Maine should remain wary of private equity takeovers of hospitals

By Geoffrey Gratwick, MD

Maine’s health care system is in a death spiral. Costs are rising faster than incomes, and Mainers are increasingly unable to afford the health care they need. The problem is exacerbated by the dire financial shape of many Maine hospitals.

Nearly half of our 24 rural hospitals are at risk of closing. When a hospital is in financial trouble, it is vulnerable to a buyout by private firms. These firms promise a major influx of capital to stabilize a hospital’s finances, but too often they make a bad situation worse.

Private equity firms are speculative investment groups that buy a business and then quite frequently sell off its assets for short-term profits, generally in five to seven years. They are not publicly traded, are poorly regulated and have a dismal track record for serving the public’s interest. Private equity firms are not guardian angels. They are more like gangrene, which, left unchecked, can spread and devour its host.

There are many reasons why private equity firms are bad for Maine. First and foremost, the goals of private equity are incompatible with those of health care. Private equity firms seek return on investment as high and fast as possible. Profit, not patient care, is their major concern. 

Second, private equity firms do not save hospitals. They accounted for seven of the eight largest health care bankruptcies in 2024. Private equity bankruptcies have led to the permanent closing of community hospitals in Massachusetts and Pennsylvania. 

Third, private equity firms compromise care. A 2023 study published in the Journal of the American Medical Association found that Medicare patients at private equity-acquired hospitals experienced a 25% increase in hospital-acquired complications (mainly falls and blood-stream infections), compared with Medicare patients at other hospitals.

Wisely, in June, the Maine Legislature acknowledged the problems private equity firms pose and placed a one-year moratorium on their purchase of Maine hospitals. They created a legislative commission to make recommendations about a path forward with a report to the Health Care, Insurance, and Financial Services Committee. 

We have attended the four commission meetings to date, and it appears that commissioners will recommend several regulations to monitor and control private equity acquisition of hospitals and other health care entities. Their recommendations are due Dec. 10. The questions then become will legislators turn them into legislation, and will the Legislature as a whole approve them.

The Legislature has the constitutional authority to pass laws that regulate various industries, among them health care, in order to protect the public interest and welfare. This includes the authority to regulate the purchase of hospitals by private equity firms, but time is short, as the moratorium ends in June 2026.

As the dangers of private equity in health care become increasingly clear, other states are taking action. Oregon, New Mexico and Massachusetts have all recently passed laws to regulate the purchase of hospitals and other health care entities. Their legislation will increase the transparency of these transactions and help protect the public’s access to health care, ensure its quality and control its cost. Maine should follow suit.

It should be noted, however, that regulating private equity-hospital transactions will not resolve the financial issues confronting Maine hospitals. The best strategy to do that is global budgeting. Under global budgeting, each hospital negotiates an annual budget with a designated state agency. 

This is no pipe dream. Maryland adopted global budgeting for hospitals in 2014. Since then, hospital spending growth has held steady in Maryland, and none of its hospitals have closed.  Vermont and Pennsylvania are currently moving toward global budgeting as well. Global budgeting is an important part of the comprehensive plan for universal health care that Maine AllCare has developed for our state, a plan that will provide health care for all Mainers, control health care costs and put hospitals on sound financial footing.

To protect Maine hospitals in the near term, we believe our Legislature should strictly regulate their sale to private equity firms. To assure their financial sustainability in the future, it should adopt global budgeting as one component of a universal health care system.

Gratwick, MD, served in the Maine state Senate from 2012 to 2020 and was a founding member of Maine AllCare. David Jolly, DrPH, worked in public health for 35 years and is vice chair of the Maine AllCare board.