A bill in Pennsylvania that would increase oversight of nursing home acquisitions by private equity is now stalled in a Senate committee.

The bill, which passed the state House in June and applies to all health care acquisitions, was prompted by recent hospital closures and the bankruptcy of Genesis HealthCare, whose private equity ties drew the ire of Pennsylvania’s Governor Josh Shapiro recently.

Originally, the bill allowed the attorney general to block acquisitions deemed not in the public interest. It passed the lower chamber after supporters agreed to exclude nonprofits and raise the review threshold from $5 million to $10 million, calling the compromise necessary for approval in the divided General Assembly.

However, now the bill faces pushback from the nursing home industry, with Democratic lawmakers worrying that industry lobbying may weaken the legislation further, according to a story in Spotlight PA.

Zach Shamberg, president of the Pennsylvania Health Care Association (PHCA), argues that private equity owns only about 5% stake in nursing homes and often brings needed capital. Shamberg blamed nursing home struggles on low Medicaid reimbursements, staffing shortages, and a harsh regulatory and legal climate.

“We need to look at the system holistically, figure out and decide where we want to put resources, where we want to put investment, to ensure that … private equity doesn’t have to come in in the first place,” Shamberg said, warning that the bill could lead to longer review periods, greater costs, and disruption to transactions.

The bill includes a provision allowing the attorney general to pause transactions involving sale-leaseback agreements, where facility owners sell the real estate to a third party, often keeping the proceeds while the facility takes on debt or high rent. In some cases, the original owner retains a stake in the new property owner.

The bill also duplicates existing the state’s Department of Health (DOH) regulations, Shamberg said, which already require reviews of ownership changes in nursing homes. Under the current rules, the state must collect information on anyone acquiring a 5% stake in a nursing home, its property, or related debt. And since October 2023, the DOH has processed 112 such applications, rejecting only five, the story states.

Moreover, Centers for Medicare and Medicaid Services (CMS) began efforts last year to create more transparency around ownership structures and financing by seeking mandatory paperwork from facilities upon revalidation.

That said, the bill’s supporters argue that increased oversight is necessary to prevent financial exploitation and abrupt facility closures. 

Gov. Shapiro supports the bill, with officials from his office arguing that current rules cover care standards, while the bill adds oversight of health care facility transactions.

“The focus of this legislation, and the goal of this additional oversight, is to ensure that health care facilities in Pennsylvania have the resources to provide care and keep the promises they make when transactions occur – and to prevent nefarious owners and operators from continuing to squeeze facilities for profit, file for closure and bankruptcy, and abandon Pennsylvania communities,” Shapiro’s spokesperson, Manuel Bonder, said in an email to the news outlet. 

Research suggests private equity ownership can compromise care quality, particularly through complex financial arrangements.

Sen. Frank Farry (R., Bucks), who chairs the key committee, suggested that hospital and nursing home transactions may ultimately require separate legislation.