Maine AllCare

1. L.D. 2190: Certificate of Need Changes

The bill would expand Certificate of Need (CON) review of proposed healthcare transactions when there is a change in ownership or control of a health care facility.  It would require review and analysis of the extent to which the applicant’s ownership structure involves a private equity company or real estate investment trust and an investigation into the prior activities and conduct of that company or trust.

The bill would also broaden the state’s authority to conduct subsequent reviews of a CON applicant when there is a change in ownership or control of a health care facility.

An important part of the bill not directly related to private equity would expand the criteria used during a CON review to include consideration of a project’s impact on affordability and accessibility of health care for all Maine residents.  Right now CON reviews only consider the impact on cost to MaineCare (Maine’s Medicaid), so this would be a significant win for residents of Maine.

All these components of LD 2190 would make acquisition of a Maine hospital less attractive to PE firms and, if a hospital were acquired, discourage PE firms’ more egregious practices.

2. L.D. 2197: Protecting Hospital Campus Ownership

This bill would prohibit sale and leaseback arrangements.  These arrangements are one of the primary ways PE firms reap short-term profits from hospitals.  A firm sells the land on which the hospital stands to a Real Estate Investment Trust (REIT), which then leases the land back to the hospital, forcing the hospital (and not the PE firm) to pay rent to the REIT – which is often owned by or closely associated with the PE firm itself!

3. L.D. 2198: Debt-to-Equity Standards for Health Care Transactions

This bill would prohibit any transaction involving a health care entity in which the ratio of debt to equity is greater than 50%.  When a PE firm buys a hospital, it finances the purchase with a mix of cash up front (equity) and loans (debt).  The debt then becomes the responsibility of the hospital purchased, not the PE firm itself, thus worsening the hospital’s financial situation.  For all PE health care acquisitions, the ratio of equity to debt is usually about 30% equity, 70% debt, but for hospital purchases the equity portion is often less – 25%, 20%, even 15%.  Requiring 50% equity would be a significant increase in the PE firm’s responsibility for the purchase.

4. L.D. 2201: Establishing a Regulatory Review & Approval Process for PE Transactions

This bill would establish a robust process for reviewing and approving transactions when a private equity company acquires a majority ownership interest in a health care entity or takes operational control over a health care entity. It would also broaden the State’s authority to impose conditions on a private equity applicant, including post-transaction reviews following an applicant’s conditional approval.

HOW TO TESTIFY

• Detailed information on how to submit testimony is available here.  Follow the links to register for Zoom testimony or to submit written testimony.
• If you decide to testify in person, you don’t need to sign up ahead of time, but limit your remarks to two minutes and bring 20 copies of testimony for distribution to the committee.
• To testify electronically (via Zoom), register here AT LEAST 30 MINUTES before the posted start time of the meeting.  Again, keep your remarks to two minutes or less.
• Written testimony need not be limited to two minutes (if read aloud) but should not be much longer.

SOME BACKGROUND INFORMATION

What happens when private equity firms acquire hospitals

Private equity firms are privately held companies that have a business model of short-term investment (usually 3-7 years) for short-term profits.  As studies have shown, when private equity firms have taken over hospitals, the result has been poorer care and worse outcomes.

A case in point:  The multibillion dollar 31-hospital Steward Health Care system, founded in 2010, was driven by its investor financial goals, not the provision of better health care. It expanded using dubious financial tactics until it collapsed and filed for bankruptcy in 2018. A number of hospitals closed their doors, others were bailed out by their states, and patients suffered, especially the most vulnerable. Its CEO and investors walked away with millions.

As you are aware, many of Maine’s hospitals are in dire financial straits.  This leaves them vulnerable to take-over by private equity firms, who promise a large influx of cash to stabilize a hospital’s financial situation, but who end up making a bad situation worse, often through staff and salary reductions and by selling off the hospital’s most profitable services (e.g. labs) for short-term profit and then leaving unprofitable services (e.g. birthing centers) to sink.

In short, private equity is capitalism on steroids.  Its goals are incompatible with those of health care, where patient well-being, not short-term profit, should be the primary concern.

In the last legislative session Maine AllCare was instrumental in the introduction of LD 985, a bill to enact a 5-year moratorium on PE takeover of Maine hospitals.  The bill’s purpose was to give Maine legislators the opportunity to consider whether private ownership and operation of Maine hospitals should be permitted and, if so, how it should be regulated.  With our support the bill passed, but it was amended to reduce the moratorium from 5 years to just one.  The moratorium ends in June of this year.

Maine AllCare recognizes that none of these bills resolves (or even addresses) the impending insolvency of Maine’s hospitals.  We firmly believe that global budgeting, as proposed in our plan for universal health care, is the long-term solution to the financial problems confronting Maine hospitals – especially our rural hospitals.  We know, however, that private equity is not the answer.  It will only make a bad situation worse!

Many thanks,

David Jolly, Co-Chair

Maine AllCare