Massachusetts passes healthcare oversight legislation in response to Steward Health Care crisis

In the eleventh hour of 2024, the Massachusetts legislature passed legislation aimed at increasing healthcare oversight and regulating private equity.[1] On January 8, 2025, Governor Maura Healey signed the bill into law.[2]

As highlighted in the legislature’s press release and bill summary, key components of House Bill 5159, “An Act Enhancing the Market Review Process” include:

• Increased reporting authority of the Center for Health Analysis and Information (CHIA) and scope of the oversight of the Health Policy Commission (HPC) by adding reporting requirements for hospitals and registered provider organizations (RPOs), including significant equity investors. Audited financial statement reporting is mandated for out-of-state operators of a hospital or RPO parent company, private equity investors, and management services organizations (MSOs).
• Enhanced penalties for not complying with CHIA data reporting requirements, including increasing financial penalties and removing penalty caps. Requiring CHIA to notify HPC and the Department of Public Health (DPH) of failure to report, which will be considered during a review by the HPC in the Cost and Market Impact Review (CMIR) process and by DPH when considering a Determination of Need (DON) application or when reviewing licensure and suitability.
• A requirement for creditors, vendors, and hospitals to notify the state 60 days before any possible repossession of medical or surgical equipment, and makes any incident like this a reportable event to the state, similar to reporting of medical and drug errors.
• Expanded authority for the Attorney General (AG) to monitor healthcare trends and enforce the False Claims Act by allowing the office to seek information from significant equity investors, real estate investment trusts (REITs), and MSOs, and to hold entities with an ownership or controlling interest in a provider organization liable if they are aware of false claims submitted to the government.
• Prohibitions on the future leasing of an acute hospital’s main campus from REITs, via the hospital licensing process. The bill requires increased disclosure of other lease arrangements as part of the licensure process with DPH.
• Requirement that expansions in capacity, transactions involving equity investor ownership, significant asset and real estate transfers, and for-profit conversions be added to the material change notice process. Further, the HPC can require any provider, provider organization, significant equity investor, or other party involved in a given transaction to submit documents and information in connection with a notice of material change or a cost and market impact review.
• Ability of the HPC, for a period of 5 year following the completion of a material change, to require a provider or provider organization submit data and information necessary for the commission to assess the post-transaction impacts of the material change.
• Requirement for DPH to hold a public hearing prior to hospital and essential service closures, and authorizing DPH to seek an impact analysis of a hospital closure of any essential health service from HPC.

Overall, H.5159 increases transparency and oversight of healthcare providers that participate in the Commonwealth’s health system – and importantly – their investors. The new law also expands the amount of and types of information these entities may need to provide to regulators both routinely and upon request. It also may make it easier for the AG to pursue claims against private equity investors in False Claims Act (i.e. Medicare/Medicaid fraud) lawsuits.

Importantly, it makes Massachusetts the first state to effectively prohibit the future sale-leasebacks of certain types of hospital real estate.

Massachusetts first state to place prohibitions on the sale-leasebacks of acute care hospitals

The prohibition on sale-leasebacks of acute care hospital real estate[3] is the first of its kind and one of the few instances in which state legislators have moved to prohibit a harmful private equity business practice versus simply to increase transparency around it.

It is important to note that this prohibition is forward looking, so hospitals that have already undergone sale-leasebacks are excluded. It also only applies to acute care hospitals’ main campuses, and so other hospital types and facilities, such as medical office buildings (MOBs) and rehabilitation and behavioral health hospitals that are also commonly sold to REITs in sale-leaseback transactions, are excluded from the prohibition. These other types of sale-leasebacks will continue to be permitted, but under the new legislation, must be disclosed to the state ahead of the transaction as a material change.

Will this bill prevent another Steward Crisis?

H.5159 is an important step forward to better protect patients and communities from private equity’s harmful impacts. However, the new law will likely be insufficient to fully prevent another Steward-like crisis from occurring. It does not go far enough to prohibit enough of the extractive and harmful practices used by Steward and its private equity investors, nor does it guarantee sufficient enforcement of the updated disclosure and transparency provisions.

Much of Steward’s harms stemmed from its extractive financial strategies it used under private equity ownership, including sale-leasebacks of hospital real estate that left its Massachusetts hospitals on the hook for expensive, long term lease liabilities, and debt-funded dividends, which lined the pockets of Cerberus Capital Management and others at the expense of the financial health of the system.[4]

In Cerberus Capital’s original leveraged buyout in 2010, which converted the nonprofit Caritas Christi system to for-profit Steward Health Care, the transaction and involved parties were heavily scrutinized, and the system was monitored for five years post-transaction. During the monitoring period, Steward experienced operating losses, engaged in sale-leasebacks of a rehabilitation hospital and 13 medical office buildings, closed the pediatric ward at one its hospitals, and announced plans to close an entire hospital.[5]

After the monitoring period ended, Steward and Cerberus executed the debt-funded dividends and sale-leaseback of most of the Massachusetts hospitals’ real estate that would contribute to long term financial problems at the health system.[6]

The new bill has a five-year time period to monitor providers or provider organizations following a material change, making it possible for regulators to solicit data and information from any provider or provider organization involved in order to assess the post-transaction impacts of a material change. But as we have already seen with Steward and its buyout of Caritas Christi, having information and monitoring health systems closely is not enough.

The new law adds a few hoops—an impact analysis and requirement for a public hearing—for hospitals to jump through if they want to shut down an essential service or close a hospital. But these added regulations will be insufficient to stop a hospital or health system from closing essential services or entire hospitals.

This bill does not limit the debt that can be used to finance transactions, including leveraged buyouts and dividend recapitalizations. An earlier version of the house bill gave the HPC the authority to set a maximum debt-to-EBITDA ratio (a measurement of a company’s debt level relative to its earnings) for provider organizations with private equity investors,[7] but this did not make the final bill that Governor Healey signed into law.

The new financial reporting requirements and penalties for lack of compliance are important, but not a guarantee that providers will comply. Massachusetts already has financial reporting requirements for hospital systems, including Steward, and yet for years Steward was out of compliance. When Steward owed over $300,000 to Massachusetts in fines for not submitting required information to CHIA, it sued the state arguing it didn’t need to pay.[8] While the law might make future lawsuits from health systems that don’t want to comply with reporting requirements more challenging, there is another challenge at hand: enforcement.

A recent audit found that CHIA failed to adequately monitor acute care hospitals financial conditions in Massachusetts over a two year period (July 1, 2021 to June 30, 2023), including that “CHIA did not complete any health system profiles for any of the eight hospitals owned by Dallas-based Steward Health Care during the audit period.”[9]

Massachusetts must devote substantial resources to enforce the current and new financial reporting requirements; otherwise, its new law will not be as effective as it could be.

H.5159’s ban on future sale-leasebacks of acute care hospitals is the only place in this bill that actually regulates a specific harmful business practice that Steward implemented while under private equity ownership. And even this component of the bill is very narrow in scope.

The eleventh hour legislation comes outside the formal 2024 legislative session[10] and on the heels of multiple critical articles about Massachusetts’ regulators and policymakers’ failure to address the Steward crisis – both leading up to and after its bankruptcy. [11]

One exposé published by the Boston Globe on December 14, 2025 stated,

“Massachusetts’s elected officials and state regulators, time and again, failed to discipline, slow, or check Steward Health Care’s aggressive expansion and pursuit of profit. All of which came at the expense of patient care… state officials spanning multiple administrations took a deferential approach toward the company, softening critical reports and overlooking clear warning signs about Steward’s financial health.”[12]

Despite the passage of separate legislation in both the House and Senate in the summer of 2024, the formal Massachusetts legislative session, which one local news outlet described as “unproductive and contentious,”^[13] ended on July 31, 2024, without a reconciled healthcare bill being signed into law by Governor Healey.^[14]

Perhaps the legislature would have passed an oversight bill with or without the mounting media criticism as 2024 came to a close. Regardless of why or how, Massachusetts legislators were able to come together in the final days of the 2024 legislative session and get a bill across the finish line.

Ultimately, this bill is a victory for more robust regulation of not just private equity-owned healthcare facilities and providers, but the for-profit health industry more generally.

However, legislation can and should go further. While transparency and increased disclosures are critical, we need state and federal legislation that will go above and beyond transparency and disclosure measures to actually limit or ban the extractive business practices that should have no place in healthcare. This includes limiting or banning sale-leasebacks for all hospitals, prohibiting hospital investors from paying themselves debt-funded dividends from health systems (also called dividend recapitalizations), and limiting the amount of debt that can be used to finance hospital and other healthcare facility acquisitions.

Importantly, acute care hospital operators should be required to offer a minimum package of services, including emergency care and labor and delivery services, to maintain or be granted a license to operate. Otherwise, we will continue to see hospitals cut important service lines like labor and delivery and emergency department care, or even close entire facilities, in the name of profit.

Under current laws, and until our society shifts to treat healthcare as a public good and a human right, healthcare profiteers will continue to dictate access to and quality of healthcare.

For a more detailed list of policy recommendations from PESP to better regulate private equity in healthcare, see our December 2024 report, “Recent policy and regulatory initiatives to address private equity’s negative impacts in healthcare.”

For a more detailed explanation of how Steward’s bankruptcy came to be, see PESP’s June 2024 report, “The Pillaging of Steward Health Care: How a private equity firm and hospital landlord contributed to Steward’s bankruptcy.”

Resources

[1] Senate Press Room. “Legislature Passes Major Health Oversight Legislation, Regulates Private Equity.” malegislature.gov, December 30, 2024. https://malegislature.gov/pressroom/detail?pressreleaseid=164.

[2] mass.gov. “Governor Healey Signs Laws Lowering Health Care Costs and Strengthening Oversight,” January 8, 2025. https://www.mass.gov/news/governor-healey-signs-laws-lowering-health-care-costs-and-strengthening-oversight.

[3] The bill language reads, “No original licenses shall be granted, or renewed, to establish or maintain an acute-care hospital, as defined in section 25B, if the main campus of the acute-care hospital is leased from a health care real estate investment trust…” See lines 1021 through 1031 of H.5159 for more information.

[4] Sharife, Khadija. “How Private Equity and an Ambitious Landlord Put Steward Health Care on Life Support.” Organised Crime and Corruption Reporting Project, October 9, 2024. https://www.occrp.org/en/investigation/how-private-equity-and-an-ambitious-landlord-put-steward-healthcare-on-life-support.

[5] See pg. 9 of Bugbee, Mary. “The Pillaging of Steward Health Care: How a Private Equity Firm and Hospital Landlord Contributed to Steward’s Bankruptcy.” Private Equity Stakeholder Project, June 26, 2024. https://pestakeholder.org/wp-content/uploads/2024/07/PESP_report_Steward-Bankruptcy_2024.pdf.

[6] See pg. 10 of Bugbee, Mary. “The Pillaging of Steward Health Care: How a Private Equity Firm and Hospital Landlord Contributed to Steward’s Bankruptcy.” Private Equity Stakeholder Project, June 26, 2024. https://pestakeholder.org/wp-content/uploads/2024/07/PESP_report_Steward-Bankruptcy_2024.pdf.

[7] malegislature.gov. “Amendment 1 H.4653,” July 18, 2024. https://malegislature.gov/Bills/GetAmendmentContent/193/H4653/1/Senate/Content.

[8] “Governor Healey Demands Financial Transparency and Patient Safety from Steward Health Care | Mass.Gov,” February 20, 2024. https://www.mass.gov/news/governor-healey-demands-financial-transparency-and-patient-safety-from-steward-health-care; See pg. 12 of Bugbee, Mary. “The Pillaging of Steward Health Care: How a Private Equity Firm and Hospital Landlord Contributed to Steward’s Bankruptcy.” Private Equity Stakeholder Project, June 26, 2024. https://pestakeholder.org/wp-content/uploads/2024/07/PESP_report_Steward-Bankruptcy_2024.pdf.

[9] Condon, Alan. “Massachusetts Hospital Audit Finds ‘startling’ Lack of Oversight: 8 Things to Know.” Becker’s Hospital Review, January 6, 2025. https://www.beckershospitalreview.com/finance/massachusetts-hospital-audit-finds-startling-lack-of-oversight-7-things-to-know.html.

[10] massbar.org. “The Legislative Process.” Accessed January 15, 2025. https://www.massbar.org/advocacy/legislative-activities/the-legislative-process.

[11] See Weisman, Robert. “Post-Steward, Lawmakers Struggle to Curb Private Equity in Health Care.” The Boston Globe, December 16, 2024. https://www.bostonglobe.com/2024/12/16/business/steward-private-equity-health-care-kinderhook/; Taylor, Sri. “Crackdown on Private Equity in Health Care Flops in State Houses.” BNN Bloomberg, December 22, 2024, sec. business/company-news. https://www.bnnbloomberg.ca/business/company-news/2024/12/22/crackdown-on-private-equity-in-health-care-flops-in-state-houses/; Serres, Chris, Liz Kowalczyk, Elizabeth Koh, and Brendan McCarthy. “Steward Health Care Regulation in Mass. What Happened?” BostonGlobe.Com, December 14, 2024. https://apps.bostonglobe.com/metro/investigations/spotlight/2024/09/steward-hospitals/regulators/.

[12] Serres, Chris, Liz Kowalczyk, Elizabeth Koh, and Brendan McCarthy. “Steward Health Care Regulation in Mass. What Happened?” BostonGlobe.Com, December 14, 2024. https://apps.bostonglobe.com/metro/investigations/spotlight/2024/09/steward-hospitals/regulators/.

[13] Wuthmann, Walter. “Inside the Unproductive and Contentious End of the Mass. State House’s Legislative Session,” August 5, 2024. https://www.wbur.org/news/2024/08/05/massachusetts-state-house-legislative-session-last-day-newsletter.

[14] Massachusetts Health & Hospital Association. “Healthcare Bills Hit a Pause,” August 5, 2024. https://www.mhalink.org/mondayreport/healthcare-bills-hit-a-pause/.