The news is full of Prospect Medical Holdings, a private-equity fund, laying waste to three Connecticut hospitals. State policymakers are looking to create guardrails so that this doesn’t happen again. But we were warned two years ago and policymakers didn’t act.
There are growing concerns about the spread of private-equity ownership of hospitals and other healthcare entities across the nation. A recent national study found that when private equity funds purchase hospitals, the quality of care suffers. Another study found that costs to patients and payers increase with private equity ownership. Connecticut is not immune to this disturbing trend. Federal regulators are investigating the harms of private equity deals.
Since Prospect Medical Holdings acquired three Connecticut hospitals, venders, providers, and municipal taxes have not been paid, cutbacks led to a serious cyberattack that jeopardized care, and the private equity fund owners borrowed over a billion dollars against the hospitals’ assets to pay investors and executives $457 million. State taxpayers have been asked to fix this expensive mess.
This mess is not unique to Connecticut, nor was it unexpected. In September 2021, the Insurance Committee held a forum with experts outlining the problem. And the Rhode Island Attorney General’s office offered promising legal and regulatory protections that preserved their hospitals’ assets from Prospect Medical Holdings’ ownership and protected patients’ access to vital care. But here in Connecticut, nothing was done.
Our state has a history of waiting to act until the worst has already happened. Now, since the problem hit Connecticut, policymakers are proposing several changes to make sure this never happens again. We should do them all.
Connecticut has a Certificate of Need process that is supposed to protect us from these dangers. The initial private equity approval happened under a different administration and different leadership at the Office of Health Strategy (OHS) with a very poor history of protecting our healthcare system. This Governor and new leadership at OHS have proposed strengthening the Certificate of Need process that should’ve caught this mess before it happened.
Hospitals oppose the Governor’s bill because the Certificate of Need process is already onerous. They’re not wrong, and we should update and speed up procedures. But OHS’s private equity “early warning system” proposal makes a lot of sense. All they are asking for is more timely reports on unpaid liabilities and profit margins that hospitals should, and likely already, run for their board members and executives on a regular basis.
The Public Health Committee has also proposed a bill for OHS to develop a plan for private equity buying into healthcare.
They are both good bills and should pass. But Connecticut also needs to move beyond our dangerous wait-and-see steady habits. And we should learn from other states that have figured it out. If a problem is wreaking havoc in other states, we should protect Connecticut now. If it doesn’t get here, that’s fine.
There’s no harm is passing protections that aren’t needed. Let’s go upstream and prevent problems instead of waiting to respond to the next disaster.
