Business and nonprofits can work together but only as long as the goals of each are clearly defined…profits and social mission in support of the common good.
First, let’s define our terms.
What is Private Equity (P.E.)? Neither intrinsically bad nor good, like many financial and technical tools, it can be used for either. However, to avoid damage to mission-driven organizations like nonprofits, P.E. must be regulated.
Unlike a startup loan, which must be repaid, the business model of private equity is often to harvest their investment when the company becomes successful, with little or no concern for community impact. The investors can sell their equity shares at a significant private profit while negatively impacting the public. As a financing tool it can create value, jobs and wealth. Alternatively, it can doom a startup to failure. It depends on how investors choose to exercise their management influence and whether or not there are any regulatory guardrails.
Private Equity is often confused with “Venture Capital” (VC). Venture capital is different in that investors “seed-fund” startups or emerging companies with needed growth capital to scale up operations. In return they often get a significant ownership stake as well as a management role in decision-making. VC is generally more interested in long-term mutual gain as opposed to short-term private extraction.
I was part of a startup trio that in the mid-‘80s merged two companies into a new company called Resolution. At our peak, we were grossing $12M a year, had over 200 employees and an array of satisfied national clients. In 2008, I retired as president. Soon after, our board decided to sell to a private-equity firm which ruthlessly cut costs, many of which were at the heart of our high-quality service. Our clients left in droves and within two years, the company was bankrupt and 200 jobs in Chittenden County had disappeared.
I know the downside of private equity.
The underlying question is whether P.E. can or is willing to ethically manage the intrinsic conflict between preserving the costs that support a quality service while trimming excessive management and administrative costs unrelated to client satisfaction.
Vermont is one of the few states that has no comprehensive “Corporate Practice of Medicine” doctrine embedded in law. The Corporate Practice of Medicine (CPOM) Doctrine is a legal principle that prohibits non-physicians and corporations from owning or controlling medical practices. This is a long-established legal doctrine in most states that ensures that medical decisions remain in the hands of licensed professionals and that healthcare is patient-focused rather than profit-driven. However, due to lack of reporting requirements and enforcement, as well as the proliferation of corporate legal loopholes, this doctrine is frequently violated with no legal consequence.
In the last few years, Private Equity HAS acquired a number of residential nursing and care homes in Vermont. Stories are rife about the decline in care and service that followed. Private equity-backed Genesis HealthCare sold six Vermont nursing home facilities before declaring bankruptcy.
Private equity has also invested widely in veterinary services in Vermont. Why? As one P.E. exec laughingly told me, “People spend more on their pets than on their kids.”
Concerns about the growing influence of P.E. investment in healthcare generated a large research project at Brown University in the Private Equity Stakeholder Project designed to impartially evaluate the impact of P.E.’s entry into healthcare. Their data and those of many other similar studies across the nation consistently show that private-equity ownership and control is associated with higher costs, higher prices, worse outcomes, and healthcare provider burnout.
Key to these regulations are:
Setting legal standards for how management services organizations may shape management of a medical practice
redefining the list of business entities that are permitted to engage in the practice of medicine
addressing the widespread use of noncompete and other restrictive agreements imposed on physicians and healthcare professionals
The current Vermont bill (H.583) under consideration in the Legislature very much aligns with legislation adopted in Oregon, Massachusetts, and California to prohibit the corporate practice of medicine in Vermont. If passed, it would require all healthcare institutions to fully disclose their ownership structure. It would also prohibit private-equity firms from taking control of medical practices or hospitals and protect physician decision-making from corporate influence as well as create a robust enforcement mechanism led by the State Attorney General.
Yet eddies of strong opposition are swirling around the bill, including from provider lobbying organizations like the Vermont Medical Society, Vermont Health Care Association and the Vermont Association of Hospitals and Health Systems (VAHHS). Their concerns appear to be rooted in the fear that regulations will inhibit needed investment in Vermont’s healthcare system and unfairly infringe upon the apparent right of a doctor’s office (business) to sell to whomever they choose. It’s important to note that individual rights -- even from a libertarian perspective – business or otherwise – do not override systemic harm when such harms are predictable, particularly to patients. You have a right to sell your car to any buyer, but will you sell it to someone who you know is going to crash into the community center to collect insurance? The right to sell a practice should not outweigh the right to affordable, high-quality care already enshrined in Vermont state statute.
As a former chair of Fletcher Allen Health Care, appointed immediately after its then - President Bill Boettcher was sentenced to two years in a federal penitentiary for lying under oath to healthcare regulators, I’m familiar with the risks and opportunities of Vermont’s healthcare infrastructure. I now serve on the Board of VHC911.org, a broad coalition of Vermonters, business executives and unions working together to improve Vermont’s broken healthcare system. Their latest findings report was just published. Our extensive work analyzing hospital data indicates that the mission of “population health,” measured in quality, accessibility and affordability, is failing in Vermont. Recent findings indicate that Vermont has the most expensive healthcare costs and healthcare insurance rates in the country.
Are we really comfortable commingling the profit motive with nonprofit mission? If we do not regulate the incursion of private equity into such an essential human need and public good as healthcare, we will only accelerate the chaos of current failure. Where’s the logic behind letting a private for-profit entity take over institutions meant to provide public health?
The most respected ethical council in healthcare is the American Medical Association’s (AMA) Council on Ethical and Judicial Affairs. Their overview of the role of business and the mission of healthcare is unequivocal: “Prioritizing profits over patients is incompatible with physicians’ ethical obligations.” It’s hard to understand why some Vermont provider lobbies appear significantly less skeptical of the harms of corporate practice of medicine than the American Medical Society.
Contact your legislators today and let them know that you support H.583 regulating private equity’s role in Vermont’s healthcare system.
Business and nonprofits can work together but only as long as the goals of each are clearly defined…profits and social mission in support of the common good.
Bill Schubart is a writer and author from Hinesburg. Mar 08, 2026
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