Private equity’s footprint in health care has expanded rapidly over the past decade, and in response states have begun to retool long‑standing doctrines and create new guardrails that target ownership, control, and transparency. The result is an emerging patchwork of laws and review processes that remake the corporate practice of medicine landscape, constrain common “friendly PC” structures, and require far more visibility into transactions involving private equity, hedge funds, real estate investment trusts (REITs), and management services organizations (MSOs).

What’s Driving State Action

Pushed by rising acquisition volumes and consolidation in local markets, lawmakers and attorneys general have raised concerns about affordability, continuity of care, and clinical autonomy. Physicians, now employees, report incentives to increase throughput and reduced latitude in referrals outside a corporate network, intensifying scrutiny of the effect ownership structures can have on patient care.

In response, many states are breathing new life into corporate practice of medicine (CPOM) principles that limit the ability of unlicensed individuals or entities to own professional practices or exert influence over clinical decisions. California’s recent statute prohibits private investors from interfering with the professional judgment of physicians and dentists. It goes beyond codifying medical board guidance by barring contract terms that restrict providers from competing with a practice after leaving or that chill speech about quality of care, utilization, ethical concerns, or revenue strategies. Importantly, the law preserves sale‑of‑business noncompetes where otherwise enforceable, but empowers the attorney general to enforce the new limits through equitable remedies.

Oregon’s comprehensive reforms represent a deeper structural rethink of the “friendly PC” and MSO model. The state restricts dual ownership positions across professional medical entities and MSOs, and targets arrangements that give MSOs (or their affiliates) control over voting, share transfers, dividends, or financing that together amount to de facto control. Operational decision‑making tied to clinical staffing levels, visit duration, diagnostic coding, clinical standards, pricing, billing, and payer contracting is expressly delineated as off‑limits for MSOs, although the statute preserves the ability to provide administrative support and consulting without crossing into control. Transitional timelines distinguish between legacy organizations and newly formed MSO/PC arrangements, and violations may be treated as unlawful trade practices, opening the door to state enforcement and private claims.

Expanding Transaction Review and Transparency
Several states have moved in parallel to expand the scope of mandatory notice and review for health care transactions and to increase ongoing disclosure obligations. California’s Office of Health Care Affordability now requires private equity groups, hedge funds, and MSOs to submit written notice and financial information for deals that result in material changes in control. Similar notice is required when owners of health care entities dispose of material assets. Massachusetts strengthened its oversight regime with broad reporting requirements covering private equity, REITs, and MSOs, higher penalties for noncompliance, and limits on sale‑leaseback transactions between hospitals and REITs. New Mexico updated its consolidation oversight framework to make temporary authority permanent, widen its scope, and add penalties for failures to report. Indiana empowered the attorney general to investigate market concentration, while Washington created a statewide registry of health care entities to improve visibility into ownership and control.

Guardrails and Moratoria
Maine imposed a one‑year moratorium on hospital purchases by private equity or REITs, underscoring the political salience of hospital ownership changes and the operational risks associated with highly leveraged acquisitions. In other jurisdictions, corporate practice rules have been refreshed to prohibit lay influence over clinical operations, with clear statutory language making it easier for regulators to identify problematic contract terms in MSO agreements and management arrangements.

Conclusion
State oversight of private equity ownership in health care is entering a new phase. Corporate practice doctrines are being sharpened, MSO roles constrained, transaction visibility increased, and enforcement tools expanded. These laws recalibrate risk across the health care investment lifecycle. For acquirers, the diligence burden is significantly heavier. Investors must carefully map state CPOM restrictions, friendly PC features, and MSO service scopes to avoid prohibited control rights and operational authority.