Regulators Taking Aim at Hospice PE Backers
Hospice News | By Jim Parker
Private equity firms are pouring investment dollars into hospices at a record pace. Meanwhile, legislators and regulators as far up as the White House are taking aim at those firms.
Despite a cool down in the hospice mergers and acquisitions market during the first quarter of 2022, private equity firms have stayed aggressive on deals. About 30% to 50% of home health and hospice transactions in 2021 involved private equity, according to the M&A advisory firm The Braff Group.
With this growing influence comes renewed scrutiny about their impact on patient care, federal policymakers have indicated. Even President Joe Biden called out PE investors during his State of the Union address this year.
“As Wall Street firms take over more nursing homes, quality in those homes has gone down and costs have gone up. That ends on my watch,” Biden said. “Medicare is going to set higher standards for nursing homes and make sure your loved ones get the care they deserve and expect.”
Though the president’s remarks focused on nursing homes, investors throughout the health care continuum should take note. A number of agencies and some lawmakers have also started to step up oversight of these firms.
The U.S. Securities and Exchange Commission (SEC) in January proposed amendments to reporting requirements for advisors to large hedge funds and private equity funds.
If made final, the new rules would require these individuals to file reports within one business day of events that could indicate potential harm to investors or signal broader financial risks.
Current SEC rules mandate that these advisors report their private equity assets under management when they meet or exceed $2 billion. The proposal would reduce that threshold to $1.5 billion and would require firms to provide more information used for risk assessment and regulatory enforcement.
Another key finance regulator, the U.S. Federal Trade Commission, is also sharpening its gaze on private equity, based on recent actions and statements from the commission’s leaders.
Stakeholders have raised similar antirust questions about PE firms that invest in health care, as well as perceived lack of oversight.
“Private equity firms operate under the public and regulatory radar. Most private equity acquisitions in health care are not reportable to antitrust or financial regulatory authorities under current law,” a report from the American Antitrust Institute recently stated. “And, even where transactions are reportable, the complex structure of private equity funds obscures the competitive impact of those deals. As a result, private equity companies operate in health care without any effective oversight.”
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