PESP calls for oversight of private equity in Washington healthcare

PESP Shares Concerns About Private Equity’s Role in Rising Healthcare Costs at Washington’s Health Care Cost Transparency Board

On October 23, the Washington Health Care Cost Transparency Board (HCCTB) convened to examine the financial and structural pressures that drive rising healthcare costs across the state. The Board was created by the legislature in 2020 to set a statewide healthcare cost-growth benchmark, analyze spending trends, and identify the forces that push care further out of reach for Washington families.

The meeting also included a briefing from the primary sponsor of proposed Washington state corporate practice of medicine legislation, noting that related policy work is expected to continue next year through proposed SB 5387, which remained in the Senate Rules Committee when the last legislative session adjourned.

At the meeting, Private Equity Stakeholder Project Senior Policy Coordinator Michael Fenne provided public comment and urged the Board to consider the growing influence of private equity in Washington’s healthcare system and how this affects affordability, quality, and financial stability.

Washington Faces High Exposure to Private Equity and Heightened Risk

Fenne highlighted findings from PESP’s Private Equity Risk Index, which shows that Washington is among the states most exposed to private equity ownership in healthcare. The state ranks in the top ten for workforce employment tied to private equity-backed companies and for pension investments tied to private equity. It also ranks among the lowest for Medicare quality ratings at private equity-owned nursing homes.

This combination of high exposure and weak quality indicators has created growing concern among workers, patients, and policymakers.

Financial Engineering Often Drives Costs Up

In his testimony, Fenne described several financial tactics commonly used by private equity firms. These patterns are well documented by PESP and others:

• Leveraged buyouts that load healthcare providers with acquisition debt
• Dividend recapitalizations that require providers to borrow again to pay owners cash
• Sale-leasebacks that sell real estate and convert it into long-term rent obligations

These practices prioritize short-term extraction rather than long-term operational improvement. Fenne pointed to Steward Health Care as an example. Steward’s former private equity owner extracted an estimated $800 million, including $484 million in dividends paid after a large sale-leaseback of Steward’s hospital real estate in Massachusetts. Steward later filed for one of the largest healthcare bankruptcies in decades, leaving communities with fewer options for care.

Washington has significant exposure to private equity, which makes the state vulnerable to similar risks.

Why Testimony to the Cost Board Matters

The Health Care Cost Transparency Board is one of the only state-level bodies that examines how ownership models and financial structures contribute to healthcare cost growth. The Board reviews financial data from payers and providers, identifies major cost drivers, and issues recommendations that inform future legislative action.

Given Washington’s high exposure to private equity in healthcare, the Board’s work is increasingly tied to questions about who controls clinical operations and how financial incentives shape costs. The proposed Washington state corporate practice of medicine legislation would address ownership and control arrangements that can enable private equity’s influence.

State Policymakers Are Already Responding

Michael’s testimony comes as many states are beginning to respond to the same financial risks he outlined. PESP’s new 2025 State Healthcare Policy Review shows that seven states passed laws this year to increase transparency, strengthen oversight of investor-backed healthcare deals, and reinforce clinical independence. Legislatures in Massachusetts, California, Oregon, Indiana, New Mexico, Washington, and Maine moved to improve ownership reporting, expand transaction review, limit extractive real-estate arrangements, and address corporate control of medical practices. These actions reflect a growing national effort to confront private equity’s influence in healthcare and protect access, quality, and system stability.