A new bill introduced by Connecticut’s legislature could upend nursing home financing, especially those facilities that opt to be financed by a real estate investment trust (REIT) or private equity group.

A surge of last-minute deals in the state is underway, as owners seek to lock in grandfathered Medicaid eligibility, according to a report from The Street.

The proposed legislation bars any new private equity or REIT ownership interests recorded on or after Oct. 1 from receiving Medicaid reimbursement. Legislators created the bill in response to Prospect Medical Holdings’ 2019 sale-leaseback of three acute-care hospitals to Medical Properties Trust – the operator was saddled with steep rent obligations that led the group into insolvency, the report found.

So far, the bill hasn’t made progress in the state Senate or House, however.

Legislators said nursing homes could meet the same fate, if operators choose to sell to national REITs in order to access capital funding and other resources. But, opponents of the bill warn the change reduces capital and would lead to closures.

Supporters say the legislation steers the industry toward more sustainable, mission-driven ownership while shielding Medicaid from being used to subsidize aggressive rent escalators. Nursing home operators are exploring alternatives to REIT funding, including nonprofit conversions, hospital partnerships and tax-exempt financing.

REITs that operate in the state, meanwhile, face complex choices. Some may hold assets, while others may opt to restructure ownership or lobby for carve-outs. Up to 65% of revenue could be lost without Medicaid, according to The Street.

Connecticut has 195 licensed skilled nursing facilities with a total of just under 27,000 beds and 82% occupancy. Roughly 200 beds change hands annually, via off-market transactions between regional operators and national REITs.

Currently, Connecticut has a growing senior population with policy shifts favoring home and community-based services, the report found.