State governments are increasingly introducing new laws regulating healthcare transactions in an effort to thwart the level of influence that private equity firms and other corporate investors have on healthcare providers. To date, at least 15 [1] states have enacted some form of healthcare transaction review law; several of these states have also enacted or proposed legislation in 2025 to expand the reach of the state’s existing transaction review laws. This trend shows no signs of slowing and presents both challenges and strategic opportunities for healthcare organizations and investors.
Overall, these state legislative actions reflect a commitment by lawmakers to enhance transparency, protect patient care, ensure market stability, and limit the influence of non-healthcare providers over clinical decisions. These actions likewise signal states’ deepening concerns regarding the long-term effects of consolidation and private equity involvement in the provision of healthcare services in the United States. Understanding regional variations in regulatory approaches and identifying early engagement opportunities with policymakers is becoming crucial for transaction planning.
This alert summarizes the evolving state regulatory landscape for healthcare transactions, including the impetus for the influx of state regulatory activity, as well as our recommendations for healthcare organizations and investors to proactively address and adapt to these changing developments.
How the regulatory landscape for healthcare transactions is evolving in 2025
Massachusetts recently enacted House Bill 5159, which expands the state’s existing healthcare transaction notification requirements and broadens the definition of “material change” to include significant equity investments. Similarly, New Mexico’s House Bill 586, effective July 1, 2025, requires a 120-day pre-closing notice to and approval from the New Mexico Health Care Authority of certain healthcare transactions.
Additionally, several more states have proposed legislation in 2025 that would materially expand existing healthcare transaction review laws. For example, in February 2025, Illinois lawmakers introduced Senate Bill 1998, which, if passed, would expand the existing Illinois Antitrust Act to add a new layer of scrutiny to covered transactions that include financing from private equity groups or hedge funds and require the Illinois Attorney General’s prior written consent. [2]
California has also introduced new modifications to its relatively new (2023) healthcare transaction review process in order to further broaden the scope of its healthcare review laws. On May 15, 2025, the California Assembly passed AB 1415, which is currently before the California Senate. The current version of AB 1415 would require “Noticing Entities” to provide California’s Office of Health Care Affordability (OHCA) with at least a 90-day written notice before entering into certain agreements or transactions with a Health Care Entity. “Noticing Entities” include (1) a private equity group or hedge fund; (2) a newly created business entity created for the purpose of entering into agreements or transactions with a Health Care Entity; (3) a management services organization (MSO); and/or (4) an entity that owns, operates, or controls a provider, regardless of whether the provider is currently operating, providing healthcare services, or has a pending or suspended license. A prior version of the 2025 California legislation included expansion of the definition of Health Care Entities to include MSOs and other entities that control Health Care Entities. However, this has been removed from the current version of the bill such that Health Care Entities include only payors, providers, and fully integrated delivery systems, in favor of the new defined term “Noticing Entities.” Additionally, AB 1415 would empower OHCA to establish data reporting requirements for MSOs to the extent necessary for OHCA to “carry out the functions of the office.” We encourage tracking of this continuously developing legislation. [3]
Of the states that do not currently maintain healthcare-specific transaction review laws, a few have proposed bills in this legislative session. For example, Pennsylvania lawmakers introduced Senate Bill 322 and House Bill 1460, the latter of which passed the House on June 9, 2025, which would grant the Pennsylvania Office of Attorney General the authority to oversee certain mergers, acquisitions, and major financial transactions, and would expand the Pennsylvania Office of Attorney General’s current authority to oversee certain fundamental healthcare transactions involving non-profit corporations to include transactions involving for-profit healthcare corporations. [4] Notably, Pennsylvania lawmakers previously advocated for and introduced legislation related to similar reforms in 2022. [5]
High-priority states to monitor closely include California, New York, Texas [6], Florida and Massachusetts, which often set regulatory precedents that other states follow. We are also seeing significant momentum in Pennsylvania, Illinois, and Washington [7], where legislation could advance quickly in upcoming sessions.
Corporate practice of medicine: Related 2025 legislation developments that may impact healthcare investments
Additionally, certain states have proposed and/or enacted related legislation that seeks to strengthen existing state restrictions on the corporate practice of medicine (CPOM) and potentially limit the ability to traditionally implement common professional entity/management structures used in such states. For example, in May 2025, the Oregon Legislature passed Senate Bill 951, which expands Oregon’s restrictions on corporate ownership, control, and management of medical practices through MSOs. Senate Bill 951 was signed into law on June 9, 2025, and explicitly requires non-licensed owners to avoid exercising “de facto” control of a medical practice’s clinical decision making, staffing levels, billing policies, and contract negotiations with third-party payors. Senate Bill 951 also prohibits certain types of overlapping ownership of medical practices and MSOs, and imposes limitations on MSOs’ ability to restrict transfer of a professional entity’s stock or ownership interests. Senate Bill 951 also voids certain non-compete and non-disparagement agreements between non-physician business entities and medical professionals. The implications of Senate Bill 951 and related pending legislation, House Bill 3410A – the latter of which has gained momentum in recent weeks, and would walk back certain provisions of Senate Bill 951 – will be explored in an upcoming alert.
Similarly, in May 2025, the North Carolina Senate introduced Senate Bill 570, which substantially limits corporate ownership and control of professional entities through MSOs and expressly requires all medical decisions related to patient care to be made by licensed professionals without clinical interference by unlicensed individuals or MSOs. If passed by the North Carolina legislature in its current form, professional entities would be required, on each certificate of registration or renewal, to include a statement certifying that no stakeholder of the professional entity is also a stakeholder of an MSO with which the professional entity contracts for services, unless the MSO is owned and held entirely by licensees of the state.
Why now?
The scrutiny of healthcare transactions, as well as other transactions backed by private equity firms, appears to be fueled by concern over the effects of consolidation and investor ownership in healthcare. Lawmakers have generally argued that private equity-backed firms often prioritize returns over patient outcomes, thereby leading to service cuts, staff shortages, and higher prices.
In recent years, concerns regarding the role of private equity in healthcare have intensified due to a few high-profile bankruptcies of private equity-backed hospital systems. For example, in January 2025, the Massachusetts Legislature enacted House Bill 5159 in direct response to the financial collapse of private equity-backed hospital system, Steward Health Care. Massachusetts state lawmakers praised House Bill 5159 as “safeguarding patients, expanding access to care, and holding private equity accountable,” as well as “clos[ing] the loopholes and shin[ing] a light on blind spots that allowed Steward to exploit Massachusetts patients for profit, enhanc[ing] transparency in hospital finances, and…promot[ing] a more stable and sustainable healthcare system by requiring disclosure of parent company, private equity, and for-profit involvement.” [8]
Similarly, while not yet enacted, the Pennsylvania Legislature is currently reviewing legislation to increase the state’s oversight of healthcare transactions as a response to the bankruptcy of Prospect Medical Holdings, a private equity-backed owner of several recently closed Pennsylvania-based hospitals, including Taylor Hospital and Crozer-Chester Medical Center. Pennsylvania Governor Josh Shapiro has strongly advocated for the passage of this legislation, stating “[p]rivate equity has no place in our health care system. We’ve seen what happens when corporate raiders like Prospect Medical Holdings prioritize profits over patients - families lose access to care, health care workers lose their jobs, and communities across the Commonwealth suffer.” [9]
Oregon Representatives echoed similar sentiments to Governor Shapiro in their Press Release following the passage of Senate Bill 951, characterizing the legislation as a response to the “national trend of corporate and private equity takeovers of independent medical practices,” in which corporate and private equity entities “have exploited loopholes by employing or contracting with physicians who are listed as owners to be in compliance with CPOM on paper, but who lack true control over the practice.” [10] Such practices, per the Press Release, put “profits over patients.”
As evidenced by the foregoing, rhetoric from state officials has grown increasingly pointed, with terms like "corporate raiders" and "exploitation" becoming commonplace in public discourse. This presents a challenging narrative environment that requires thoughtful engagement and strategic messaging from industry stakeholders.
As a result, there appears to be a commitment by state lawmakers to hold private equity-backed institutions accountable and to ensure patients and communities remain the priority rather than investors. This heightened regulatory environment shows no signs of slowing. Rather, more states are expected to introduce transaction review and related CPOM bills in 2026 while states with existing laws may opt to further expand their reach in the coming year. [11]
Strategic considerations for healthcare organizations and investors
For healthcare organizations and investors, this means greater challenges in complying with the patchwork of review systems and corporate practice restrictions across the United States. As the healthcare industry evolves, so too will the legal and political frameworks that govern it – one state at a time. Thus, as states continue to navigate these issues, healthcare providers and investors are encouraged to stay informed about evolving regulations to ensure compliance and maintain trust with patients and regulators alike.
We recommend several proactive approaches:
- Transaction timeline planning: The expanding pre-closing notification periods (eg, up to 120 days in New Mexico) necessitate longer transaction timelines and earlier regulatory engagement. Entities are encouraged to factor these extended timelines into deal structures and financial planning.
- Multi-state compliance strategy: Organizations operating across multiple states are encouraged to develop a comprehensive compliance plan that accounts for varying notification thresholds, documentation requirements, and approval processes.
- Proactive CPOM compliance: While none of the newly enacted state laws appear to ban private equity or other corporate investors from funding healthcare companies, a number of these laws will introduce a new level of scrutiny clarifying what a non-provider (eg, MSO) can and cannot do in connection with its relationship with a licensed healthcare entity or provider. Proactively refreshing transaction documents or engaging in an audit of whether inter-company arrangements between an MSO (or other non-provider entity) and healthcare providers comply with the newly enacted laws could potentially garner support from government authorities for any transaction.
- Stakeholder engagement: Entities are encouraged to cultivate relationships with key regulatory officials before transactions are contemplated. Understanding agency priorities and concerns can streamline review processes.
- Narrative development: Entities are encouraged to prepare narratives that articulate how transactions will benefit patients, maintain or enhance service quality, and support healthcare workforce stability.
In addition, lobbying is a key force in influencing how these laws are drafted and enforced. Therefore, healthcare providers and investors are likewise encouraged to get involved early in the legislative process to ensure well-reasoned approaches are being instituted by state lawmakers.
The summer months present an ideal opportunity to engage with state legislators while many are not in session and can devote more time to understanding complex healthcare transaction and CPOM issues. Trusted legal advisors and lobbyists could help facilitate these introductions and develop state-specific advocacy strategies tailored to your organization's footprint and growth plans.
[1] This includes Oregon, Nevada, Colorado, Minnesota, Hawaii, California, Washington, New Mexico, Illinois, Indiana, New York, Vermont, Connecticut, Rhode Island, and Massachusetts.
[2] Illinois’ General Assembly is organized into a biennium, such that each cycle of legislative activity is two (2) years. Accordingly, while the spring session of Illinois’ General Assembly concluded on June 1, 2025, Senate Bill 1998 will remain under consideration through the end of the current biennium in June 2026 unless sooner vetoed.
[3] In addition, in 2024 the California Assembly and Senate passed an expansive healthcare transaction review bill, AB 3129, which Governor Gavin Newsom ultimately blocked on the basis that he believed it was duplicative of existing review processes. AB 1415 is a renewed yet more limited measure to expand the existing OHCA healthcare transaction review process.
[4] The Pennsylvania Office of Attorney General currently oversees fundamental change transactions involving non-profit healthcare entities in its role as parens patriae with respect to charitable trusts. The Pennsylvania Office of Attorney General’s Review Protocol for Fundamental Change Transactions Affecting Health Care Nonprofits serves as a guide for reviewing mergers, divisions, conversions, sales, and affiliations among healthcare nonprofits, however, the proposed legislation would provide an explicit grant of statutory authority for healthcare specific transactions involving both not-for-profit and for-profit entities.
[5] See eg, Pennsylvania SB 1270; SB 1271; SB 1272 (2022).
[6] Earlier this year, Texas introduced legislation (Senate Bill 1595) proposing to require reporting of certain ownership and control of healthcare entities annually and upon specified “material change” transactions. While this bill effectively died with adjournment of the legislative session, similar legislation could be reintroduced in a future session.
[7] This year the Washington State Legislature considered House Bill 1881, which would have expanded the existing healthcare transaction review process to require the Washington Health Care Authority to review transactions subject to the law, and grant expanded authority to the Washington Attorney General to approve, approve with conditions or modifications, or deny any material transaction. House Bill 1881 and its companion bill, Senate Bill 5704, would have also, among other things, broadened the scope of current healthcare transaction notification requirements by: (1) expanding the definition of material change to include, in relevant part, all “entities engaged in healthcare services;” (2) removing revenue thresholds for transactions involving an out-of-state entity; (3) adding the Washington Health Care Authority as a required notice recipient; and (4) increasing the timeline for filing pre-closing notices from 60 days to 90 days.
[8] Press Release, Legislature Passes Major Health Care Oversight Legislation, Regulates Private Equity (dated December 30, 2024).
[9] Press Release, Governor Shapiro Announces Plan to Protect Pennsylvanians’ Health Care from Private Equity, Deliver New Support for Southeastern Pennsylvania in the Wake of the Crozer Closure (dated May 15, 2025).
[10] Press Release, Oregon Passes First-in-the-Nation Bill to Block Corporate Takeovers of Medical Practices (dated May 28, 2025).
[11] Some states have taken much more restrictive actions against private equity firms.For example, in the context of nursing homes, recent proposed legislation in Connecticut (Senate Bill 1332) would prohibit private equity companies and real estate investment trusts from acquiring or increasing any direct/indirect ownership interest or any operational/financial control in a nursing home.
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