US senators Elizabeth Warren and Ed Markey, both representing the state of Massachusetts, have rolled out the ‘Corporate Crimes Against Health Care Act of 2024’ to curb private equity abuse.
The proposed bill, which is aimed at curbing corporate and private equity abuses in the healthcare sector, seeks to impose a new criminal penalty of up to six years in prison for executives whose financial misconduct at healthcare entities leads to a patient's death.
The act empowers state attorneys general and the US Department of Justice (DOJ) to reclaim all compensation paid to private equity and portfolio company executives within a ten-year window surrounding the financial distress of a healthcare organisation caused by such misconduct.
Additionally, it proposes a civil penalty up to five times the amount recovered and restricts federal health programme payments to entities engaging in certain real estate transactions.
The proposed legislation also calls for the repeal of a tax rule that permits taxable REIT subsidiaries to influence healthcare operations and the elimination of a 20% pass-through deduction for REIT investors, introduced in the 2017 tax reforms.
Healthcare providers receiving federal funds would now be required to disclose financial data and report any mergers, acquisitions, or ownership changes.
The latest legislative move comes in response to the growing private equity fund assets, which reached $8.2tn in 2023, the senators noted.
The aggressive investment strategies of private equity in healthcare have raised concerns over patient safety and the potential misuse of taxpayer money.
One of the most recent examples in Massachusetts is the mismanagement by Steward Health Care executives and its former private equity owner, which led to the company's bankruptcy.
Warren said: “My Corporate Crimes Against Health Care Act would prevent what happened with Steward from ever happening again. 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.”
