By MERILEE DANNEMANN
Triple Spaced Again
© 2024 New Mexico News Services
Healthcare companies should never have profit as their primary mission, don’t you think?
There’s a genuine conflict between the profit motive and what healthcare is supposed to accomplish: providing a service that heals people’s illnesses or helps them stay healthy. For a healthcare institution to be successful, profit has to be tempered with giving priority to the wellbeing of patients.
America has been struggling with this conflict for decades, because so much of our healthcare is provided by for-profit entities. New Mexico regulators are making a new attempt to intervene, based on Senate Bill 15, enacted this year.
In recent years, businesses called private equity companies have entered the healthcare field, and it appears nothing good is resulting from this except for their investors.
Private equity firms’ business is simply to make money for their investors, whatever that takes. If it requires cutting costs by firing employees or selling off assets, that’s what they reportedly do.
As described in a Los Angeles Times opinion article, “Private equity is a 40-year-old Wall Street creation that thrives on cost-cutting, wealth extraction, short time horizons, and financial engineering. It bought, sold, and liquidated its way through the American retail sector years ago…”
Private equity has been implicated in the bankruptcies of well-known and popular companies such as Toys ‘R’ Us, J. Crew and many other former retailers whose names are still familiar.
B15 gives the state Office of the Superintendent of Insurance (OSI) regulatory authority over proposed takeovers of hospitals in New Mexico. The carefully worded press release described the authority as “oversight over certain hospital transactions that result in a change of control.”
The bill that passed was a substitute. The original version would have given OSI the same authority over more types of healthcare entities.
At a recent public meeting, Superintendent Alice Kane cited statistics about the negative effects of private equity ownership of healthcare facilities, including factors like cutting back the number of nurses, eliminating services that were not profitable, replacing in-person medical visits with telemedicine, and producing higher costs and worse outcomes for patients.
Private equity firms, she said, own 38% of New Mexico rural hospitals. These facilities were vulnerable to takeover because they were starving for cash.
A new report from the Private Equity Stakeholder Project says 17 out of 80 healthcare bankruptcies in 2023 were backed by private equity firms, plus 12 bankruptcies by companies with venture capital backing. Another wave of bankruptcies is expected in 2024, the report says.
SB15, called the Healthcare Consolidation Oversight Act, starts creating a regulatory structure that will authorize OSI to review and approve or disapprove major management changes such as mergers and acquisitions. It was sponsored by Sen. Katy Duhigg, D-Albuquerque and Rep. Reena Szczepanski, D-Santa Fe.
The new Healthcare Authority is to be involved in these decisions, the bill says. The Healthcare Authority is just now coming into existence, replacing the Human Services Department and adding bureaus moved from several other agencies.
The bill has a limited life. It contains its own repeal, effective July 1, 2025, and presumably is intended to lead to more comprehensive follow-up legislation next year.
A series of meetings around the state is underway to hear comments and receive recommendations on the next phase of legislation. The meeting schedule is posted on the OSI website under “health-care-consolidation”.
We’ve been hearing about the crisis of small rural hospitals for so long we can’t call it a crisis anymore; it’s just the way things are because we refuse to fix it. Maybe this new law can help slow down the inevitable decline.
Contact Merilee Dannemann through www.triplespacedagain.com.