Warren, Markey introduce bill to jail executives who 'loot' healthcare system

Massachusetts’ progressive senators have debuted a federal bill that would introduce criminal and civil penalties for executives who “loot” healthcare organizations to the detriment of patient care and the provider's ability to operate.

The legislation includes measures empowering state and federal law enforcement to claw back payments made to a healthcare entity’s private equity backers should the organization land in financial troubles during the 10 years following.

Further, it aims to disincentivize organizations from selling off their assets to a real estate investment trust or using the assets as collateral for a loan from those lenders.

Sens. Elizabeth Warren and Ed Markey introduced their bill outside of a hospital run by Steward Health Care, which is currently wading its way through bankruptcy proceedings.

The organization, its executives and its prior private equity backers have been widely criticized by the lawmakers and others for jeopardizing patient care by engaging in some of the practices being targeted in the bill.

“My Corporate Crimes Against Health Care Act would prevent what happened with Steward from ever happening again,” Warren said in a release. “When private equity gets hold of healthcare 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.”

The legislation outlines the type of “triggering event” that would warrant penalties to include Chapter 11 bankruptcy filing, loan defaults, late rent payments, late salary payments for a quarter or more or outright closure.

Per the bill, the criminal penalty of one to six years in prison would apply to executives in cases where one of those triggering events “results in the death or injury of a patient or patients under the care of the target firm.” The executives’ civil penalty, meanwhile, would cap out at five times the amount of any law enforcement clawbacks.

Other areas of the bill would require any providers that receive federal funds to publicly report any mergers, acquisitions and changes in ownership and control as well as more financial data on their debt position than they are currently required to disclose. It also requires the Department of Health and Human Services’ Office of Inspector General to put together a new research report for Congress on “the harms of corporatization in healthcare.”

“Private equity firms and their enablers will continue to steal from America’s healthcare system to feed their corporate greed unless we stop them,” Markey said in a release. “We need guardrails now to guarantee CEO wealth doesn’t come before the public’s health.”

The lawmakers’ proposal came alongside acclaim from a slew of labor groups, financial activists and other opponents of private equity. Their concerns have picked up steam across recent months in light of high-profile private-equity-backed bankruptcies, like Steward Health Care, and recent data showing that more than a fifth of 2023’s sizable healthcare bankruptcies involved companies with private equity ties.

Though Warren and Markey are among Congress’ loudest—and often divisive—critics of private equity in care, the progressives aren’t the only ones at the federal level calling for a crackdown.

About half a year back, bipartisan heads of the Senate Budget Committee launched a probe into hospitals that had been taken over by private equity firms and subsequently “experienced significant staffing reductions and substandard healthcare, and have been stripped of valuable assets, including their real estate, leaving them saddled with debt.”

The White House also has a keen interest in combating private equity in care, and has instructed regulators and law enforcement to take a firmer stance against such deals as they occur.