Pennsylvania Gov. Josh Shapiro is urging lawmakers to advance a pair of bills that would increase state regulators’ oversight of healthcare transactions — Senate Bill 322 and House Bill 1460 — amid growing concerns that for-profit healthcare ownership has led to declines in healthcare quality and access across the state.
The governor made his pitch last week during a visit to Delaware County-based Crozer-Chester Medical Center. The facility has sat closed for two weeks, after a yearslong effort by Shapiro and county officials failed to prevent its owner, Prospect Medical Holdings, from abruptly shuttering the hospital and nearby Taylor Hospital.
The facilities are representative of the problem Shapiro sees in the the broader system — private equity investors and some for-profit owners draining hospitals of resources to get rich. Over the past five years, Pennsylvania has seen 26 hospital closures, Shapiro said.
“Private equity has no place in our health care system. We’ve seen what happens when corporate raiders like Prospect Medical Holdings prioritize profits over patients — families lose access to care, health care workers lose their jobs, and communities across the Commonwealth suffer,” Shapiro said Thursday at Crozer-Chester.
The legislation would grant the state attorney general increased power to scrutinize healthcare deals, require corporations to submit more financial disclosures prior to completing hospital mergers and acquisitions, and bar sale-leaseback transactions by private equity firms.
It’s not the first time Pennsylvania lawmakers have set their sights on reining in private equity and corporate interests in healthcare. However, similar bills have struggled to gain traction in both chambers. Last year, a nearly identical bill cleared the House before ultimately dying in the Senate, after Republican lawmakers declined to bring the bill to a vote.
However, the governor has grown increasingly intolerant of lawmakers’ inability to pass healthcare reform legislation.
In February, Shapiro tasked lawmakers with passing legislation to crack down on corporate interests and private equity in healthcare delivery during his his budget address.
“I’m done letting private equity treat Pennsylvania hospitals like a piggy bank they can empty out and smash on the floor,” Shapiro said. “Pass the bills, put them on my desk, and stop letting private equity take advantage of our health care system.”
Crozer’s closure has further amplified pressure on lawmakers to pass reforms.
Prospect Medical Holdings purchased Crozer, a then four-hospital health system, for $300 million in 2016, pledging to keep the facilities open for 10 years. However, nine years later, all of the facilities had shuttered, with the final two, Crozer-Chester and Taylor, closing during Prospect’s bankruptcy proceedings this spring.
The closures have cost 2,600 workers their jobs and prompted care disruptions for Delaware County’s more than 570,000 residents, state and local officials said. In at least one instance, a patient has died following the closure of Crozer’s trauma unit, after a typical five-minute ambulance ride to Crozer for a gunshot victim turned into a 30-minute trip to another facility.
“If Crozer were open, we could have saved him,” said Max Cooper, an emergency room physician who previously worked for Crozer, during a press conference Thursday.
It’s the exact scenario Judge Stacey Jernigan worried about when she approved Prospect’s request to close Crozer Health over pushback from nurses last month, who warned her of the possible harms to patient care.
“I worry about people getting in a car wreck or getting shot or burned, a mama going into labor. I just hate the widespread consequences here,” Jernigan said during a hearing to approve the closure. Still, Jernigan determined she had no other option because Prospect was out of cash.
The governor’s office, which footed Prospect more than $15.5 million over the last seven months in an attempt to prevent Crozer’s closure, blames Prospect and its former private equity owner Leonard Green & Partners for Crozer’s demise.
A U.S. Senate investigation published in January accused the private equity firm of shackling Prospect with high levels of debt while extracting millions in dividends for investors. Shapiro said Prospect deployed similar maneuvers in its management of Crozer by selling the hospitals’ real estate and saddling the health system with over $200 million in mortgage debt.
“Private equity raided Crozer, lined their pockets, and gutted the system – leaving Chester residents and those living in the region without care, putting their lives at risk,” Shapiro said.
A spokesperson for Prospect disputes the governor’s narrative.
“Contrary to the Governor’s assertion, at all times, Prospect Medical negotiated and collaborated in good faith with the Commonwealth and other parties to find a viable path that would enable Crozer Health to remain open,” the spokesperson said. “This included arranging for Crozer, and all of its assets, to be transferred to any party supported by the Commonwealth for no cash payment free and clear of any claims, as well as keeping Crozer open for as long as possible post-bankruptcy to allow for a local solution to be achieved at the expense of its third party creditors.”
Still, Crozer’s closure has spurred public outrage about private equity owners and corporate management of hospitals, said Democratic State Sen. Tim Kearney, who has sponsored hospital reform bills since 2022.
Crozer Health’s closure provides a “story people can understand,” and helps underscore the importance of the legislation, Kearney said.
There’s also currently more political appetite for reform, said Kearney. While “complex dynamics” within the majority caucus and a lack of support from the state’s hospital lobby caused legislation to stall in the past, this year the senator said the hospital lobby has engaged in “active discussions” about reform. That’s a win, given hospital associations typically see any policies that add more layers of regulatory review for M&A as unnecessary red tape.
As for getting Kearney’s Republican colleagues to join the cause, the senator said it’s about communicating the stakes.
“The hospitals that are most ripe for picking for the playbook of private equity are rural hospitals,” Kearney said. In Delaware County, if a hospital closes, travel time for a patient could go up by half an hour or 45 minutes. In more rural districts, a patient might have to travel two hours for service if a facility closes, he said.
“Those hospitals are almost all represented by folks on the other side of the aisle,” Kearney said.
Should the legislation pass, Pennsylvania will join a growing number of states tackling private equity and corporate interests in healthcare. Earlier this month, Indiana passed a law granting its attorney general increased authority to review healthcare transactions. In January, Massachusetts, galvanized by Steward Health Care’s bankruptcy, passed a law to strengthen oversight of healthcare deals.
