(Bloomberg) – A spate of health care bankruptcies has sparked a wave of public anger against the industry’s financial traders, prompting state lawmakers across the country to draft tough new regulations.
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The crackdown on those who want to be cracked down is progressing rapidly.
California Governor Gavin Newsom has vetoed a bill that would have allowed the state to block private equity deals for most medical facilities. Efforts to tighten oversight of financial institutions or outright bans on certain health investments have also stalled in Pennsylvania, Connecticut, Oregon, Washington and Minnesota.
In Massachusetts, political criticism of private equity and real estate companies reached a climax after Steward Healthcare, one of the state’s largest hospital operators, filed for bankruptcy in May. A bill that would have strengthened oversight of such investors is stuck in a legislative stalemate with just days left before the end of the session.
The failure of those efforts, including in Democratic-majority states, has largely reduced the short-term risk of stricter rules for health care industry financial traders.
Federal action has already dragged on, so future discussions could potentially include more comprehensive disclosure requirements that could at least give lawmakers more warning when a company is in distress. Less radical discussions are likely to focus on ways to curb dangerous practices. Other states, including Indiana, have enacted laws requiring special notice for certain health care transactions, but stop short of providing full blocking power.
“I don’t think it’s realistic or viable to completely eliminate private equity,” Massachusetts Governor Maura Healey said in an interview. “I think there is a role for private equity in health care, but the question is, what is that role? How do you define that role? What are the guardrails that we need here? I think it’s the right thing to consider.”
Identification of responsibility
Critics of the Massachusetts and California bills, the most advanced of state legislative efforts, argue that they unfairly blame private equity and real estate companies for larger problems in the health care industry. There is.
“American companies in health care and other sectors of the economy need more investment from all sources. Private equity and private credit can provide the capital they need,” said a private equity lobbyist. Drew Maloney, CEO of the American Investment Council, said in a September letter to members of Congress.
