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Massachusetts Gov. Maura Healey signed a sweeping healthcare invoice into legislation on Wednesday that will increase oversight over for-profit healthcare funding following the collapse of Steward Well being Care final 12 months.
The legislation, which is an element of a bigger healthcare bundle, will increase regulators’ oversight of offers and sharpens monetary penalties for corporations that don’t adjust to reporting necessities.
State regulators and public well being officers spent nearly all of 2024 enmeshed in difficulties associated to Steward, after the for-profit well being system crumbled below the burden of unsustainable monetary obligations and filed for chapter.
Previous to going bankrupt, Steward operated eight hospitals within the state, and its failure strained Massachusetts’ already fragile public well being system.
Throughout its restructuring, Steward completely closed three Massachusetts hospitals, laid off greater than a thousand staff and sought tens of millions of {dollars} from the state with a view to hold its remaining Massachusetts amenities open.
State officers say that the brand new oversight legislation will shut “loopholes” that allowed Steward executives to cover the system’s more and more dire monetary scenario from regulators.
“What [CEO] Ralph De La Torre and Steward did to our residents was unconscionable and reprehensible, nevertheless, it was authorized,” stated State Rep. John Garden Jr. in an announcement on Wednesday. “Following the Steward Well being Care disaster, it’s the Legislature’s accountability to make sure that what occurred with Steward by no means occurs once more within the Commonwealth.”
Sharper enamel, additional attain
A number of the key parts of the brand new legislation map on to regulators’ high considerations about Steward.
For instance, the brand new legislation will increase monetary penalties for well being techniques that fail to supply regulators with complete annual monetary statements. Fines will enhance from $1,000 to $25,000 per week, with no annual cap.
Though Steward was required to supply monetary statements previous to declaring chapter, the well being system had been ignoring the necessities since at the least 2017 — regardless of regulators levying fines towards the system and looking for a court docket order trying to compel the monetary statements. Healey’s administration additionally pleaded with Steward’s CEO to reveal monetary info.
Nonetheless, Steward stalled and regulators didn’t see the total image till the well being system started to file paperwork in federal chapter court docket, revealing over $9 billion in complete liabilities.
Along with growing fines, the legislation additionally offers regulators the chance to evaluation monetary info from a broader array of healthcare stakeholders, together with non-public fairness traders, healthcare actual property funding trusts, managed service organizations and pharmacy profit managers.
The Well being Coverage Fee — which each opinions new offers and annual healthcare value tendencies within the state — will scrutinize the market affect of transactions involving “vital” fairness traders and people involving sale-leaseback transactions.
Politicians have accused Steward’s personal non-public traders — together with its former non-public fairness proprietor Cerberus Capital Administration and healthcare REIT Medical Properties Belief — of utilizing monetary maneuvers akin to debt-funded dividends and sale leaseback transactions to get wealthy whereas Steward suffered.
The state can also be cracking down additional on healthcare actual property funding trusts. MPT’s leases with Steward drew scrutiny within the months previous its chapter. Though attorneys for MPT testified in federal court docket that they had been to not blame for the well being system’s chapter, Sen. Elizabeth Warren, D-Mass., characterised the rents as unsustainable in a letter to MPT’s CEO, Edward Aldag.
“MPT has – together with Steward – plundered these hospitals,” Warren wrote in April.
Beneath the brand new legislation, the Division of Public Well being is not going to concern a license to ascertain or keep an acute care hospital that leases its major campus from a REIT, nevertheless, there’s an exception for hospitals that had lease agreements in place as of April 1.
Massachusetts’ crackdown on non-public traders in healthcare supply comes amid mounting stress nationwide on non-public fairness companies and REITs.
This week, the Senate Price range Committee printed a report documenting a year-long investigation into the deleterious affect non-public fairness traders had on healthcare high quality at sure hospitals.
The report included proof that sale leaseback transactions orchestrated on the path of personal fairness companies — during which hospitals promote their actual property to a REIT after which pay to lease the ability — benefited traders by producing fast money, however at instances left hospitals paying unsustainable excessive rents.
