Committee hears experts on private equity’s tactics, risks and proposed oversight

Nancy Kane, a presenter and former financial monitor for the Massachusetts Attorney General's Office, said private equity investors typically buy existing health-care organizations with the clear intention of extracting their investment within a limited time frame. "They have to get their money out," Kane said, adding that firms often finance purchases with heavy debt that is placed on the acquired entity rather than the investor.

The committee’s briefing, introduced by Chair Black of the House Committee on Health Care, combined academic review and case history. Kane described commonly used tactics — leveraged buyouts, dividend recapitalizations and sale-leasebacks — and traced how those moves can raise operating costs, reduce staff and leave hospitals vulnerable to bankruptcy.

"Private equity firms typically don't have an interest in making their companies financially healthy for the long term, and they're more interested in extracting wealth in that brief ownership period," Michael Fenney, senior campaign and research coordinator for health care at the Private Equity Stakeholder Project, told the committee. Fenney summarized industry data showing rapid growth in private equity deals across hospitals, physician practices, nursing homes and outpatient specialties.

Both witnesses highlighted Steward Health Care as a working example. Kane and Fenney said Steward’s owner used a sale-leaseback with a real estate investment trust (REIT) and large dividend payments to extract cash while the operating company retained heavy lease obligations and debt. Fenney said Steward executed a roughly $1.2 billion sale-leaseback and paid about $500 million in dividends; later filings listed liabilities in the billions and contributed to Steward’s Chapter 11 filing.

Witnesses summarized peer-reviewed and administrative findings: private-equity ownership has been linked in academic reviews to higher costs to payers and patients and mixed effects on clinical outcomes; nursing-home studies showed lower staffing and lower average ratings for facilities owned by private equity. Kane noted that physician practices are a fast-growing target: roll-ups and platform acquisitions can concentrate market share and allow owners to negotiate higher payer rates.

Committee members asked whether Vermont already has private equity–owned hospitals or practices. Fenney said hospitals in Vermont are not privately equity-owned at scale but warned private equity often enters a state through management companies, joint ventures, physician practice management firms or staffing companies rather than only through outright hospital purchases. Kane and Fenney pointed to management firms such as Ovation (formerly QHR), staffing firms such as Envision Health, and anesthesia consolidators as examples of how private equity can be present without owning an operating hospital.

Mike Fisher, introduced on the record as a health-care advocate, echoed the witnesses’ concerns, stressing the state should not assume it is immune. "We're not saying private equity is bad," Fisher said, "we're saying some of the practices that private equity tends to use — those extractive techniques — should be prohibited in this state." He and the witnesses urged better reporting, merger review and limits on particular financing tactics.

Witnesses identified several policy approaches discussed in other states and academic reports: expanded reporting and disclosure of ownership and lease terms, restrictions or review triggers for sale-leasebacks of core hospital campuses, restrictions on dividend recapitalizations and stronger post-acquisition monitoring. Fenney said model legislation prepared by the National Academy for State Health Policy and state-level merger-review laws are among tools other states have used.

Committee members said they will review the testimony and further materials; witnesses offered to supply reports and case studies the committee requested. The committee noted an existing bill on its docket, H71, which was mentioned as a topic on the committee’s wall but was not debated or amended during this session.

For now the discussion remains at the education-and-study stage: committee members signaled interest in exploring reporting requirements and statutory tools to limit financing structures that place operating companies at risk. The witnesses emphasized that different private-equity strategies produce different risks and that policy should target specific extractive tactics rather than investor status alone.