Advocates point to the collapse of Prospect Medical Holdings and now press for companion legislation targeting nursing home ownership.

June 4, 2026

HARTFORD, Conn. — Connecticut has enacted a new law designed to limit private equity influence over the state’s hospitals and to tighten scrutiny of the real estate maneuvers that have destabilized health systems elsewhere. Governor Ned Lamont signed SB 196, which the Private Equity Stakeholder Project (PESP) praised as a meaningful safeguard for community care.

What the new law requires

SB 196 imposes two central obligations on Connecticut hospitals and broadens oversight of a financing practice that watchdogs have long flagged. Specifically, hospitals must now:

• Confirm that no private equity entity holds a controlling stake in the institution.
• Confirm that such investors are not interfering with the clinical judgment of physicians and other providers.

The law also subjects hospital sale-leaseback transactions — a tactic frequently linked to private equity-owned systems — to greater scrutiny.

A response to Prospect’s collapse

Lawmakers acted in the wake of the financial unraveling of Prospect Medical Holdings, a hospital operator backed by Leonard Green & Partners that ran several Connecticut facilities before declaring bankruptcy in 2025. According to PESP, sale-leaseback arrangements were central to Prospect’s decline: under Leonard Green’s ownership, the company sold off the real estate beneath its hospitals while investors pulled out hundreds of millions of dollars in dividends and fees. The group estimates that owners extracted at least 658 million dollars even as the hospitals’ finances and operations deteriorated.

Michael Fenne, PESP’s healthcare policy coordinator, framed hospitals as vital community infrastructure rather than mere financial assets, and said the new law targets arrangements that can weaken hospital stability, pile on costs, and endanger patients, workers, and surrounding communities. He described Prospect as a cautionary example of what happens when hospitals are burdened with debt, stripped of valuable property, and pushed to deliver returns to investors.

Pressure for a nursing home companion bill

PESP also urged the governor to approve a companion measure, SB 125, aimed at improving transparency around how nursing homes are owned and financed. The group pointed to Connecticut’s recent experience with Genesis Healthcare, whose facilities have drawn repeated safety alarms:

• 2022: Residents were emergency-transferred from the Quinnipiac Valley Center in Wallingford after inspectors cited immediate jeopardy violations involving neglect, staffing, infection control, and medication errors.
• 2025: The St. Joseph’s Center in Trumbull was evacuated over Legionella bacteria and fire safety problems and later marked for closure.

Genesis ultimately filed for Chapter 11 bankruptcy following years of debt layering and sale-leaseback deals that left it without ownership of its real estate but bound to long-term lease payments. Fenne argued that SB 125 would give the state better tools to identify nursing home owners, understand their financing, and see how those decisions affect day-to-day care.