Treating the symptom, not the disease: Private equity, hospital finance and the policy debate we should be having

Policymakers are missing the mark
Over the past decade, private equity firms have become significant investors across virtually every corner of American health care. According to a recent report from NYU’s Stern Center for Business and Human Rights, private equity has invested more than $1 trillion in the U.S. health care sector over the last ten years, funding hospitals, physician practices, nursing homes, ambulance services and behavioral health providers.¹ The Private Equity Stakeholder Project estimates that roughly 500 U.S. Hospitals are owned by private equity firms.²

That scale of investment has attracted growing scrutiny, and policymakers across the states and federal government are responding. Dozens of states are advancing transparency and ownership restriction measures,³ including Oregon, which recently enacted what one legal observer described as the toughest limits on private equity in physician practices in the nation.⁴ A recently introduced federal bill would cut Medicare funding to private equity-owned hospitals entirely.⁵

While we understand the concerns being raised around private equity in health care, there is a foundational question that is being missed in this debate, which is why are so many hospitals and physician practices turning to private equity in the first place?

If hospitals and physician practices are increasingly financially unsustainable, then perhaps restricting private equity without addressing the underlying conditions that created the need for it may solve less than its proponents’ hope.

The regulatory response – CPOM and ownership restrictions
The primary legal vehicle many states are using to enact restrictions on private equity is through the Corporate Practice of Medicine (CPOM) doctrine, which is the longstanding principle that generally prohibits ownership and operation of medical groups or practices by laypersons, and requires medical judgment to remain with licensed professionals.

Private equity firms largely navigated CPOM through Management Services Organizations (MSOs), which are management companies that contract with physician practices to provide administrative services without technically owning them, while often holding the financial levers tightly enough to exercise significant practical influence.

Many states, including Oregon, are moving to restrict these structures. Last year, Governor Kotek signed Senate Bill 951 into law, which widely prohibits MSOs from owning or controlling medical practices, sitting on their boards or holding governance rights, amongst other things. It further draws an explicit line between permissible administrative services and prohibited clinical influence, covering hiring decisions, patient scheduling, diagnostic coding and payer contract negotiations.⁶

At the federal level, Senator Chris Murphy (D-CT) and Representative Mary Gay Scanlon (D-PA) introduced a bicameral bill titled the “Take Back Our Hospitals Act,” which is also sponsored by Oregon Senator Jeff Merkley. If enacted, this bill would make private equity-owned hospitals and nursing homes ineligible for Medicare reimbursement, which would, as a practical matter, effectively curtail private equity hospital ownership.⁵ Whether the bill advances in the current political environment is uncertain, but its introduction signals that federal action is now a live legislative issue.

The conversation we should be having
Both SB 951 and the proposed federal “Take Back Our Hospitals Act” respond to private equity’s growth in health care. But neither directly asks why private equity found such fertile ground in the first place.

The answer is not complicated – hospitals, particularly nonprofit and rural hospitals, and physician practices are often no longer financially sustainable under current conditions. Private equity did not create that condition – it moved into the vacuum.

The numbers in Oregon tell the story clearly. As we highlighted recently, Oregon hospitals are already in dire straits. As reported by Willamette Week, “Collectively, Oregon’s 60 hospitals made just $50.5 million in 2024, about one-tenth of their average profitability in the decade prior to the pandemic.”⁷ The most recently released OHA data for Q3 of 2025 showed that statewide total operating expense exceeded total operating revenue by $55.5 million.⁸ Around half of Oregon’s 60 hospitals lost money on operations last year.⁹

The cost pressures are real and persistent – payroll, benefits and supply expenses have risen substantially⁹ and Oregon’s nurse staffing mandate added significant new labor obligations.¹⁰ Further, Oregon’s Medicaid expansion, which covers one in three Oregonians (compared to less than 20% nationally), means a large share of patients are reimbursed at rates that routinely fall short of the actual cost of care.⁹

The federal outlook adds further pressure. The One Big Beautiful Bill Act, signed July 4, 2025, includes more than $1 trillion in reductions to federal health care spending over ten years, with deep Medicaid cuts projected to result in approximately 10 million people losing coverage nationally.¹¹

Ownership restrictions are a legitimate response to the concerns raised about private equity in health care. But if the underlying problem is that hospitals and physician groups cannot cover their costs, restricting who owns them does not fix that problem. The conversation that should really be occurring is not about who owns our hospitals, but how we make them financially viable enough that outside capital is a strategic option rather than a lifeline.

Sources

1. Michael Goldhaber, “Private Equity in Healthcare,” NYU Stern Center for Business and Human Rights (March 10, 2025), p. 1 (“Private equity firms have become a major force in health care, investing more than $1 trillion over the last ten years”).
2. Private Equity Stakeholder Project, PESP Private Equity Hospital Tracker (updated April 2025) (“Approximately 488 US hospitals are owned by private equity firms”). https://pestakeholder.org/private-equity-hospital-tracker/. Note: The Murphy press release (note 5 below) uses the figure “more than 400 hospitals and nursing homes,” which reflects the bill’s own framing and includes nursing homes as a combined category.
3. Private Equity Stakeholder Project, “Dozens of State Bills Proposed Addressing Private Equity in Healthcare” (March 9, 2026) (tracking 79 bills across 25 states as of early 2026 addressing private equity and investor-backed ownership in healthcare). https://pestakeholder.org/news/dozens-of-state-bills-propose-addressing-private-equity-in-healthcare/
4. Kirkland & Ellis LLP, “Oregon SB 951 — Nation’s Toughest Limits on Private Equity in Physician Practices Now Law,” Kirkland Alert (June 23, 2025) (“SB 951 sets a new ceiling for state-level oversight of private equity healthcare investment… none have gone as far as Oregon in directly policing MSO operations and contractual terms”). https://www.kirkland.com/publications/kirkland-alert/2025/06/oregon-sb-951
5. Press Release, Office of Senator Chris Murphy, “Murphy, Scanlon Introduce Bicameral Bill to Ban Private Equity From Owning Nurses and Hospitals” (March 23, 2026). Note: The bill was introduced March 23, 2026. https://www.murphy.senate.gov/newsroom/press-releases/murphy-scanlon-introduce-bicameral-bill-to-ban-private-equity-from-owning-nurses-and-hospitals
6. Oregon SB 951 (Enrolled, 2025 Regular Session), signed June 9, 2025. MSO dual-ownership prohibition: Sections 3–4. Administrative vs. clinical line-drawing: Section 6. Unlawful trade practice enforcement: Section 8. https://olis.oregonlegislature.gov/liz/2025R1/Downloads/MeasureDocument/SB951/Enrolled. Analysis: Kirkland & Ellis LLP (note 4 above).
7. Nigel Jaquiss, “Dismal Financial Results Threaten Oregon Hospitals,” Oregon Journalism Project / Willamette Week (May 2, 2025). The quoted sentence (“Collectively, Oregon’s 60 hospitals made just $50.5 million in 2024, about one-tenth of their average profitability in the decade prior to the pandemic”) appears verbatim in the article. A separate sentence in the same article states: “In the 18 years of hospital profitability data the Oregon Health Authority has collected, only one year — 2022 — yielded lower profits than 2024.” https://www.wweek.com/news/2025/05/02/dismal-financial-results-threaten-oregon-hospitals/
8. Oregon Health Authority, “Oregon Acute Care Hospitals Financial Trends Q3 2025” (published February 9, 2026), p. 2 (“statewide total operating expense exceeded total operating revenue by $55.5 million”; statewide operating margin of -1.0%). Note: Q3 2025 total margin (which includes investment and other non-operating income) was positive at 3.0%. Q4 2025 data had not been published as of the date of this article. https://www.oregon.gov/oha/HPA/ANALYTICS/HospitalReporting/hospital-quarterly-current.pdf
9. Hospital Association of Oregon, “Oregon Hospitals on the Brink: 2024 Hospital Utilization and Financial Analysis” (April 25, 2025). Specific data: 45% of hospitals with negative margins (p. 3, source: Apprise Health Insights 2025); payroll/benefits/supply = 70% of costs, up 40%+ since 2020 (pp. 6–7, source: Apprise Health Insights 2025); Medicaid covers one in three Oregonians vs. under 20% nationally (p. 7, citing U.S. Census Bureau, Health Insurance Coverage in the United States: 2023); Medicaid reimbursement at 56 cents per dollar of care (p. 7, source: Apprise Health Insights 2025). https://oregonhospitals.org/wp-content/uploads/2025/04/2025.04.25_Report_Oregon-Hospitals-on-the-Brink_FINAL.pdf
10. Amelia Templeton, “Oregon Hospitals’ Bleak Financials Leaves Them Vulnerable to Tariffs, Proposed Medicaid Cuts,” OPB (May 1, 2025). Providence nurse staffing figures: “Providence has hired an additional 200 full time nurses in Oregon to meet the requirements of the state’s nurse staffing law.” Medicaid reimbursement rate: “Oregon’s Medicaid program pays hospitals 54 cents per every dollar of care hospitals provide its members.” https://www.opb.org/article/2025/05/01/oregon-hospitals-dire-financials-vulnerable-tariffs-proposed-medicaid-cuts/
11. KFF, “Health Provisions in the 2025 Federal Budget Reconciliation Law” (December 2025) (“The CBO has stated the law will reduce federal spending on health care by over $1 trillion and lead to a 10 million increase in the country’s uninsured population”). https://www.kff.org/medicaid/health-provisions-in-the-2025-federal-budget-reconciliation-law/