10. Cross-Country:
State Regulation of Healthcare Transactions and Investments
BY LARA FLATAU & TABITHA GREEN We anticipate continued legislative efforts to increase state-level review of healthcare transactions and investments in 2025. Over the last several years, a growing number of states have enacted legislation requiring pre-closing notice and/ or approval of certain healthcare transactions. These state transaction notification laws allow the relevant state agency (commonly the state attorney general or health department) to review healthcare transactions that meet the statutory criteria or that involve certain healthcare entities. The state notification requirements vary considerably in the types and sizes of transactions to which they apply, the filing and timing requirements, and the scope of review or approval of the applicable state agency. However, the laws all share a common goal of allowing state regulators to assess the impact of certain healthcare transactions on local market competition and restrictions on patients’ access to care. Investments and transactions involving PE firms continue to appear to be some of the primary intended targets. Certain states with more robust requirements require disclosure of detailed information regarding any PE sponsor, and in some cases, their other portfolio companies. Proponents of the legislation allege that increases in the volume of transactions and private investments (as opposed to physician investment) adversely impact competition, cost, and patients. They argue that enhanced regulatory scrutiny is needed to reduce the adverse impacts of such transactions and prevent violations of the traditional corporate practice of medicine prohibition principles. In particular, those state agencies regulating PE transactions and investments are concerned that the aim to secure high returns on investments conflicts with delivering affordable, accessible, and high-value healthcare patients in their states. As of January 1, 2025, 15 states – California, Colorado, Connecticut, Hawaii, Illinois, Indiana, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington – have enacted transaction notification requirements. Two of these states – Indiana and New Mexico – enacted transaction notice requirements in the past year. Further, the Massachusetts legislature passed HB 5159, which bolsters existing state transaction notice requirements and includes several other provisions impacting PE investment in healthcare, at the end of 2024. The bill is currently pending governor signature to become law. Other states – including California, Connecticut, Oregon, and Pennsylvania – had proposed legislation aimed at regulating healthcare investments that ultimately failed during the 2024 legislative session. Notably, several of the failed legislative efforts would have had impacts on PE investments above and beyond existing notification and approval requirements for applicable transactions. Some of this legislation would have prohibited certain arrangements between PE groups and physicians, restricted control exercised by MSOs, and limited the use of stock transfer restriction agreements. We expect the trend toward legislation aimed at regulating healthcare transactions and investments to continue in 2025, including in Oregon where legislation failed in 2024. Parties to healthcare transactions should review existing state notification requirements in the early stages of their transaction process to determine applicability and consider the impacts on transaction timing. In addition, parties to transactions should monitor new legislation that may impact the structure and timing of future transactions and investments. See our map for State Healthcare Transaction Notice and Approval Requirements here.
8 | BASS, BERRY & SIMS
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