to PE firms and health company executives who unjustly enriched themselves as the health care organization spiraled toward serious, avoidable financial difficulties. A corporate owner who shows that it could not have prevented the financial troubles will not be penalized.
Importantly, and proactively, the legislation would prohibit federal health programs from making payments to hospitals and other health organizations that sell assets to a real estate investment trust (REIT).
It provides transparency by requiring health care entities receiving federal funding to report changes in ownership and control as well as financial data including debt. Health care professionals caught between the demands of their corporate owners and the needs of their patients experience this conflict in deeply personal and disabling ways that have been termed “moral injury.”
The........