State Lawmakers Scrutinize Private Equity’s Healthcare Acquisitions

State-level politicians across the country appear to be growing concerned about private equity investing in healthcare.

Over the past two years, legislators in Illinois, Indiana, New Mexico and New York have passed laws to bring greater transparency to healthcare acquisitions within their respective states.

In January, Massachusetts Gov. Maura Healy (D) signed into law HB 5159 to give move power to state entities to review healthcare sector acquisitions.

And also in January, Connecticut Gov. Ned Lamont (D) called for legislation to apply greater oversight of private equity investments of healthcare in the Nutmeg State.

“In recent years, we’ve seen a real change in how the healthcare system is being operated,” Lamont said in a press release. “This includes an increased share of our state’s healthcare system being owned or managed by out-of-state, for-profit companies. These recent changes have shown that our current statutes contain loopholes allowing important transactions to escape necessary review. I am urging the General Assembly to update our laws to enable the state to have proper oversight of significant health system transactions. We need to provide the state with the tools needed to protect our healthcare system from dangerous and destabilizing practices and ensure that our system continues to provide quality, accessible, and affordable health care for all.”

The above examples are just the tip of the iceberg in terms of state legislative interest in private equity investments in healthcare. According to LexisNexis® State Net® data, at least 13 states have introduced 26 bills dealing with private equity investment in healthcare.

“Health care consolidation, which is often driven by private equity, can lead to higher prices for health care services while quality of care worsens or remains stagnant,” said Illinois Attorney General Kwame Raoul in a June press release.

Over Dozen States Looking at Private Equity Investment in Healthcare

According to LexisNexis® State Net® data, at least 13 states have considered 26 bills dealing with private equity investment in healthcare. Massachusetts enacted such a measure.

What’s Driving Policymakers’ Interest?

Writing in the health policy journal Health Affairs, researchers from the University of Michigan Medical School found in November 2024 that “(m)ost current research suggests that private-equity ownership may have ‘mixed to harmful impacts’ on the quality of patient care, whether through lower staff-to-patient ratios or through increased use of unnecessary tests/procedures.”

The researchers suggested three things for policymakers to consider: increasing transparency into private-equity transactions, regulating such transactions to ensure that private-equity goals align with good patient outcomes and implementing and enforcing existing corporate practice of medicine or CPOM laws to alleviate any pressure medical providers working under private-equity-owned facilities might feel to “prioritize short-term revenues over patient care.”

A joint report released in the final days of the Biden Administration, however, offered an even blunter explanation for why private equity’s investments have become a hot topic in state legislatures.

The tri-agency report produced by the Federal Trade Commission, the U.S. Department of Justice and the U.S. Department of Health and Human Services found that “the American public is dissatisfied with ongoing trends in the health care sector.”

The report, which looked at more than 2,000 comments submitted by patients and others involved in the healthcare system, found that “the volume of comments and criticisms that target transactions engineered by private equity firms” have apparently “struck a nerve in the public.”

A common theme among those negative comments was that provider consolidation that private equity investment contributes to increases healthcare costs and decreases patient access.

“Many patients expressed frustration that following the acquisition of their preferred physician practice or facility, they were unable to afford the care they previously enjoyed,” the report said. “Many also mentioned difficulties in making appointments and seeing the physicians they trust and have seen for years.”

“In theory,” the report states, “private investment in health care services could lead to increases in output, reduced prices, and improved quality, but the comments we received—which are consistent with the growing body of research—suggest that the opposite is true. The harmful effects of private equity in the health care delivery system deserves ongoing scrutiny and greater research.”

State-level policymakers clearly have gotten the memo, or one like it. It would not be surprising at all to see more legislative activity around private equity acquisitions in the healthcare sector in the future.

—By SNCJ Correspondent BRIAN JOSEPH

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