By Chris Cumming
State laws restricting private-equity involvement in the medical sector have taken their first scalps, as authorities signal an aggressive approach to enforcement.
Last year, lawmakers in California and Oregon passed measures to prevent corporate healthcare investors from encroaching on medical care, part of a broad backlash against private equity's role in the sector.
The new laws started to bite last week. In California, Attorney General Rob Bonta unveiled the first settlement for violating the new law, penalizing Aspen Dental Management, which is backed by asset managers Leonard Green & Partners and Ares Management.
Just a day earlier, Oregon hospital operator PeaceHealth scrapped plans to bring in an out-of-state medical-staffing company after a federal judge said the move looked like an end-run around the state's strictest-in-the-nation ban on corporate medicine.
The result "elated" Oregonians opposed to the corporatization of healthcare, said Hayden Rooke-Ley, a Portland-based senior fellow at the Brown University School of Public Health who advises states -- including Oregon -- on how to combat corporate medicine.
"For those who are concerned that corporate medicine is an inevitability and can't be resisted, this has been a sliver of hope," he said. "It is the first instance that folks can point to showing that collectively we don't have to organize our healthcare system this way."
For private-equity investors, however, the actions in Oregon and California are a wake-up call, showing that the new laws can't be ignored, said John Saran, a partner at law firm Holland & Knight.
"These laws are real and you need to make a good-faith attempt to comply, " said Saran, who advises private-equity firms on healthcare deals. "The time of putting your head in the sand is over."
Public opposition to healthcare buyouts has grown in recent years, spurred in particular by the disruptive bankruptcies of hospital operators Steward Health Care System and Prospect Medical Holdings in 2024 and 2025, respectively. Both were formerly owned by private-equity firms.
Other states are considering following the lead of Oregon and California by toughening restrictions on corporate medicine. On Wednesday, for instance, Vermont's state Senate advanced a bill aimed at restricting private equity's role in medical care.
The idea of these bills is to revive and strengthen longstanding bans on corporate medicine -- many enacted in the early 20th century -- that are currently on the books in about 30 states. But the bans have become ineffective due to lax enforcement and because private-equity firms have devised workarounds to get economic and operational control of medical practices without violating the laws, Rooke-Ley said.
Existing corporate-medicine bans "are chronically unenforced, in a clear departure from the spirit of these laws that say medical practices need to be owned by licensed clinicians in the state," he said.
Recent attempts to strengthen state laws often take aim at private-equity-backed support organizations, which provide back-office services to medical and dental practices in exchange for a fee. But Rooke-Ley and other critics say these organizations can use loopholes to unlawfully control the practices and evade restrictions.
Last week's actions touched on this issue. In California, Bonta said Aspen Dental had exceeded its role as a support organization and took part in managing dental practices, in violation of California's corporate-medicine ban. He ordered Aspen Dental to pay $2.3 million in penalties and restitution while also imposing new conditions to ensure the company doesn't exert undue control over dental care at the practices it supports.
The state "is making clear that patient care must remain in the hands of licensed professionals," Bonta said. An Aspen Dental spokeswoman said every Aspen Dental office operates independently under the control of licensed dentists in a model "designed to protect the integrity of the doctor-patient relationship and keep clinical decision-making at the local level, where it belongs." She added the settlement "provides clarity" and the company is fully prepared to implement it.
Leonard Green didn't reply to requests for comment. Ares declined to comment.
Before the Aspen Dental fine, Bonta sent a shot across the bow on his intent to strictly enforce the ban on corporate medicine. In particular, he indicated last month that he wanted to ban the so-called "friendly physician" model, another legal structure commonly used by private-equity firms to back medical practices. That would be a step further than California lawmakers went in writing the law last year.
The Oregon dust-up touched on both the friendly-physician model and the role of support organizations, though private equity wasn't involved. The firestorm erupted in February when hospital operator PeaceHealth tried to replace Eugene Emergency Physicians with Atlanta-based ApolloMD at a Eugene-area hospital.
The move spurred a backlash from politicians and community members. The ousted physicians' group sued, alleging ApolloMD was trying to evade the requirement that Oregon medical practices be owned and controlled by state-licensed physicians.
U.S. District Judge Mustafa Kasubhai criticized the arrangement between ApolloMD and the physician group it created to operate in Oregon, which he said didn't reach the standards of the new corporate-medicine law. Enacting the new state law was a "wise, far-reaching decision" to prevent precisely the type of arrangement ApolloMD planned, the judge said. ApolloMD declined to comment.
After several days of testimony, PeaceHealth agreed to retain Eugene Emergency Physicians.
The decision was made "after listening carefully to concerns raised by physicians, caregivers and community leaders," said a PeaceHealth spokesman. "We are focused on working collaboratively with our broader care community to ensure safe, reliable and well-staffed emergency departments for the patients and communities we serve."
Write to Chris Cumming at chris.cumming@wsj.com
(END) Dow Jones Newswires
May 15, 2026 09:42 ET (13:42 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments