Key Takeaways
- North Carolina's SB 570, which aimed to further restrict private equity involvement in medical practices by enhancing Corporate Practice of Medicine restrictions, has stalled after failing to meet the legislative crossover deadline.
- This development represents a broader national trend of states attempting to regulate healthcare investments, with some states successfully enacting new restrictions and others facing pushback.
- Healthcare M&A participants should work with specialized counsel to navigate the evolving patchwork of state regulations, as requirements can vary significantly and change rapidly across jurisdictions.
In the latest example of the regulatory changes buffering private equity (PE) investors in the healthcare sector, the North Carolina General Assembly failed to pass SB 570 ("NC SB 570") out of the North Carolina Senate prior to the legislative session chamber-crossover deadline. The failure to move the bill along stalls the proposed regulations that would have further restricted PE firms' involvement in the corporate practice of medicine (CPOM).
Like North Carolina, many states have proposed—and some have ultimately adopted—legislation that seeks to impose new requirements on healthcare transaction reporting and/or new limitations on corporate involvement in medical businesses. These efforts include state laws that may impact the long-adopted Management Services Organizations (MSO) model, a well-established corporate structure used by PE and other investors in physician-owned medical practices to navigate CPOM considerations in certain states. States like Oregon and Maine have recently enacted robust bills into final law, attracting much national attention, as the Dechert Healthcare team has continued to cover. Meanwhile, states like North Carolina, California and Connecticut have faced significant headwinds, including from state legislators and advocacy participation by industry stakeholders. Dechert's team is continually monitoring the changing CPOM regulatory landscape.
How Does North Carolina Compare?
In March 2025, Democrat NC Senators Mayfield, Grafstein and Waddell of the minority party introduced NC SB 570. Nationally, NC SB 570 received attention, in part because it sought to enhance North Carolina CPOM restrictions. The existing North Carolina CPOM doctrine is already considered among the most robust nationally.
NC SB 570, suggestively named An Act to Restore the Supremacy of Medical Providers' Professional Judgement and to Prohibit the "Corporate Practice of Medicine," would have required many existing medical business arrangements in the state to be restructured, and as drafted, would not have offered a grace period to allow for remediation of non-compliant arrangements. Notably, NC SB 570 would have heavily restricted the use of MSOs in the state.
NC SB 570 failed to meet the May 8, 2025, crossover deadline and therefore will not be considered during the current regular legislative session in North Carolina. The legislative session runs through the end of 2026 without a set end date. While NC SB 570 has failed to meet crossover, there are other avenues for language on CPOM to pass, such as being placed in other bills for approval. Dechert is tracking any future CPOM related proposals in the North Carolina General Assembly.
Practical Considerations for Healthcare M&A
The first half of 2025 has been an active period of regulatory change for healthcare organizations, investors and other stakeholders, particularly those with medical businesses or prospects in multiple states. New and proposed state healthcare transaction-reporting and CPOM laws have created a patchwork of adopted and proposed rules across the 50 states, making it critical for those considering transactions in the remainder of 2025 and into 2026 to work with healthcare counsel to assess applicable state-level reporting and compliance requirements early on. Dealmakers should not rely on previous reviews of the regulatory state of play; in many cases, the relevant legal considerations would not have been ripe five years, or even one year, earlier. Raising these types of threshold considerations early into the deal planning process will mitigate delays and streamline necessary documentation preparation.
Healthcare counsel can also support balancing the general tension between transparency in healthcare transactions (e.g., transaction notices, annual disclosures, and/or agency testimony) with available state law protections for commercially sensitive information from public release. The Dechert Healthcare team works hand-in-glove with our Corporate team to help you stay proactive and support your healthcare transaction planning.
The authors wish to thank summer associate Joseph Buckner for his contributions to this OnPoint.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
