Senate President Pro Tem Martin Looney is calling for the restriction of private equity in the healthcare, nursing, housing, childcare and education industries saying its role in essential public services is “dangerous and toxic as a matter of public policy.”
The Senate president and Senate Majority Leader Bob Duff sent letters Feb. 5 to the chairs of the Housing, Education, Children’s, Public Health and Aging Committee asking that “on behalf of the Senate Democratic Caucus, that they request that the committees “raise a concept” restricting private equity in their particular industry.
“To a private equity company, a widget coming off a conveyor belt in a factory that could just be closed down and parts sold off and workers laid off is all the same as a frail and frightened cancer patient or someone with a dangerous cardiac condition,” Looney said. “It is all the same to them.”
Lawmakers failed to pass legislation last session restricting private equity’s role in Connecticut hospitals.
The alleged impact of private equity in health care has been seen in Connecticut as Prospect Medical Holdings, a private equity company, filed for Chapter 11 bankruptcy last year.
“What has happened with Prospect is a cautionary example of what happens when you have someone motivated exclusively by maximizing profits and sucking the resources out of an entity in order to maximize profits and the collateral damage as a result of that is really staggering and sobering,” Looney said.
Prospect owned Manchester Memorial, Rockville General and Waterbury hospitals. The hospitals struggled over the years under the company with inadequate staffing and antiquated equipment. Health giant Hartford HealthCare has since purchased Manchester Memorial and Rockville General. The Office of Health Strategy approved UConn’s Health emergency certificate of need to purchase Waterbury Hospital on Jan. 30.
Prospect Medical Holdings did not return an email for comment for this story.
Looney said the role of private equity affected patient care in the state with the loss of experienced nursing staff, a decline of treating physicians and the lack of updating and modernizing equipment.
In November 2024, the state Department of Public Health in a consent order fined Waterbury Hospital $60,000 for violations of state law and called on the hospital to develop, review and revise policies and procedures related to staffing levels, abuse prevention and other policies.
David Bednarz, spokesman for Gov. Ned Lamont, declined to comment Wednesday on the proposal from the Senate Democratic Caucus.
Attorney General William Tong said in an email that he has not seen any legislation and could not comment on specifics.
“That being said, from Prospect Medical to Concierge Apartments, private equity is hurting Connecticut families, workers and communities while enriching out-of-state vulture capitalists,” he said. “I strongly support meaningful change now.”
But Republican Senate leader Stephen Harding of Brookfield had reservations about the Senate Democrats’ concept.
“I don’t know if it is necessarily addressing the root of the problem and I fear by doing this you actually will create less options and opportunities for individuals whether it be in health care, childcare, etc,” he said. “I understand there have been private equity companies that have not worked in the best interest of the people they serve and that is unacceptable and they should be held to the highest account of the law. But I don’t know that just banning any private equity outright is necessarily the answer.”
House Republican leader Vincent Candelora of North Branford said it is important to regulate private equity activity rather than ban it altogether.
“I do think private equity leads to a lot of problems we have seen with bad actors in housing and bad actors in health care,” he said. “At the same time in trying to restrict those bad actors we need to make sure that we get good investments in Connecticut. It is a difficult balancing act that we need to try to tackle.”
The Private Equity Stakeholder Project (PESP), a nonprofit watchdog organization focused on the growing private equity and broader private funds industry, said on its website that “private equity has grown substantially in recent years and now controls over $12 trillion in assets …”
Referring to further statistics from the Private Equity Stakeholder Project, Looney said “70% of the largest bankruptcies where a company was valued at more than a billion were companies owned by private equity firms.”
Health care and childcare industries
Sen. Saud Anwar, co-chair of the Public Health Committee, said “the reality is when private equity comes into any industry their primary goal is to make money.
“This is a cancer that is spreading and we have to start to make laws to make sure that we don’t allow private equity to harm every important aspect of our lives,” Anwar said.
Rep. Cristin McCarthy Vahey, a Fairfield Democrat and co-chair of the Public Health Committee, said with the increasing cost of health care there will continue to be pressures “for private dollars.
“We are going to make sure that there is appropriate oversight,” she said. “I think it is a worthy, important conversation for us to be having. This is always and should always be about protecting patients and patients’ access to care and patient safety, quality of their care, equity around care and affordability of care. That is really what has to be at the heart of this: the patients.”
The Public Health Committee filed SB 196, which restricts private equity in hospitals.
Anwar said there will be multiple bills on private equity with the Senate leadership and the attorney general’s office are also preparing bills.
Referring to the childcare industry, Looney said he has learned that private equity has begun to buy up child care entities “especially in the wake of the fact that we passed a bill last year to set up a new endowment for childcare.”
Sen. Cecil Maher, co-chair of the Children’s Committee and a Wilton Democrat, said the Children’s Committee may raise a concept concerning private equity in the childcare industry.
“We see this across the board in many sectors that private equity comes in and will force smaller businesses and smaller entities out of the marketplace,” she said. “We have seen that in childcare as well.”
Housing and nursing homes
The Private Equity Stakeholder Project said in its risk index of private equity in the state that “Connecticut is among the top 10 states for the rate of growth in the share of single-family homes purchased by corporate investors over a five-year period.”
Looney said “there seems to be a consolidation in some communities of private equity entities starting to move in and buy large entities of units and that is dangerous too because if one entity controls too much of a market it has too much market power to set rents and things of that nature.”
Rep. Antonio Felipe, co-chair of the Housing Committee, and a Bridgeport Democrat, said he is interested in the idea as it pertains to companies buying large swaths of certain municipalities and those looking to fix prices in certain regions.
“From my perspective I think it is important to make sure there is an even playing field for everyone,” he said. “To me that doesn’t mean that we should fully restrict private equity but private equity should not control or set the market.”
Referring to nursing homes, Looney said there has been “an increasing number bought out by private equity entities.”
Rep. Jane Garibay, chair of the Aging Committee, and a Windsor Locks Democrat, said it is critical for private equity companies to have transparency in their transactions.
“It is difficult to see where the money goes and what they are doing,” she said. “We have no clear way of knowing what they are spending.”
In its risk assessment, The Private Equity Stakeholder Project, said that 5.4% of nursing homes in the state are owned by private equity companies.