Desiree Sainthrope is a distinguished legal expert whose career has been defined by a meticulous approach to drafting and analyzing complex trade agreements and global compliance frameworks. With a background that spans intellectual property and the high-stakes legal implications of emerging technologies, she brings a unique, macro-level perspective to the shifting tides of healthcare regulation. As states begin to assert more control over the financial structures of medical practices, Sainthrope’s ability to decode the intersection of corporate law and public policy offers invaluable clarity on the future of patient care.
This conversation explores the recent cooling of the private equity market in the healthcare sector, specifically focusing on the legislative hurdles that are slowing down corporate takeovers. We examine the decline of management service organization deals, the impact of Oregon’s landmark 2025 law, and the growing demand for stronger state-backed enforcement to protect the autonomy of local physicians.
The landscape for private equity in healthcare has shifted dramatically, with recent data showing an 18.5% drop in deals compared to the same period last year. How do you interpret this cooling of the market, particularly regarding the “friendly physician” model?
This 18.5% decline in deals during the second quarter of 2026 is a clear signal that the regulatory friction we have been anticipating is finally manifesting in the data. For years, the “friendly physician” model served as a convenient legal workaround, allowing out-of-state entities to control the administrative and financial heart of a clinic while maintaining a local doctor as the nominal owner. By implementing stricter standards that went into effect in January of this year, Oregon and other states have essentially dismantled the predictability that private equity firms rely on to justify their investments. We are seeing a moment of significant recalibration where the complexity of navigating these “Corporate Practice of Medicine” restrictions has made the old “roll-up” strategies incredibly difficult and expensive to execute. It is no longer a simple matter of high-speed acquisition; it is now a grueling process of proving clinical independence, which naturally scares away capital looking for a quick, administrative-led flip.
Management service takeovers have plummeted by nearly 36%, moving from 111 deals down to 71 in just one year. What specific regulatory mechanisms are making these administrative control models less attractive to investors?
The drop from 111 to 71 deals represents a fundamental disruption in the Management Services Organization, or MSO, model that has dominated the industry for the last decade. The 2025 Oregon law was a pioneer in this regard, as it explicitly prohibits these organizations from holding majority control or ownership over a clinical practice. When you remove the ability for a corporation to hold the majority stake, you remove their leverage over the revenue cycle and the operational decision-making that drives their profit margins. Investors are finding that the “handshake and a wink” agreements, which once allowed them to conceal their influence over a firm’s decisions, are being scrutinized by federal judges who are no longer willing to look the other way. This increased scrutiny lengthens transaction timelines and adds layers of due diligence that many firms simply find too cumbersome to navigate in the current economic climate.
In the case involving PeaceHealth and ApolloMD, we saw how local doctors had to take legal action themselves to challenge corporate influence. Why is the current reliance on private litigation for enforcement being viewed as a weakness in the system?
The situation in Lane County was a perfect example of the “David versus Goliath” dynamic that occurs when we rely on private litigation to enforce public policy. Expecting a small, local group of emergency physicians to spend their own time and resources fighting a national staffing giant in federal court is neither sustainable nor particularly effective for the broader healthcare system. While the settlement was a major victory for those doctors, the fact remains that the 2025 law is currently enforced primarily by clinics taking legal action rather than through state-backed agencies. This is why we are hearing such a strong push from lawmakers to provide the Attorney General and the Department of Justice with the necessary tools and funding to put “real teeth” into these protections. Without centralized enforcement, we risk a “checkered” landscape where only the wealthiest or most organized physician groups can afford to defend their clinical autonomy.
There is a tension between the need for administrative efficiency and the desire to keep clinical decisions in the hands of physicians. How is the current legislative environment redefining the boundaries of what a corporation can and cannot touch within a medical practice?
The current legislative trend is drawing a very bright, very firm line between “support services” and “medical judgment.” In the past, we saw giants like Optum take over groups and implement non-compete agreements that essentially treated doctors as interchangeable corporate assets, forcing dozens of them to leave their communities when they wanted to escape corporate oversight. The new laws rendered these restrictive agreements largely unenforceable, sending a message that a physician’s primary duty is to the patient, not the shareholder. We are moving toward a standard where a corporation can handle the payroll and the janitorial services, but they cannot have a say in staffing levels or the specific ways a doctor chooses to treat an illness. It is a visceral shift for the medical community; you can feel the relief among practitioners who are finally seeing the law acknowledge that a spreadsheet should never overrule a stethoscope.
What is your forecast for the future of private equity in the health sector?
I expect the next two years to be characterized by a “quality over quantity” shift, where the era of aggressive, high-volume consolidation is replaced by a more cautious, transparency-heavy investment style. While the 18.5% drop in deals feels like a shock to the system right now, it is actually a necessary market correction that will likely lead to a more stable environment where physician-owned practices can once again compete on a level playing field. We will see more states adopting the Oregon model, creating a patchwork of strict regulations that will force private equity firms to either accept lower margins in exchange for clinical integrity or exit the healthcare space entirely. Ultimately, the future of the sector will belong to those who can prove that their financial backing enhances patient care rather than merely extracting value from it.
