Senator MD Rahman Votes to Limit Private Equity Control of Connecticut Hospitals

HARTFORD — Senator MD Rahman (D-Manchester) voted Wednesday to pass Senate Bill 196, a proposal to restrict private equity control of Connecticut healthcare facilities, as Manchester Memorial Hospital recovers from years of mismanagement under for-profit ownership.

“When Manchester Memorial was struggling under Prospect’s ownership, families in my district had real reason to worry about whether their community hospital would survive,” said Senator Rahman, who co-sponsored the bill. “No one should have to wonder whether their hospital will be there when they need it. This legislation protects Connecticut hospitals from the financial engineering that brought Prospect to bankruptcy and left our communities in danger of losing a key healthcare provider.”

Senate Bill 196 takes two steps to limit private equity presence in Connecticut healthcare. First, it would prevent so-called “sale-leaseback” arrangements of Connecticut hospitals beginning in July 2027. This change would prevent hospital owners from selling their properties to another party then leasing the same land in a transaction that has generated profits for private equity firms while weakening the financial standing of the facilities.

The bill would also require hospitals to annually attest to the Department of Public Health that private equity does not have controlling interest in their main campus operations. Hospitals would also need to attest that private equity had no ability to influence their policies or interfere with the decisions of doctors. Violations of these provisions could result in civil penalties of up to $2,000.

State legislators prioritized these safeguards in response to the recent mismanagement of three Connecticut hospitals by for-profit Prospect Medical Holdings, Inc. Prospect’s management of Manchester Memorial, Rockville Memorial, and Waterbury Hospital led to declines in the quality of service until Prospect entered bankruptcy last year.

Prospect engaged in sale-leaseback agreements at its three hospitals, increasing its revenue while leaving the hospitals to pay increased costs.

The Connecticut Hospital Association testified in support of SB 196 when the bill received a public hearing on February 18. The association’s testimony acknowledged the “damage that unregulated private equity investment has caused” healthcare facilities.

The Senate’s Wednesday vote sends SB 196 to the House of Representatives for consideration before the legislative session’s May 6 adjournment.