A Growing Wave of Proposed Legislation in 2026 Targets Healthcare Real Estate Transactions

Healthcare real estate has evolved dramatically over the past three decades. In the early 1990s, medical office buildings and surgery center assets were simply categorized as commercial office space. By the mid-1990s, healthcare real estate had become its own investment sector, attracting a wide range of investors interested in pure medical properties, including those pursuing sale-leaseback arrangements for hospitals and other medical facilities. Today, that sector faces a new challenge: a rapidly expanding patchwork of federal and state legislation aimed at increasing oversight of healthcare transactions. In 2026, several states have introduced bills placing real estate investment trusts (REITs) in the crosshairs, with the first measures passed in Connecticut. If more are enacted, it could reshape how the REIT industry does business with healthcare.

A Broader Trend in Healthcare Transaction Oversight

The concept of reporting healthcare transactions or disclosing ownership information is not new for many healthcare providers. Hospitals hold licenses, and providers enrolled in government and commercial payer programs often disclose ownership and officer information. However, in recent years, a subset of the healthcare industry has operated outside these traditional oversight lanes, leaving state regulators without a full view of what was happening. In addition, many transactions fall below the thresholds required for reporting to the Federal Trade Commission.

That changed following several high-profile health system failures that drew public attention and caused federal and state legislators to face pointed questions: Why wasn't this identified earlier, and what could have been done to prevent it? The result has been a wave of legislative activity focused on healthcare consolidation in areas that historically lacked regulation.

In 2022 and 2023, a surge of mergers and acquisitions in the healthcare market prompted states to seek a clearer picture of what was occurring beyond existing attorney general reporting and state licensure processes. Legislators wanted to understand the effects of healthcare consolidation on care access, quality and costs – in short, how this impacted patients.

Oregon was among the first states to enact a comprehensive bill – one that captured most transactions involving healthcare businesses operating in the state. From there, the legislative trend spread to Washington and California, then expanded along the East Coast and eventually moved into the Midwest. The scope of these bills also broadened over time, reaching beyond traditional healthcare providers to encompass private equity investment in healthcare, management services organizations and physician practices.

REITs Enter the Picture

For much of this legislative wave, REITs remained on the periphery. Before turning to private equity investment, most bills were focused on physician transactions. There was a particular interest in for-profit entities acquiring nonprofit hospitals due to high-profile health system failures. Historically, those transactions already involved state attorney general oversight. But not every health system or hospital is a nonprofit, and not every state has a hospital transaction review or certificate of need process. The result is a patchwork of oversight that varies significantly from state to state.

REITs occupy a distinct position in healthcare transactions. Unlike a private equity buyer who acquires and operates a healthcare business, a REIT typically seeks to own the real estate and lease it back to the operator. REITs derive their income from rent or mortgage payments and do not provide healthcare services. Despite this distinction, legislators have increasingly lumped REITs together with private equity buyers in proposed and enacted legislation.

The first REIT-focused bills appeared in Minnesota around 2024,¹ but they failed to advance and drew little attention at the time. However, in the wake of continued high-profile health system failures, there was a growing concern regarding identified sale-leaseback elements, lease structures and rent obligations. Accordingly, interest in regulating REIT transactions grew substantially.

By 2025, several states had moved forward with related legislation. Massachusetts expanded its existing healthcare transaction reporting law to capture sale-leaseback transactions and certain REIT models.² In a notable development, in late 2025, a REIT was required to provide written testimony at Massachusetts' annual cost hearing regarding its operations and effects on the state's healthcare market. Additionally, Maine enacted a one-year moratorium prohibiting REIT transactions involving hospitals, with private equity also included; this moratorium is set to expire in mid-June 2026. Louisiana introduced a similar moratorium bill, though it did not advance.³

At the federal level, a bill introduced at the end of 2025 focused specifically on REIT arrangements. Among its provisions was a requirement for federal review of leases – a concept that had not appeared in prior state proposals. This bill followed a pattern seen before: An earlier federal bill targeting private equity investment in healthcare failed to advance but spurred a wave of state-level actions. Now, the federal REIT-focused bill appears to have the same catalytic effect. Another federal bill proposed in late March 2026 would disable Medicare payments to hospitals or skilled nursing facilities controlled by REITs.

Enacted and Proposed Legislation Across States

As of early 2026, nine state bills targeted sale-leaseback transactions, with some states proposing heightened scrutiny for these arrangements. The states leading this charge are concentrated in New England, with Louisiana as the sole geographical outlier.⁴ This pattern is important, as some of the most troubled health systems are located in New England.

After years of efforts to advance healthcare real estate legislation, Connecticut finally enacted two significant bills in response to recent health system failures in the state. Gov. Ned Lamont on May 27, 2026, signed Senate Bill (SB) 196, which prohibits hospitals from entering into sale-leaseback transactions on and after July 1, 2027. Beginning February 15, 2027, hospitals must submit annual attestations to the commissioner of the Connecticut Department of Public Health that no private equity entity has a controlling interest in the hospital or ultimate governance control and authority over any asset or activity of the main campus, including all clinical, operational, managerial, financial or human resources matters. Hospitals must also attest that no private equity entity directs the adoption of any policy or procedure that would interfere with the professional judgment or clinical decisions of duly authorized clinicians. This reflects a legislative compromise following several failed bills that tried to address recent health system failures. Similarly, Washington enacted upgrades to its existing reporting requirements to capture sale-leaseback transactions.⁵

Gov. Lamont also signed SB 125 on June 4, 2026, providing significant changes for the nursing home industry. The bill requires nursing homes to report ownership information regarding investment entities – defined to include entities that collect capital investments to acquire ownership interests in nursing homes, as well as REITs – to the commissioner of the Connecticut Department of Social Services by February 15, 2027, then annually thereafter. Such information includes the names and business addresses of investment entities with a 5 percent or greater beneficial ownership interest, audited and certified financial statements, descriptions of financing arrangements, copies of purchase agreements, and information about escrow and contingency accounts.

On and after July 1, 2028, nursing homes subject to an investment entity holding a beneficial ownership interest of 5 percent or more must, at the time of application for or renewal of a nursing home license, secure a surety bond or similar form of security in favor of the state in an amount equal to 90 days of operating costs. On and after February 1, 2028, each entity holding a nursing home license must maintain full governance control and authority over the nursing home's assets and activities – including all clinical, operational, managerial, financial and human resources matters – and submit an annual attestation to the public health commissioner that no investment entity has control over nursing home resident health, safety or care. The requirement to maintain full governance control by February 2028 represents one of the most aggressive timelines enacted to date.

On June 1, 2026, New Jersey legislators proposed two companion bills – Assembly Bill (AB) 5185 and SB 4395 – that would prohibit the issuance of certificates of need to healthcare facility projects where the proposed or transferred site is leased from a healthcare REIT. Both bills define a healthcare REIT as one whose assets consist of real property held in connection with the use or operations of a healthcare facility or a healthcare provider. Existing arrangements are exempt, and any healthcare facility that is already leasing its site from a healthcare REIT as of the effective date would not be subject to the prohibition. Additionally, the public health commissioner may waive the requirements and provide a certificate of need to the proposed or transferred site of a satellite facility that provides outpatient services. The bills also include enhanced enforcement measures, increased penalties for violations, hospital receivership provisions and debarment authority for the public health commissioner.

Another notable example in New England is a bill proposed in Rhode Island, SB 2950, that would require parties to a REIT-involved hospital transaction to not only report the deal to the attorney general but also post a financial bond. The bond would function as an insurance policy for the state, covering roughly a year's worth of operational expenses plus amounts sufficient to fund an independent supervisor. The purpose is to ensure that if a transaction leads to an adverse outcome, the state has resources to maintain operations and preserve access to care. This bill was held for further study.

The types of healthcare facilities captured by these bills also vary by state. Though hospitals are a common target, the scope can extend to skilled nursing facilities, imaging centers, physician practices, joint ventures between physician groups and hospitals, and other healthcare operations. Some states have adopted expansive definitions that reach nearly any business providing healthcare services.

The Case for Industry Engagement

Because this legislative landscape is still evolving, there is a meaningful window for industry stakeholders to shape outcomes. Unlike well-established regulatory regimes that have been in place for decades, these bills are being developed in real time. Enacted laws still need to be refined through regulations and guidance, and proposed bills remain subject to discussion, education and advocacy.

Industry participants who engage in the legislative process have had measurable success. When actual providers and market stakeholders get in front of legislators and explain the real-world effects of proposed restrictions on investment and healthcare delivery, the results tend to be more informed and balanced pieces of legislation. In some cases, engagement has persuaded legislators to slow down and develop more thoughtful approaches rather than rushing bills through.

This is particularly important for REIT-focused legislation, which is still in its early stages. To date, only Massachusetts, Connecticut and Maine have enacted significant provisions, and Maine's moratorium is set to expire shortly. The window for meaningful participation remains open, especially in the New England states, where the most active proposals are concentrated.

A Long-Term Strategy Is Essential

One recurring challenge in this space has been the tendency for stakeholders to take a narrow, short-term view. When a bill captures a dozen different types of stakeholders, each group may focus exclusively on securing its own carve-out rather than working toward a broader solution. This approach is shortsighted for several reasons. First, it can fracture coalitions, leading to weaker collective advocacy and, ultimately, worse legislative outcomes. Second, because this is a national trend with significant information-sharing among state legislatures, provisions from one state's bill are frequently copied and expanded by other states. Securing narrow language in one jurisdiction does little good if the next state adopts an even broader version of the same bill.

The lesson from recent years is clear: Stakeholders such as REITs who were not initially targeted eventually found themselves within the scope of expanding legislation. Those who engaged early and broadly were better positioned when the spotlight turned to them. The most effective approach is to treat this as a long-term discussion, participating consistently across jurisdictions rather than reacting to individual bills on an ad hoc basis. The national trend is accelerating, and it will continue to grow until there is significant resistance to further change.

How Legislation Could Reshape the Industry

If one or more of these proposed state-level bills passes in addition to Connecticut's recently enacted laws, it could chill the interest of REITs and other capital providers to invest in real estate, healthcare systems or hospitals in the relevant states and markets. Healthcare systems and independent hospitals generally benefit from having access to a wide array of capital sources, including commercial lenders, private equity investors, REITs and real estate development partners. If REITs and other capital investors face regulations that force them out of these investments, healthcare systems and hospitals could be harmed.

REITs and other real estate investors often seek to be a capital partner for healthcare systems so it can use its available capital on delivery of critical healthcare services rather than tying up capital in real estate investments that are expected to yield lesser returns. Eliminating sources of capital that healthcare systems and providers typically rely on can be expected to increase the cost of capital used in delivering healthcare services, resulting in greater financial distress for providers.

Moreover, such proposed legislation appears to convey a not-so-subtle message that investments from REITs and private equity sources in healthcare systems are tainted, which could subject those systems to higher regulatory scrutiny in an already heavily regulated business. Any reluctance by healthcare systems to accept investments from REITs and private equity investors may accelerate plans to restrict further investments in the healthcare real estate market. These legislative initiatives signal to healthcare systems that REIT and private equity investments are a threat to the long-term survival of health systems, without offering an alternative source of capital to such health systems.

For more information or questions, please contact the authors.

Notes

¹ 2024 Minnesota House File 4206 and Senate File 4392.

² 2024 Massachusetts House Bill (HB) 5159.

³ 2025 Louisiana HB 317.

⁴ 2026 Connecticut HB 5045, HB 5316 and SB 196, Maine Legislative Document 2197/House Paper 1476 (stalled), Rhode Island (HB 7720, SB 2492, SB 2950) and Louisiana HB 1118.

⁵ 2025 Washington HB 2548.

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