By Stacey Pogue and Nadia Stovicek
Steward Health Care, the nation’s largest private, for-profit hospital chain, filed for bankruptcy in May 2024, resulting in one of the largest health care provider bankruptcies in decades. This action has left patients and employees of Steward’s 31 hospitals in communities across eight states worried about hospital closures and disruptions to care. Steward’s financial distress stems in part from destabilizing private-equity tactics that stripped hospitals of assets and loaded them with debt. Steward’s financial collapse prompted recent hearings in both the Massachusetts Legislature and US Senate. A key theme across both hearings was the need for more transparency of entities that own health care providers.
As explained in a previous Health Affairs Forefront article, the nature of ownership or control of doctors’ practices, hospitals, and other providers can have profound effects on price, use, quality, and access to care, yet it can be hard or impossible to know which entities own or control a health care provider. A web of complex corporate structures among interrelated entities can obscure ownership or controlling interests. Existing Centers for Medicare and Medicaid Services (CMS) data sources on hospital and nursing home ownership and control have gaps, although recent CMS efforts will increase information on nursing homes. In addition, there is no complete, publicly available data source with ownership information for physician practices.
The lack of good data on ownership and control limits the ability of policy makers to target policies aimed at lowering prices, encouraging competition, and improving quality. It also hinders researchers’ ability to study the impacts of various types of ownership and controlling interests on health care markets. For example, although Optum, owned by UnitedHealth Group, now employs or affiliates with one in ten US physicians, researchers have limited ability to identify Optum-linked physicians in relevant databases, understand the degree of Optum’s control, or study the impact of that control. Most of Optum’s physicians are not employees but are linked by an affiliation or contract, and key CMS data do not capture information on such relationships. Data on private-equity ownership and control is also limited. To study its effects, researchers must conduct tedious manual research, supplemented by proprietary databases that are both expensive and incomplete. This research has produced accumulating evidence showing private-equity investment in health care is rapidly increasing, frequently leads to higher prices, and can compromise quality.
While transparency alone is insufficient to mitigate price increases and other harms from growing consolidation in health care markets, it forms a crucial foundation for further action. This article reviews recent ownership transparency efforts at the federal level and in two example states: Indiana and Massachusetts. It further explores how Massachusetts is applying lessons from Steward to strengthen its long-standing provider transparency programs in light of increasingly obscure ownership structures and controlling interests.
Recent Efforts In Congress
House Of Representatives
At the end of last year, the House of Representatives passed the bipartisan Lower Costs, More Transparency Act that, among many other provisions, requires Medicare Advantage plans to periodically report on health care provider practices they own or with which they share a parent company to the Department of Health and Human Services. This provision increases ownership transparency with respect to one type of vertical integration, when private insurers offering Medicare Advantage or Medicare drug coverage buy up physician practices, pharmacies, or other providers. More broadly applicable provider ownership transparency provisions with bipartisan backing were considered, but ultimately not included in the House-passed Lower Costs, More Transparency Act.
Senate
In recent months, concerns about patient safety at private-equity–backed medical facilities prompted Senators from both parties to inquire about provider governance, staffing, and transactions. Senators Charles Grassley (R-IA) and Sheldon Whitehouse (D-RI) are seeking information from private-equity–backed hospitals, and Senator Gary Peters (D-MI) is seeking information from private-equity–backed emergency departments.
On April 3, 2024, a subcommittee of the Senate Health, Education, Labor, and Pensions Committee held a field hearing on the impact of private equity in health care with a focus on Steward. At the hearing, Subcommittee Chairman Senator Ed Markey (D-MA) released a discussion draft of his Health over Wealth Act, which, among other provisions, would improve transparency of ownership and control of private-equity–backed or corporate-owned hospitals, physician practices, hospices, behavioral health providers, and other provider types.
State Efforts On Ownership Transparency
Given the degree of deadlock in Congress, states may be better positioned to advance health care ownership transparency policies. States generally require facilities, such as hospitals and nursing homes, to file some ownership-related information as part of state licensure. Broader provider ownership data collection efforts in states, where they exist, have taken two different forms: annual or periodic filings, and filings triggered by transactions or material changes, such as proposed mergers and acquisitions. States differ in what information they make public. Here, we focus on Indiana and Massachusetts, two states with differing political contexts that have considered or established both types of ownership data collection. Indiana considered policies in its 2024 legislative session, while Massachusetts reports to have the longest-standing systematic collection of provider relationship information, including ownership data.
Indiana
- Annual filing: The Indiana legislature considered a bill this year that would have required a range of health care entities, including hospitals, physician groups, health insurance companies, third-party administrators, and pharmacy benefit managers, to annually disclose entities that have an ownership or controlling stake, including private-equity firms. Notably, the bill would have required ownership information be publicly posted on the state Department of Health website. The bill passed the House and died in the Senate.
- At merger: Indiana’s Legislature passed a bill this year that requires health care entities including medical providers, insurers, pharmacy benefit managers, and private-equity partnerships to give 90-days’ notice to the state’s attorney general before mergers or acquisitions with assets totaling more than $10 million. The bill explicitly makes this information confidential. The bill stems from a recommendation of Indiana’s Health Care Cost Oversight Task Force.
Massachusetts
- Annual filing: In 2012, the Massachusetts legislature established the Massachusetts Registration of Provider Organizations (MA-RPO) program, the first-of-its-kind state program to systematically collect information on corporate, contracting, and clinical relationships of provider organizations that meet certain revenue and patient thresholds. The MA-RPO program requires the uppermost entity in a provider’s ownership hierarchy that has a primary purpose of health care delivery or management to annually file information with Massachusetts’ Health Policy Commission (HPC) and the Center for Health Information and Analysis.
These data provide a baseline map of ownership structures, interrelated entities, and system-level financial performance that informs the agency’s market oversight and analysis functions. The HPC publicly posts data sets that identify a provider’s corporate parent entity, levels of ownership or control, corporate affiliations, and financial performance, as well as corporate organizational charts. The data set includes provider identifier fields, allowing the data to be readily linked to other sources for analysis. The MA-RPO program aims to publicly provide information sufficient to allow policy makers, researchers, and market participants to understand and improve the state’s health care system.
- At material change: Most provider organizations that must register with the MA-RPO program also must file a notice of material change 60 days before certain changes to operations or governance. The HPC publicly posts the filings. Providers must report proposed transactions that increase patient revenues by $10 million or more a year, such as the proposed acquisition of Steward’s physician network by Optum. Examples of other reportable changes include acquisition of or by a hospital or insurer and mergers that result in a near-majority market share.
Even States With Robust Ownership Transparency Efforts May Need Updates
With nine Steward-owned hospitals in the state, Steward’s financial crisis provided a stress test for Massachusetts’ long-standing programs to monitor its health care system, and a few cracks have emerged. Massachusetts’ provider registry and notice of material change programs were designed with vertical and horizontal mergers between health care entities in mind. They are not well equipped to respond to the recent, rapid increase of private-equity acquisitions and other types of financial-sector control of health care providers. For example, Steward’s sale of its hospitals’ property to a real estate investment trust in 2016 and subsequent leaseback did not require a notice of material change under current rules, which today, only capture transactions between two health care providers or a provider and health insurer.
An HPC analysis shows that private-equity transactions have greatly accelerated in the decade since the MA-RPO program was established. To conduct its analysis, the agency had to supplement its own provider ownership and transaction data with information from proprietary databases that, the HPC acknowledges, may lack complete data. As Erin Fuse Brown, a professor at Brown University, summed up in testimony at a recent Massachusetts legislative hearing, “even the state officials and researchers with the greatest access to data often find themselves using manual Google searches and expensive proprietary databases to try to get a sense of the degree of private-equity penetration in the state.”
Lessons From Massachusetts
Massachusetts is considering fixes to the blind spots Steward exposed, ranging from increased transparency to enhanced oversight. The Massachusetts House of Representatives recently passed a bill that incorporates HPC recommendations to bolster the state’s provider transparency systems.
Transparency-related bill provisions would require large providers to disclose additional information, both at annual registration and prior to a material change. Providers would have to disclose controlling interests, financial information, and actions that are obscured today, including private-equity and other financial investment, the sale and subsequent leaseback of a provider’s property, and affiliations with management services organizations. The bill would also substantially increase penalties for entities that fail to submit required data from $1,000 to $25,000 per week. Steward has refused to file its parent-company-level financial data with Massachusetts since 2017 and sued the state.
Looking Forward
Transparency of health care-entity ownership is a crucial foundation, whether a patient wants to know if their doctor’s office is owned by a corporate entity or a policy maker wants to encourage quality and competition in increasingly consolidated health care markets. Congressional observers note that bipartisan health care transparency-related policies could be up for negotiation in any year-end legislative package. If included, broadly applicable ownership transparency provisions could yield valuable information and enable targeted policy responses to consolidation-driven rising health care prices. Yet, states need not wait. States can increase ownership transparency so they can better understand their own health care markets. Lessons from Massachusetts may be instructive to future efforts, and accelerating private-equity investment in health care and increasing complexity in provider ownership interests can serve as a catalyst for reforms.
Author’s Note
Arnold Ventures provided support for the authors’ time drafting this article.
Stacey Pogue, Nadia Stovicek, “State and Federal Efforts to Improve Ownership Transparency,” Health Affairs Forefront, July 31st, 2024, https://www.healthaffairs.org/content/forefront/state-and-federal-efforts-improve-ownership-transparency. Copyright © 2024 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.
