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S 2950Medical Services

Health and Safety - The Hospital Conversions Act - Healthcare Investment Bond Requirement

Private equity firms buying healthcare facilities must post a large financial bond to ensure patient care continues if the business fails.

Held for study
Population
Affected
65
Email Legislator
Introduced Mar 4, 2026Committee Senate Judiciary

Plain-English Summary

This legislation amends the Hospital Conversions Act to impose strict financial requirements on private equity companies and real estate investment trusts (REITs) that acquire healthcare providers. Specifically, these investors must post a financial bond equal to one year of the provider's operating expenses plus administrative costs. The bill prohibits these companies from placing the debt for this bond onto the healthcare provider itself. If the facility faces bankruptcy or closure, the state can use the bond funds to maintain patient care. Additionally, the bill explicitly forbids these investors from interfering with the clinical decisions of healthcare practitioners.

For younger readers

Sometimes, big investment companies buy hospitals or doctor's offices to make money. This bill says that if one of these companies buys a healthcare place, they have to put a large amount of money in a special piggy bank (called a bond). If the company runs out of money or tries to close the hospital, the state can use that piggy bank money to keep the doctors working and helping sick people. It also says the money people cannot tell the doctors how to do their jobs or treat patients.

Who & Where It Applies

Impacted groups
Private Equity CompaniesReal Estate Investment Trusts (REITs)Healthcare ProvidersPatientsRI Department of Health
Impacted communities
All

Constitutional & Fiscal Check

The requirement to post a bond equal to one year of operating expenses could be challenged as an excessive fine or an unconstitutional taking under the Fifth Amendment, or as a violation of the Commerce Clause by placing an undue burden on interstate investment. However, given the state's broad police powers to regulate public health and safety, a court might uphold it as a necessary regulation of a critical industry. The risk is moderate.

Estimated cost
None
Estimated revenue
None

Bill Analysis

Both viewpoints
For Progressives
  • Protects the healthcare safety net by ensuring that funds are available to keep hospitals and clinics open even if corporate owners drive them into bankruptcy or attempt to close essential services.
  • Prevents "asset stripping" by predatory investors, as the bill explicitly forbids private equity firms from loading the debt for the required bond onto the healthcare provider itself.
  • Safeguards the integrity of medical care by strictly prohibiting corporate owners from interfering with or controlling the clinical decisions of doctors and healthcare workers.
  • The bond requirement is so high (one year of operating expenses) that it might deter investment completely, potentially leaving struggling non-profit hospitals with no capital options and forcing them to close anyway.
  • Relies heavily on the Department of Health to accurately calculate expenses and manage the funds, creating a bureaucratic hurdle that could delay urgent financial rescues for failing facilities.
  • Does not ban private equity ownership entirely, meaning the profit-motive structure remains in healthcare, merely regulated rather than replaced by a public model.
For Conservatives
  • Ensures financial responsibility by forcing investors to put up their own capital, preventing taxpayers from being on the hook to bail out failed healthcare systems.
  • Protects the sanctity of the doctor-patient relationship by legally preventing corporate administrators from meddling in medical decisions.
  • Prevents "fly-by-night" operators from entering the market, ensuring that only financially stable entities with long-term commitment can acquire critical community infrastructure.
  • Imposes a massive, government-mandated financial barrier to entry (one year of operating expenses) that violates free market principles and effectively strangles private investment.
  • Grants the government excessive power to seize private capital based on subjective determinations like "imminent risk of closure," threatening property rights.
  • Expands the administrative state by giving the Department of Health broad authority to interfere in private business transactions and dictate terms of ownership.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 37 additions

SECTION 1. Chapter 23-17.14 of the General Laws entitled "The Hospital Conversions Act" is hereby amended by adding thereto the following section: 23-17.14-37. Bond requirement for private equity company or REIT investment.

(a) Any private equity company or real estate investment trust (REIT) engaging in a transaction that will lead to the private equity company or the REIT obtaining direct or indirect ownership or control of a provider, as defined in federal law, 42 CFR § 400.202 or provider- sponsored organization (PSO), pursuant to federal law 42 U.S.C. § 1395w-25(d) shall:

(1) Submit a notice of material change to the department of attorney general pursuant to rules promulgated pursuant to § 6-36-22 to include, but not limited to, 110-RICR 30-00-5; and

(2) Deposit, a bond with the department of health ("department").

(b) The private equity company or REIT shall not use the provider or PSO or the provider's or PSO’s assets or property as security for the bond, pay for the bond by placing debt on the provider or PSO, permit the provider or PSO to pay the bond on the private equity company or REIT’s behalf, or allow the provider or PSO to otherwise be liable or indemnify the private equity company or REIT for the bond.

(c) Until such bond has been deposited, the department shall not issue a license to such provider or PSO under this chapter, and any material change notice submitted pursuant to subsection (b) of this section shall be deemed incomplete. If the bond has not been deposited, but the department would otherwise be permitted to collect the bond, the department shall be permitted to collect from the private equity company or the REIT the amount the department would have been able to collect had the bond been deposited.

(d) The department shall determine the amount of the bond, which shall equal one year of the provider's or PSO’s average or estimated operating expenses, plus the estimated cost of hiring an independent supervisor and reasonable staff to supervise and facilitate collecting and spending the bond. The private equity company or REIT shall maintain the bond for as long as the private equity company or REIT directly or indirectly owns or controls the provider or PSO, and for seven

(7) years thereafter.

(e) The department may collect the bond if the provider or PSO declares bankruptcy, is at imminent risk of closure, or closes a majority of the essential services the provider or PSO provides, as determined by the department. The department shall use the bond proceeds to support the continued provision of healthcare services to patients served by the provider or PSO. Prior to spending the bond, the department shall seek input from the public, including, but not limited to, providers, PSOs and patients, regarding how to spend the bond. The department may select an independent supervisor and reasonable staff to supervise and facilitate collecting and spending the bond. This section does not provide the department with the authority to petition for the appointment of a receiver for the provider or PSO.

(f) The private equity company or the REIT is prohibited from interfering with or controlling the clinical decisions of health care practitioners.

(g) The department shall promulgate regulations necessary to implement this section.

SECTION 2. This act shall take effect upon passage.