Texas Bills Would Implement Notice Requirements for Healthcare Transactions

BACKGROUND

On February 12, 2025, the Texas House of Representatives introduced H.B. 2747 to strengthen the state’s ability to enforce laws and prevent anticompetitive practices in the Texas healthcare market. H.B. 2747 would require healthcare entities to provide written notice to the Texas attorney general of any material change transaction at least 90 days before it takes effect.

On February 24, 2025, the Texas Senate introduced S.B. 1595 to “enhance transparency and accountability” by requiring healthcare entities to report information about their ownership and control. S.B. 1595 would require entities to report to the Texas secretary of state upon executing a material change transaction and annually thereafter. On March 11, 2025, Texas Representative Jay Dean (R) introduced H.B. 4408, a sister bill to S.B. 1595. S.B. 1595 has been read and referred to the Health and Human Services Committee. Senator Hancock, who introduced S.B. 1595, is a member of that committee.

Both H.B. 2747 and S.B. 1595 would clarify several relevant terms, including “healthcare entity” and “material change transaction.” These key definitions are listed at the end of this client alert.

H.B. 2747

H.B. 2747 would require healthcare entities to notify the attorney general 90 days before any material change transaction (i.e., mergers, acquisitions, control changes) to combat market consolidation that has reduced competition and increased prices. The bill would authorize the attorney general’s office to conduct studies on healthcare market conditions, request relevant documents from entities, and assess the impact of completed transactions. Failure to comply with the notice requirements could result in civil penalties.

S.B. 1595

S.B. 1595 would require self-disclosure and reporting from healthcare entities in Texas with total assets and annual revenue of at least $10 million (including both in-state and out-of-state figures), and new entities with anticipated annual revenue of at least $10 million, that undergo material change transactions. These subject entities would be required to report ownership and control information to the Texas secretary of state upon executing a material change transaction and annually thereafter. The report must include comprehensive company identification; organizational and financial information; and details about ownership, controlling interests, management services organizations, and significant equity investors related to the healthcare entity.

S.B. 1595 would also grant the secretary of state authority to audit and inspect records of any healthcare entity that fails to submit requested information, or where the accuracy or completeness of submitted information is in question. The bill would permit the secretary of state to conduct random annual audits of subject healthcare entities to verify compliance and accuracy of reported information.

If the bill is passed, the secretary of state would define essential healthcare services and set standards to identify “significant reductions in services” for defining material change transactions. The secretary of state could also assess administrative fees sufficient to cover the costs of overseeing and implementing the reporting requirements.

ANALYSIS

H.B. 2747 and S.B. 1595 would create additional obligations for transactions in Texas’ healthcare services industry. Interested parties looking to transact within Texas’ healthcare landscape should closely monitor these bills, as the new requirements would impose various notice, transparency, and monitoring obligations on certain healthcare entities.

Investors should note that these bills are part of a growing trend to reshape healthcare transactions in Texas and across the United States. Visit McDermott’s Health Transactions Resource Center to monitor developments.

PENALTIES FOR FAILURE TO COMPLY WITH REPORTING REQUIREMENTS

H.B. 2747

Failure to comply with H.B. 2747’s notice requirements could result in penalties of up to $10,000 per violation. The attorney general could also recover reasonable expenses and enjoin violations of the notice requirements. Under the attorney general’s authority to conduct market studies, an entity’s failure to provide requested information within 30 days could result in administrative penalties of up to $1,000 per day.

S.B. 1595

For entities consisting of independent healthcare providers or provider organizations with no third-party ownership or control, with 10 or fewer physicians and annual revenue not exceeding $10 million, failure to provide a complete report or submitting false information could result in penalties of up to $50,000 per violation. For all other healthcare entities, penalties could reach up to $500,000 per violation. The attorney general could also recover reasonable expenses and enjoin individuals from violating the notice requirements.

APPLICABILITY TO ENTITIES

H.B. 2747 and S.B. 1595 stipulate that notice and transparency requirements for material change transactions would apply to single transactions or a series of related transactions within a specified timeframe (one year for H.B. 2747 and five years for S.B. 1595). The bills specify that the following material change transactions would be subject to reporting requirements:

• Mergers that include one or more healthcare entities;
• Acquisitions of one or more healthcare entities, including insolvent healthcare entities;
• Contracts that result in a healthcare entity’s change of control;
• Formation of partnerships, joint ventures, accountable care organizations, or management services organizations for administering contracts with healthcare providers, managers, and administrators;
• Transfers of control of a healthcare entity’s board of directors or governing body;
• Real estate sale or lease agreements involving a material amount of healthcare entity assets;
• Closures, significant reductions or discontinuations of services of healthcare facilities, or contractual affiliations that eliminate or significantly reduce a healthcare facility’s essential services (only applicable to S.B. 1595); and
• Sales or acquisitions of a material amount of the assets or operations of one or more healthcare entities (only applicable to H.B. 2747).

S.B. 1595 would only apply to material change transactions involving Texas healthcare entities with total assets and revenue, including both in-state and out-of-state, of at least $10 million (or anticipated to have, in the case of new entities).

Both bills state that reporting requirements for material change transactions would not apply to graduate medical education programs, employment offers to a single physician, or clinical affiliations formed solely for collaboration on clinical trials. S.B. 1595 would exempt transactions, including corporate restructurings, where a healthcare entity directly or indirectly controls, is controlled by, or is under common control with all other parties involved.

ADDITIONAL EXCEPTIONS TO S.B. 1595 TRANSPARENCY REQUIREMENTS

S.B. 1595 would exempt certain healthcare entities from the annual transparency reporting requirement. An entity would be exempt if it consists of at most three physicians and is an independent provider organization not under the control or ownership of another entity. A healthcare provider or provider organization owned or controlled by another healthcare entity may be exempt from the transparency reporting requirements if the controlling entity reports all required information on behalf of the provider or provider organization and includes the provider or provider organization in its organizational chart. Healthcare facilities would not be exempt from the reporting requirements.

KEY DIFFERENCES: CONFIDENTIALITY OF REPORTED INFORMATION

Most significantly, H.B. 2747 and S.B. 1595 differ in their approaches to the confidentiality of information subject to reporting requirements. Under H.B. 2747, documents and information provided to the attorney general regarding material change transactions would not be considered public information under Chapter 552 of the Government Code. Consequently, the information could not be released or made public absent a subpoena or the submitting entity’s consent.

In contrast, S.B. 1595 provides that information reported to the attorney general would be subject to disclosure under Chapter 552 and could not be considered confidential, proprietary, or a trade secret. The bill would mandate that the secretary of state publicly post information from an entity’s transparency report, including names, addresses, and details of any changes in ownership or control of a healthcare entity.

OTHER DIFFERENCES

• S.B. 1595 would establish a comprehensive annual reporting system to the secretary of state for entities with assets over $10 million, while H.B. 2747 would require healthcare entities to notify the attorney general 90 days before material change transactions occur;
• S.B. 1595 would impose steeper civil penalties (up to $500,000, compared to H.B. 2747’s $10,000); and
• While both bills would define similar key terms and exempt certain transactions such as clinical trial affiliations and single physician hiring, S.B. 1595 has a broader scope, with a five-year lookback period for related transactions compared to H.B. 2747’s one-year period.

McDermott will continue to monitor the bills’ progression through the state legislature and update this client alert as developments arise.

KEY DEFINITIONS

To help readers understand the specific terminology used in the bills, the below table is an appendix of the key terms found in H.B. 2747 and S.B. 1595.