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HARRISBURG — Democratic lawmakers have narrowed the scope of a proposed crackdown on hospital mergers and acquisitions, focusing it on private equity and excluding nonprofit operators from additional oversight after pushback from the industry’s powerful lobby.
Gov. Josh Shapiro and other policymakers say they would support a broader measure encompassing Pennsylvania’s many nonprofit hospitals, whose ranks include UPMC, the state’s largest nongovernmental employer.
But they also acknowledged the challenges a more extensive bill could face in the legislature. Last year, Republican leaders in the state Senate let such a measure die after it passed with bipartisan support in the House.
“We've got a divided government, and we've got a government where people have different views on different issues,” Shapiro, a Democrat, said at a recent news conference, “so I'm never going to let the perfect be the enemy of the possible.”
For years, state lawmakers have pushed various iterations of a bill to give Pennsylvania’s attorney general more power to review and intervene when hospitals are sold or merged. These deals can have huge ramifications for communities, creating health care deserts in some cases and powerful monopolies in others.
Mergers, acquisitions, or changes in ownership also preceded more than 90% of hospital closures in Pennsylvania in recent history.
Last year, the state House passed a bill that would have required both nonprofit and for-profit hospital operators to report major proposed mergers and acquisitions. The attorney general would then be tasked with reviewing the proposal and taking legal action if they determine it’s not in the public’s best interest.
The attorney general can already intervene in any transaction involving a charity, in the name of protecting the public interest. However, they often learn about hospital sales or bankruptcies too late to step in.
State Rep. Lisa Borowski (D., Delaware) reintroduced a similar bill last week with a major difference: It covers only for-profit operators, including private equity owners and investors, and not nonprofits.
The legislation would also ban sale-leaseback deals, in which private equity owners sell off hospital real estate, then have the sellers lease it back to the hospital, often at exorbitant rates. This kind of deal was made by the private equity owners of Delaware County’s Crozer system, which recently closed two hospitals.
State Sen. Tim Kearney (D., Delaware) plans to pitch the same language as Borowski in the GOP-controlled state Senate. At a news conference last week, in front of a now-closed Crozer facility, he was candid about why the scope of the legislation changed.
“There are, as you can imagine, a lot of fairly powerful interests at work here, including the Hospital Association [of Pennsylvania], who opposed the bill last year,” he said. “We've been working very hard to get to a point where we can get them to neutral.”
Last year, the Hospital and Healthsystem Association of Pennsylvania (HAP) told lawmakers in a letter that the bill was duplicative and would increase hospitals' regulatory burdens when half operate at a loss.
In an interview on Monday, CEO Nicole Stallings told Spotlight PA that the organization, which represents giants like UPMC and small, regional systems alike, is still reviewing the new proposal.
Still, she added that mergers and acquisitions do not often involve financially stable hospitals, and that “entities of late that have been at risk were in financial trouble for a long time.”
She argued state lawmakers should be more proactive: “Our message is: If you don't want these situations to continue to happen, then you need to ensure that you are addressing those things upstream that are really impacting hospitals' financial viability,” Stallings said.
She said they could look at targeted investments to help Pennsylvania medical centers keep their doors open, such as boosting state payments to hospitals for delivering babies to low-income moms in rural communities.
As Spotlight PA reported last week, Shapiro has been telegraphing a focus on private equity since his budget address in February. At the time, he said private equity “has infected our health care system” and treats Pennsylvania hospitals like “a piggy bank they can empty out and smash on the floor.”
But while private equity’s quest for short-term profit can lead to hospital closures, closures aren’t exclusive to for-profit systems.
At least 26 hospitals have closed across Pennsylvania in the past five years, according to data collected by the Pennsylvania Health Access Network. In the same period, at least 46 hospitals changed ownership.
Nonprofit systems were behind 64% of the hospital closures, according to PHAN’s analysis, which was based on media reports. And of the 46 hospitals the organization identified as changing ownership, 98% were acquired by health care systems incorporated as nonprofits.
Critics argue that consolidation leads to higher prices for consumers without any gain in care. Hospitals counter that acquisitions keep troubled systems running.
HAP represents 235 hospitals and health care systems, from giants like UPMC to regional groups like St. Luke’s University Health Network, as well as specialty for-profit providers. Almost 80% of its members are nonprofits.
The trade association employed four lobbying firms in 2024, racking up $1.1 million in direct expenditures to promote the association’s message to lawmakers. Individual hospitals and systems separately spend millions annually employing lobbyists.
In addition, HAP’s political action committee and hospital executives from across the commonwealth routinely give hundreds of thousands of dollars to state lawmakers’ campaigns.
“Politics are local, and lawmakers want to make sure that their constituents have access to health care,” Stallings said. “I think that's the No. 1 driver for the influence that we have.”
Private equity has a comparatively much smaller lobbying footprint.
At last week’s news conference, Spotlight PA asked why lawmakers carved nonprofit hospitals out of their oversight bill. After Kearney pinned the change on pressure from HAP, Shapiro argued the maneuver is all about results.
“I'll be damned if I'm going to let lobbyists stymie this effort,” Shapiro said. “We’ve got to put the people before powerful interests in Pennsylvania.”
A spokesperson for state House Democrats told Spotlight PA the caucus plans to run Borowski’s new bill “in the near future.”
The state Senate has made no such commitment. However, Majority Leader Joe Pittman (R., Indiana) said in a statement he was “intrigued” by Shapiro’s comments on private equity-driven hospital mergers in February, and that given “the crisis facing numerous hospitals across the commonwealth, the measure is certainly worthy of further conversations."
Kearney noted that the bill is still being negotiated.
“The bill, as it stands now, is not necessarily the bill we're going to pass,” he said. “A lot of these questions, in particular, the ones about nonprofits and for-profits, are still very much up in the air, and it's going to be a question of how we can actually navigate the next few months politically to get to a point where we can get it passed.”
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