Gov. Lamont signs CT hospital oversight law targeting private equity influence

New law bars private equity entities from holding controlling interests in Connecticut hospitals following Prospect turmoil

HARTFORD, CT — The Private Equity Stakeholder Project (PESP) applauds Connecticut Governor Ned Lamont for signing SB 196 into law, legislation aimed at increasing oversight of hospital sale-leaseback transactions and limiting private equity influence over Connecticut hospitals.

The law comes after years of financial turmoil tied to Prospect Medical Holdings, the Leonard Green-backed hospital system that operated multiple hospitals in Connecticut before filing for bankruptcy in 2025.

“Hospitals are essential community infrastructure, not just financial assets,” said Michael Fenne, healthcare policy coordinator for PESP. “SB 196 is an important effort to address the kinds of arrangements that can undermine hospital stability, increase financial burdens, and create risks for patients, workers, and communities.”

SB 196 requires hospitals to attest that no private equity entity has a controlling interest in the hospital and that private equity entities are not interfering with the professional judgment or clinical decision-making of healthcare providers. The law also increases scrutiny of hospital sale-leaseback transactions, a financial tactic commonly associated with private equity-owned healthcare systems.

Sale-leaseback deals played a major role in Prospect Medical Holdings’ financial deterioration. During Leonard Green’s ownership of Prospect, the hospital system sold off hospital real estate while investors extracted hundreds of millions of dollars in dividends and fees. PESP research found that Prospect’s owners collected at least $658 million from the hospital chain even as hospitals experienced worsening financial conditions and operational instability.

“Prospect became a warning sign for what can happen when hospitals are loaded with debt, stripped of valuable real estate, and pressured to generate returns for financial investors,” Fenne added. “Connecticut lawmakers responded to a real and growing threat facing healthcare systems across the country.”

PESP also called on Governor Lamont to sign SB 125, legislation focused on increasing transparency and oversight around nursing home ownership structures and financial practices.

Connecticut has already experienced the risks associated with financially engineered nursing home ownership models. Genesis Healthcare facilities in Connecticut have faced serious health and safety concerns in recent years, including the emergency transfer of residents from Quinnipiac Valley Center in Wallingford in 2022 following findings of “Immediate Jeopardy” violations tied to patient neglect, staffing, infection control, and medication administration failures. In 2025, Genesis Healthcare’s St. Joseph’s Center in Trumbull faced evacuations tied to Legionella bacteria and fire safety concerns before the facility was ultimately slated for closure.

Genesis Healthcare later filed for Chapter 11 bankruptcy after years of private equity-driven debt layering and sale-leaseback transactions that stripped the company of real estate ownership while saddling it with long-term lease obligations.

“SB 125 would give Connecticut better tools to know who owns nursing homes, how these facilities are financed, and how financial decisions are impacting care on the ground,” said Fenne. “Instability tied to private equity-backed companies like Genesis shows why we need far greater transparency around complex ownership structures and the financials shaping long-term care facilities.”