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Top Ten 2025: The Evolving Landscape of State Health Care Transaction Review Laws

• American Health Law Association

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Based on AHLA's annual Health Law Connections article, this special series brings together thought leaders from across the health law field to discuss the top ten issues of 2025. In the tenth episode, Ragini Acharya, Partner, Husch Blackwell LLP, speaks with William S. Richmond, Partner, Kirkland & Ellis LLP, about the latest developments related to state health care transaction review laws. They discuss the growth in the number of states introducing new or expanding current health care transaction review laws; trends related to notice versus consent; the types of transactions these laws apply to; and how parties to transactions should navigate the variation in state timing requirements, contingency planning, and confidentiality of deal terms. From AHLA’s Business Law and Governance Practice Group.

Watch the conversation here.

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Speaker 1:

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Speaker 2:

A HLA is pleased to present this special series highlighting the top 10 health law issues of 2025, where we bring together thought leaders from across the health law field to discuss the major trends and developments of the year. To stay updated on all the major health law news, subscribe to ALA's New Health Law Daily podcast, available exclusively for premium members@americanhealthlaw.org slash daily podcast .

Speaker 3:

Good morning. Thank you for joining us for this A HLA top 10 issues and health law podcast series where we'll be talking about the evolving landscape of state healthcare transaction review laws. I'm rag Ria , a partner at Husch Blackwell, located in Denver. I have a healthcare regulatory and transactional practice, and I'm also a vice chair of ALA's Business Law and Governance Group. Joining me today is Will Richmond, a partner at Kirkland and Ellis, will recently co-authored the evolving landscape of state healthcare transaction review laws , uh, section of the A HLA top 10 issues 2025 in the Health Law Connections magazine. Um, I'll let, will give a fuller introduction regarding his background for our discussion today.

Speaker 4:

Yes, thank you so much. I appreciate it. Happy to be here and happy to talk about this topic. Um, I'm, look , I'm a partner in Kirkland Analysis DC office. I focus in healthcare transactional and regulatory space. And as part of that, I've spent a good part of the last three years thinking pretty heavily about state healthcare transaction review laws, how they impact our practice area today , um, what that might look like at the end of the year, and kind of practical implications as we work through transactions and regulatory hurdles , um, trying to assist clients in acquisitions , um, dispositions and, and things of that nature. So it's an exciting time, lots of changes , um, and even some, I suspect, between the time this is recorded and released.

Speaker 3:

Awesome. So to get us started , um, you mentioned in your article that there are new states likely to bring similar legislation this year, and I kind of wanted to get your opinion. What, what other states do you think will expand the current requirements and what do you think those requirements will be like?

Speaker 4:

Yeah, it's, it's a great question. You know, these types of laws started out really with Massachusetts about a decade or so now, and there was a little bit of a pause until the last three years and you had a rush where , um, about 10 or 15 states passed their own set of laws, but it, they really trickled in, right? It was one a month, one every three or four months, a new state would come to the fray. This year, just between January 1st and where we are today at March 7th , um, there are 12 states. Those are either states of the existing laws or new states that don't have one that, that want to implement, one that are thinking about putting some type of healthcare transaction review process in place. Now, I think that some of these states, not everything's gonna make it through state legislatures, and even if they do right, there's no guarantee that these will be signed into law. But there is clearly a concerted effort at the state level and really an organized effort to pass legislation that puts greater scrutiny into private investment into healthcare assets. Um, I would say by and large, these are focused more to healthcare providers, right? States wanting to say, Hey, who is kind of , um, gonna be the gatekeeper or own or control healthcare provider access in our state? Um, and what is that gonna look like from a transactional perspective? I think it's really interesting. The biggest impact is going to be you're gonna be entering a new review process that you really haven't seen before, and that most, and that there haven't really been that many transactions that have gone through. So in , in a lot of ways you're building this, you , you're building the plane as you're trying to fly it in terms of how do I get this deal done? What does this regular regulator want to focus on? Um, I suspect there'll be some bumps along the road initially, but at the end of the year, I think that we'll go from 15 states having these laws to potentially 20 or more. It's really quite a thing to see.

Speaker 3:

That's interesting. Yeah. And I, I know that you and I had previously talked a little bit about , um, a couple of the states in particular. So I think New Mexico, for example, is one of the ones that, that had introduced a bill earlier this year and , um, recently I think they , uh, made some revisions to their draft of the bill. Um, and I think they're really taking public comment into consideration regarding notice and consent requirements and, and the scope of this . So I kind of wanna lead into the next question, which is what , um, what is the split you're seeing between states that only require notice versus those that require consent? And what are the trends that you're noticing there Air ?

Speaker 4:

Sure. So that , another very interesting question, and what I think you're seeing there is right now the majority of states have a, what they'll call a notice requirement. And that's simply tell me about your transaction, give me some information about it, and I'm gonna take a look at this. And then at the end of whatever notice period there is , um, theoretically you're supposed to be able to move forward with that transaction. However, even in only notice states , there are typically provisions of after we the state review this notice we'll decide whether to refer it to our attorney general or some other enforcement body in the state that could potentially take action to stop condition , um, or otherwise impair the transaction. So I would say that's the majority of states. However, there are a few, and this is really important , um, for states such as Massachusetts, Oregon, California, that even if they say it's a notice, it's really a consent, right? You, they take the positions of regulatory authorities and bodies take the positions that you cannot close the transaction until they have appropriately reviewed and signed off on it. That can really be a long and arduous process, and it can put healthcare transactional attorneys in an interesting space that we really haven't , that we don't often find ourselves in. I I won't say that no one has been in it because I'm sure they have, but we don't often find ourselves as healthcare consent in one state being the holdup for the entire transaction to close. Um, however, if you're in Oregon or a California or Massachusetts, you very well may find yourself there. So it's something to really keep in mind, make sure that you understand the review process of the state that you're gonna be filing in. Um, it's not always apparent from their statutory regulatory language. And you may find that regulators and practice kind of conduct their review processes quite differently than what it says they will do on paper.

Speaker 3:

So what are you seeing in terms of the types of transactions that these laws apply to and and what we expect them to apply to going forward?

Speaker 4:

Yeah , uh, really I would say that, I think I said it at the beginning, but it it , it is worth repeating here, which is it's really getting after direct to patient healthcare products and services. So if you have a direct to consumer medical device company, if you have , um, physician practice up for PPM model companies , um, you're seeing states that are implementing regulations or statutes that are specifically capturing these companies. They, they want to know when a different owner comes in and takes them over. They want to know if you're going to do significant add-ons in some states. And that's a space at pri both private equity, different private investment for-profit hospitals , um, even right public companies have been pretty active in over the last decade or so. And so you've got folks holding a fair amount, fair number of assets that are potentially implicated, both one if you own it and want to sell it to someone else, or two, if you want to be a new entrant into this space and acquire one of these existing assets, what are you not seeing captured as much? I would say generally , um, we'll call them wholesale manufacturers, pharmaceutical manufacturers items and folks who provide items and services of that nature are generally not picked up as much. You can certainly have a fact pattern that implicates these, but as drafted, it's not really what you're seeing. However, like having said that the trend is both with exist states with existing laws and states that are proposing new laws is to draft them more broadly to, to be able to review more transactions, not less, right? It's not specific carve outs that is excluding wholesale manufacturers or, or pharmaceutical manufacturers from these reviews. It's really how states are defining in their regulations saying, what transactions are we going to capture? And so if all they need to do at the end of the day is revise the regulation to say, Hey, now let's go after some of these other folks, you may see that happen. Um, you're gonna see it in one example I would say is gonna be in California is one that comes to mind where they, at the end of last year took a look and said, I'm not quite sure why we all have , we had so few filings in our state for our, at the Office of Healthcare for affordability, and they've looked into strengthening, kind of tightening up their regulations that in a way that's gonna capture more transactions in their review process this year than less.

Speaker 3:

So kind of thinking about the additional transactions , um, and the types of transactions to which these laws will apply, I, I've noticed, at least in in my practice, an increase in arrangements with management services organizations and um, for example, I think New York started including those back in 2023. I'll correct me if I'm wrong on my timing, but um, that's included even in the revised version of the New Mexico bill manage , um, arrangements with MSOs are also included, whether they're with hospitals as a whole or just for a service line . So I guess what is your opinion on, I guess, including arrangements with MSOs and control from that perspective?

Speaker 4:

Well, it's certainly an area that states are interested in and largely because in states with corporate practice and medicine and corporate practice and medicine doctrine states, right? Private investors don't own or control healthcare providers because they're not legally allowed to. And so they've structured their arrangements with these companies to management service organizations and I think states have decided that, you know, that's all well and good. You may not directly control these folks and you're not controlling their professional judgment 'cause you're not allowed to legally, but you still are involved enough where we want to take a look and understand more about one, how this arrangement's going to work, how it could theoretically impact patient care for , um, the constituents in our states . Now I do think that some of these , um, we'll call them just corporate structures are maybe unfairly maligned, right? It's not always a malicious intent that there's physician practice management , um, companies that are rolling up physician practices. The bottom line is the economics of healthcare are changing, right? Consolidation has been coming to the healthcare industry for the past 25 years, really may be longer than that. And so the fact that you're seeing that manifest into a management service organization or physician practice management model is really nothing new. It's just something that states are interested in learning more about. And so if you approach it in that manner of your filings in that manner , if you're caught in a state of, look, here's what we do, it's not really much different than what anyone else is doing. We're not looking to take away healthcare services. We're not looking to massively increase costs for patients. It's simply a more efficient way to deliver care that is and has been an effective strategy for getting regulators comfortable with these types of transactions.

Speaker 3:

Interesting . Yeah. So , um, I wanna shift gears a little bit to timing. I think you briefly touched on this a little bit earlier in our discussion, but you know, those entities that are navigating multi-state , um, and just generally timing , um, requirements associated with these laws. How should the parties to a transaction navigate something that varies so much?

Speaker 4:

It is a great question, right? Because particularly if you're in more than one state and you're going to implicate one of these filings, but you know, at the outset, the initial , um, we'll call it just the initial preliminary notice period likely varies between those states. But truthfully, and , and , and that can vary anywhere from somewhere like , uh, New York that says, I think it's New York that says, I would like a 30 day pre-close notice to an Oregon that says, you know, 180 day pre-close notice. Even within that, there's still huge variability of the 30 days or the 180 days or whatever time period that you think is gonna start running does not necessarily run when you submit your filing and having answered all the questions , um, that were on there, right? In many states, they're taking the position that your filing is not complete and the clock does not run until you've answered all my questions until I , the regulator am satisfied that your filing is complete and I have actually given you a letter in hand saying it is complete. And that uncertainty really can drive a lot of friction in a deal process. It can drive it between buyers and sellers. It can drive between clients and legal count , right? Your clients and their le and their legal counsel , um, to manage through that. Be upfront , right? Don't tell folks you're going to be able to get your transaction through in 30 days or 60 days 'cause you very well may not be able to. And if you're in a state that's more than just a notice state , um, for example in Oregon or California, you don't wanna promise a timing that you can't meet. And so really incident to that is how do you deal with these in transaction documents, which is another interesting question. And the answer has to be you need to build in flexibility to go get these consents and approvals. Um, whether you're going to tie it to a hard and fast state that's certainly risky for reasons outside of your control, you can't meet it because the regulator's not given approval for a transaction yet. And so really what I think you're seeing a shift towards is more a best efforts covenant to go out and get these types of approvals that are required. And maybe that's tied to an outside date that says, Hey, if at the end of this , um, at the end of this, you know, six month period we still can't get our approvals right , here's some options and we can think about both walking away from this deal. It's really more akin to what you used to see really in the context of HSR and antitrust processes than specific healthcare regulatory filings. But now those two are aligning more closely.

Speaker 3:

Right . Kind of thinking about, you know, incorporating those types of terms into your transaction documents and just generally thinking about risk and contingencies, can you speak a little bit about how parties to a transaction and their legal counsel and other advisors should be looking at this from, you know , in the inherent risk of uncertainty and, and other contingency plans?

Speaker 4:

Well, it's something that folks need to put a lot of thought into on the front end, right? You want to think through, Hey, what happens if we cannot get this approval in place? Um, and whether that actually makes its way into writing on the transaction document or whether it's just an understanding between the parties, it's still important to think through on the front end. And so what does that mean? Well, maybe it means that you're going to at least discuss the possibility of if it's really a set of assets in one particular state that's causing a problem , um, but you're ready to close on the asset , on the assets operations that are located in maybe 10 other states. There's a way to carve out the items and the assets that are, that are holding up your, the , your broader transaction from closing. That may not always be possible 'cause you may start just depending on what the actual physical corporate structure looks like, but it's something to think through. Are there viable contingency plans to let the transaction move forward in the absence of approval? And sometimes the answer may be yes, and sometimes the answer may be no. And that's where, kind of getting back to what happens if we can't get regulatory approval, is there, are we able to walk away with this without some type of fee? Is there a breakup fee involved? Um, or the parties just going to start getting angry at each other and pointing fingers and potentially trying to sue each other , uh, over bad faith negotiation. Uh , I think I've seen , I've seen it go really in each of those directions , um, which I'll reiterate again leads me to let's pay attention to this on the front end.

Speaker 3:

No, exactly. That makes a lot of sense. Uh, another big consideration that I think providers are really concerned about is the confidentiality of deal terms. I know that at least a few states are requiring disclosure of the deal documents themselves, including letters of intent, you know, the actual acquisition definitive documents. So is this something they should be concerned about in terms of confidentiality or what, what do you propose providers should do when it comes to having to disclose this type of information?

Speaker 4:

Yeah, no , I , I really think it is something that folks need to pay attention to and , and be wary of because information, some of these states will require a really expansive amount of information to be provided for these filings. They'll, they'll want business terms, how you operate your business today, how you price all your products and services , um, right. Things that you very well may consider trade secrets and the regulators are gonna say, that's great, I still want to see them . So now your next concern is, well look, I don't want this to be subject to a FOIA request, right? I don't want it to be posted on publicly on your website. So how do you deal with that? Some states have, a lot of states have a confidentiality provision built directly into their transaction review laws. So there is a methodology for you to provide effectively two filings. One is a confidential version that regulators can see and one is a public version that if there is a FOIA request or if that state is one that provides information publicly online, will actually be in the public domain. Um, for some states, if they have not directly addressed the confidentiality provision, there are still mechanisms to provide this information in a manner that is not subject to a public information request. Right? I've seen situations where you might go and ask the attorney general to issue a civil investigative demand that you could produce documents under that they're saying they want for the sole purpose of it not being discoverable or , or discoverable from a public , um, records request standpoint. And also I think that where previously I had seen people take position of really broadly designating all this information as confidential 'cause they didn't really want anything out there, right? You are seeing state regulators push back on that. They, in the states that we've worked with and , and the , and I've really done a filing almost in every single state right now. They want you to justify why something is designated is confidential. Um, it can't just be a blanket, right? Here's the executive summary for one page that can describe the transaction. This can be public and the rest of this filing is confidential. You're not seeing that you really need to go and understand and justify that one, this is a trade trade secret or two, this is client privilege. I'm not gonna give it to anybody. And it's a balance. Um, you may find yourself trying to explain to regulators that why something is a trade secret where you don't feel like you don't have to, but just be prepared for those. Um, some folks in some states would be a little bit easier to deal with than others, but at the end of the day, it's a question that very well may come across your desk.

Speaker 3:

Yeah, and I think , um, something to keep in mind that you previously touched on with respect to timing and if , I think you had, you and I previously discussed how sometimes the efforts to maintain the confidentiality of some of this information may be futile and expensive and affect ultimately the timing. Um, do you think that's still the case going forward as well?

Speaker 4:

It really comes down to a matter of leverage in my mind, which is if you're in a state that requires consent, you need to consent to close your transaction, you really just don't have a lot of ground to stand on. So what's the cost benefit analysis of really fighting over keeping that information confidential? You may not win it anyways, right? They may just say, that's great, we're not gonna give our approval till you complete the filing and give us all the information we requested. Um, so, and , and it is expensive, right? Going back and forth with these various state regulators. It , it costs clients an extraordinary amount of money and extraordinary amount of money, right? It's not your typical license change of ownership or even what some people might think of like certificate of needs being a more involved process, right ? It's really, these can cost quite a bit more than that. So being upfront about the time and expense associated with one, completing the filings, two, going back and forth with state regulators or trying to hold your ground on a specific portion of a filing, like a confidentiality request. Um, those are conversations you wanna have on the front end and perhaps game plan out and , and really maybe not game plan out, but maybe rank where it is that here's what I'm willing to give on, here's what I'm not going to give on. If you end up in that place, regulators are so reasonable people, you can talk to them. Um, and if you can come up with a good argument for why something should remain confidential or you shouldn't need to provide a piece of information, go and make that argument, right? It's, it can be a give and take.

Speaker 3:

That's interesting concept of thinking about, you're always thinking about which hill am I willing to die on in the context of the transaction and negotiating with the counterparty. But thinking about that now in context of working with regulators is a , is something else entirely <laugh> . Um, so the last question I have for you is, do you have any other miscellaneous thoughts or tips for providers and their advisors as they're considering transactions in this environment , um, and the type of preparation they should be, you know, doing , um, in advance of these types of transactions?

Speaker 4:

Sure. So I think the biggest thing is that you need to get it , it is , and I've said it three or four times, right ? But , but get in, get in front of this early, right? Even at the term sheet stage for some of your clients, when your clients tell you that they're thinking about transacting in a space, you don't want your client submit to or commit to something like a simultaneous sign and close in a matter of weeks if you really can't get the regulatory approvals in place to do that. Whereas there have been instances where clients will take risks of closing over certain, you know, perhaps indirect change of ownership license filings in the past. These are not those, there are real penalties tied to non-compliance with these, with these laws, right? They can range from monetary penalties to referral to state attorney general's offices , um, to decide if they want to take further action. So I would say understand which states you are in and in a, in , in a time when there are 12 states that are proposing either expanding existing laws or passing new laws. Understand if that landscape's gonna shift in the next couple of months when you're trying to get your transaction done. Keep all of that in mind. Inform your clients of it upfront so there's no surprises later on. Um, and just work collaboratively with your, with your opposing counsel . 'cause ultimately you're both gonna need provide info , provide information in order to get these filings through . This is not just one party providing information. This is both buyer and seller coming together to, in most cases , most cases create a unified filing. I think if you do those things, which is something that we do on a daily basis as transaction with regulatory attorneys , um, you'll be well positioned to navigate these , um, these types of laws. It'll be interesting to see where it ends up at the end of the year and even beyond. But I suspect that we are just now entering the age where these are foundational transactional considerations as opposed to five years ago when these requirements really didn't exist.

Speaker 3:

Will , will, thank you so much to for your time today. Um, that's the end of today's podcast. Uh , for our audience, if you're looking for more information regarding state healthcare transactions laws or, or similar content, I first recommend checking out the Health Law Connections publication in particular Will's article , uh, which is available on the EH HLA website. Also ALA's Business Law and Governance Practice Group has a lot of really good resources and , um, if I'm not mistaken, we'll be publishing a webinar on this same topic in the next couple of months. So a little bit of a plug for that. Um, will, again, this has been incredibly helpful. Thank you so much for your time today. I appreciate you synthesizing all of this really dense information into something concise , um, and helpful for, you know, both transactional attorneys and their clients so they can use that going forward.

Speaker 4:

Sure. Well, thank you so much for having me. I really enjoyed the conversation , um, and I look forward to hopefully working with all the listeners here at some point in the future.

Speaker 2:

Thank you for listening. If you enjoyed this episode, be sure to subscribe to ALA's speaking of health Law, wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org .