By: Kylie Lutz
Image source: https://time.com/4837864/healthcare-history-beginning-obamacare-ahca
I. Introduction
“[U]nconscious, pulseless, and blue.”[1] That was the condition of twenty-two-year-old Cole Schmidtknecht when he arrived at the hospital after suffering a severe asthma attack.[2] Just five days earlier, Schmidtknecht had faced a terrifying reality when he tried to refill his asthma inhaler, his health insurer no longer covered it.[3] The out-of-pocket cost, which had never exceeded $70, had risen to $539.19.[4] Schmidtknecht could not afford it.[5]
Schmidtknecht’s story illustrates a problem within the American healthcare system: medical treatment is controlled not just by necessity, but by financial incentives. Indeed, after Schmidtknecht’s death, his family brought a wrongful death action against Optum Rx and Walgreens.[6] The family alleged that Optum Rx chose to “stop covering Cole’s [inhaler] not because of any legitimate medical reason, but because manufacturers of competing drugs provided Optum Rx with financial incentives.”[7] Enter: pharmacy benefit managers (“PBMs”). Optum Rx, a subsidiary of UnitedHealth Group, operates as a PBM, an industry that has recently faced significant backlash.[8]
PBMs, though largely unknown to the average consumer, serve as the middlemen between health insurers, drug manufacturers, pharmacies, and patients to manage prescription drugs.[9] Since they emerged in the 1960s, PBMs have negotiated with drug manufacturers and pharmacies to “set prices, [and] determine patients’ access to different medication . . . .”[10] Because PBMs exercise significant control over prescription drugs, their financial incentives can affect patients’ out-of-pocket costs and access to medication.[11] In 2022, the Federal Trade Commission launched an investigation into PBMs and, in 2026, secured a landmark settlement with the three largest PBMs in the country.[12] The FTC originally filed the lawsuit against those PBMs “for engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs.”[13] The settlement represents a significant win for patients who rely on insulin. Meanwhile, in the Schmidtknecht case, the United States District Court for the District of Wisconsin denied Optum Rx’s motion to dismiss, and the case has now entered discovery.[14]
Insurance coverage is only one example of the problem with American healthcare. Increasingly, private equity firms have entered the healthcare system.
II. Private Equity’s Impact on the Healthcare System
Private equity (“PE”) firms invest funds from private sources to acquire companies and raise profits for investors.[15] To do so, PE firms generally improve the operations and streamline services of the acquired company.[16] In recent years, PE firms have turned their attention to the healthcare industry.[17] As of June 2026, PE firms owned or operated 447 hospitals, representing approximately 9.5% of all private hospitals in the United States.[18]
Healthcare offers an attractive industry for the PE business model. The healthcare industry generates consistent revenue because patients need medical care regardless of price.[19] Healthcare also generates a significant portion of the American economy, contributing to nearly 20% of the total U.S. GDP.[20] So, these characteristics make the healthcare industry particularly attractive to investors.[21] The concern, however, isn’t that investors make money through the healthcare system, it’s how they make the money.
PE ownership can change how hospitals and medical practices provide patient care.[22] Studies have identified trends associated with PE ownership, including staff cuts, price increases, and concerns about the quality of care.[23] Specifically, in PE owned medical practices, fewer physicians have been hired while relying more on nurse practitioners and physician assistants.[24] Hospitals likewise have reduced staffing which has contributed to changes in patient care, such as more frequent transfers to other hospitals.[25] Not all PE owned hospitals or medical practices produce worse outcomes for patients[26] but these findings raise questions about whether PE is a business model that aligns with patient needs.
III. Delaware’s Response
In response to the growing presence of PE firms in the healthcare industry particularly in hospitals, Delaware recently enacted Senate Bill 313 (“SB313”) to protect nonprofit acute care hospitals.[27] The bill specifically “prohibits any for-profit entity from acquiring control of a nonprofit acute care hospital in Delaware—including through full sales, mergers, and affiliations, as well as through incremental routes such as minority ownership stakes, the right to appoint board members or executives, or contractual veto power over major hospital decisions.”[28] The prohibition will be in place through July of 2028 and any transaction that violates it will we void and have no legal effect.[29]
SB313 was prompted by the closure of Crozer-Chester Medical Center and Taylor Hospital in Delaware County, Pennsylvania.[30] Representative Kendra Johnson, a sponsor for SB313, stated “Delaware County, PA issued a disaster declaration to help communities find alternative emergency medical services after Crozer Health filed for bankruptcy . . . I refuse to let my community in Delaware suffer.”[31] Likewise, Senator Spiros Mantzavinos emphasized that “[w]e’re seeing a surge of private equity firms buying hospitals around the country with one simple and alarming goal: maximizing profit off of patients seeking care . . . [w]e’re not going to let this happen in Delaware.”[32]
IV. Conclusion
The American healthcare system is treated as a financial asset rather than a public necessity. Financial incentives influence who receives care, what care is provided, and at what cost. Delaware’s recently enacted SB313 represents an important recognition of these problems. Though its scope is limited to general acute care hospitals,[33] it is a step in the right direction to place restrictions on private equity ownership in Delaware’s healthcare system.
About the Author
Kylie is a third-year regular division student at Widener University Delaware Law School. She serves as External Managing Editor for Volume 52 of the Delaware Journal of Corporate Law. During law school, Kylie interned at the Delaware Court of Chancery for the Honorable Magistrate Christian Douglas Wright and in the summer of 2026, she was a summer associate at Saul Ewing, LLP in Wilmington, Delaware. During her third year, Kylie served as a Josiah Oliver Wolcott Fellow to the Honorable Chancellor Kathaleen St. J. McCormick at the Delaware Court of Chancery. Her other extracurricular activities include serving as the President for the Alternative Dispute Resolution Society and a 1L mentor for the Student Bar Association.
[1] Schmidtknecht v. Optum Rx, Inc., 2025 WL 2096866, at *1 (E.D. Wis. July 25, 2025).
[2] See id.
[3] Id.
[4] Id.
[5] Schmidtknecht, 2025 WL 2096866, at *1.
[6] Id.
[7] Schmidtknecht, 2025 WL 2096866, at *1.
[8] See id.
[9] See Kristi Martin, What Pharmacy Benefit Managers Do, and How They Contribute to Drug Spending, The Commonwealth Fund (Mar. 17, 2025).
[10] Id.
[11] Id.
[12] See Ahmed Aboulenein, Why Are US Pharmacy Benefit Mangers Under Fire?, Reuters (July 9, 2024); see also Press Release, Fed. Trade Comm’n, FTC Secures Major Settlement with Caremark, Resolving Antitrust Case Against Second Drug Middleman (July 14, 2026), https://www.ftc.gov/news-events/news/press-releases/2026/07/ftc-secures-major-settlement-caremark-resolving-antitrust-case-against-second-drug-middleman [hereinafter Caremark Settlement].
[13] Caremark Settlement, supra note 12.
[14] Court Listener, Schmidtknecht v. OptumRx, Inc., (1:25-cv-00093), (Aug. 13, 2026), https://www.courtlistener.com/docket/69562259/schmidtknecht-v-optumrx-inc/.
[15] Derek C. Angus & Matthew B. O’Connor, Private Equity’s Growing Presence in Healthcare–Promise or Peril? A Healthy Dialogue With Sneha Kannan, JAMA, (June 3, 2026), https://jamanetwork.com/journals/jama/fullarticle/2849854.
[16] See id.
[17] See id.
[18] PESP Private Equity Hospital Tracker (2026), (July 20, 2026), Priv. Equity Stakeholder Project, https://pestakeholder.org/reports/private-equity-hospital-tracker-2026/#hospital_tracker (last visited Sep. 27, 2026).
[19] Angus & O’Connor, supra note 15.
[20] Janet Gao, Yongseok Kim & Merih Sevilir, Private Equity in the Hospital Industry, 171 J. Fin. Econ., Art. 104107, at 1 (2025).
[21] Angus & O’Connor, supra note 15.
[22] See id.
[23] See Angus & O’Connor, supra note 15.
[24] See Private Equity’s Growing Presence in Health Care: Promise of Peril?, JN Learning (JAMA Podcasts, June 3, 2026), https://edhub.ama-assn.org/jn-learning/audio-player/19068713.
[25] See id.
[26] Gao, Kim & Sevilir, supra note 20 at 21.
[27] Governor Matt Meyer, Governor Meyer Signs Landmark Health Care Affordability Package to Lower Costs and Protect Patients, Delaware News, (July 21, 2026), https://news.delaware.gov/2026/07/21/governor-meyer-signs-landmark-health-care-affordability-package-to-lower-costs-and-protect-patients/ (“As private equity firms continue buying hospitals across the country, we are seeing a trend of healthcare being placed above the safety and wellbeing of the patients. Delaware cannot allow these practices to occur within our state . . . .”).
[28] S.B. 313, Amend. 1, 153d Gen. Assemb., at 6 (Del. 2026).
[29] Meyer, supra note 27.
[30] Governor Matt Meyer, Governor Meyer Announces Landmark Healthcare Legislation that Lowers Costs and Increases Access for Delawareans, Delaware News, (May 12, 2026), https://news.delaware.gov/2026/05/12/governor-meyer-announces-landmark-healthcare-legislation-that-lowers-costs-and-increases-access-for-delawareans/.
[31] Id.
[32] Id.
[33] Id.
Leave a Reply