Drops Market Oversight Bill On Guv's Desk With Only Hours Left In Session

Lawmakers rushed a hospital oversight bill to Gov. Maura Healey on Monday, agreeing on policy responses to the Steward Health Care crisis that aim to better regulate private equity firms and stiffen penalties for entities that fail to submit required information.

The health care market reform bill (H 5159) would give state health regulators and Attorney General Andrea Campbell more regulatory oversight and enforcement authority over transactions involving private equity investors, health care real estate investment trusts and management services organizations.

House and Senate negotiators announced their agreement Friday evening, alongside a prescription drug reform package that the Legislature also sent to Healey on Monday. After negotiations collapsed at the end of formal lawmaking in July, the breakthroughs emerged just before the two-year term must end on Tuesday.

The late-session breakthrough leaves little time for any back and forth with Healey on potential changes to the bill and essentially gives the governor a take-it-or-leave-it dynamic where she can sign the bill into law or let it die by pocket veto since the Legislature that drafted the sweeping bill is about to dissolve.

The bill increases penalties for hospitals that fail to comply with data reporting requirements, mandates that lessors notify the state 60 days before repossessing medical equipment, overhauls how regulators manage care costs and assess resources, and blocks the Department of Public Health from issuing a license to establish or maintain acute care hospitals whose main campuses are leased from a real estate investment trust.

The compromise does not outright ban real estate sale-leaseback agreements, though it would require a formal material change notice with state health regulators. The Senate took that approach in its oversight bill, while the House bill had prohibited such leases that partially led to Steward's bankruptcy.

Sen. Cindy Friedman, the Senate's lead negotiator on both health care packages, made no explicit mention of Steward as she explained the compromises. But the Arlington Democrat decried the role of private equity in health care, a perspective that Senate Minority Leader Bruce Tarr refuted.

"There is no room for private equity in the delivery of health care. These two things are completely at odds with each other -- not a judgment, it's a fact," Friedman asserted on the Senate floor. "Private equity's job is to make money in the short term for investors. Health care is around delivering care and taking care of the needs of people who need our help because they are sick. Those two things do not jive."

Tarr, who also did not directly name Steward, said he "generally" agreed that Massachusetts has seen the "devastating consequences" of private equity in health care.

"I am not prepared to agree with a blanket exclusion, to the extent that for many providers, private equity, and particularly smaller practice groups, is the means by which they acquire the tools that they need to deliver health care," the Gloucester Republican said. "And so while I think those things need to be properly overseen and regulated, I cannot agree with the proposition that there is no role for private equity in the delivery of health care."

The compromise broadens the oversight capacity of the Health Policy Commission, which in recent months helped vet the sales of the some Steward hospitals to new owners.

At its annual cost hearings, the HPC under the bill would be able to scrutinize pharmaceutical manufacturing companies, pharmacy benefit managers, private equity investors, health care real estate investment trusts, and management services organizations.

Private equity transactions would be subject to the HPC's material change notice process, and regulators could require information like audited financial statements. After transactions are approved, the HPC could require that entities submit additional information over the next five years, a tool the agency lacked in handling the sale of Steward's physician network to a private equity firm.

The agreement also requires private equity investors, health care real estate investment trusts and management services organizations to comply with financial reporting requirements to the Center for Health Information and Analysis. Fines for entities that fail to submit requested data on time would skyrocket from $1,000 to $25,000 a week -- without a cap.

The attorney general's office would gain tools to hold private equity firms accountable under the compromise, including more investigative authority over health care transactions.

The House had passed its hospital oversight bill on a 152-1 vote in May, with the Senate voting 38-2 to pass its version in July. House Speaker Ron Mariano pulled the bills from conference committee negotiations during the early morning hours of Aug. 1, and by Oct. 22, he told reporters the "trades" were not lining up.

Tarr, a conferee on both the hospital oversight and prescription drug reform bills, aired his frustration Monday over how the Legislature was handling the agreements.

"These are matters that are extremely significant, they are extremely complex, and they are extremely impactful," Tarr said on the Senate floor. "And it is unfortunate that we are considering them in an informal session, Mr. President, and that we were not able to consider these in the formal session so that they could have the debate and the recorded votes that they deserve."

Leaders in both branches have advised legislators of "potential" sessions on Tuesday.