U.S. Sen. Elizabeth Warren introduced a new bill this week that aims to rein in private equity misconduct in the health care industry, as many PE-backed medical business have filed for bankruptcy in recent years
The proposed Corporate Crimes Against Health Care Act would impose strict penalties, including jail time, for private equity executives whose deals result in the death of a patient.
A press release about the bill from Warren’s office said that “aggressive deal-making in the health care sector poses grave risks to patient health” as firms “routinely load up portfolio companies with usurious debt, sell off valuable assets, and extract exorbitant dividends and fees.”
Warren announced the bill at St. Elizabeth’s Medical Center in Boston — which belongs to the Steward Health Care System. Steward, the nation’s largest physician-owned hospital network, was once backed by Cerberus Capital Management and in May filed for bankruptcy.
Warren said her bill would have prevented “what happened with Steward from ever happening again.”
She added, “When private equity gets hold of health care systems, it is literally a matter of life and death, so if you drive a hospital like Steward into bankruptcy, putting patients and communities at risk, you should face real consequences.”
At least 17 medical business backed by private equity filed for bankruptcy last year, according to the Private Equity Stakeholder Project.
Under Warren’s proposed bill, executives who “loot” health care business such as hospitals and nursing homes could face six years in prison if their looting results in a patients death.
The bill would also give the Department of Justice the power to claw back all executive compensation within a 10-year period before or after a health care business faces “serious, avoidable financial difficulties due to that looting.”
In response to the bill, Drew Maloney, CEO of the private-equity trade group American Investment Council told the Wall Street Journal, “Private equity in Massachusetts helps develop cures, supports urgent care facilities, and improves access for patients. Senator Warren’s bill is a purely political attack—not a real solution that will help patients, providers and hospitals.”
