SB 1507 — AN ACT PROHIBITING PRIVATE EQUITY OWNERSHIP AND CONTROL OF HOSPITALS AND HEALTH SYSTEMS AND THE CONTROLLING OF OR INTERFERENCE WITH THE PROFESSIONAL JUDGMENT AND CLINICAL DECISIONS OF CERTAIN HEALTH CARE PROVIDERS AND REQUIRING AN EVALUATION OF THE APPOINTMENT OF A RECEIVER TO MANAGE HOSPITALS IN FINANCIAL DISTRESS.

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OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 26 $ FY 27 $ Public Health, Dept.

GF - Cost 121,300 153,500 State Comptroller - Fringe GF - Cost 42,700 58,400 Benefits1 Note:

GF=General Fund Municipal Impact:

None Explanation This bill, which includes various provisions regarding hospitals, health systems, and health care practices, results in a cost to the General Fund of $164,000 in FY 26 and $211,900 in FY 27 and annually thereafter, as described below.

The cost is associated with personnel needs in the Department of Public Health (DPH) due to Section 2.

Section 1 prohibits private equity companies and real estate investment trusts from new or increased acquisitions or control of any hospital or health system, which results in no fiscal impact to the state.

Section 2 prohibits licensed health care entities and management servicesorganizationsfromcontrolling clinicaldecisionsofahealthcare practice or clinician.

This results in a cost to DPH of $121,300 in FY 26 and $153,500 in FY 27 (and annually thereafter), with an estimated cost to the Office of the State Comptroller for associated fringe benefits of The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller.

The estimated active employee fringe benefit cost associated with most personnel changes is 40.71% of payroll in FY 26.

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614 $42,700 in FY 26 and $58,400 in FY 27.

FY 26 costs reflect an October 1 start date for all staff.

It is anticipated that this prohibition will result in an increase in case volume for the Facility Licensing and Investigations Section (FLIS) regarding interference and coercion claims.

To handle this increase, DPH requires:

(1) a part-time (0.5 FTE) Supervising Nurse Consultant, at an annualized salary of $47,500 (plus $19,300 annualized fringe benefits);

and (2) a full-time Nurse Consultant investigator, at an annualized cost of $96,000 (plus $39,100 annualized fringe benefits).

These positions will complete essential duties in conducting healthcare investigations, such as reviewing patient records and facility documentation as well as interviewing staff and patients.

The FLIS currently has a backlog of approximately 1,000 complaints, making additional staff necessary to complete investigative work that may result from this bill.

Other expenses are expected to total $16,500 in FY 26 and $10,000 in FY 27 in annually and thereafter.

This includes a one-time total cost of $8,400 in FY 26 for laptops and related hardware, and ongoing annual costs of $10,000 (with partial year costs in FY 26 of $8,100) consisting of:

(1) fleet maintenance costs for one motor vehicle ($4,600) needed to allow investigations to be conducted at facilities across the state;

(2) mileage reimbursement ($5,000);

and (3) $400 for software and general office supplies.

Section 3 requires the Commissioner of Health Strategy to evaluate the potential appointment of a receiver to manage hospitals in financial distress or operational crisis, which results in no fiscal impact.

The duties required by the bill can be accomplished through existing resources.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

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614 OLR Bill Analysis sSB 1507 AN ACT PROHIBITING PRIVATE EQUITY OWNERSHIP AND CONTROL OF HOSPITALS AND HEALTH SYSTEMS AND THE CONTROLLING OF OR INTERFERENCE WITH THE PROFESSIONAL JUDGMENT AND CLINICAL DECISIONS OF CERTAIN HEALTH CARE PROVIDERS AND REQUIRING AN EVALUATION OF THE APPOINTMENT OF A RECEIVER TO MANAGE HOSPITALS IN FINANCIAL DISTRESS.

SUMMARY Starting October 1, 2025, this bill prohibits private equity companies and real estate investment trusts (REITs) from acquiring or increasing any (1) direct or indirect ownership interest in or (2) operational or financial control over a hospital or health system (i.e.

hospitals or parent corporations of hospitals and their affiliates).

The bill also prohibits (1) health care facilities or entities licensed by the departments of public health (DPH) or mental health and addiction services (DMHAS) and (2) management services organizations (MSOs) from directly or indirectly interfering with or otherwise directing the professional judgment or clinical decisions of health care practices or clinicians with independent practice authority at these facilities or entities or at health care practices.

Prohibited conduct includes, among other things, controlling the amount of time spent with patients, decisions on patients’ clinical status, or diagnostic codes used.

Starting July 1, 2025, the bill makes null and void any (1) nondisclosure or non-disparagement agreements regarding this prohibited conduct to which a clinician with independent practice authority is a party and (2) policies or contracts that violate the bill’s provisions.

It authorizes DPH to adopt regulations to implement the bill’s sSB1507 / File No.

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614 provisions.

Lastly, the bill requires the Office of Health Strategy (OHS) to evaluate whether the attorney general should be allowed to petition the Superior Court to appoint a receiver to manage hospitals in financial distress or operational crisis.

The OHS commissioner must report onthe evaluation to the Public Health Committee by October 1, 2026.

EFFECTIVE DATE:

July 1, 2025, except the provision on the OHS evaluation and reporting requirement takes effect upon passage.

PRIVATE EQUITY COMPANY AND REIT ACQUISITIONS Starting October 1, 2025, the bill prohibits private equity companies and REITs from acquiring or increasing any (1) direct or indirect ownership interest in or (2) operational or financial control over a hospital or health system.

Under the bill, a “private equity company” is a publicly or privately traded entity that collects capital investments, and a “REIT” generally is a company that owns or finances income-producing commercial real estate.

The bill defines an “ownership interest” as having equity in a hospital’s or health system’s capital, stock, or profits or owning the real estate where these facilities operate.

It defines “operational control” as (1) influencing or directing the actions or policies of any part of a hospital or health system or (2) choosing, appointing, or terminating a person or entity that participates in the hospital’s or health system’s operation (e.g., board member, senior employee, or consultant).

INTERFERENCE WITH CLINICAL DECISIONS Prohibited Conduct The bill prohibits (1) DPH- or DMHAS- licensed health care facilities or entities and (2) MSOs from directly or indirectly interfering with, controlling,orotherwisedirectingtheprofessionaljudgementorclinical decisions ofhealth care practicesor clinicians withindependent practice authority who provide health care services through these facilities or sSB1507 / File No.

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614 entities or at a health care practice.

This prohibition includes controlling (directly or indirectly) through discipline, punishment, threats, adverse employment actions, coercion, retaliation, or excessive pressure any of the following:

1.

the amount of time spent with patients or the number of patients seen in a given time period, including the time allowed to triage patients in the emergency department or evaluate admitted patients;

2.

the time period within which patients must be discharged;

3.

decisions on patients’ clinical status, including whether they should be kept in observation status or receive palliative care, and where they should be placed after discharge;

4.

the diagnosis, diagnostic terminology, or codes that are entered into the medical record;

5.

the appropriate diagnostic test for medical conditions;

or 6.

anyotherconductDPHdetermineswouldinterferewith,control, or otherwise direct the professional judgment or clinical decision of a clinician with independent practice authority.

Under the bill, clinicians with independent practice authority include physicians, advanced practice registered nurses, and other health providersgiventhisauthorityunderstatelaw.MSOsarebusinessesthat provide, for compensation, management or administrative services to health care providers or an organization of them (e.g., health care practices).

Nondisclosure and Non-disparagement Agreements Under the bill, any nondisclosure or non-disparagement agreement entered into, amended, or renewed on or after July 1, 2025, regarding the prohibited conduct described above to which a clinician with independent practice authority is a party is void and unenforceable.

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614 Similarly, the bill makes void and unenforceable any policy or contract entered into, amended, or renewed on or after July 1, 2025, that violates the bill’s provisions.

If a court finds that a policy, contract, or contract provision is void and unenforceable under the bill, it must award the plaintiff reasonable attorney’s fees and costs.

BACKGROUND Related Bills SB 1332 (File 133), favorably reported by the Aging Committee, prohibits private equity companies and REITs from acquiring or increasing their ownership interest, operational control, or financial control in a nursing home starting October 1, 2025.

sSB 1480 (File 387), favorably reported by the Human Services Committee, requires nursing homes or hospitals to be free of new ownership interests by private equity companies or REITs in order to be eligible for Medicaid reimbursement.

HB 6873, favorably reported by the Public Health Committee, adds to the types of health care entities and transactions subject to review by the attorney general under the antitrust laws, among other things.

COMMITTEE ACTION Public Health Committee Joint Favorable Substitute Yea 32 Nay 0 (03/21/2025) sSB1507 / File No.

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