Dem legislators push bill taking on private equity in health care

By Susan Morée

A bill expected to be filed this session aimed at providing oversight of private equity investment in New Mexico healthcare may not be a panacea for the state’s health care worker shortage, but advocates and the bill’s sponsor say it’s a start.

The Healthcare Consolidation Act, which will be co-sponsored by two Democrats — state Sen. Katy Duhigg, of Albuquerque, and House Majority Whip Reena Szczepanski, of Santa Fe —  would set up a mechanism requiring the potential purchaser of a health care entity or facility to go through a review process by the New Mexico Office of Superintendent of Insurance. Insurance Superintendent Alice Kane told NM Political Report the bill is aimed to ensure communities don’t see a loss of service or access, not to interfere with the purchases. 

According to Duhigg, private equity firms currently own nearly 40% of New Mexico’s health care facilities and the expansion of private equity into the medical sphere is a growing concern in both the state and the nation. Duhigg said she and Szczepanski are filing the bill because the state lacks a statute to provide oversight of private equity transactions when they occur. The nonprofit watchdog Private Equity Stakeholder Project ranks New Mexico as having a 100% risk score for private equity in healthcare.

Duhigg said the consolidation act would not prohibit private equity purchases in healthcare in New Mexico but it would create much needed transparency.

“New Mexico has absolutely nothing in place to even be aware of these transactions, let alone meaningful oversight over them,” Duhigg said.

She said a bill passed last year was “a band-aid” that lacked both transparency requirements and an enforcement mechanism. She said the bill she’s sponsoring this session is a much more comprehensive bill.

Matt Parr, communications director for the Private Equity Stakeholder Project, told NM Political Report the goal is to increase profit margins when private equity firms purchase hospitals. He said, typically, private equity firms hold a healthcare acquisition for about five to seven years and often cut services, the number of employees and require physicians to see more patients each day to increase profit.

He said another private equity tactic is to sell the land a hospital occupies, then charge the hospital rent.

“The private equity firm gets the money from the sale and requires the hospital to lease the land, which adds to operating expenses which leads to financial distress for the hospitals,” Parr said.

Parr said the watchdog group has found private equity-owned dental companies push unnecessary services on patients to increase profits.

“We’ve seen dental companies push root canals on children and babies,” he said.

Parr said, overall, cutting services, employees and the amount of time providers can spend with their patients, plus, at times, pushing unnecessary procedures onto patients, all lead to poor patient outcomes.

Kane said her office would not regulate private equity firms if the bill is enacted. 

“This isn’t going to solve everything,” Kane said.

But, she said, the bill would allow her office to monitor a private equity transaction process. She said if the private equity firm making the purchase begins to cut services, impact access, quality or cost, the state would be able to bring enforcement against the company.

“We’re trying to prevent problems seen in prior transactions,” Kane said.

Republicans said in legislative meetings last year that a previous version of the bill would hurt business investment in New Mexico.

Kane said government regulation often elicits those kinds of comments, but in the insurance industry it has not held true.

“I don’t think that’s going to happen,” Kane said.

Kane said she thinks a whistleblower protection section of the bill will prove to be important since it will enable employees of a private-equity owned healthcare facility to come forward without fear of reprisal if they see problems occurring.

“Providers need protection so they could come tell us if conditions are not being met. They’re going to be our strongest source of information,” Kane said.