Executive Summary

• Illinois expands its existing healthcare transaction notice law. Effective January 1, 2027, certain transactions in Illinois may require notice even when the transaction parties are not healthcare entities, including transactions involving private equity (PE) companies, parent entities, and other upstream owners that directly or indirectly own or control covered healthcare entities.
• Vermont targets PE and hedge fund investment and control. Effective July 1, 2026, Vermont restricts PE groups and hedge funds from controlling specified clinical, operational, and economic decisions, and requires certain healthcare facilities and management services organizations (MSOs) to report PE and hedge fund ownership and investment relationships.
• The practical impact extends beyond transaction filings. PE sponsors, MSOs, and healthcare companies including venture-backed healthcare companies and MSOs, should evaluate state healthcare transaction requirements, including upstream ownership, contractual and governance rights, and post-closing control, early in transaction structuring and diligence. Simply determining whether a transaction triggers a pre-closing notice requirement is no longer sufficient.

State healthcare transaction laws are entering a new phase¹ that expands beyond pre-closing notice regimes focused on healthcare consolidation to broader scrutiny of investment in healthcare, including who owns or controls healthcare entities and the governance and management rights investors retained after closing. New laws in Illinois and Vermont illustrate this shift from different directions: Illinois is expanding its existing transaction notice regime to reach certain transactions occurring higher in the ownership chain, expressly including certain PE transactions, while Vermont is imposing new restrictions on PE and hedge fund involvement in healthcare, including limitations on clinical and operational control and new ownership and investment reporting requirements. Notably, neither law expressly carves out venture capital investors, potentially making the new requirements relevant to venture investors as well as traditional PE-backed platforms. Against a broader backdrop of federal scrutiny of healthcare investors, these developments underscore that transaction parties increasingly need to consider not only whether an investment triggers a filing requirement, but also who is investing, what rights the investor will hold, and how those rights may be exercised.

Illinois

Effective January 1, 2027, Illinois will significantly amend and expand the scope of its existing healthcare transaction notice law. The amendments make the existing notice framework permanent and extend it to certain transactions involving entities that own or control healthcare facilities or provider organizations, even where the parties to the transaction are not themselves healthcare entities. The law expressly contemplates that these upstream parties may include PE companies.

The amendments make several notable changes to the existing Illinois framework, including:

• PE companies are now expressly addressed by the law. The amendments define a “private equity company” and expressly contemplate PE companies as parties to covered transactions. A “private equity company” is defined broadly to include a company or partnership that collects capital investments and, directly or through other entities, owns or controls all or part of an ownership interest in an Illinois healthcare entity or certain out-of-state healthcare entities. The definition does not expressly exclude venture capital investors, leaving open the question of whether certain venture capital investors could fall within the definition.
• The definition of “covered transaction” is expanded. A transaction may now be a “covered transaction” even when the transaction parties are not themselves healthcare facilities or provider organizations, if they directly or indirectly own or control the healthcare facilities or provider organizations that will come under common ownership or contracting affiliation as a result of the transaction.
• The notice requirement may reach transactions involving parent companies and other upstream owners. Parties may need to consider the broader ownership and control structure, including parent companies, investment vehicles, PE companies, and other upstream owners.
• The Illinois notice regime becomes permanent. The amendments eliminate the January 1, 2027 sunset of the healthcare transaction notice provisions, making the state's transaction-notification framework permanent.

What Does the Illinois Expansion Mean for PE and MSO Transactions?

The expansion has important implications for PE-backed MSO structures. PE investment in a healthcare platform often occurs at the MSO or parent level, while healthcare services are provided through separately owned professional entities. Under the expanded law, however, the fact that the professional entity is not itself a party to the transaction does not necessarily end the analysis. PE sponsors, investors, and MSOs will need to consider whether the MSO, its parent, or another transaction party directly or indirectly “controls” a healthcare facility or provider organization implicated by the transaction.

Notably, the law does not define “control,” creating uncertainty for MSO-PC structures in which the MSO does not own the professional entity but may hold contractual rights through management services agreements and related governance, transfer restriction, or succession arrangements. The statute does not specify whether or which such rights are sufficient to constitute indirect control. Until the state provides further guidance, PE sponsors and MSOs should consider the particular contractual and governance rights within the structure, rather than relying solely on equity ownership, when evaluating whether an Illinois filing may be required.

Vermont Targets PE Control and Requires New Ownership Disclosures

Effective July 1, 2026, Vermont's Act 133 (H.583) imposes new restrictions on PE group and hedge fund involvement in healthcare facilities and establishes new reporting requirements for certain PE and hedge fund ownership and investment relationships. As in Illinois, the law does not expressly exclude venture capital investors from its definition of private equity, potentially extending its relevance beyond traditional private equity transactions.

The new law includes several significant requirements:

• PE groups and hedge funds are prohibited from interfering with clinical decision-making. A PE group or hedge fund involved with a Vermont healthcare facility may not interfere with a healthcare provider's judgment in making healthcare decisions, including decisions regarding diagnostic testing, referrals, treatment plans, patient volume, and provider working hours.
• Certain operational and business decisions are also protected from investor control. The law extends beyond traditional clinical decision-making and prohibits PE groups and hedge funds from exercising control over specified matters, including clinical staffing levels, the selection of medical equipment and supplies, billing and coding decisions, the amount of time providers spend with patients, and the prices charged for healthcare providers' services.
• Healthcare facilities and MSOs face new PE ownership and investment reporting requirements. By March 1, 2027, healthcare facilities and MSOs must report to the Green Mountain Care Board whether a PE group or hedge fund held an ownership or investment interest in the entity as of June 1, 2026. Entities with such an interest must provide additional information, including information regarding financial interests and ownership and control, an organizational chart, and certain financial statements. The law exempts certain entities from these reporting requirements, including nursing homes, healthcare staffing companies, federally qualified health centers, and entities that offer only telehealth services in Vermont.
• New or modified PE involvement triggers ongoing reporting. After March 1, 2027, a healthcare facility or MSO that enters into a new or modified ownership or investment relationship with a PE group or hedge fund must report specified information to the Green Mountain Care Board.
• The law creates new enforcement mechanisms, including a private right of action. A healthcare provider aggrieved by prohibited interference by a PE group, hedge fund, or an entity controlled by either may bring an action in Vermont Superior Court for equitable relief, actual damages, reasonable costs, and attorneys' fees. The law also authorizes civil penalties for knowingly failing to comply with the ownership and investment reporting requirements or making a material misrepresentation in a required report.

What Does the New Law Mean for PE-Backed Healthcare Structures in Vermont?

For PE-backed healthcare platforms, Vermont's law may require a closer examination of how decision-making authority is allocated among the investor, MSO, and professional entity. Management agreements, governance documents, reserved powers, and investor approval provisions may warrant particular attention where a PE group, hedge fund, or controlled entity has approval, veto, or other rights over matters specifically addressed by the law.

Importantly, the law does not prohibit the provision of management, administrative, business, or other nonclinical services. It does, however, limit the authority that PE groups, hedge funds, and their controlled entities may exercise over specified decisions. PE-backed MSO-PC structures should therefore consider not only the formal allocation of authority among the parties, but also whether contractual approval or governance rights and the manner in which those rights operate in practice could amount to prohibited investor control.

In addition, Vermont does not maintain a prohibition on the corporate practice of medicine, meaning that PE groups and hedge funds can invest directly in healthcare entities and non-professional entities can directly employ and provide medical services through licensed physicians (e.g., an MSO-PC structure is not required in Vermont) so long as the controls established by the new law are observed. For companies operating in Vermont and in states with prohibitions on the corporate practice of medicine, the need for and design of an MSO-PC structure should be discussed closely with healthcare regulatory counsel.

Vermont's law may also raise questions for certain venture capital investors and VC-backed healthcare companies. An earlier version of H.583² expressly excluded venture capital firms exclusively funding startups or other early-stage businesses from the definition of private equity, but that exclusion was removed before enactment. The final law does not expressly address venture capital one way or the other, leaving open the question of whether certain venture capital investors could fall within the law's definition of private equity. Accordingly, while the law is expressly directed at PE groups and hedge funds, venture investors and VC-backed healthcare companies should consider whether a particular investment or ownership structure could implicate the law.

By contrast, certain other state regimes, including Massachusetts³ and Maine⁴, expressly carve out certain venture capital investors that exclusively fund startups or other early-stage businesses from their definitions of private equity.

Looking Ahead

Illinois and Vermont are the latest examples of states expanding scrutiny of healthcare investment beyond traditional pre-closing notice requirements. For investors and healthcare companies, these developments make it increasingly important to identify state-law issues early in the transaction process, not only to determine whether notice or reporting is required, but also to evaluate whether the proposed ownership, governance, and management structure creates additional regulatory considerations.

As states continue to focus on PE and other healthcare investments, transaction parties should expect state-law diligence to cover the full investment structure, including upstream ownership, management arrangements, governance and approval rights, and post-closing control. For an overview of current state healthcare transaction notification requirements and ongoing developments, visit Wilson Sonsini's State Healthcare Transaction Notification Laws Resource.

Contact Us

Wilson Sonsini helps clients navigate the expanding patchwork of state healthcare transaction notification laws, from identifying whether a deal is subject to notice in one or more states to managing filings, regulatory review, and closing timelines. Our healthcare regulatory and antitrust attorneys work together with healthcare companies and their investors to identify reporting obligations early, structure transactions to manage regulatory and competitive exposure, and respond to substantive agency and cost and market impact review.

For more information or advice, please contact Andrea Linna, Nawa Lodin, Seamus Taylor, or any member of Wilson Sonsini’s Healthcare and FDA Regulatory team.

 

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[1] For a broader discussion of the expanding state healthcare transaction notification landscape and its implications for deal timing and execution, see Wilson Sonsini’s client alert: State Healthcare Transaction Notification Laws: A Growing Risk to Deal Timing and Execution in Healthcare M&A.

[2] Vermont H.583 Draft No. 1.2 (Feb. 3, 2026).

[3] 958 CMR 7.02.

[4] L.D. 2201, § 371(10).