A powerful Senate Democrat wants to “take for-profit, equity-based companies out of the health care system,” a bold declaration as state policymakers look to contain the crisis surrounding the floundering Steward Health Care network and its hospitals across Massachusetts.
Senate Ways and Means Chairman Michael Rodridgues, D-1st Bristol/Plymouth, told WCVB-TV’s “On The Record” on Sunday that it is imperative for the Legislature and Gov. Maura Healey to effect change in the health care world, specifically as Steward’s financial problems threaten access to care for thousands of patients in the Bay State.
The Senate’s top budget-writer said “everything is on the table” as Beacon Hill looks to “navigate through this current immediate crisis” and then address the sector more broadly.
“I’m worried about health care in general because all of our providers, all of our hospitals, are facing immense pressures — labor and workforce pressure, they can’t get enough nurses; inflationary costs, health care costs generally have increased more over the last year than it has in probably the prior decade,” Rodrigues said.
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“Adding to that, the Steward crisis where it’s obscene to think how much money Cerberus [Capital Management] made when they sold the hospitals: $800 million that should have flowed back into the health care system but went into corporate, into their pockets,” he continued.
Rodriques added that policymakers need to “ensure that we take for-profit, equity-based companies out of the health care system, there should be no room for that in our health care system.”
Steward and its hospitals were owned for about a decade by private equity firm Cerberus. Controlling interest of Steward was transferred from Cerberus to a group led by Steward founder and CEO Dr. Ralph de la Torre in 2020.
Cerberus said in a statement last week that it is “incorrect and unfair” to say that its executives pocketed $800 million in connection with the Steward transaction.
“These returns primarily benefited our investors, including millions of teachers, firefighters, law enforcement personnel, and municipal workers as well as other pension funds, universities, and endowments,” the company said after Massachusetts Democratic U.S. Sens. Ed Markey and Elizabeth Warren targeted private equity in health care at hearing last week.
The Private Equity Stakeholder Project, a non-profit that tracks private equity investments across industries and testified at the hearing Markey and Warren held last week, said approximately 460 hospitals in the United States are owned by private equity firms.
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Those facilities represent 8 percent of all private hospitals in the U.S. and 22 percent of all proprietary for-profit hospitals in the country. And 22.5 percent of private equity-owned facilities are psychiatric hospitals, the group said.
The organization’s Private Equity Hospital Tracker lists one Massachusetts hospital owned by a private equity firm as of January: Bournewood Hospital, a psychiatric facility in Brookline owned by the firm Kohlberg & Company.
It also lists the Hospital for Behavioral Medicine in Worcester, also a psychiatric facility, as a venture capital-backed facility.
Data released in late 2022 by the Centers for Medicare & Medicaid Services showed that 49.2 percent of the 4,644 hospitals enrolled in Medicare were non-profit outfits, 36.1 percent were for-profit entities, and 14.7 percent were government-owned hospitals. The same report found that non-profit hospitals are larger on average, with a mean bed count of 209 compared to 107 for for-profit hospitals and 175 for government hospitals.
The Joint Committee on Health Care Financing held a hearing last month on how private equity’s growing involvement has influenced the state’s health care system.
Researchers cautioned the panel that while some private equity deals might have some positive aspects – such as investing to keep rural or community hospitals open – they typically lead to higher patient costs, poorer quality of care and reduced staffing.
One researcher said patients see an increase in bloodstream infections and falls at hospitals once they have been acquired by private equity firms.
The committee chairs said the hearing gave them a greater sense of the task before them, and House and Senate leaders have suggested they are interested in tackling the issue of private equity in health care before their formal lawmaking period ends July 31.
“We have to,” Rodrigues said when WCVB-TV co-host Ed Harding asked whether the Legislature and governor can effect change and “fix the problem.”
During the roundtable segment of “On The Record,” Republican political analyst Virginia Buckingham – a former chief of staff to Govs. Bill Weld and Paul Cellucci — agreed that something should be done about private equity firms and their control of health care facilities.
Buckingham stopped short of supporting Rodrigues’ call to eliminate for-profit and equity-backed companies from Massachusetts’ health care world.
“It’s a critical issue. There has to be regulation of these private equity firms owning hospitals and gutting hospitals,” she said. “That has to happen, whether it’s here in Massachusetts state law, or federally.”
