CT Lawmakers Push to Curb Private Equity in Hospitals

Connecticut lawmakers are making their third run at reining in private equity’s grip on the state’s hospitals, and this time they say they actually have the votes and the governor in their corner.

Senate Bill 196 passed the state Senate on Wednesday and now heads to the House. The bill would bar private equity investors from owning a majority stake in the main campus operations of any Connecticut hospital and would cut them out of clinical decision making entirely. It would also block hospitals from selling their main campus buildings to real estate investment trusts through so-called “sale-leaseback” deals, a financing structure that generates returns for investors while saddling hospitals with ongoing rent obligations.

That last piece matters more than it might sound. Sale-leaseback arrangements have surfaced in post-mortems of financially distressed hospital systems across the country, and Connecticut has had a front-row seat to the damage.

Third time’s the charm?

The General Assembly has tried to move legislation like this for two consecutive sessions. Last year, Gov. Ned Lamont and lawmakers each put forward separate proposals built on different theories of the problem. The session clock ran out before anyone could reconcile them. Both sides blamed each other. The year before, similar.

This session, the co-chairs of the Public Health Committee say the dynamic has shifted. Sen. Saud Anwar, a Democrat from South Windsor who co-chairs the committee, said his office has spent months in direct talks with Lamont’s team.

“Our hope is that both of them will succeed,” Anwar said. “We have been in robust conversations for the past two months.”

His co-chair, Rep. Cristin McCarthy Vahey, a Democrat from Fairfield, said the collapse of the formerly private-equity backed hospital operator that had owned three Connecticut facilities changed the conversation in Hartford. When a hospital system goes bankrupt, it stops being an abstract policy debate.

Two bills, one goal

Lamont is pursuing a parallel track with House Bill 5045, which would expand the state’s certificate of need process. That’s the approval mechanism Connecticut uses for major health care transactions, including mergers, acquisitions and unit closures. Under Lamont’s proposal, any transfer of a large physician practice involving a private equity entity would require state sign-off. So would any acquisition of 20% or more of a health entity’s assets or operations by any organization, private equity or otherwise.

The two bills aren’t duplicates. Senate Bill 196 draws a hard line on ownership and clinical control. House Bill 5045 adds transparency and oversight to the front end of transactions before deals close. The idea, at least in theory, is that both can pass and work together.

Cathryn Vaulman, a spokesperson for Lamont, stopped short of endorsing Senate Bill 196 specifically but signaled the governor’s continued commitment to the broader goal.

“For the past several sessions, the Governor has put forward comprehensive legislation to ensure financial oversight of hospitals to help us protect patient care,” Vaulman said in an emailed statement. “Profits should not come before people.”

Why this matters for CT patients

Connecticut’s three hospitals previously owned by the bankrupt, formerly private-equity backed operator aren’t an abstraction. They serve communities across the state, and the financial wreckage from that collapse touched patients, workers, and local governments. Private equity ownership of hospitals has drawn increasing scrutiny nationally, with researchers documenting higher rates of adverse patient outcomes and cost-cutting that erodes care quality at PE-owned facilities.

For Connecticut residents, especially those outside Fairfield County’s well-resourced hospital network, the stakes are concrete. Rural and mid-size communities don’t have the luxury of driving to the next system if their local hospital is hollowed out by investors chasing returns.

The CT Mirror first reported the details of both bills and the ongoing talks between the legislature and Lamont’s office.

What to watch

The House vote on Senate Bill 196 is the next pressure point. If it passes, Lamont will face a decision on whether to sign it alongside his own proposal or use it as leverage in the final days of the session.

The session doesn’t run forever. Last year’s failure came down to timing and finger-pointing. Anwar says this year’s two-month runway of conversations with the governor’s office makes the difference. Still, Hartford has been here before. The bill has to clear the House, survive any amendments, and land on a desk where someone has to sign it.

Not guaranteed. But closer than it’s been.