Health Care Equity Reform Legislation Introduced

As anticipated, this week Senators Elizabeth Warren (D-MA) and Ed Markey (D-MA) introduced S. 4503, the Corporate Crimes Against Health Care Act of 2024 to address alleged private equity and corporate abuse in health care (see bill text and summary). This legislation was expected due to the Steward Health Care bankruptcy affecting 8 hospitals in Massachusetts.

Please note, this legislation is separate and distinct from the Health Over Wealth Act, legislation expected to be introduced by Senator Markey in the coming weeks.

Senator Warren’s bill primarily targets hospitals, certain physician practices and nursing homes, but also includes assisted living communities, hospice programs, and home health agencies among other specified entities subject to the legislation. The bill also provides the Secretary of the Department of Health the authority to add other entities that “furnish health care items and services” and imposes a number of criminal, civil and financial sanctions and requirements on private equity and similar entities as well as executives.

Provisions in the legislation include:

• Creates a new criminal penalty of up to 6 years in prison for executives who loot health care entities like nursing homes and hospitals, if that looting results in a patient’s death.
• Provides state attorneys general and the DOJ with the power to claw back all compensation, including salaries, issued to private equity and portfolio company executives within a 10-year period before or after an acquired health care firm experiences serious, avoidable financial difficulties due to that looting.
• Authorizes an associated civil penalty of up to 5 times the clawback amount.
• Prohibits payments from federal health programs to entities that sell assets or use assets for a loan collateral made to a REIT, with an exemption for current arrangements; repeal a rule in the Tax Code that allows taxable REIT subsidiaries to exert influence on the operations of health care entities; and remove the 20 percent pass-through deduction, passed in the 2017 Trump tax cuts, for all REIT investors.
• Requires health care providers receiving federal funding to publicly report mergers, acquisitions, changes in ownership and control, and financial data, including debt and debt-to-earnings ratios.
• Mandates an HHS OIG report to Congress on the harms of corporatization in health care.

In addition to the Warren bill, we are continuing to anticipate the introduction of Senator Markey’s Health over Wealth Act, which similarly would have extreme negative impacts on private equity’s ability to finance health care and similar entities which also include assisted living communities. Argentum and ASHA submitted joint comments to Senator Markey last month outlining our concerns about including assisted living with clinical health care settings and specifically requested to be removed from the definition of health care entities. We believe that this legislation will be introduced sometime in July, although there is not a firm timetable.

Argentum will be providing more detailed analysis of both pieces of legislation and any changes of status.

Next Steps:

• Coordinating with ASHA on a joint response to Senator Warren’s bill and a meeting as soon as possible.
• Coordinating with our State Partner, the Massachusetts Assisted Living Association, on local outreach with both Senators Warren and Markey.
• Planning a briefing for Congressional staff with industry experts to present on the nuances of private equity in assisted living.
• Coordinating with other industry stakeholders on a response to Senator Warren.
• Continuing to meet with Congressional offices to relay our concerns about increasing legislative proposals relating to private equity in health care and to exclude assisted living from those proposals.