Key Takeaways:
Vermont on Monday became the third state since the start of 2025 to restrict private equity's role in healthcare, as the American Medical Association voted days earlier to push for a nationwide ban on corporate interference in physician decision-making.
"Vermont Gov. Phil Scott, a Republican, signed a bill prohibiting corporate entities such as private-equity firms and hedge funds from interfering in the practice of medicine at healthcare facilities they back," said Rep. Alyssa Black, a Democrat from Essex who sponsored the legislation. The law also requires healthcare companies to publicly report their ownership and investors.
The measure arrives as a growing body of research links private-equity ownership to worse patient outcomes. A study published last year by researchers at Harvard Medical School, the University of Pittsburgh and the University of Chicago found that patient deaths increase at hospitals acquired by private equity. The bankruptcies of formerly PE-backed hospital operators Steward Health Care System and Prospect Medical Holdings in 2024 and 2025, which led to hospital closures and cost taxpayers tens of millions of dollars, helped galvanize opposition.
Vermont had no prior requirement to disclose medical practice ownership and no ban on the corporate practice of medicine — a prohibition on the books in most states. The state had 33 private equity-backed companies as of 2022, with $760 million invested that year, according to the American Investment Council, the industry's largest trade group. The group has argued that PE investment "plays a critical role in supporting quality, affordable health care in the United States."
The AMA's federal push
The American Medical Association, which represents more than 270,000 physicians, voted June 10 to seek a nationwide prohibition on corporate interference with patient care and to oppose legal structures commonly used by private-equity firms to invest in medical practices. The shift marks a reversal from the group's prior position, which supported state-level restrictions but stopped short of endorsing a federal ban.
"The tide has shifted" on doctors' views of private equity in healthcare, said Vicki Norton, a Florida emergency physician and president of the American Academy of Emergency Medicine, who introduced the resolution. "People are coming to realize that when you get in bed with private equity, you're making a deal with the devil."
The AMA's new stance follows Oregon's passage last year of the toughest state-level restrictions against private-equity investment in medicine. Those rules helped a group of emergency physicians in Eugene block an out-of-state staffing company from replacing them last month, Norton said.
A widening regulatory front
Vermont, Oregon and California have all passed new restrictions on the corporate practice of medicine since early 2025. Massachusetts and Indiana recently enacted laws to scrutinize private-equity healthcare investments, while Connecticut last month banned a transaction type critics say PE firms use to extract money from hospitals.
Rep. Black said the Vermont bill was significantly softened from an earlier version that would have banned private equity from the state's medical sector entirely, facing "overwhelming" opposition from healthcare lobbyists. She plans to continue pushing for restrictions, including a ban on the so-called friendly physician model, which she characterized as a "loophole" used to avoid investment limits. "This is going to be a multiyear process," she said.
The regulatory momentum at the state level, combined with the AMA's federal push, signals growing headwinds for private-equity investment in US healthcare. If the trend continues, PE firms may face higher compliance costs, reduced deal flow in the sector, and potential valuation compression for existing healthcare portfolio companies.
This article is for informational purposes only and does not constitute investment advice.
