Connecticut lawmakers are pushing for a groundbreaking bill that could reshape the state’s nursing home landscape by banning new investments from private equity firms and real estate investment trusts (REITs). Senate Bill 1332 (SB 1332) aims to prevent these entities from acquiring or increasing ownership in nursing homes, a move that has sparked both concern and debate within the industry.
This proposed legislation comes amidst growing national scrutiny of private equity’s role in healthcare, particularly in the long-term care sector. While other states have focused on increasing oversight, Connecticut’s bill stands out for its outright prohibition of new investments.
“We are concerned that SB 1332 holds an inherent assumption that all private investment in nursing home operations or real estate is bad, when many providers point out that private capital investments have served to provide considerable stability in the system and can often provide more favorable lending terms to nursing homes,” said Matthew Barrett, president and CEO of the Connecticut Association of Health Care Facilities/Connecticut Center For Assisted Living, in an interview with McKnight’s Long-Term Care News.
The federal government estimates that private equity investors had an ownership role in just 5% of nursing homes in 2022. This relatively small percentage belies the significant impact these investments can have. Critics argue that private equity’s focus on short-term profits can lead to cost-cutting measures that compromise resident care.
The Private Equity Stakeholder Project (PESP) reported that the number of US healthcare deals involving private equity fell from 1,135 in 2023 to 1,049 in 2024, a 7.6% decrease. Despite this, PESP continues to advocate for regulation, citing past findings that link private equity to higher costs and potentially worsened patient outcomes.
“We still think it’s important to regulate private equity in nursing homes and hospitals, even if deal activity is temporarily lower than it has been in the past,” said Matt Parr, PESP Communications Director. “Legislation is ultimately forward looking, and states need to safeguard against future bad behavior from private equity investors.”
The proposed ban raises concerns about the potential impact on struggling nursing homes. Without the option of private equity investment, some facilities may face closure. Matthew Barrett also expressed that the bill requires more clarity when defining the type of private equity it intends to regulate.
The backdrop to this legislative push includes recent high-profile bankruptcies involving private equity-backed healthcare companies. Prospect Medical Holdings, which owns hospitals in multiple states, filed for Chapter 11 bankruptcy last month, highlighting the financial pressures facing these entities.
“Three hospitals bought by Prospect Medical Holdings saw an erosion of care where financial support to continue functioning was decreased and resulted in negative impacts on quality of care,” Joe O’Leary, press aide for Senator Saud Anwar, told McKnight’s.
As Connecticut lawmakers debate the merits of SB 1332, the nursing home industry is closely watching, anticipating the potential ripple effects of this groundbreaking legislation. The outcome could set a precedent for other states grappling with the role of private equity in long-term care.