Last week, California Governor Gavin Newsom signed into law a bill that would require additional transparency for private equity transactions in the health care industry. This expansion of an existing law continues the growing trend of state legislatures looking to hold greater oversight in this area.
“We are preparing clients to think of it as a more expansive and burdensome process that they should anticipate going through in any of their physician practice or similar health care deals,” Jennifer Romig, partner in the health care practice at the law firm Ropes & Gray, told Newsweek.
Assembly Bill 1415 will require private equity firms to notify the state Office of Health Care Affordability before major transactions in health care. Those firms also may have to provide more details around ownership and profit cash flows before they may continue acquisitions.
Newsom last week also signed Senate Bill 41, which places additional regulatory scrutiny on pharmacy benefits managers. Both laws take effect January 1, 2026.
“These statutes are part of a larger trend, states have been enacting statutes that require notification of health care transactions more broadly,” Ryan Kantor, partner at the law firm Morgan, Lewis & Bockius, told Newsweek. “The goal is to allow the states to look at those deals before they close.”
While California expanded its policies for private equity activity in health care, numerous states have passed similar legislation over the last year, including Oregon, Massachusetts and Indiana, with many other states like Connecticut, Illinois, New York and Pennsylvania mulling proposed legislation as well.
“Over the past five years there’s been increasing state interest in regulating private equity and hedge fund investments in healthcare consolidation,” Romig said. Her firm maintains a public tracker of private equity health care regulations across the country.
Why It Matters
The Private Equity Stakeholder Project (PESP) estimates that 488 hospitals in the United States are owned by private equity firms, representing 22 percent of the country’s for-profit hospitals. PESP also notes that at least 27 percent of private equity-owned hospitals are in rural areas and that six “private equity or formerly private equity-backed hospitals” have closed in 2025. In 2024, more than 670 firms acquired health care companies or related assets.
A bipartisan U.S. Senate Budget Committee report investigating the effects of private equity ownership in health care found that the firms wield significant influence over medical care decisions and have a tendency to focus on financial goals over quality of care, noting multiple health and safety violations as well as understaffing and closure of several PE-owned hospitals.
The report also noted an increased involvement of private equity in the industry, with an initial surge from 2009 to 2011 continuing through the 2010s and into this decade.
A recent Harvard research study identified higher patient mortality in private equity-owned hospitals, as well as decreased ICU times and an increased number of patient transfers to other hospitals, largely due to staff shortages.
“Staffing cuts are one of the common strategies used to generate financial returns for the firm and its investors,” Dr. Zirui Song, professor of health care policy at Harvard Medical School and a lead researcher on the study, said on the school’s website. “This study shows that those financial strategies may lead to potentially dangerous, even deadly consequences.”
The purpose of these emerging state laws is to prevent harm to public health and safety driven by financial interests.
“[Policymakers] want to know what’s happening with important healthcare assets in their state. These are important to the folks that live there, it’s important to patients, and I think they just want to understand what’s happening,” Kantor said.
A 2023 Harvard study also led by Song found higher rates of adverse events caused by PE-owned hospitals, including falls and infections. Similar research has identified increased mortality rates at PE-owned nursing homes.
Private equity firms argue that states enacting health care regulations may see less overall investment going to their states.
“[Some people argue that] less capital may flow to states that have these types of statutes, because it’s harder to make investments, and then it’s also harder to exit those investments,” Kantor explained.
What To Know
Right now, different states have different standards in their policies, but all of them are focused on increased scrutiny over private equity deals in health care.
In Oregon, the law also includes a maximum ownership share of 49 percent that can be held by outside firms and a mandatory approval process. In most other regulations, the state is looking for notification of the transaction for awareness and may seek more details in either an approval process or a something like it.
In the recently passed California law, for example, Ropes & Gray health care partner Brett Friedman told Newsweek: “It’s not an approval process, but you need to wait for something to happen,” such as a green light from the state’s governing body, the California Office of Health Care Affordability.
“So don’t call it approval, but if you proceed without doing this and [are] waiting for an answer, and the answer is [you have to conduct a Cost and Market Impact Review (CMIR)], then you’re acting in contravention of the law. You have to wait for something to happen that seems awfully like an approval,” he explained.
The attorneys speaking with Newsweek all pointed out that this regulation is in its early days, and the strictness or severity of state reviews of health care private equity transactions is yet to be determined. Romig notes that so far, in her firm, “we’ve only seen one” CMIR in California.
“Some of these statutes are somewhat opaque,” Kantor said. “It also comes down to how they’re going to get enforced. Some reviewing agencies may end up being aggressive in this area…but others might not be aggressive.”
Firms looking at ownership acquisitions of health care providers with a presence in multiple states will want to be careful of regulations in every jurisdiction in which they operate.
“This does make cross-state transactions very complicated, because you have to build in different timing based on any individual state,” Kantor said. “If you are a company that’s doing a multi-state transaction, you have to build in the possibility of very different reviews on the merits and timing.”
What People Are Saying
House Majority Leader Ben Bowman (D- Oregon), who introduced the Oregon bill, said: “We’re at an inflection point in this country when it comes to the corporatization of healthcare. With the passage of this bill, every Oregonian will know that decisions in exam rooms are being made by doctors, not corporate executives.”
Romig adds: “There is a real focus on private equity and similar investments in health care as a market. And even for states that have a current law on the books, like a California, like a Massachusetts… they may go back to the table with more stringent laws.”
She continues: “I view these healthcare transaction laws as sort of an undulating wave, but we’re seeing a desire and a persistence on the part of certain state legislatures to make sure that they are capturing private equity and similar investment in healthcare.”
Friedman adds: “The biggest issue I’ve seen, in general, is how much disclosure you can get the regulators comfortable with without giving them everything you don’t want to give them… There’s a tension in what is truly proprietary and confidential and subject to disclosure.”
He continues: “The critical change is more entities have to submit paperwork in connection with these transaction goals, not just the decision practice side, but the management service organizations (MSO) and the MSO ownership entities, the private equity or hedge fund entities that own those MSOs… so what you’re seeing here is a lot more disclosure.”
Kantor adds: “It adds uncertainty to the deal. You may find yourself with an extended merger review process, and then you might find yourself with a blocked transaction… We’ll start to get some data points soon enough about how they are taking actions under the statute that that would be meaningful.”
What’s Next
The California law takes effect January 1, 2026. Other states are considering similar legislation and, as Romig indicated, states that have already passed regulations like this may pass stronger ones.
“It’s too soon to get really, really concerned if you’re one of these entities,” Friedman said. “But it’s something definitely to watch.”
