Private equity healthcare deals fell 18.5% in the second quarter of 2026 from a year ago, while deals in two key segments — physician practice management companies and generalist and multispecialty providers — were on pace to finish at about half of their 2025 levels, according to a new industry report.

Financial data firm PitchBook cited a mix of economic and industry factors behind the slowdown, including increased state-level regulatory scrutiny.

Eleven states enacted laws over the past 2 years to increase oversight of private equity healthcare transactions, said Michael Fenne, JD, healthcare senior policy coordinator at the Private Equity Stakeholder Project (PESP), a nonprofit that researches and tracks private equity legislation and investments.

California, Connecticut, Delaware, Illinois, Indiana, Maine, Massachusetts, New Mexico, Oregon, Vermont, and Washington have adopted measures ranging from greater disclosure and transaction review to restrictions designed to keep certain medical practice decisions in physicians’ hands.

He noted that PESP is tracking an additional 22 pending bills, although many have seen little recent activity. Pennsylvania’s HB 1460 is one exception: The state House passed a version last year, and a Senate committee substantially narrowed the measure in June. The amended bill could still come up for a vote this year, he said.

How much the new laws themselves are contributing to the decline in private equity investment remains unclear. “Many [of the laws] add notice provisions that only took effect in 2026 or will take effect in 2027,” Fenne said. “It may still be too early to say.”

Why States Are Taking a Closer Look

High-profile financial woes and closures of hospitals tied to private equity helped put the broader issue of private equity in healthcare in lawmakers’ sights, Maureen Hensley-Quinn, MPA, senior director for coverage, cost, and value at the National Academy for State Health Policy (NASHP), told Medscape Medical News.

The collapse of Steward Health Care was a notable example. A private equity firm acquired a struggling six-hospital Massachusetts system and formed Steward in 2010. Steward eventually expanded to more than 30 hospitals across eight states and entered into a sale-leaseback of hospital property with a real estate investment trust (REIT). The private equity firm later ended its investment. Steward filed for Chapter 11 bankruptcy in 2024 with about $9 billion in liabilities, including $6.6 billion in long-term rent obligations, Reuters reported at the time.

Hensley-Quinn said state officials are concerned about sale-leasebacks that leave hospitals without ownership of their real estate but still paying considerable rent to a REIT. A 2025 The BMJ study highlighted the potential risk for these real estate deals: Among 87 hospitals whose real estate was acquired by REITs, 25% later closed or filed for bankruptcy compared with 4% of matched hospitals.

Concerns about private equity’s involvement in hospitals have also led states to look more closely at other areas of healthcare. Hensley-Quinn said officials are trying to understand private equity’s role across physician practices and other healthcare organizations, including who ultimately controls them.

But that ownership can be difficult to track. Private equity firms may acquire a larger “platform” practice and expand it through smaller acquisitions of competitors, some of which may fall below transaction-review thresholds, Fenne said.

“Unlike publicly traded companies, which make disclosures to the Securities and Exchange Commission, private equity firms generally aren’t required to make regulatory disclosures,” Fenne said. As a result, physician practices and other healthcare organizations can change hands without patients or employees necessarily knowing who owns them, he added.

Protecting Physician Control

Most enacted and proposed measures have focused on requiring advance notice and regulatory review of deals before they can finalize, Fenne said. But some states are going further, adding restrictions on sale-leasebacks and strengthening corporate practice of medicine protections intended to preserve physician control over medical decisions.

California’s SB 351, which took effect in January, prohibits private equity groups and hedge funds involved with physician or dental practices from interfering with clinicians’ professional judgment. The law says its purpose is to ensure that “clinical decision-making and treatment decisions are exclusively in the hands of licensed healthcare providers.”

Oregon’s SB 951, enacted last year, similarly limits the control that management services organizations (MSOs) can exert over providers. MSOs can help manage practices’ administrative and business functions, but the law seeks to keep clinical and certain other practice decisions in providers’ hands.

Connecticut’s SB 196, signed into law in May, includes protections similar to those against private equity control and interference, but it also prohibits hospitals from entering into sale-leaseback transactions beginning July 2027.

The laws address concerns states have heard directly from physicians about private equity ownership or management, including doctors losing control over hiring, billing, and coding, and which insurers their practices accept, Hensley-Quinn said. Some told officials their practices would no longer accept Medicaid.

States are also confronting declines in the availability of primary care, maternity care, and behavioral health services. Hensley-Quinn cautioned that those trends have many causes and cannot be directly attributed to private equity, but she said they have contributed to officials’ interest in knowing who controls the decisions about which service lines are offered.

A Model for Transparency

Hensley-Quinn said states have asked NASHP for guidance on private equity, prompting the organization to develop a model law addressing transaction review, ownership transparency, and physician-practice protections.

“At the core of all of this,” Hensley-Quinn said, states are saying, “we need to understand who owns what in our state because these transactions don’t often trigger antitrust issues.”

Meanwhile, medical groups face financial pressures that can make outside investment attractive. A June 2026 poll by the Medical Group Management Association found 84% of medical groups reported higher operating costs than a year earlier, averaging about 11% more. Labor costs, including wages, benefits, and staffing shortages, were among the primary drivers.

“By and large, states are trying to balance these things,” Hensley-Quinn said, acknowledging that practices may benefit from outside investment and management assistance without having to yield control of the practice or care.

Still, private equity is only one part of the changing ownership dynamics in healthcare. About 6.5% of physicians worked in private equity-owned practices in 2024 compared with at least 47% employed by or affiliated with hospital systems, according to a US Government Accountability Office review.

“When you start digging into some of this, it’s actually a larger consolidation issue,” Hensley-Quinn said. Physicians have told state officials that even acquisitions by large nonprofit hospital systems can affect their autonomy and control over practice decisions, she added.

She expects states to continue examining private equity and healthcare consolidation in the next legislative session.

“I think we’re experiencing a little bit of a growing pain,” Hensley-Quinn said, “with the healthcare market changing as quickly as it is, and states trying to keep up.”

The experts cited in this article reported no relevant financial disclosures.

Steph Weber is an award-winning freelance journalist specializing in healthcare and law.