To bring more scrutiny to private equity ownership of nursing homes, members of the legislature’s Aging Committee are considering a bill that would boost financial disclosure mandates and require owners to secure a performance bond or other form of security.
The issue of private equity investment in health care facilities has been a hot button topic in Connecticut recently. Other committees are also considering legislation that offers more oversight of private equity deals.
The nursing home bill would require facilities, beginning Feb. 15, 2027, to disclose a slew of records to the state’s Department of Social Services, including the names and business addresses of all entities with a beneficial ownership interest, the names of directors, trustees and managing and general partners, the number of shares owned by each partner, audited and certified financial statements (balance sheets, income statements, cash flow records), descriptions of any mortgage, loan or other financing used for acquisition or construction, records on the refinancing of debt, and purchasing agreements, among other documents.
The state’s social services commissioner would have the power to impose civil penalties of $1,000 per day on any nursing home that fails to provide the mandated information.
Facilities that have “an ownership entity with a beneficial interest” must, when applying for or renewing a license, demonstrate that the nursing home has obtained a performance bond or other form of security in an amount equal to 90 days of operating costs. The bond would have to remain in effect for the duration of the license term.
Also, owners would not be able to sell or transfer the property on which a nursing home is located during the first five years after acquisition without written permission from Connecticut’s public health commissioner. “Such approval shall be granted only upon showing that the sale will benefit resident care or improve operational stability,” the bill’s authors wrote.
The measure drew support from legislative leaders and municipal officials but sparked concerns from nursing home representatives.
“The inferior conditions and higher costs associated with private-equity-owned nursing homes overall are a clear result of putting profits before patients. Some cost-cutting tactics are more direct, such as reducing nurse staffing levels … others, such as schemes in which private equity firms buy nursing home property only to lease it to other nursing home companies (who are sometimes under the same ownership) at an inflated rate, more insidiously reduce a facility’s financial bandwidth to provide high-quality patient care,” Senate President Pro Tem Martin Looney, D-New Haven, and Senate Majority Leader Bob Duff, D-Norwalk, said in joint written testimony.
“In response to this growing trend that has life and death consequences, I demand more transparency from private equity groups who invest in nursing homes.”
Zachary van Luling, a town councilman in Rocky Hill, urged Aging Committee members to pass the proposal.
“S.B. 125 strengthens accountability around who owns nursing homes, how they finance those acquisitions and whether the business structure supports safe and stable care,” he said. “It gives Connecticut stronger tools to protect residents and families from preventable instability in a sector where instability carries direct human cost.”
Andrea Barton Reeves, the state’s social services commissioner, said the measure will strengthen her department’s ability to monitor how nursing homes use public money.
“While complicated ownership structures are legal and increasingly becoming the standard, the department has a duty to ensure as much of the Medicaid dollar is reaching resident care and supporting improved quality for its residents,” she wrote to lawmakers. “This bill would require nursing home ownership arrangements to be fully disclosed and will assist the department in monitoring these complex ownership structures and use of public funds.”
Mag Morelli, president of LeadingAge Connecticut and Rhode Island, which represents many nonprofit nursing homes, asked that reporting requirements be streamlined and expressed concern over the performance bond mandate.
“We understand the strong interest in regulating the role and influence of private equity firms in the health care field, but we are concerned about how we accomplish this,” she said. “Please be assured there is already a comprehensive change of ownership statute in place for nursing homes, as well as financial disclosure requirements for initial licensure.
“We continue to have concerns regarding the availability, feasibility and cost of a bond equal to 90 days of operating expenses and request further clarification.”
On the proposal to ban the sale or transfer of properties during the first five years post-acquisition, she added: “Rather than prohibiting sale of nursing home property … without DPH approval, we recommend requiring notice to DPH of such sales.”
Matthew Barrett, president and CEO of the Connecticut Association of Health Care Facilities, pointed to a nursing home oversight bill raised last year, calling it a “much more developed” version of this year’s proposal.
“We don’t know if it was intentional to draft this session’s SB 125 not reflecting [last year’s bill], and there is no requirement to do so, but our first recommendation would be to include those provisions as a starting point to this session’s private equity discussions,” he said.