Senators introduce bill to criminalize private equity ‘looting’ in healthcare
Senators Ed Markey (D-Mass.) and Elizabeth Warren (D-Mass.) have introduced a bill that would impose criminal penalties for private equity firms that extract wealth from healthcare organizations.
The Corporate Crimes Against Health Care Act of 2024 would allow federal prosecutors to hold private equity executives liable if the business practices of their healthcare entities result in the death of a patient. Penalties include a stint in a federal prison and stiff fines.
Warren and Markey said the legislation is aimed at curbing “looting” by private equity, where investors purchase healthcare practices and hospitals only to run them out of business by prioritizing short-term profits.
“Over the last decade, private equity fund assets have more than doubled, totaling $8.2 trillion in 2023. While private equity funds have purchased companies in nearly every sector of the economy, their aggressive deal-making in the health care 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,” a statement from Markey and Warren said.
The bill would give the Department of Justice the ability to “claw back” executive compensation if a healthcare business succumbs to “serious, avoidable financial difficulties” within 10 years of a private equity buyout.
The number of bankruptcies for healthcare organizations owned by private equity firms has exploded 112% over the last five years, according to a study from the Private Equity Stakeholder Project. The rise has led to increased scrutiny from regulators and the public.
The collapse of Steward Health Care
Massachusetts has been attempting to grapple with the recent closure of Steward Health Care, which operates eight hospitals in the state. Its private equity ownership sold Steward’s property to a real estate firm, leaving the hospital chain unable to afford its rent.
“My Corporate Crimes Against Health Care Act would prevent what happened with Steward from ever happening again,” Warren said. “When private equity gets hold of health care 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 Corporate Crimes Against Health Care Act is newly proposed and has yet to face a vote in Congress.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.