On the heels of significant legislative activity in 2024 when numerous state legislatures sought to expand the reach of "mini-HSR laws" by targeting healthcare transactions involving private equity firms or sponsors, state governments are proving to be just as active in 2025, with laws both passed and proposed aimed at identifying and reviewing private equity investment in healthcare.
(See our previous LawFlashes for more background on this topic.[1])
Massachusetts
On April 8, 2025, Massachusetts joined Indiana as the only other state to enact a law that has explicit reporting requirements[2] for private equity transactions in healthcare, as part of the state’s broader mini-HSR Act. Under the new Massachusetts law, known as House Bill 5159 (HB 5159), notice of a “material change” to healthcare providers and provider organizations has been broadened to cover a “significant equity investor,” which includes private equity companies and investors that possess more than 10% of the healthcare provider.
The Massachusetts Health Policy Commission (the Commission) has 30 days upon receipt of such notice to “determine whether the material change is likely to result in a significant impact on the commonwealth’s ability to meet the health care cost growth benchmark . . . or on the competitive market.” If the Commission finds that material change will have a “significant impact” on such markets, the Commission may conduct a cost and market review, which could delay closing of the transaction.
Indiana
Indiana’s mini-HSR Act went into effect July 1, 2024, and applies to certain transactions involving a “private equity partnership” and a “health care entity” (such as a healthcare provider, payor, health maintenance organization, pharmacy benefit manager, or third-party administrator). The Indiana legislature is considering amendments to its mini-HSR Act that would require certain healthcare entities to report ownership information (confidentially) to state agencies and permit the attorney general to investigate the market concentration of a health care entity. These amendments are still under consideration by the state legislature.
A number of lawmakers or governors in states with existing mini-HSR Acts have announced proposed legislative amendments or legislative priorities this year that would supplement those laws with additional provisions related to private equity investments in healthcare.
California
California’s Assembly Bill 3129 (AB 3129) would have provided the California attorney general with significantly enhanced authority to scrutinize, delay, or even veto private equity healthcare transactions. While AB 3129 passed the California legislature, Governor Gavin Newsom vetoed the law in September 2024, on the basis that the California attorney general’s review under AB 3129 would be duplicative of the existing California mini-HSR Act (the Health Care Quality and Affordability Act), administered by a separate California state agency.
Lawmakers in California are now trying again, having introduced Senate Bill 351 (SB 351) in February 2025. SB 351 incorporates many of the same provisions of AB 3129, but a critical difference (and one designed to address Governor Newsom’s veto of AB 3129) is that SB 351 does not condition the closing of private equity healthcare deals on the express approval of the California attorney general.[3] SB 351 is proceeding through the early stages of the legislative process.
Connecticut
In January 2025, Connecticut Governor Ned Lamont introduced Governor’s Bill 6873 (GB 6873), recommending that the legislature broaden the state’s existing mini-HSR Act to capture private equity transactions in healthcare. GB 6873 would extend the initial waiting period in Connecticut from 30 to 60 days and establish a new procedure for the Connecticut attorney general to extend the initial waiting period by conducting an in-depth merger investigation.[4]
Illinois
Illinois’ Senate Bill 1998 would amend the state’s existing mini-HSR Act to require Attorney General consent for certain healthcare transactions where private equity or hedge funds provide financing. As drafted, the legislation does not set a time frame by which the Attorney General must provide consent.[5] Under the existing law, healthcare transactions must notify the Attorney General if private equity or hedge fund financing is involved, but Attorney General consent is not required.
New Mexico
New Mexico House Bill 586 (HB 586) passed the House on March 17, 2025 and passed the Senate just three days later on March 20, 2025. The legislation would amend New Mexico’s mini-HSR Act and require pre-closing notice and approval for proposed transactions involving mergers, acquisitions, or changes in control of hospitals and certain healthcare provider organizations. Furthermore, the reviewing healthcare authority must complete its review within 120 days of receiving a complete notice, and shall consider factors such as access to essential services, healthcare quality, patient costs, and more. This legislation is particularly relevant given New Mexico has the largest portion of private equity-owned hospitals in the country.[6] Notwithstanding a veto from Governor Michelle Lujan Grisham, HB 586 will go into effect July 1, 2025.[7]
New York
New York Governor Kathy Hochul’s proposed FY 2026 budget includes amendments to the state’s mini-HSR Act that would expand that law to allow the state to conduct a cost and market impact review that could extend waiting periods from the current 30 days to potentially over 240 days if the state decides to conduct an in-depth merger investigation.[8]
Pennsylvania
Pennsylvania Governor Josh Shapiro’s 2026 budget proposal requests that the state legislature send him a bill that authorizes the Pennsylvania attorney general to review all private equity healthcare transactions. Governor Shapiro indicated that the purpose of the bill would be to get “private equity out of [Pennsylvania’s] health care system” to “make healthcare accessible and affordable for all Pennsylvanians.”[9] Governor Shapiro also called for an end to lease-buyback arrangements, “where a hospital or nursing home sells their land to a private investor and then rents it back.”[10]
Laws requiring more extensive disclosure of private equity involvement in healthcare transactions and in-depth reviews of these transactions will likely continue to be introduced in state legislatures. Healthcare providers and private equity investors should take note of these enhanced legal requirements as they contemplate expansions or changes to their existing holdings. Morgan Lewis continues to monitor these developments.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:
[1] Growing Number of US States Target Private Equity Transactions in Healthcare (Aug. 28, 2024); California, Illinois, Minnesota: Latest States to Enact ‘Mini-HSR’ Acts for Healthcare Deals (Aug. 28, 2023); New York State: Healthcare Entities Must Disclose Certain Material Transactions (May 9, 2023).
[2] Note, however, that other states have broad definitions in their mini-HSR Acts that could implicate private equity sponsors and their other healthcare portfolio companies in certain parts of the premerger notices. See, e.g., Cal. Code Regs. tit. 22, §§ 97431(a), 97435(d) (size-of-person threshold includes revenues of “the submitter and all affiliates,” where an “affiliate” is any entity that “controls, is controlled by, or is under common control with another legal entity” to provide healthcare services); Or. Rev. Stat. § 415.500(4)(a) (defining “[h]ealth care entity” to include “[a]ny other entity … that is a parent organization of, or is an entity closely related to, an entity that has as a primary function the provision of health care items or services”).
[3] California Senate Bill 351.
[5] Illinois Senate Bill 1998.
[6] House Passes Bill to Review Hospital Consolidation Deals, Los Alamos Reporter, March 17, 2025.
[7] New Mexico House Bill 586.
[8] FY 2026 New York State Executive Budget, Health and Mental Hygiene Article VII Legislation.
[9] Pennsylvania 2025–2026 Budget Proposal, Health Care.
[10] Id.