On Wednesday, Massachusetts Governor Maura Healey signed new legislation expanding regulatory oversight of healthcare private equity investments.
“We’ve seen bad actors exploit vulnerable hospitals and communities,” said Healey at the bill’s signing. “We need to prevent that from happening again.”
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The law broadens Massachusetts’ Health Policy Commission (HPC) material change notice requirements. Investors must now file for a range of transactions, including capacity expansions, changes in ownership or control, and sale-leasebacks, and the mandatory review threshold has been lowered. Previously, a “near majority” market share triggered additional review. Now, a “dominant” market share is enough.
New deals in the state can also be subject to an HPC Cost and Market Impact Review (CMIR) process.
As part of CMIR, the HPC can demand detailed capital structure information, ownership documentation, and five years of post-closing operational data. While the commission cannot block deals outright, its findings are public and may be referred to the attorney general.
The new law also mandates that “significant equity investors”—a definition that includes any private equity firm with a financial interest in a provider, provider organization, or MSO—participate in legislative hearings where they can be required to testify under oath regarding healthcare costs, staffing levels, and financial stability.
Firms must also disclose detailed compensation data, including base salaries, incentives, options, and deferred compensation for portfolio company executives.
House Bill 5159 caught some by surprise.
The legislation had stalled in the state assembly’s summer session before being brought back to life in a last-minute New Year’s Eve revival.
The Massachusetts bill was one of seven state measures proposed in 2024. Private funds industry groups successfully stalled six of those measures, failing to see off only an Indiana bill granting the state attorney general a review right for healthcare mergers.
What helped push Massachusetts over the line—and what initially spurred the bill in the first place—was public backlash over the fate of Steward Health Care.
Cerberus Capital Management bought the struggling system in 2010 and, with a series of add-ons, built it into the nation’s largest private for-profit health system.
In 2014, Cerberus was criticized for closing a Steward hospital despite an earlier pledge not to do so for at least 10 years post-close. State officials also accuse the firm of refusing to report health system financial information as required by law, which they feel masked Steward’s eventual descent into insolvency.
Cerberus began its exit in 2020 by selling a majority stake in the system to its physicians, financed with a seller’s note. After shuttering five more hospitals, Steward filed for bankruptcy in early 2024 amid “reports of mismanagement, unpaid vendors, and legally questionable practices,” as told by Governor Healey.
Concerns over lapses in patient care had prompted daily monitoring visits from the state Department of Public Health, and Steward nurses testified to unsavory conditions, such as the storage of dead newborns in cardboard boxes when Steward failed to pay the vendor supplying proper bereavement equipment.
With the Chapter 11 filing four years after the firm’s majority exit, Cerberus maintains its investment “rescued and restored critical community hospitals” and says it had no knowledge of Steward’s performance after selling its controlling stake.
Even so, Cerberus has become a lightning rod for the debacle.
The most restrictive part of Massachusett’s new law is a prohibition on Department of Public Health licensure for new acute-care hospitals whose main campus is leased from a REIT — a response to Cerberus’ $1.25 billion sale-leaseback with Medical Properties Trust, which was blamed for saddling Steward with exorbitant rents that hastened its collapse.