Private Equity Acquisition in Healthcare
Between 2013 and 2023, the Massachusetts Health Policy Commission (HPC) tracked 199 new healthcare acquisitions, with over half involving private equity (PE). This number marked a systemic transformation in the healthcare industry. Where healthcare delivery was once conducted through traditional provider networks, it is now increasingly mediated by profit-maximizing financial institutions.
In the last decade, small-scale specialty clinics—such as behavioral health clinics, hospice centers, or dental clinics—have become key targets for private equity firms due to their relatively low regulation, predictable revenue streams, and scalable service models. Although hospitals have been less affected by PE acquisition, they experience consequential indirect effects, largely due to the fact that their referral partners or ancillary providers (like imaging or rehab centers) are owned by PE firms.
The most prominent example of PE’s disruption in the healthcare system is shown by Steward Health Care’s collapse. In early 2024, Steward Health Care filed for bankruptcy, revealing its complex ownership structure with multiple layers of shell companies and leveraged financing. The immediate effects for healthcare workers and patients were tangible, with Massachusetts hospitals Carney and Nashoba closing soon after no bidders emerged to take over operations. These abrupt closings left thousands in Dorchester and Ayer counties without accessible local care, increasing the strain on neighboring hospitals. Following Steward’s collapse, Massachusetts legislators declared that the bankruptcy was a product of regulatory blind spots, as investor-backed deals were structured through intermediaries that evaded the state’s oversight.
Massachusetts Law on Private Equity in Healthcare
Seeing the strain on their constituents, Massachusetts legislators worked to expand the state’s regulatory influence over PE, with Massachusetts Bill H. 5159 eventually signed into law by Governor Maura Healey on January 8, 2025. The new law marked a first-of-its-kind effort to directly regulate financial entities within healthcare, with a stated purpose to “strengthen oversight of material change transactions in healthcare markets and expand financial reporting obligations for providers, hospitals, and related entities.”
The new regulatory measures apply to private equity investors, Real Estate Investment Funds (REITs), and Management Services Organizations (MSOs) as each of these firm types seek a financial stake in healthcare. The goal of the law is to expand the legal definition of “material change” so that even partial acquisitions or changes to management contracts can prompt state review. Massachusetts lawmakers hope that this increased oversight will dissuade private entities from structuring deals just below regulatory thresholds to avoid legal disclosure—a common practice before the law’s passage earlier this year.
The core provisions that aim to expand the legal implications of “material change” are grounded in increased disclosure requirements. Following the law’s passage, private entities must disclose all ownership chains, investor affiliations, and audited financials. With this new disclosure policy in effect, Massachusetts lawmakers are optimistic that previously hidden financial arrangements will be available in public records. Noncompliance with disclosure will cost firms up to $25,000 per week, with the harshest penalties given to firms who have yet to renew their operational license with the state.
Arguments in Favor of the Law
Members of the Massachusetts legislature who voted in favor of the law’s passage believe that increased bureaucratic requirements will ensure that state regulators can detect early warning signs like excessive dividend capitulations or debt-funded acquisitions. Ideally, transparency in these business interactions should dissuade unfit firms from purchasing equity in healthcare, preventing a potential loss of ethical integrity in hospitals and subsidiary health firms. Following Steward Health Care’s collapse, a collection of new studies has proven that this loss of ethical integrity in our healthcare infrastructures could have detrimental consequences.
In 2024, a study in the Journal of the American Medical Association found a 25.4 percent increase in hospital-acquired conditions like falls or infections. Most notably, falls increased by 27.3 percent and central line-associated bloodstream infections increased by 37.7 percent following PE acquisition. Cases of surgical site infection also rose despite an 8.1 percent decline in surgical volume, likely caused by staff cuts and decreased sterility practices. These results indicate that PE acquisition is correlated with worsening inpatient quality, providing a strong argument in favor of the new Massachusetts law.
Additional evidence has shown that PE-owned hospitals also engage in “cherry-picking,” which refers to the practice of selectively admitting lower-risk patients to maintain profitable margins. Recent data from heart failure patients suggest that PE-owned hospitals are more likely to avoid these cases, as they carry high financial risk. Further, this principle affects patients with compounding conditions or those who are socioeconomically challenged, as their treatment is often non-profitable.
Along with the patient’s perspective, many healthcare workers are in favor of new state regulations. Due to the staffing and wage cuts, PE-owned healthcare institutions are operating with fewer staff or more tightly scheduled shifts. Practically, this amounts to excess burdens for healthcare workers in the forms of longer hours, increased patient loads, and less internal decision-making autonomy. Over time, researchers worry that this will exacerbate workforce burnout by reducing job satisfaction and increasing malpractice risks.
With new financial pressures, clinicians also may be forced to shift their attention away from the patient and more towards the financial targets from which they’re being evaluated (i.e. revenue per patient, patient quotas). Physicians are against these changes, as those employed at PE-owned organizations reported substantially lower satisfaction (44.8 percent in PE-owned vs. 74.4 percent in control institutions). These physicians reported a loss in their autonomy to provide care (48.3 percent in PE-owned vs. 66.3 percent in control institutions) which proves that new financial pressures harm a physician’s ability to do their job with integrity.
Arguments Against the Law
Despite the law’s attempt to apply measurable criteria to its regulatory language, critics argue that H. 5159’s terminology still leaves too much room for interpretation. The global law firm Sidley notes that key phrases—such as “significant equity investor” and “dominant market share” – are not precisely defined, potentially leading to inconsistent enforcement or litigation. Sidley argues that this ambiguity could continue to allow investors to exploit gray areas in the law, while simultaneously burdening compliant entities with uncertainty about what qualifies as reportable ownership. In practice, this ambiguity may delay the law’s implementation, as exploitative firms will find new ways to evade the state’s regulation, with compliant healthcare institutions subject to unnecessary strain.
While the Massachusetts law represents a step forward in oversight, some policy analysts have predicted that its impact will be diluted through political negotiation. The law firm of McDermott Will & Emery highlighted that earlier drafts of the bill included stronger provisions, such as leverage caps, more explicit limits on Management Services Organizations (MSOs), and mandatory review of sale-leaseback transactions—all of which were removed before passage. As a result, they argue that the new law may function as a more symbolic gesture toward accountability than as a tool for genuine structural reform.
AP News elaborates on concerns over the law’s practical implementation, noting that state agencies like the Health Policy Commission (HPC) and Center for Health Information and Analysis may struggle to process the influx of new legal reports and filings without equal increases to bureaucratic staffing or funding. Further, the law firm Ropes & Gray argues that the new expanded oversight could complicate new investments to the point of discouraging legitimate investment into healthcare infrastructure. While greater transparency is beneficial, critics contend that excessive regulatory friction could make Massachusetts healthcare investment unattractive to all private entities, not just those that exploit the system. This would pose a threat that could undermine hospital modernization or expansion projects in the state that generally rely on private financing—potentially setting Massachusetts’ healthcare development back long-term.
Future Outlook
Regardless of arguments for or against, Massachusetts’ H. 5159 marks an important step toward restoring transparency and accountability in a healthcare system increasingly shaped by private equity. By requiring ownership disclosure and financial oversight, the law confronts the risks exposed by the Steward Health Care collapse and seeks to realign investor behavior with patient and worker welfare. Still, its long-term success will depend on clear regulatory enforcement, sufficient bureaucratic capacity, and the ability to balance oversight with continued investment in healthcare infrastructure. If effectively implemented, H. 5159 could serve as the national model for reconciling private capital with public health—demonstrating that financial profit and ethical care can exist simultaneously without conflict.