Private equity in health care doesn't have to be bad

The investment of private equity in health care is not new. Since at least the 1980s, investment firms have been interested in the sector’s scale, stability and complexity. After all, health care spending represents nearly one-fifth of the U.S. economy, touches every community and operates within a uniquely intricate regulatory and reimbursement environment.

What is new is the intensity of scrutiny.

In 2025, seven states enacted legislation aimed at increasing oversight of private equity involvement in health care transactions. In just the first quarter of 2026, six more states have signed or introduced similar measures. Policymakers have good reason to take a second look. Global health care private equity activity reached record levels last year, with more than $190 billion in estimated deal value.

This debate is unfolding against a volatile backdrop. Providers are navigating Medicaid funding uncertainty, tariff and subsequent supply chain pressures, rising labor costs, ongoing declining reimbursement rates and the resulting thin margins. The system is strained, and capital plays an increasingly decisive role in determining which organizations succeed, whether we like it or not.

Private equity has earned a complicated reputation in this environment as it has been mentioned in connection with high-profile hospital closures and bankruptcy proceedings, and has been affiliated with fears about consolidation, transparency and clinical autonomy. There are valid conversations to be had around its role now and into the future, for sure.

So, let’s begin with a truth we can all agree on: Health care’s challenges did not begin with private equity, and they will not be solved by excluding it from the system. Private equity is not inherently at odds with health care’s mission. In a highly regulated system under pressure, responsible private investment can be a major part of the solution.

The problem is bigger than private equity

Private equity is often portrayed as a uniquely destabilizing force in health care, but is it? Closures, modified service offerings and layoffs are happening at hospitals across the country. In early 2025, Mass General Brigham, one of the largest health systems in the country, announced massive layoffs due to a $250 million budget shortfall. And research has shown that nonprofit hospitals have seen significant growth in profits and cash reserves without corresponding increases in charity care, underscoring that financial prioritization over community benefit is not unique to private equity ownership.

For rural hospitals in particular, consolidation has often been a lifeline. Between 2011 and 2021, 125 rural hospitals had to close their doors, while in the same time period, 441 avoided the same fate by merging with or being acquired by a larger system.

Drexel University professor Robert Field, Ph.D., M.P.H., J.D., noted on the AMA Journal of Ethics podcast “Ethics Talk” that problems frequently attributed to private equity — like rising costs, market consolidation, billing abuses and quality concerns — have occurred across nonprofit, public and traditional for-profit systems alike.

Health care is already a commercialized, capital-intensive industry operating under significant financial pressure. Private equity is one participant in that landscape. The impact of private investment depends less on its presence and more on how it is executed.

What responsible investment looks like

If private equity is going to play a constructive role in health care, the key is intentional structure.

Evidence supports this distinction. One study followed a full-integration approach to consolidation including early leadership alignment, a unified electronic health record (EHR), shared quality metrics and analytic-driven interventions. Far from declining quality after the investment, there was a 27–33% relative reduction in mortality over three years.

Responsible expansion is not a theory, buzzword or unrealistic expectation. Private equity firms, along with the compliance leaders who support their platforms, can take concrete steps:

Treat compliance as infrastructure, not overhead.

When organizations view regulatory oversight, supervision frameworks and documentation standards as core systems rather than administrative costs, consolidation becomes more stable and transparent. Embedding compliance into the operating model reinforces accountability and protects clinical independence, countering the perception that growth prioritizes financial efficiency over patient safeguards.

Engage clinical and regulatory expertise before expansion begins.

Health care is complex. Each state maintains its own licensure, scope-of-practice and supervision requirements, so when growth crosses state lines, investors need a partner who understands the nuances.

Rapidly-growing tools that private equity leaders are naturally interested in, like telehealth and remote patient monitoring, have also prompted increased federal enforcement scrutiny. Experienced medical directors and health care compliance partners can help interpret the various laws and regulations to keep scaling on track. Doing so reduces the risk that consolidation leads to regulatory missteps, opaque ownership structures or inconsistent clinical oversight. 

Standardize medical oversight, documentation and clinical decision authority across the platform.

What works at a single site does not automatically translate across multiple markets. As organizations scale, inconsistencies in supervision agreements, prescribing protocols, documentation standards and escalation pathways can become liabilities.

Establishing clear physician leadership structures, defined supervisory relationships and uniform documentation expectations ensures that care delivery remains consistent and defensible across every location. Standardization strengthens transparency and protects clinical autonomy, so private investments don’t lead to a decline in care quality.

Build audit-ready systems before diligence, not in response to it.

Regulatory review is an inevitability in health care. Platforms that wait until a transaction closes or an inquiry arrives to formalize compliance processes are already behind. Implementing centralized reporting, routine internal chart reviews, documented training protocols and transparent oversight mechanisms from the outset signals operational maturity.

Audit-ready systems also make oversight visible to regulators, providers and patients alike, so growth doesn’t have to mean less accountability. 

Health care is not standing still. It is consolidating, digitizing, expanding across state lines and absorbing new technologies faster than its regulatory frameworks were designed to accommodate. Capital will continue to move into that environment not to destroy it, but because healthcare is both essential and deeply in need of modernization. When investment is paired with disciplined compliance, transparent ownership, respect for physician judgment and infrastructure built to support sustainable growth, it can modernize operations, strengthen oversight and expand access in ways that fragmented providers often cannot achieve alone.

Private equity has been part of health care’s story for decades. With the right guardrails and infrastructure, it can also be a stabilizing part of its future.

Chris Seitz, M.D., is a board-certified emergency physician and CEO of Guardian Medical Direction.