Pennsylvania House passes bill to expand AG oversight of health system transactions

HARRISBURG, Pa. (WHTM) — The Pennsylvania Attorney General could have a greater say over health system sales to private equity firms.

House Bill 1460 would prohibit for-profit and investor-owned health care entities from entering into sales or mergers “against public interest” without the AG’s approval. It passed in a 121-82 bipartisan vote on Tuesday.

“These corporate raiders aren’t thinking about Pennsylvania workers,” said Rep. Dan Frankel (D-Allegheny), who chairs the House Health Committee, at a press conference. “They’re not thinking about patients or communities who rely on these hospitals and nursing homes.”

The bill defines a transaction as “against public interest” if it results in:

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• A significant reduction in competition or a significant increase in costs for health care payers, purchasers, or consumers.
• An unfair method of competition in or unfairly affecting health care commerce, or an unfair or deceptive act or practice in or affecting health care commerce.
• A significant reduction in the quality of care available within the health care entity’s market territory.
• A significant reduction in access to or availability of health care services for payers, purchasers, or consumers.
• A significant reduction in access to care in a rural, low-income, or disadvantaged community.
• A health care leaseback agreement.

Currently, the AG can only file lawsuits to stop such transactions.

Rep. Lisa Borowski (D-Delaware) proposed the bill, also known as the Health System Protection Act, after the bankruptcy of Prospect Medical Holdings, Inc.

The California-based company shuttered its two PA hospitals earlier this year as part of a plan to realign its focus outside California. Its holdings included two Delaware County hospitals, Crozer-Chester Medical Center in Upland and Taylor Hospital in Ridley Park.

Last year, the AG sued the company, alleging in a lawsuit that Prospect Medical Holdings, Inc. mismanaged and neglected the Delaware County-based Crozer Health System, resulting in a shattered care network for hundreds of thousands of Pennsylvanians.

“We have all worked so hard on this to make sure that something positive comes out of the negative when it comes to Crozer,” Rep. Borowski said at a press conference.

Rep. Frankel urged the Senate to pick up the bill, warning that “corporate profit strategy tends to move a lot faster than the legislative process.”

Governor Josh Shapiro celebrated the bill and said he would sign it if it made it to his desk.

The Hospital and Healthsystem Association of Pennsylvania, which advocates for more than 230 healthcare entities in the state, said it could not support the bill.

Instead, it asked for more clarity on the approval process and for the state to align with federal guidelines governing hospital transactions, such as an increase in the percentage of ownership that triggers a change of control from 10% to 50%.

“It is imperative the legislation does not unintentionally result in an overcorrection to the identified problem by stifling the variety of current and future business arrangements between hospitals and their partners,” the organization said in a statement.