The Health Over Wealth Act Takes Aim at Private Equity Investment in Health Care

Key Points

• Congress is increasing oversight and legislative activity related to the role of private equity in health care.
• Sen. Markey and Rep. Jayapal jointly introduced the Health Over Wealth Act on July 25, which aims to curb or outright prohibit private equity investment in patient-facing health care providers.
• This sweeping legislation proposes a wide-range of policies, including new transparency requirements, changes to the tax code to discourage sale-lease back transactions in health care, new federal licensing requirements for private equity to purchase health care providers, significant penalties for closing hospitals or reducing access to services, new divestment and civil penalty provisions, and even an outright ban on private equity acquisition of health care providers under certain circumstances.
• While the Health Over Wealth Act is unlikely to become law in its current form, it provides further insight into the concerns on the part of some members of Congress regarding the role of private equity in health care and potential areas of future federal and/or state action. 

Background

Over the last several years, various members of Congress have been increasingly engaged on the issue of private equity in health care. The recent introduction of the Health Over Wealth Act by Senator Ed Markey (D-MA) and Representative Pramila Jayapal (D-WA-07) is the most recent example and comes on the heels of Senators Ed Markey (D-MA) and Elizabeth Warren (D-MA) unveiling The Corporate Crimes Against Health Care Act of 2024 earlier this summer, which seeks to create new civil and criminal penalties for health care investors who are responsible for “triggering events” that result in patient injuries at health care facilities. This policy alert provides an overview of the Health Over Wealth Act and the potential path forward for this legislation as stakeholders continue to monitor congressional activity focused on private equity investment in health care.

Key Provision of the Health Over Wealth Act

The Health Over Wealth Act focuses on transparency through new and extensive data collection. The legislation would require for-profit health care companies and private equity-owned health care providers to publicly report 10 years of data on their debt, equity, leverage, executive pay, fees, profits, health care charges to patients and insurance plans, sale-lease back arrangements and any reductions in services, wages or benefits for workers, fund profits and performance, and the disclosure of names of limited partners (among other things). The transparency provisions are aimed at gathering data related to specific critiques of private equity ownership in health care (primarily accusations of better profits and worse outcomes). As we have seen in other legislation in this space (such as the air ambulance provisions in the No Surprises Act¹), we would expect any future legislation to include additional data reporting and transparency requirements even if such data reporting and transparency requirements are not as rigorous as those set forth in this bill.

The Health Over Wealth Act also establishes a task force to monitor changes in the health care marketplace, address and limit the role of private equity and consolidation in health care, and address changes to the health care marketplace and private equity or market consolidation patterns related to health care disparities or disparate outcomes. The bill requires the Secretary of Health and Human Services (HHS) to annually report to Congress on recommendations for limiting the role of private equity in health care, taking into account the implications on health outcomes and staff working conditions, and identify emerging trends within the health care marketplace that may undermine access to care, quality of care, patient safety or create financial instability or risk for health care providers. Under the bill, the Task Force is to be chaired by the Secretary, co-chaired by a practicing health care provider and specific criteria is outlined regarding the members the Secretary shall appoint to serve on the Task Force. Of note, the bill requires the Chair of the Federal Trade Commission and Attorney General to serve as advisory members to the Task Force.

The bill also seeks to disincentivize real estate investment trust (REIT) sale-leaseback transactions in health care by:

(a)  Eliminating preferential tax treatment for REITs that have significant sale-leaseback arrangements in health care.

(b)  Prohibiting any registered investment company from “stripping assets” from health care entities or undermining the quality, safety or access to health care.

The bill also would (i) require private equity-owned health care companies to set up escrow accounts with sufficient cash to cover five years of operating expenses to ensure continuation of care in the event of a hospital closure or service reduction, (ii) create a new federal private equity health care investment licensing process, (iii) permit HHS to revoke investment licenses from private equity firms that price gouge, understaff or create access barriers to care, (iv) set forth penalties for violations that span special civil monetary penalties (requiring repayment of all federal funds received by the health care provider) to mandatory divestment, (v) sets forth a process for proposing regulatory and legislative recommendations related to private equity’s role in health care, and (vi) authorize the Secretary to prohibit future private equity investments in health care until a new task force reports on ways to curb private equity investment in the health care space.

Outlook for the Legislation

While the Health Over Wealth Act is unlikely to advance, the introduction of this legislation in both the Senate and House reflects a growing critique by some members of Congress (and some policymakers in the last two administrations) of private equity ownership of patient-facing health care providers. While there is currently no consensus on the specific legislative proposals in the Health Over Wealth Act, expect the scrutiny of private equity investments in patient-facing health care to continue to grow in the months and years ahead—and with it the mounting potential for some future legislative action.  This is the key reason stakeholders should continue to carefully monitor the latest congressional developments in this space.

^{1 See H.R. 133, Consolidated Appropriations Act of 2021 (116th Cong.), Division BB.}