States Continue to Pursue and Expand Healthcare Market Oversight at an Unprecedented Pace, with Significant Implications for Private Equity

Introduction

In recent years, states have shown an increased interest in regulating healthcare markets. The trend has accelerated further since the start of 2025, with a flurry of proposals in at least 12 states. Some of these proposed laws specifically aim to regulate private equity investment in healthcare, and all of these draft laws would profoundly affect the way private equity currently does business if passed in their current form. For regulated parties, this increase in state-level efforts contrasts with expected changes in federal priorities under new leadership at both the Federal Trade Commission (“FTC”) and Department of Justice Antitrust Division. While healthcare will likely remain a focus, the new administration’s appointments, particularly the exit and replacement of former FTC chair Lina Khan, a vocal critic of private equity, may signal reduced federal scrutiny for private equity investors.¹ Perhaps as a reaction to an anticipated federal recalibration, several states appear poised to pick up the torch from the Khan-led FTC and ramp up monitoring and enforcement around private equity’s role in healthcare. In the first section of this alert, we provide an overview of the two predominant types of laws state lawmakers and regulators are pursuing, explain how they affect private equity, and describe trends for each type:

1. Mini-HSR Laws, which require parties to certain healthcare transactions to provide notice and related disclosures to state regulators
2. Corporate Practice Restrictions, which reserve certain activities for licensed healthcare professionals and are commonly referred to as corporate practice of medicine (“CPOM”) or dentistry (“CPOD”) restrictions

In the second section, we catalog the proposed laws in each state, categorizing each proposal and elucidating concrete impacts on private equity investors.

Mini-HSR Laws

What are Mini-HSR Laws?
The first category of measures comprises what we refer to as “Mini-HSR Laws,” which largely parallel the reporting requirements under the federal Hart-Scott-Rodino Act. Mini-HSR Laws require parties to give advance notice of some subset of healthcare-related transactions (frequently referred to as “Material Change Transactions”) to state attorneys general or other state regulatory authorities.² These laws vary widely across jurisdictions, with the length of the notice period, breadth of the Material Change Transaction definition, and comprehensiveness of the regulatory filing itself all informing the intensity of the obligation under a given state’s Mini-HSR Law. Without understating the impact of closing delays and ownership disclosures on private equity investors, the most consequential variable for Mini-HSR Laws is whether (and under what circumstances) state authorities can delay, place conditions on, or even block Material Change Transactions to preserve market competition, advance patient access to healthcare services, or promote similar interests. In the simplest possible terms, the states with the most restrictive Mini-HSR Laws require private equity investors to submit more frequent and comprehensive notice filings, wait longer, and obtain affirmative approval before parties can close a transaction.

How do Mini-HSR Laws affect private equity?
To comply with Mini-HSR Laws, private equity firms entering Material Change Transactions have to submit regulatory filings that can (1) be due earlier than other common regulatory filings (such as change of ownership filings for permits and Medicaid enrollments), (2) include more extensive disclosures about such firms and fund investors, and (3) involve demonstrating that the Material Change Transaction will not have certain effects, such as increased healthcare costs or reduced access. Making timely, comprehensive, effective filings requires earlier and more involved coordination between private equity firms and healthcare and antitrust counsel, as well as careful planning to protect sensitive information about limited partners and co-investors.

What are the trends in current Mini-HSR proposals?
Currently, at least 15 states have Mini-HSR Laws, as tracked on Goodwin’s State Healthcare Transaction Notification Laws resource. Prior to 2020, Mini-HSR Laws were limited in number and scope, frequently focusing only on hospital mergers and acquisitions, likely reflecting states’ desire to prevent hospital closures or bankruptcies. A second wave of these Mini-HSR Laws has taken effect since 2020, especially in the past two years, as many states have created new reporting regimes. The second-wave Mini-HSR Laws have generally been broader in scope, reflecting a shift in focus toward traditional antitrust concerns such as market consolidation and increasing healthcare costs. These more recent laws have, in some cases, targeted private equity firms specifically. Most recently, Massachusetts Governor Maura Healey signed a proposal into law in January (as detailed here) that grants state regulators greater authority to review Material Change Transactions, especially those involving private equity investment. The new law will become effective in April.

In contrast to the activity that characterized much of 2023 and 2024, nearly all current Mini-HSR proposals would strengthen existing Mini-HSR Laws, rather than create reporting regimes in new states. Since December 2024, officials in at least nine states (California, Connecticut, Illinois, Indiana, Massachusetts, New Mexico, New York, Vermont, and Washington) have introduced proposals to strengthen transaction review regimes by requiring regulatory filings in connection with new types of transactions or additional types of healthcare entities (with a particular focus on private equity) or by increasing state regulators’ authority to impose conditions on Material Change Transactions or block them entirely. Measures in six of those nine states would establish or enhance the state’s authority to block proposed transactions. Proposals in five states would impose additional or heightened requirements for private equity investors or private equity-backed providers. Only in Texas have lawmakers proposed creating a new Mini-HSR Law in a state currently lacking any such law. While it is unclear at this stage which of these proposals will take effect, Goodwin will continue to provide updates and track these various measures through the relevant legislative and regulatory processes.

Corporate Practice Restrictions: Background and Activity Summary

What are Corporate Practice Restrictions?
“Corporate Practice Restrictions” constitute the second category of legal requirements affecting private equity investors in healthcare. Corporate Practice Restrictions originate from the principle that unlicensed individuals and the corporations they own and control should not have influence over the clinical judgment of licensed healthcare professionals. Fundamental examples of Corporate Practice Restrictions are limitations on corporations’ (other than those owned by licensed professionals) ownership of medical, dental, or other healthcare practices (“Clinical Entities”) or employment of licensed healthcare practitioners (“Licensed Clinicians”).³ The scope and source of Corporate Practice Restrictions varies significantly from state to state — and even between licensed professions within a state. While some jurisdictions have codified their restrictions in statutes or regulations, others have common law restrictions established and refined across various judicial opinions or standards articulated in guidance by state attorneys general or licensing authorities.

Beyond the fundamental limitations on formal lay ownership of Clinical Entities and employment of Licensed Clinicians, Corporate Practice Restrictions have evolved to address modern healthcare businesses. In states with Corporate Practice Restrictions, private equity and other investors may comply with applicable laws by forming management services organizations (“MSOs”), which contract with Clinical Entities to manage the finances, operations, and other non-clinical elements of such businesses. States have sought to ensure that MSOs are not vehicles for lay investors to achieve de facto ownership of Clinical Entities or employment of Licensed Clinicians while formally complying with Corporate Practice Restrictions. Lawmakers, regulators, and courts have introduced new prohibitions and expanded and interpreted existing ones to preserve Licensed Clinicians’ professional judgment. Examples include explicit restrictions on MSO involvement in establishing reimbursement rates for professional services or personnel decisions involving Licensed Clinicians and prohibitions on MSO management fees based on a percentage of Clinical Entity revenue or profits. Generally, the stronger a state’s Corporate Practice Restrictions, the less involvement private equity-backed MSOs can have in managing Clinical Entities.

How do Corporate Practice Restrictions affect private equity?
In contrast to Mini-HSR Laws, which focus on a pre-closing process, Corporate Practice Restrictions require careful structuring of transactions and post-closing operations. Private equity investors pursuing platform and add-on deals with Clinical Entities must balance, on the one hand, the need for alignment between MSOs and Licensed Clinician-owners and, on the other, compliance with Corporate Practice Restrictions. Private equity firms must coordinate with corporate and healthcare counsel to ensure that the documents defining the MSO-Clinical Entity relationship, including management services agreements and other ancillary contracts, such as equity transfer restriction agreements (“ETRAs”), do not put MSOs in control of clinical decision making. In the most restrictive states, ETRAs may be limited or prohibited, meaning private equity investors must find alternative mechanisms to achieve alignment.

What are the trends in current Corporate Practice Restriction proposals?
As noted above, Corporate Practice Restrictions have evolved over time, moving from general principles about who can own Clinical Entities and employ Licensed Clinicians to limitations on specific business practices common to MSOs. Corporate Practice Restrictions proposed since December 2024 continue to sharpen the focus on the reality of professional practice management and place even clearer and more restrictive limits on MSOs. At least six states (California, Connecticut, Oregon, South Carolina, Vermont, and Washington) have seen proposals for new Corporate Practice Restrictions since December of 2024. At least three of the proposals (in Oregon, Vermont, and Washington) would limit ownership of or employment by MSOs for Licensed Clinician-owners and implicate the use of ETRAs. As with Mini-HSR proposals, Goodwin will continue to monitor and provide updates on these developments.

Summary of Proposed Mini-HSR Laws and Corporate Practice Restrictions

• California: 
  
  • Mini-HSR Law: S.B. 25 would require any person making a transaction notification filing pursuant to the Hart-Scott-Rodino Act (including healthcare and private equity firms) to also file a copy of the form with the Attorney General. The additional filing would only be required if the filing person has (1) its principal place of business in California or (2) annual net sales in California for the goods or services involved in the transaction of at least 20 percent of the minimum HSR filing threshold (which is currently $126.4 million).
  • Mini-HSR Law: A.B. 1415 would expand the notice regime administered by the state’s Office of Health Care Affordability (“OHCA”) to require filings for transactions involving MSOs. The proposal would also extend the transaction reporting obligation, which currently applies to healthcare entities, to private equity firms and hedge funds.
  • Corporate Practice Restriction: S.B. 351 would prohibit private equity firms and hedge funds from interfering with the professional judgment of physicians or dentists in California and from exercising any control over certain functions, such as hiring and firing Licensed Clinicians, determining the contents of medical records, or making billing and coding decisions. The prohibition would apply explicitly to MSOs owned directly or indirectly by private equity firms and hedge funds.
• Connecticut: 
  
  • Mini-HSR Law: S.B. 261 would impose restrictions on private equity firms buying, operating, or holding a controlling interest in hospitals, including by limiting the ability of such firms to lease property back to the hospital for a fee after purchasing the land rights. 
  • Mini-HSR Law: S.B. 567 would expand the authority of the Attorney General and Commissioner of Health Strategy to regulate private equity ownership of hospitals, radiology groups, and drug rehabilitation facilities. Further, the law would restrict “self-dealing property transactions.” 
  • Mini-HSR Law and Corporate Practice Restriction: S.B. 469 would restrict private equity firms from acquiring hospitals, prohibit hospitals from entering real estate investment trust (“REIT”) transactions, and establish physician-led ownership requirements for certain medical groups and centers. 
  • Mini-HSR Law: S.B. 837 would require group practices to submit information about intended acquisitions or mergers to the Commissioner of Health Strategy, repeal the presumption in favor of approving certificate-of-need applications for large group practice ownership transfers, and mandate the Health Care Cabinet to develop legislative recommendations to increase oversight of group practice mergers and acquisitions.
  • Mini-HSR Law: H.B. 6570 would prohibit private equity firms from acquiring ownership or control of healthcare provider practices or facilities and would require healthcare administrators to disclose ownership structures and significant changes in such structures to the Health Systems Planning Unit. The Attorney General would be authorized to enforce these provisions.
  • Mini-HSR Law and Corporate Practice Restriction: S.B. 1507 would prohibit any transaction effecting new or increased private equity or REIT ownership of hospitals, health systems, or group practices. It would also prohibit healthcare facilities and MSOs from engaging in certain activities that interfere with or control the professional judgment or clinical decisions of Licensed Clinicians. 
• Illinois: Mini-HSR Law: S.B. 1998 would update the state’s current Mini-HSR Law to require private equity firms and hedge funds to obtain consent from the Attorney General if they provide financing for certain covered healthcare transactions.
• Indiana: Mini-HSR Law: H.B. 1666 would require private equity firms acquiring a healthcare facility, regardless of the total assets at issue, to submit a 90-day pre-closing notice. Under a new consent requirement, the Attorney General would have 45 days to approve or deny the transaction. Further, healthcare entities, including hospitals, insurers, and pharmacy benefits managers, would be required to file annual ownership structure reports.
• Massachusetts: Mini-HSR Law: S.D. 1910 would prohibit private equity firms from engaging in transactions that are likely to cause financial distress to a healthcare provider due to debt placement. In addition, the legislation would create requirements for how private equity firms direct healthcare providers to pay fees and issue dividends, while also requiring private equity firms to deposit a bond with the Department of Health. 
• New Mexico: Mini-HSR Law: S.B. 14 would require private equity transactions involving certain healthcare entities to provide a pre-closing notice to the Office of Superintendent of Insurance (“OSI”) no later than 60 days prior to the proposed date. The OSI would be authorized to require a cost and market impact review, in which case parties would need to obtain OSI approval with or without conditions. 
• New York: Mini-HSR Law: H.M.H. Article VII Legislation, Part S would expand the notice requirement under the state’s current Mini-HSR Law from 30 days to 60 days and require parties to disclose any sale-leaseback agreements, the impact of the transaction on competition, and whether a party to the transaction owns another healthcare entity that closed or reduced services. If the Department of Health determined a cost and market impact review was necessary, it would have 180 days from the notice date to issue a final report. For a five-year period following closing, the Department would continue to monitor covered transactions.⁴
• Oregon: Corporate Practice Restriction: S.B. 951 would limit certain overlapping ownership and control relationships between MSOs and contracted Clinical Entities. It would also prohibit MSOs from influencing certain Clinical Entity activities and limit certain restrictions common to ETRAs. 
• South Carolina: Corporate Practice Restriction: S.B. 46 would codify restrictions on corporate interference with physicians’ professional judgment and prohibit certain restrictive covenants in physician contracts.
• Texas: Mini-HSR Law: H.B. 985 would require a hospital that acquires an outpatient healthcare facility to provide written notice to the Attorney General and to the Health and Human Services Commission. 
• Vermont: Mini-HSR Law and Corporate Practice Restriction: H.B. 71 would require healthcare entities to notify the Green Mountain Care Board at least 180 days prior to entering into Material Change Transactions. The Board, in consultation with the Attorney General, would have 30 days to review the transaction and approve, approve with conditions, or disapprove. A comprehensive review could also be initiated, which would extend the review process by 90 days. The proposal would also prohibit shareholders, directors, and officers of medical practices from owning or holding certain positions in contracted MSOs and prohibit Licensed Clinician owners from transferring control over a Clinical Entity’s equity or assets, a common feature of ETRAs. 
• Washington: 
  
  • Mini-HSR Law: S.B. 5561 would require healthcare entities to annually disclose information on entities with a controlling interest or ownership stake in healthcare providers, including financial and organizational information. The information would form a public interactive tool displaying changes in ownership or control, organization structures, and trends in consolidation. 
  • Mini-HSR Law: H.B. 1072 would require healthcare entities that provide protected healthcare services, such as reproductive services, death with dignity services, and gender-affirming care, to notify the Department of Health at least 60 days prior to entering into a transaction. The Department would have 60 days to review and issue a final determination; otherwise, the transaction would be considered approved. 
  • Corporate Practice Restriction: S.B. 5387 would prohibit shareholders, directors, and officers of healthcare practices from owning or holding certain positions in MSOs with which such practices are contracted. The proposal would also prohibit such individuals from relinquishing certain control over the sale of a healthcare practice’s shares or assets, a common feature of ETRAs.

The Goodwin team will continue to monitor these developments. Please contact the authors if you have any questions.

 

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^[1] Notably, the FTC’s first deal challenge in the new administration was brought against a private equity-backed transaction but asserted only traditional consolidation of competition theories of harm, rather than novel private equity-specific theories such as roll-ups. 
^[2] This alert categorizes certain proposals, namely outright prohibitions on private equity ownership of certain healthcare entities and laws requiring disclosure of healthcare entity ownership outside of the transaction context, as Mini-HSR Laws. Although such proposals do not specifically require pre-transaction regulatory filings, they impose requirements and restrictions on private equity investors that are comparable to those imposed by Mini-HSR Laws.
^[3] Some states prohibit anyone other than a Licensed Clinician from owning any percentage of Clinical Entity, while others require that Licensed Clinicians own a majority of such entities.
^[4] New York has also recently introduced the “21st Century Antitrust Act.” While not healthcare-specific, the basic principle is that if you “conduct business” in New York and are making a federal HSR filing, then you must also submit the HSR to the New York Attorney General. See NY State Assembly Bill 2025-A2015.

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.