On May 27, 2026, Connecticut enacted new legislation that places restrictions on certain hospital real estate transactions and introduces additional oversight of private equity involvement in hospital governance and operations (the “Act”). The law limits specific sale-leaseback arrangements involving hospital main campuses and requires hospitals to submit annual certifications concerning private equity ownership, control, and operational influence.
Restrictions on Hospital Sale-Leaseback Transactions
Beginning July 1, 2027, Connecticut hospitals will be prohibited from entering into certain sale-leaseback transactions involving their main campuses.
Under the Act, a sale-leaseback transaction refers to an arrangement in which a hospital sells hospital-owned real estate that constitutes its main campus and then leases that property back from the purchaser. The legislation defines a hospital’s main campus as the licensed premises where the majority of inpatient beds are located.
Importantly, the law does not prohibit all healthcare real estate transactions or leasing arrangements. Its focus is limited to sale-leaseback transactions involving a hospital’s primary campus. Other healthcare properties, including outpatient facilities, ambulatory surgery centers, physician offices, and administrative buildings, are not directly covered by the prohibition.
Historically, hospitals have used sale-leaseback transactions to unlock capital, improve liquidity, and support operations. The new legislation limits the use of this strategy when it involves a hospital’s principal inpatient campus.
Annual Reporting Requirements Related to Private Equity
The Act also establishes new annual attestation requirements concerning private equity involvement in hospitals.
Beginning February 15, 2027, and annually thereafter, hospitals must submit certifications to the Connecticut Commissioner of Public Health regarding private equity ownership and control.
The legislation broadly defines a private equity entity as an organization that raises investment capital and acquires a direct or indirect ownership interest in a hospital, either directly or through affiliated entities.
Hospitals must certify that no private equity entity:
- Holds a controlling interest in the hospital; or
- Exercises ultimate governance authority over assets or operations associated with the hospital’s main campus.
The Act defines “controlling interest” broadly, encompassing the direct or indirect ability to influence management or policy through ownership rights, contractual arrangements, or other mechanisms.
Notably, the legislation does not prohibit all private equity investment in healthcare. Instead, it focuses on situations where private equity entities exercise significant governance authority or operational control over hospitals and their primary campuses.
Clinical Decision-Making Protections
Hospitals must also certify that private equity entities are not permitted to direct or influence policies that interfere with the independent clinical judgment of healthcare professionals.
The statute specifically references matters such as:
- Patient evaluation and treatment timing
- Hospital discharge decisions
- Observation status determinations
- Palliative care decisions
- Diagnostic coding practices
- Diagnostic testing decisions
Hospitals that fail to provide the required attestations may face civil penalties of up to $2,000 per violation.
Important Exceptions
The legislation contains several notable carve-outs. It does not:
- Prohibit hospitals or affiliated entities from participating in joint ventures
- Restrict contractual relationships between hospitals and physicians or physician groups
- Interfere with coordination between hospitals and their parent health systems
These provisions help preserve common healthcare operational and organizational structures while targeting specific concerns related to governance and control.
Practical Implications
The Act may have significant consequences for hospitals, health systems, investors, and private equity-backed healthcare organizations operating in Connecticut.
Hospitals exploring real estate monetization strategies should carefully evaluate whether proposed transactions could fall within the scope of the sale-leaseback prohibition and consider alternative transaction structures where appropriate.
Similarly, the annual attestation requirements may increase compliance obligations and scrutiny of:
- Governance frameworks
- Management services arrangements
- Ownership structures
- Contractual rights involving affiliated entities
- Operational oversight arrangements
Because the legislation reaches both direct and indirect forms of control, hospitals may need to review existing relationships to determine whether any arrangement could be viewed as creating a controlling interest or ultimate governance authority.
Looking Ahead
Connecticut’s legislation reflects a broader national trend toward increased oversight of healthcare ownership, governance, and private equity participation. Across the country, lawmakers and regulators have proposed or enacted measures that expand healthcare transaction review requirements, strengthen reporting obligations, and increase scrutiny of management and control arrangements.
By restricting certain hospital sale-leaseback transactions and requiring ongoing certifications regarding private equity influence, Connecticut’s new law may reshape how healthcare transactions are structured and how governance relationships are documented and maintained. Additional regulatory guidance may further clarify the scope and practical application of these requirements in the coming years.