House made of money
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Two Democratic senators from Massachusetts have introduced a bill they say is meant to “root out corporate greed and private equity abuse” in nursing homes, assisted living communities, home health agencies, hospices and other “healthcare entities.”

Post-acute and long-term care provider advocates, however, are calling the legislation “misguided,” “overly broad” and “concerning,” saying that it would threaten access and existing care models while serving as “a distraction from the real issues that impact the majority of providers.” Some also are questioning the inclusion of assisted living in the bill.

Sens. Ed Markey and Elizabeth Warren announced the Corporate Crimes Against Health Care Act of 2024 on Wednesday.

“Over the last decade, private equity fund assets have more than doubled, totaling $8.2 trillion in 2023,” according to a joint press release issued by the senators. “While private equity funds have purchased companies in nearly every sector of the economy, their aggressive deal-making in the healthcare sector poses grave risks to patient health and raises questions about potential abuse of taxpayer dollars, as private equity companies routinely load up portfolio companies with usurious debt, sell off valuable assets, and extract exorbitant dividends and fees — regardless of how their investments preform.”

The legislation, according to the text, would apply to entities such as nursing homes, assisted living communities, home health agencies, hospice programs, hospitals, independent freestanding emergency departments, health systems, physician practices, ambulatory surgical centers, behavioral health treatment facilities and renal dialysis facilities owned or controlled by entities such as real estate investment trusts, venture capital funds and private funds.

The act, according to the senators and bill text, would:

  • Create a new criminal penalty of a minimum of one year and a maximum of six years in prison for executives if their actions create a “triggering event” that results in someone’s injury or death.
  • Provide state attorneys general and the Department of Justice 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 healthcare firm experiences “serious, avoidable financial difficulties” due to the triggering event.
  • Authorize an associated civil penalty of up to five times the clawback amount.
  • Prohibit 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 healthcare entities; and remove the 20% pass-through deduction, passed in 2017, for all REIT investors.
  • Require healthcare providers receiving federal funding to publicly report mergers, acquisitions, changes in ownership and control, and financial data, including debt and debt-to-earnings ratios.   
  • Require the Health and Human Services Office of Inspector General to produce a report for Congress within three years of enactment that “evaluates profit-driven practices, including cost-cutting practices and revenue-enhancing practices, in healthcare delivery,” including overbilling or up-coding, inflated patient/resident assessments, executive and provider compensation “designed to increase revenue or profits, such as bonuses based on productivity, relative value units or service volume,” staff reductions, the substitution of caregivers with technology, service mix changes to maximize revenue, and more.

Introduction of the bill follows the March announcement by the Federal Trade Commission, the Department of Health and Human Services and the Department of Justice of the launch of a cross-government public inquiry into private equity’s role in healthcare. The agencies specifically mentioned home- and community-based services providers, nursing homes, home health agencies, hospice providers and other types of service providers in their announcement.

‘Misguided in its accusations’

Clif Porter, senior vice president of government relations at the American Health Care Association/National Center for Assisted Living, told McKnight’s that the groups “fully support financial transparency and reporting” but that the newly proposed legislation is “misguided in its accusations against nursing homes and long-term care providers.”

“Less than 5% of nursing homes are owned by private equity firms,” he said. “These investments largely happened a decade ago but were unsuccessful, and many of the larger private equity firms have since left the nursing home industry.”

Since 2015, Porter said, nursing homes have accounted for less than 10% of private equity capital and deals in healthcare. “ The reality is that owners of long-term care facilities are extremely diverse and are often run by Main Street, not Wall Street,” he said. 

Porter said that rather than focus on private equity in long-term care, which he said is “a distraction from the real issues that impact the majority of providers, like Medicaid underfunding and workforce shortages,” policymakers should “find a proper balance of oversight while still encouraging more investments.”

Given the right incentives, Porter said, investors will enter the healthcare sector “for the right reasons, producing great outcomes for residents and patients, modernizing our services and buildings, and expanding access to care.” 

‘A number of concerning provisions’

The American Seniors Housing Association told McKnight’s that it has “serious concerns” about the bill, which the association described as “overly broad” and “punitive.”

“The legislation calls for a number of concerning provisions, including imposing both civil and criminal penalties, including prison time, for bad outcomes in healthcare entities financed with private equity and other private investment,” Vice President of Government Affairs Jeanne McGlynn Delgado said. “The bill largely targets REITs by prohibiting Medicare-funded entities from engaging with REITs, repeals the special rule for the RIDEA structures and eliminates the 20% deduction for REIT dividends. It also includes a section calling for mandatory reporting of health-related ownership information and includes assisted living as a ‘specified entity,’ which doesn’t make much sense but yet has attached to it a noncompliance penalty of $5 million.”

Delgado said that ASHA “will work to ensure this and other similar initiatives do not deter the much-needed investment in senior living required to serve the aging population.”

Assisted living ‘fundamentally different’

The inclusion of assisted living in the bill also is a concern for Argentum, said Argentum Senior Vice President of Public Affairs Maggie Elehwany, JD. 

“Assisted living communities are fundamentally different from the healthcare entities included in the legislation,” she said. “Assisted living communities provide access to healthcare services but primarily offer supportive housing and personalized care designed to promote independence and quality of life for older adults.”

Unlike other provider entities defined in the proposed legislation, she said, assisted living does not depend on Medicare and Medicaid reimbursement or private health insurance. Rather, Elehwany added, it primarily is a market-driven, private-pay residential environment.

“Including assisted living in this bill could have enormous consequences for the 1.4 million Americans who today call assisted living home and the millions of seniors who will need care in the future,” she said, adding that inclusion “would threaten a model of care that improves the lives of seniors.”

The regulatory environment should support the growth and sustainability of assisted living, Elehwany said.

“Private capital investment in assisted living is needed to meet rapidly growing demand, and legislation that seeks to curtail these vital investments will likely result in access shortages for millions of seniors for decades to come and almost certainly make assisted living less affordable,” she said.