Vermont Legislature SmartTranscripts:

[Alyssa Black (Chair)]: Welcome back. It's

[Cory (Committee staff/assistant)]: +1, 234568910.

[Alyssa Black (Chair)]: And our health care advocate, Mike

[Mike Fisher (Health Care Advocate)]: Good morning, Mike Fisher, health care advocate. Yeah, it's good to be here, and thank you, health care committee. I I wanna start with a big thank you. First, a thank you to reps Goldman and Bloomly for last year for spearheading

[Cory (Committee staff/assistant)]: court court is in blue. Did I say that? Court is in blue. For

[Mike Fisher (Health Care Advocate)]: for last year for spearheading age 71, and this year to to to reps black and Bloomly for continuing the push. I I wanted to just come for just a few minutes and do a little bit of a process comment about how we got from '71 to '8 May. And and to recognize, hey. I I we sat here in this seat last year and and walked through what we were trying to do in '71 and talked about the work we had to do over the summer in the interim to be able to come this year with something to work off. At that moment, I wanna so a key difference between that bill and this bill was that bill had a large regulatory structure. That bill framed up requiring the Green Mountain Care Board to set up to to regulate these transactions. And what when we you know, largely as a result of concerns expressed by the provider community and concerns expressed by the Green Mountain care boards. After the session, we took a little pause. We rethought what was going on and thought that the right step to do was to strip that section out. So when I was here in front of the committee saying, we have a lot of work to do, I was thinking about how to make the regulatory structure something that the provider community could support. What we ended up doing was ripping it out. So I I guess I wanna just sort of plainly, you know, recognize the process going forward didn't happen exactly according to plan. We spent a long time trying to get the language right and and, of course, working through with legislators and the legislature council to get the language to the table. And so we did not do the provider sitting down with providers that that I talked about doing. And and so for that, I just wanna recognize it. It didn't happen the way we had intended. And so here we are now with the bill in front of you, and, I think it is, a tremendously important bill. I don't know about you. I was scared by a lot of what doctor Song had to had to say. It was, for me, fear inducing. And and so I think, what is before you is a tremendously important bill. And I also wanna recognize this is the health care committee, and a lot of the language in this bill is financial transaction language. It's not language that you're used to looking at. And so I wanna cut everyone a ton of slack. It's easy to misread parts of the bill. Is the bill absolutely perfect? Of course not. Might it need some clarification to make sure it does what we're trying to do? Of course. But it seeks to do a couple of very high level things. It seeks to I'm gonna use doctor Song's term guardrails to try and prevent the most predatory extractive behave behaviors, not to prevent investment, but prevent those bad behaviors, to try to assure that your doctor is giving you the best clinical advice, not pressured by financial interests from above your doctor, and transparency. What's

[Sam (Office of the Health Care Advocate)]: going on

[Mike Fisher (Health Care Advocate)]: here in Vermont? I get asked that question all the time. Don't know, and the bill seeks to create a platform for us to gain some knowledge about what's what's going on. So I think it's an important bill, and and I think that's all I really had to say. And our real expert from the healthcare advocate's office on this is Sam Piesch, who's gonna spend some more time.

[Alyssa Black (Chair)]: Thank you.

[Cory (Committee staff/assistant)]: Can I just ask how much time

[Alyssa Black (Chair)]: do I have? You have until 11:59.

[Sam (Office of the Health Care Advocate)]: Oh, okay. Well, I definitely wanna take that much time.

[Alyssa Black (Chair)]: If you don't take that much time, then we can Jessa, may I ask how much time do you need?

[Jessa (Invited witness)]: I didn't run through. I just I mean, twenty minutes.

[Alyssa Black (Chair)]: Okay. We're gonna do you. We're gonna reschedule Okay. We've had some snafus with our scheduling today to include we accidentally scheduled during our floor. So we've gotta move those as well.

[Sam (Office of the Health Care Advocate)]: Good morning. You know me, but Sam Pouch with The Healthcare Advocate. Again, thank you for taking the time to hear from me. I am going to skip a couple of these slides in the interest of time and because Doctor. Song, quite frankly, covered some of these things far better than I could, if I'm going to be honest. Just a bit of an overview of what I'm going to do this morning. I'm probably going to go through the what is private equity background a bit quickly, because I think you've heard a lot from Doctor. Song and Maureen from NAFTA this morning, focus a bit more on why I think we need the bill, what does it actually do, and also what does it not do, address some of the misconceptions, which I agree with Mike, some of them are very understandable. A lot of them are. And I'm still learning about the best way to frame things. As Doctor. Song said, we're still learning a lot because this is still relatively new and there's still some research that needs to be done. I'm going to share a couple of provider stories and quotes. These are from public testimony that has been given. A lot of it's federal testimony to the health committee and then have some recommendations for the next steps. So, I'm not going read through all these, it's a lot of text, but I just want to point out that some folks might be familiar with junk bonds and Michael Milliken, and this is somewhat of actually the origins of private equity. So, in the years ago, it was just called leveraged buyouts. Private equity is a bit of a euphemism and a term. And I just want you to know that because there is a lot of framing language that can shape how we think about these things. And sometimes it's or I would say often, it's important to think about what is actually happening. What is a plain language term? And what are we actually seeing in the field? I think we haven't answered questions about what leveraged buyouts are, but really, they're quite unique. And they're quite unique to private equity. And what makes them unique is really the last piece. The debt is assumed by the acquired entity. This is very different than if I took out a mortgage, I have a mortgage for a house. It's very different. This bill is not intended to prevent debt or eliminate debt. It's to prevent this type of transaction. It's one of the pieces. So really, what this practice does is it loads debt onto the target. You heard that from Doctor. Song and not the PE firm. So really, they're kind of, in another way, diffusing responsibility for managing debt and other types of things like that. So, this is a quote from John McDonough. I was fortunate enough to study with him when I was in grad school. He was also a policymaker in Massachusetts. He said this about leverage buyouts. The purpose of the deal making is to enrich the owners as quickly as possible, and then get out and move on to your next conquest. I want to give a little more context about what corporate practice of medicine is. It's actually been around for a long time. I know we have some providers here. It's not new, and it really stems from a Hippocratic Oath in a lot of ways. It's a legal principle that aims to prohibit standard business corporations and non physician entities from the following. And a lot of these things you heard from Maureen earlier, it's really about controlling provider decision making. And I would say interfering in the practice of medicine. So, I just wanted to show this kind of the scope and scale system wide of private equity. So, this number is in trillions with a T. So, this is what we're looking at, and this is forecasting out to 2028. So, it's an enormous, enormous amount of money that's going into this. I want to talk a little bit about known private equity activity in Vermont. And as Mike rightly said, there's a lot we don't yet know. And that's part of the reason why the bill has a reporting and transparency section. So, the biggest influence that we know about is nursing homes. So around a quarter of nursing homes are owned or controlled by PE firms in Vermont. And I can tell you that the quality outcomes and some of the data is aligned with what Doctor. Song has been saying. A lot of it's worse. And hopefully, you'll hear testimony, I think, from the long term care ombudsman who's been involved in the drafting of the bill about that. There also is the New England Collaborative Health Network, which I know folks have heard about. They contract with Ovation. They're a PE owned firm, and these are some of the hospitals that are part of that network. There's also some involvement in Medicare only accountable care organizations. A lot of them have PE funders on the back end and then some independent provider contracts, which particularly we've seen. There's not a lot of visibility on this. There's some data, but the pain clinics is one, dermatology, specialty care. But due to the lack of regulatory and oversight structure in Vermont, we really don't know. To us, that's a concern. So, I wanted to put a couple other pieces of research in front of you. There was a systematic literature review in twenty three years. What a literature review that's systematic, looks at all the studies, finds the highest quality ones, and what is the main conclusion of these things? And they found that private equity ownership of US providers increased healthcare costs to patients and providers in nine of 12 cases. So 75% of the time. Three of the time it was basically the same. They decreased costs in none. So I think that's really important because this committee is rightly focused on reducing healthcare costs, out of pocket costs to patients, reducing costs to hospitals as well. This review shows that private equity involvement, particularly through leveraged buyouts, is really not achieving that outcome. So that's something that we all care about in the state, and I think we do. Leveraged buyouts from private equity firms does not accomplish that.

[Unidentified Committee Member A]: I think one of the

[Alyssa Black (Chair)]: things we'll also hear about is that we need this type of investment to increase competition to drive down and become more competitive. So you're saying basically it has shown that that has never been the case?

[Sam (Office of the Health Care Advocate)]: That's never been the case for private equity investing that's used leveraged buyouts. So that's a great question. And one of the things I want the committee to leave with and sit with is there are many ways to invest in our healthcare system and in providers that do not involve leveraged buyouts. I think you heard from Doctor. Sung, there's venture capital, there's state investments, there's foundation grants. I'm going to talk about Capital Link in a bit. So I just encourage you to try to expand all of our collective imagination about what's possible. That sounds so pretentious. Never going say that again. A couple of things. MIT Sloan, they did an analysis about hospitals and insurers. We saw a 32% increase in prices. And a lot of the health care entities in The US that were at risk of default, nearly 90% were owned by private equity firms. So, gets into the, Rev. Narbhukha, your question about distressed and why that's a piece, that's part of this. I'm going to skip over this, except for the last part because some of this Doctor. Song talked about. But I just I wanted to highlight I really think we need to appreciate like, if we have an emotional reaction, like, we should sit with that. And I had fear, and there's a lot of moral outrage with some of these structures. And I just want to point out the last bullet. Approximately twenty one thousand lives lost over twelve years due to private equity ownership of nursing homes. So, one life through this kind of leveraged biostructure being lost is too many. But there are thousands through this analysis. And again, this is an analysis of a specific ownership structure with private equity. This isn't saying all private equity is bad. But this type is very well documented, well researched to have bad health outcomes.

[Unidentified Committee Member B]: Well, you kind of answered it. I was just wondering how you get a little number of 21,000.

[Sam (Office of the Health Care Advocate)]: So what you do, a trial one of two research methods on you. But you look at those hospitals and then you compare them to the ones that don't have private equity, and then you look at trends over time. And you look at what kind of causality was there. And a lot of it was staffing. I don't want to get too technical of that, but that's how that's Thank you to Doctor. Kane. Nancy Kane let me use the slide she presented last year. This looks at the impact I'm not going go through all these studies but looks at the impacts of these leveraged buyout structures from private equity firms in terms of health outcomes, quality. The red and the yellow is mixed or negative. And you'll see some of the beneficial ones. Cost to operate, which Doctor. Song also mentioned. So, these are some of the common themes. We have debt loading, we have asset stripping, quality declines, service cuts, bankruptcy and abandonment. So those are unfortunately features of when private equity firms use leveraged buyout structures. And I'm going to skip a little bit ahead to the punchline. This bill, if passed, would ban, it would straight up prohibit this transaction structure from occurring. So, that is the objective. And there might be language that can make that more explicit, but that is absolutely the intent. It is not to prevent debt being used or prevent investment. It is specifically meant to target that type of transaction, which you heard a lot about. Why do we need the bill now? That map that showed where private equity involvement was twenty years ago and where it is now and showed Vermont without hospital ownership, but still some involvement. I see private equity involvement as an inevitability in the states. There is no way they're going to be like, oh, I'm going to invest in the other 49 states to try to get it, but not in Vermont. So it's not a question of if for us, it's when. And we want to be prepared to channel that investment in a way with clear guardrails. So we benefit from it. We meaning providers. We meaning patients. We meaning the healthcare system. And we prevent the worst harms. So that's my objective, and I think that's the objective of a lot of people in other states that have passed bills in this area. So this is a map of laws. So the green is where laws were enacted, and a lot of these were in the last two to three years. Blue is enacted or proposed. Yellow is proposed. That's where on that map. And then there are also some states where these efforts have failed. Those are in red. So this is a map of states that already have a corporate practice of medicine doctrine on their books. And in my view, Vermont has the unfortunate distinction of being one of the few states that has nothing on the books. So, the reason I raise this is and I think we have some consensus with the provider groups I think there's a need for this. Or I would say there definitely is a need for it. Shouldn't be coy. Because we are exposed and quite vulnerable without it. I would say it's a necessary piece, but not sufficient. And I'll get into that later on. Slow me down if I'm going too quickly.

[Alyssa Black (Chair)]: I did want to say that I had occasion to attend a multi state through NCSL this year. And of all the legislators, and there were probably 60 of us from all different states, this rose to the top as the number one, we've got to do something states now around this particular area, not that regulated PBMs, but Well, go

[Cory (Committee staff/assistant)]: ahead. Hi.

[Sam (Office of the Health Care Advocate)]: Hey, Cory, nice meet you.

[Cory (Committee staff/assistant)]: Can you go back one slide

[Sam (Office of the Health Care Advocate)]: for Yes, of course.

[Alyssa Black (Chair)]: A moment,

[Cory (Committee staff/assistant)]: before. The one before it, please. Okay, the failed laws. Can you explain that a little bit?

[Sam (Office of the Health Care Advocate)]: Yeah, sure. So these are states that tried to pass a regulation bill, and they were unsuccessful. So advocates like myself in Texas tried to pass a private equity regulation bill, and it was rejected by the legislature. So that's what that means.

[Unidentified Committee Member A]: When you say go ahead. It's just directly related to that. When you say rejected, does that mean it got traction and got voted down or it was proposed and it may not even have been discussed or all? Variation. Yeah, so both.

[Sam (Office of the Health Care Advocate)]: I'm I'm familiar with Colorado and Pennsylvania the most, Texas less so. So I can get back to you with more detail if you want. It's not that important.

[Unidentified Committee Member A]: It was more just understanding the opposition to it and why it failed that it would be more important to me.

[Sam (Office of the Health Care Advocate)]: Yep, yep.

[Cory (Committee staff/assistant)]: Curious of the numbers in Florida, I mean, given I don't want to be stereotypical. I feel Florida is known as a retirement state. Just curious why. I don't know.

[Alyssa Black (Chair)]: Those things

[Sam (Office of the Health Care Advocate)]: Yeah. Well, the case that I know probably the best is Massachusetts and Connecticut. And there were strong provider concerns about lack of investment and whether or not the bill would chill and kill that type of investment. So that's one reason. And I'll get into some of the reasons for that and examine some of those criticisms, because I think we need to take that on. It's a real concern.

[Cory (Committee staff/assistant)]: Thank you. I've a question.

[Unidentified Committee Member B]: Same You've enacted laws, which is green, enacted and proposed law. What's the difference?

[Sam (Office of the Health Care Advocate)]: That's a good question. I'd have to ask that. To me, that seems like a I agree. Enacted. Yeah, seems like a typo for More

[Alyssa Black (Chair)]: than one. Yeah, one's enacted and then they have others.

[Sam (Office of the Health Care Advocate)]: Think I don't want to assume that that's I'm pretty sure that's true, but but I didn't prepare that part of it. But I think that that's case. I can double check. That's a good question. You guys like maps, which is good. So what are the goals? And perhaps I should have led this off earlier, but the goals are really at a high level. They're four: protect healthcare providers and patients from corporate control prevent further declines in health outcomes and care quality prevent cuts to essential services and care deserts, and establish rules of the road or guardrails for private equity investment in Vermont. So what this bill would do would require PE firms and their provider partners to demonstrate investment is good, for lack of a better word, through transparent disclosure, and prohibit bad PE investment, which I would say is, I'm comfortable saying, leveraged buyouts that strip hospitals of their assets for people and then allow them to leave millions of dollars. I'm comfortable saying that's bad. And I'm also going to hope that we can all agree that that's bad. This is an attempt at plain language. This is an inherently complex area. So if there's complexity in the bill, it's not because we want it to be complex. It's because the subject area is complex. If you want to be cynical, some of the complexity allows a lot of these business practices to persist because people understand, Abir, like, what the is going on here? This is too hard for me to understand. Leverage buyouts, in particular, make people's heads hurt. And I think that is the appropriate response. Because oftentimes, it's like, how do I apply that situation to my own life? It'd be like if I got a mortgage, and then the house would be responsible for the debt. It doesn't really make sense. It's really hard to understand. So if we pass this bill, corporations and firms, they would not

[Cory (Committee staff/assistant)]: Okay, Lori.

[Sam (Office of the Health Care Advocate)]: I have a question

[Alyssa Black (Chair)]: at the end of this slide. Okay,

[Sam (Office of the Health Care Advocate)]: they can't own medical practices, can't control decision making, can't require providers to sign non competes or non disclosure agreements. And I think that's an area I hope that we can find compromise or consensus with the provider groups in Vermont. Can't take over control, can't extract money, can't pay themselves using them bonuses really. That's what dividends are another word for that. Can restrict providers from seeing patients because of what insurance they have. Because one thing we've seen a lot is PE firms take up and they control, and they say, Skewer towards commercial. Make it hard for uninsured or Medicaid or Medicare recipients to get care. As a state that cares a lot about health equity, I don't think that's what we want to see here. And the last one is a little bit more nuanced, but I would say very important. They cannot form shell companies to extract money from hospitals or community providers. One loophole that private equity firms have used is they use this outside shell company that you might have heard is called the Management Services Organization. So that has been a way that a lot of these more problematic firms have gotten around a lot of state regulation. The state regulation has not said anything really about MSOs, management services organizations. So they've done a lot of the same practices that these states have tried to prevent through them. So it's kind of like an end run loophole. So we attempt to close that loophole.

[Alyssa Black (Chair)]: Do we have any management service organizations operating currently in the state?

[Sam (Office of the Health Care Advocate)]: I'm almost certain that that we do. Yes.

[Alyssa Black (Chair)]: I'm just curious, if we do number one, why we need all the others?

[Sam (Office of the Health Care Advocate)]: Well, a lot of times you can extract things without fully owning them. And oftentimes a lot of these providers and hospitals don't know necessarily that they're being owned. And I want to be kind. That's not that they're not smart. It's just that these PE firms are very savvy and they structure these deals in a way that are It's not always clear oftentimes that they're actually becoming owned. So there's, I don't want to say deception, but there's a lot of complexity that's difficult to sort through. And I think about my grandfather was a pediatrician. He worked at UVM for forty years. He was far smarter than I am. We would have conversations when he was alive about how complex this was. So it's really tricky. So I appreciate your willingness to spend time with something that's this dense.

[Alyssa Black (Chair)]: Leslie has a question, but I have a question also, which is if you're, say, an independent provider and you've always owned your own practice and you're getting ready to retire and you want to sell your practice, how does the first one allow you are we basically saying you can only sell to essentially a limited liability or another practitioner?

[Sam (Office of the Health Care Advocate)]: It's a good question. No, it's just restrictions on how you can sell and what level of control, if you were selling to a PE firm, what level of control they would be. All right.

[Cory (Committee staff/assistant)]: Leslie? Well, that's interesting.

[Alyssa Black (Chair)]: What's the difference? Well, okay, my question actually goes back to slide nine because you mentioned Brownellburg and Springfield, and I know them quite well. Did their involvement with a PE owned firm come before or after their financial crisis?

[Sam (Office of the Health Care Advocate)]: Yeah, he would have to ask them that specifically. I think Springfield contracted with them around their bankruptcy, I don't know if it

[Alyssa Black (Chair)]: was what's the cause of it, is what I'm thinking about?

[Sam (Office of the Health Care Advocate)]: I would need to look into that more I would hesitate to say cause without doing more analysis, that's my reticence as a researcher of being careful. Thank you.

[Cory (Committee staff/assistant)]: Chopper.

[Sam (Office of the Health Care Advocate)]: One quick one. Yeah. I don't know,

[Unidentified Committee Member B]: at least I'm not sure what essential providers mean. Yeah.

[Sam (Office of the Health Care Advocate)]: I think that will help when Jen goes through the walkthrough, I think that will be, I don't want to punt you, Jen, but I think we'll go through that in the bill. I think she'd be better positioned to answer that. Is that okay, Jen? Okay. First

[Cory (Committee staff/assistant)]: question.

[Sam (Office of the Health Care Advocate)]: Yeah, it's always good to volunteer without yeah, sorry about addressing understandable misconceptions and critiques. Folks who know me, this is something that I love to do. So, one thing that I get a fair amount is shouldn't this issue just be dealt with federally? Like, why are states even looking at this? You know? And there are a a couple of big reasons for this. So current law, there's a pretty high bar for any type of pre merger review. So that's a 133,900,000.0. I don't know why they didn't run from a 34. Just but so anything below that doesn't really get federal scrutiny. And but I don't wanna say that the federal government has done nothing. Like, the the US Congress, in a bipartisan way, by the way, Chuck Grassley, a Republican, is very concerned about private equity in health care. So this is not a It's one of those actually rare areas of bipartisan agreement and concern, and it might be coming at it from different directions, competition, equity. But there's pretty broad bipartisan interest in this, which is interesting. And you saw it in Indiana, which is led by Republicans. They passed the law in this area, too. So it's not just a blue versus a red thing. There's been some investigations. And because private equity firms under federal law, they don't have to comply with the same rules that public companies and investment funds do, the industry is really opaque, unless there's reporting and disclosure requirements. So you would need the passage of a new federal bill in this area. And given the way things are in Washington, I see that as difficult to unlikely at this time. So that's why states have stepped up in trying to regulate in this area. So we heard a little bit about this this morning. Isn't private equity just the same as other forms investment? And I hope that we've convinced you that it is very unique. And also within private equity, the world of private equity, I have friends that operate in this world, there are firms that, good faith, want to invest and do not believe in leveraged buyouts. They don't wanna strip assets. They do wanna provide that level of investment. What I would say is if you are a, quote, good firm or a good investment firm, like, you in my opinion, you shouldn't be scared of being open about what your plans are and be clear about what your investment strategy is. Basically, open yourself to the same scrutiny that a public company will be required to do through an earnings call, audited financials. If you're good, prove it, is really what this bill says. A couple of things that are unique. A lot of private equity not all, some not all often there's an obligation, a shareholder obligation, to leave very quickly. So what I hear and say it often is, we need sustained investment in our healthcare system. A lot of private equity is looking for short term private benefit. And I think what we are looking for as a state is long term public good, public investment that's sustained. So to me, there's a lack of alignment between those two things that we are keen to prevent negative outcomes from that. So this is a table Doctor Song's table is better, if I'm being honest but this one shows really some differences. So, there's investment type, how long it typically is, and then impact to investors. So, investment type, private equity, leveraged buyouts. Again, so this is a specific type of private equity, not all private equity. I think we saw pretty clearly that the research shows worse health outcomes, higher prices, cuts to services, control of provider staff, decision making, unsafe staffing. I also want this committee to know that I said this earlier, and I'll say it again there are many other ways to invest in our healthcare system that don't involve leveraged buyouts. And here are some of them. Capital Link is probably one of the best known, and we can reach out to them and see if they want to testify. But they're a nonprofit foundation that provides long term investment. It's not predatory, but it provides that capital infusion that I totally understand that providers want. Like, if I were a provider, I would want to be able to buy new technology, things like that. So there are other ways to do that that are far lower risk to providers and structured in a way that's much safer and guided towards long term mutual benefit rather than just more private benefit. And of course, this is a legislative committee. State and local investments are another way to do that. There are other bills on the wall that are going be taken up, I'm sure, to talk about where do we want our money to go? Do we want a lot of that money to be spent in our hospital systems? Do we want some of it out in the community? Those are conversations that we need to have. One thing I've heard a couple of times is private equity can't make money here. We have nothing to fear in Vermont. Private equity firms are really adept at identifying assets, even within hospitals that are not doing that well, but still have profitable service lines. So, to the conversation earlier, a lot of it turns into what is distressed? What is a distressed hospital? And hospital finance experts have different metrics for that. I don't think anyone can argue that some of our hospitals are in really tough shape. Distressed, a lot of our hospitals, even the small ones, still have very profitable asset lines, and some of them have very profitable real estate. So, there are still assets within these hospitals, even though some of them are struggling, that are attractive for this type of structure. And that's why we've seen private equity activity in every single state, and it's grown so significantly, and why A lot of it's in rural areas too. So was this bill language just like pulled pulled from thin air? No. I hope that that's clear that it was not. Worked two So years ago, we worked directly. We started working directly with Maureen, who you heard from earlier, from Doctor. Song, also with Nancy Cain, who at this committee has heard testimony from John McDonough, and also the private equity stakeholder project. They're the national nonpartisan nonprofit expert in this area. I think you'll also hopefully hear testimony from them. And there are several others that I didn't mention on here that we consulted with. But it just feels important to know that we had a lot of buy in and a lot of advice from these folks, who are the real subject matter experts. So I think this is where a lot of our conversation will focus, like this bill will kill or chill investment that's needed in Vermont. And I've kind of talked about this already, but in our view, good investors are willing to follow public disclosure rules like other publicly traded companies. Good investors have business plans and involve mutual benefits. Good investors make long term, non extractive commitments to Vermont providers and patients. And if we see some of these private equity firms that do these leveraged buyouts, which again, this bill would prohibit, in my view, that is not an activity that's connected with good outcomes quality. And it doesn't really help providers. I think we really need to center their voices here. It doesn't help them either. Providers I know, when I go to the doctor, they want to stay in business. They're just oftentimes don't have the investment, don't have the capital. And so I'm extremely sympathetic to that concern. I have many providers in my family. I'm very receptive to that. What I would encourage folks in that camp to think about is expand the aperture, if you will, of ways to invest and be aware of the risks, of buyer beware with some of these private equity firms. Because they do sell a very good story.

[Unidentified Committee Member B]: Yeah. The first two bullets. This does not mean private equity firms operating in Vermont. That's right. Can you explain that? I've heard up till now is different.

[Sam (Office of the Health Care Advocate)]: Explain how you think it's different, because that's not our how is it

[Unidentified Committee Member B]: different to your Are we going to ban is this bill going to ban these private equity firms in purchasing nursing homes and clinics and hospitals? I

[Sam (Office of the Health Care Advocate)]: would focus on the type of transaction structure, not banning the firm. So I would focus your energy there. But I think some people have asked me, Why don't you just ban private equity from Vermont? Why don't you just cut the BS? That's what it looks like to me. Yeah, so that's not what we do. If we wanted to do that and felt that that was the right path, the bill would have been one page long. And it would not have been receptive to the provider concerns about needed investment. So we're trying to thread a needle, is really what we're trying to do. We want to make sure we're using a scalpel and not a hammer. But we have tools to make sure that these transactions that I think there's variable I know, there's broad consensus are bad. We don't want that type of investment approach or strategy. So that's what we're trying to do. Yeah, thanks. Yeah. Aren't some PE firms good? I don't want to get into a moral debate, but do want to talk about how I can probably just skip this, but if there's one thing I'd take away from this, there are lot of business people. I've talked to them. I know some of them. They believe that leveraged buyouts should be regulated. Some of them even believe that leveraged buyouts would be illegal. So, this is not an anti business. There's a spectrum within the business community about this specific type of transaction. So, I really want you all to be aware that this isn't something that the business community all likes or believes is a good idea. I kind of touched on this, and it's eleven forty five. Two posts out of this. Warren Buffett and Charles Munger, they are capitalists. This is what they say about leverage buyouts. I've seen more people fail because of liquor and leverage, leverage being borrowed money, it's not as good as it looks. All they're doing is lying a little bit to make the money come in. So, these are famous investors. They're Carl Berkshire Hathaway, Munger Republican, Buffett Democrat. I just want to highlight both the business community angle here and also the bipartisan nature of their concern. So, another thing we've heard is don't we already have laws in Vermont that keep us safe? As I said earlier, we don't have any practice of corporate practice in medicine doctrine or laws that are unique in that way. None of these common extractive activities are prohibited. Many of the types of these transactions are actually explicitly exempt at the moment from review. This is not just me saying this. This has been independently evaluated by two other groups, a law firm and a think tank.

[Alyssa Black (Chair)]: I know that we make some exceptions in there, one around ambulatory care centers. Don't we have in statute, maybe I'm looking to look at regulating ambulatory care surgical or ambulatory surgical centers? Don't we have?

[Cory (Committee staff/assistant)]: We license ambulatory centers.

[Alyssa Black (Chair)]: Okay, we don't have reporting requirements or anything like that? We have

[Cory (Committee staff/assistant)]: some reporting, we're supposed to do some reporting on them for a time limited period. Okay. I'm not sure what kind of reporting, but not as far as their financial model, I know.

[Sam (Office of the Health Care Advocate)]: Unless explicitly asked, and it's good that you raised that. So the third bullet down, so the board's certificate of need can like, it can impose conditions when they approve, but they expire after they get these reports. So it's just like to Jen's point, it's time limited. So, can we just pass a corporate practice and medicine bill and not worry about the transactions? And maybe we don't need reporting or oversight. And I think what you've heard pretty clearly and what you will hear from other states is passing a corporate practice medicine without reporting or oversight, it's not going to go far enough. And I think the old adage of bad activity hides in the dark, I don't know how to regulate something if we don't even know what it is or what is going on. And from an enforcement perspective, it's very hard to investigate and enforce a violation if you don't really have data. So that's a real challenge. And it isn't to say that CPM is bad, it's definitely good. It's a huge component of our bill, but it's necessary but not sufficient, is what I would say. So California did pass a corporate practice medicine bill last session. It had some strong provisions in there. I want to also flag, though, that they already had very strong enforcement of oversight authority. Bless you. So they already had a regulator set up with a lot of the authority that currently in Vermont we do not have. So I I just wanna highlight that both pieces need to come together if we're really gonna be doing this in an effective way and try to solve this at the root. Just a few more points on this. Many states, so a lot of states, as I said earlier, they only have CPOM language and they failed. They were well intentioned, but they failed to deter deter some of the worst PE activities. And many of these states now were like, woah. We need more. So what I'm trying to do or what we are trying to do is get ahead of this thing before it gets out of control. And we're in a really I don't wanna you know, I really do think we're in a very urgent moment. And to chair Black's point, like, it doesn't surprise me that you heard this was a very urgent concern from other legislative leaders. There hasn't been nearly as much of this activity in Vermont, but I will say yet. So this is a really if this committee really cares about I know you care about prevention. This is a really golden opportunity that I fear if we don't take action this year, we're going to be coming back and hearing some of the stories that I'll share with you momentarily. Mike did a great job talking about this. I'll just highlight. So, what changed from 'seventy one? So, we reduced the admin burner for regulators and providers, in our view, substantial amount. So, the total amount of the bill went from 45 pages to 26 pages. We kept the prohibited transactions. We kept the corporate practice of medicine doctrine. We reduced the workload of the board, and we shifted enforcement to the attorney general, who I know you'll be hearing from in the afternoon. I want to put in some provider perspectives. Doctor. Song cited the study as well, so I won't go into all these slides. But in general, among physicians, there's a lot of concern about private equity in general. And these are some of the provider groups nationally that have expressed concerns about private equity's negative impact in healthcare as well. So it's a very long list. Want to read a couple of quotes. It doesn't surprise you, probably, that the healthcare advocate wants quotes and stories. That's our jam. So, these are stories from providers. We've talked a lot about doctors. My mom's a nurse. So, I think we need to raise up our nurses and their stories as well. I think it's critically important. So, these are quotes from nurses at PE owned facilities. We don't have enough staff. We don't have enough equipment. We're fighting every day to give good quality care to patients, and we are not able to do it. We went from a cohesive, well run unit, plagued with management cuts two two one, plagued with infant cuts, intrusiveness by management, and an attitude of, you don't like it, don't let the door hit you on the way out. My uncle would add another word in there. But what we saw was a war zone for the last twenty months. It's not over. We have not gotten support. And one more. So this is from Stewart. It's not just Stuart. Private equity or other types of for profit providers need to be held accountable. Our state and federal agencies that are charged with regulating and ensuring the safety of our healthcare providers and facilities, it's our hope that this crisis can serve as a wake up call to all levels of government and to the public that the danger to our public health from the influence of the for profit motive into healthcare is significant. We have to do all of our part to protect our most valuable resource. So, couple of recommendations, next steps. I very much want to try to find compromise about the corporate practice medicine language with the provider groups. Some of these are technical changes that I don't really think that now is the right time. But I just wanted to put them before the committee. And I think I'm sure we'll come back when we look at language more specifically. I want to be totally transparent. This is where we are in terms of our positions. So, we're open to adding more provisions, like a specific one is a sale leaseback, as well as clarifying the language. We want to make sure that we're doing what we're intending to do. We are close to removing these prohibitions. So the idea that I'm going to be totally blunt and honest you are never going to convince me that we should allow leveraged buyouts in Vermont. Full stop. Reporting requirements, we're open to changes. We're open to suggested language to address concerns, clarify intent. We are close to removing reporting and transparency. Or the point that I made earlier, if we don't have data, if we don't know what's going on, it really limits why are we even doing this. Former practice of medicine, we're open to changes, we're open to additions to address concerns, clarify, and I'm hopeful that we can find consensus on that as well. And these are some links. Five minutes to I went a little long. I'm sorry.

[Alyssa Black (Chair)]: You have exactly five minutes left.

[Unidentified Committee Member A]: So I did try to find this out while you were talking, and I couldn't. That's fine. But there was a private equity firm and on their website, it's totally not transparent about how it's run. Are you aware if that nursing home, if their closure is related to a private equity firm, abandoning them? I would have to

[Sam (Office of the Health Care Advocate)]: investigate them more. I would want to talk to the long term care enlistment, but I'm happy to do that.

[Unidentified Committee Member A]: I did hear in the hallway today when I asked someone else about it, that the owners are selling it but buying another one in New Jersey. When I heard that, I was like, well, that sounds like what we're talking about right now. So thank you for looking into it.

[Sam (Office of the Health Care Advocate)]: Yeah, no, it's not uncommon that when private equity owned nursing homes sell, they sell to another private equity firm. So it's kind of like a nesting doll of Thank you for listening. Karen,

[Cory (Committee staff/assistant)]: I just have one question. Do you see any private equity involvement with guardrails that could assist in a positive way medical assets in the state? Do you see a model?

[Sam (Office of the Health Care Advocate)]: Can you say more about medical assets, what you mean by that?

[Karen Lueders (Member)]: Well, mean, any of these entities that deliver, provide healthcare. The leveraged buyout of clearing your position, if there's something incrementally less, is there any model that I'm just wondering if you have thought on how that could be effective?

[Sam (Office of the Health Care Advocate)]: Yeah, totally. If our bill is done correctly, we are allowing for that. I think definitely, one of the consistent findings is that some of these PE firms that are investing in providers, that are using these buyouts, providers like it. They like the capital infusion. They like being able to But the concern is what turns around with control. And that's what Doctor. Song talked about with trade offs. So what I want to encourage is more competition, but also encourage us to think more broadly about other investment mechanisms that don't involve this. Because it's pretty risky. And very, very smart people have been confused by people far smarter than how these structures kind of play out in a way that is different than what they thought they were getting into.

[Karen Lueders (Member)]: So you proposed two options, one being state and the three limited resources and the other being the non profits or foundations. And it seems like there's an absolute prohibition on, if you had a private equity situation, any debt, any use of the asset as carrying any debt.

[Sam (Office of the Health Care Advocate)]: Great question, and that is an extremely common misconception about it. I'm also in the Moncton Slack portal. If I say something that doesn't make sense to people, it's my fault. I need to explain it better. If a voter doesn't understand something, I have to explain it in a way that makes sense.

[Cory (Committee staff/assistant)]: I was just looking at slide 17 number six, where you say you cannot use the assets of debt.

[Sam (Office of the Health Care Advocate)]: So it's the very last part, and Jim will go through this so we can spend some time on it. So it's the use of debt that will become an obligation of fine of the provider. But then that's extremely critical. And it's like a nuance, it's hard to pick up on. Again, we could have written that more clearly, and that captures, that's intended to capture the leveraged buyout piece, where they basically just load it up with it and then bounce, for lack of a better word.

[Alyssa Black (Chair)]: I have one question, and it's a very simple answer. But I keep thinking about all the things that we have done in the last few years and what we're trying to achieve here in Vermont. We have AHS by 2028 with a statewide strategic plan. We just received this rural health transformation. I particularly noticing that one of the positives that providers said was an infusion into technology and everything. We just got 195,000,000 a year to invest in providers for this very thing. And I'm wondering if you see this bill as a way for us to ensure that all the other things that we put in place are not working at odds with if we didn't do this.

[Sam (Office of the Health Care Advocate)]: 100 percent. Yeah, I think this absolutely aligns with where we're trying to go. And I know there's maybe some reasonable disagreement about how we should use those dollars, but I would like to think that we're all rowing in the same direction. We do wanna invest particularly in independent and primary care. I think that's a broad consensus. I think the only question is how to best do it and how much over what duration. So, I see this rare, I don't want you to say windfall, injection of federal monies that does come with real risks. And there are, as you know, Medicaid cuts. So, I don't want us to be distracted by the shiny big pot of money that is real, but there are some risks to it. And there are some real limitations to what we can use that money for. So, I think there will be some gaps that need to be filled other ways. And my fear is that if we don't have these guardrails in place, enticing offers from, I would say, more privately interested firms that do not have the best interest of the state in their mind, I worry about them filling those gaps.

[Alyssa Black (Chair)]: Thanks. We really need to stop. See we'll be back in on this. So we've got lots of time for questions. We're gonna do a fair amount of testimony on this bill. So, thank you, Sam. Really appreciate it.