Last month, Vermont Governor Phil Scott signed into law H.583, “An Act Relating to Health Care Financial Transactions and Clinical Decision Making” (the “Act”), which establishes a new statutory framework governing private equity group and hedge fund involvement in Vermont health care businesses.[1] The Act, which was made effective July 1, 2026, seeks to limit private equity and hedge fund influence over clinical decision-making at health care facilities doing business in Vermont and imposes new ownership and investment reporting requirements on health care facilities and management services organizations (“MSOs”). The Act also provides for a number of enforcement mechanisms, including a private right of action for providers and civil penalties administered by the Vermont Attorney General. While the Act does not outright prohibit private equity investment in Vermont health care entities, its substantive restrictions on operational control and governance may affect existing and future investment structures, MSO arrangements and provider affiliations. The legislation reflects a growing trend among states to increase oversight of private equity participation in health care and follows similar legislative efforts in jurisdictions including California, Oregon, Massachusetts, and Connecticut.[2]
Who is Covered?
The scope of the Act is quite broad and reaches a wide range of stakeholders in the healthcare industry. Specifically, the Act covers the following entities:
- Hedge funds, defined to mean a pool of funds managed by investors for the purpose of earning a return on those funds, regardless of the strategies used to manage the funds, including a pool of funds managed or controlled by private limited partnerships. Hedge funds do not include:
- individuals or entities that contribute, or promise to contribute, funds to a hedge fund but do not participate in the management of the hedge fund or the fund’s assets or in any change of control of the hedge fund or the fund’s assets; or
- entities that solely provide or manage debt financing secured in whole or in part by the assets of a health care facility, including banks, credit unions, commercial real estate lenders, bond underwriters, and trustees.[3]
- Management services organizations, defined to mean any organization or entity that contracts with a health care provider or provider organization to perform management or administrative services relating to, supporting, or facilitating the provision of health care services.[4]
- Health care facilities, defined to mean persons or institutions that offer diagnosis, treatment, inpatient, or ambulatory care to two or more unrelated persons, and the buildings in which those services are offered, and include but are not limited to hospitals, nursing homes, health maintenance organizations, home health agencies, outpatient diagnostic and therapy programs, etc.[5]
- Private equity groups, defined to mean an investor or group of investors who primarily engage in the raising or returning of capital and who invest, develop, dispose of, or purchase any equity interest in assets, either as a parent company or through another entity the investor or investors completely or partially own or control.[6]
Restrictions on Private Equity and Hedge Fund Influence Over Clinical Decision-Making
A central feature of the Act is a set of prohibitions intended to ensure that clinical decisions remain under the control of licensed health care providers rather than financial investors.[7] These prohibitions apply to private equity groups and hedge funds involved in any manner with a health care facility doing business in Vermont, including as investors in the facility or as investors or owners of the assets of the facility.[8]
Specifically, a private equity group or hedge fund may not interfere with the judgment of health care providers in making health care decisions, including those regarding:
- Appropriate diagnostic testing for a particular condition;
- Referrals to or consultations with other health care providers;
- Patient care plans, including the treatment options available to the patient; and
- The number of patients a provider sees in a given period of time or the number of hours a provider works.[9]
The Act also prohibits private equity groups and hedge funds from exercising control or delegated authority over certain operational and clinical matters, including but not limited to, establishing clinical standards, policies, or staffing levels; controlling the content of patient medical records; hiring or terminating providers or clinical personnel based on clinical competency; setting prices or charges for provider services; making coding and billing decisions; and selecting or approving medical equipment and supplies.[10]
Accordingly, the Act further prohibits a private equity group or hedge fund, or any entity controlled in whole or in part by such a group or fund, from entering into any agreement or arrangement with a Vermont health care facility that would enable these prohibited forms of interference or control.[11] Notably, the restrictions are not limited to ownership interests and may apply to contractual arrangements that effectively provide operational or governance authority over a health care facility.
Continued Ability to Provide Management and Administrative Services
Notwithstanding the prohibitions and limitations described above, the Act does not prohibit non-clinical management support arrangements. Indeed, the Act specifies that unlicensed individuals and entities may continue to provide nonclinical management, administrative, business, and consulting services to health care facilities doing business in Vermont, subject to two conditions: (i) a licensed health care provider must retain ultimate responsibility for and approval authority over those relevant decisions and activities; and (ii) the services provided may not constitute an exercise of de facto control over the administrative, business, or clinical operations of the health care facility in a manner that affects a provider’s clinical decision-making or the nature or quality of care delivered.[12]
Health care facilities, MSOs, private equity sponsors, and affiliated entities may be wise to review (and potentially revise) existing management agreements, governance structures, and delegated authority provisions for consistency with the Act’s requirements.
New Reporting and Transparency Requirements
The Act also establishes new reporting obligations regarding ownership and investment interests in certain health care entities.[13] Starting March 1, 2027, each health care facility and MSO must submit to the Green Mountain Care Board (the “GMCB”) either a report disclosing private equity and hedge fund ownership and investment interests (for entities with such interests as of June 1, 2026) or an attestation of no such involvement.[14] Required disclosures for reporting entities include: (i) the identity of all ownership and investment interest holders, controlling interests, and significant equity investors; (ii) a current organizational chart reflecting the entity’s business structure including affiliates and subsidiaries; and (iii) the entity’s most recent fiscal year profit and loss statement and balance sheet.[15]
For purposes of these requirements, “ownership or investment interest” includes direct or indirect possession of equity totaling more than five percent of an entity, as well as interests held by a pool of funds managed or controlled by private limited partnerships that employ investment strategies to earn a return; and a “significant equity investor” includes any private equity group with a direct or indirect ownership or investment interest in a health care facility or MSO, any investor with more than ten percent equity in a health care provider or provider organization, and any private equity group or investor with a controlling interest in or that operates substantially all the real or personal property of a health care facility or MSO under a lease, management, or operating agreement.
After March 1, 2027, reporting is also required upon any new private equity or hedge fund investment or modification to an existing interest.[16] The following entities are expressly exempt from the reporting requirements: (i) nursing homes as defined under 33 V.S.A. § 7102; (ii) health care staffing companies; (iii) federally qualified health centers; and (iv) entities whose Vermont health care services are delivered exclusively through telehealth.[17]
Ownership and control information filed with the GMCB is considered public, subject to limited exceptions. The Act also requires the GMCB to post a biennial public report on its website beginning July 1, 2027, summarizing reported ownership and control information.[18]
Enforcement and Penalties
To reinforce the aims of these measures, the Act establishes two new enforcement mechanisms:
- A health care provider aggrieved by a violation of the Act’s clinical decision-making restrictions may bring an action in Vermont Superior Court seeking equitable relief, actual damages, reasonable costs, and attorneys’ fees.[19]
- Health care facilities and MSOs that knowingly fail to provide required disclosures may be subject to civil penalties of up to $50 per day, capped at $10,000 annually, and entities that make material misrepresentations in required reports may face penalties of up to $25,000 per misrepresentation. The Vermont Attorney General is authorized to maintain actions in Superior Court to collect these penalties and to seek appropriate injunctive relief.[20][21]
Practical Considerations
Given its scope, the Act may have significant implications for health care providers, hospitals, physician organizations, MSOs, investors, private equity sponsors, and other parties evaluating Vermont transactions or those with existing operational structures in the state.
Stakeholders should consider reviewing existing governance structures, management agreements, and operational oversight arrangements, as any rights and powers established under such arrangements could be characterized as providing direct or indirect control over matters reserved to licensed providers under the Act. Parties should not assume that arrangements characterized as purely administrative or nonclinical fall automatically within the Act’s carve-out without careful analysis against the “de facto control” standard and the “ultimate responsibility” condition set forth in the Act.
Furthermore, the Act’s broad definitions of “ownership or investment interest” and “significant equity investor” mean that entities operating through layered or multi-tiered ownership structures should evaluate where within those structures the relevant thresholds are met and what obligations may attach at each level. An indirect equity interest of more than five percent, or any interest held by a pool of funds employing investment strategies to earn a return, may be sufficient to trigger both the operational restrictions and the reporting obligations under the Act.
The public nature of the ownership and control information to be filed with the GMCB also represents a meaningful departure from the relative opacity that has historically characterized private equity involvement in health care. Organizations should consider the implications of that public disclosure for competitive positioning, stakeholder relationships, and investor communications. The legislation may also affect transaction structuring considerations for future acquisitions, affiliations, joint ventures, recapitalizations, and management arrangements involving Vermont health care providers.
Looking Ahead
Vermont’s enactment of H.583 reflects a broad and accelerating national trend toward increased scrutiny of private equity participation in health care delivery and operations. Vermont was previously one of a handful of states without an explicit corporate practice of medicine doctrine and had no statutory provisions directly regulating common private equity financial transaction structures in health care.[22] Unlike some state laws that only or primarily establish notice or reporting obligations, the Act imposes additional substantive limitations on the ability of private equity groups and hedge funds to influence provider operations and clinical decision-making, while also establishing a public transparency regime through the GMCB’s biennial reporting obligations.[23]
FOOTNOTES
[1] H.583, An Act Relating to Health Care Financial Transactions and Clinical Decision Making, 2026 Vt. Acts & Resolves (Bill as Passed by Both House and Senate) (adding 18 V.S.A. ch. 233, §§ 9771-9774).
[2] See H.583 HCA Presentation, Sam Peisch, Health Policy Analyst, Office of the Health Care Advocate (Jan. 21, 2026) (citing legislative developments in California, Oregon, Massachusetts, Connecticut, and Pennsylvania); see also Major Regulatory Updates from the West Coast: New California and Washington Approaches to Healthcare Private Equity and MSO Regulation, Sheppard Healthcare Law Blog (Feb. 28, 2025), https://www.sheppard.com/insights/blogs/major-regulatory-updates-from-the-west-coast-new-california-and-washington-approaches-to-healthcare-private-equity-and-mso-regulation; and see also Oregon Targets Corporate Practice of Medicine with Enacted Bill: What SB 951 Means for MSOs, PE-Backed Physician Groups, and Physicians, Sheppard Healthcare Law Blog (June 17, 2025), https://www.sheppard.com/insights/blogs/oregon-targets-corporate-practice-of-medicine-with-enacted-bill-what-sb-951-means-for-msos-pe-backed-physician-groups-and-physicians.
[3] Id. at § 9771(8)(A).
[4] Id. at § 9771(7)(A)-(C).
[5] Id. at § 9771(10)(A)-(C).
[6] 18 V.S.A. ch. 221, § 9432.
[7] 18 V.S.A. ch. 233, § 9772(a).
[8] Id. at § 9772(b).
[9] Id. at § 9772(b)(1)(A)-(D).
[10] Id. at § 9772(b)(2)(A)-(H).
[11] Id. at § 9772(c).
[12] Id. at § 9772(d)(2).
[13] Id. at § 9773(a).
[14] Id. at § 9773(a)(1)-(2).
[15] Id. at § 9773(b)(1)-(3).
[16] Id. at § 9773(c)(1)-(2).
[17] Id. at § 9773(e)(1)-(4).
[18] Id. at § 9774(a)(1)-(5).
[19] Id. at § 9772(e).
[20] Id. at § 9773(g)(1)-(2).
[21] Id. at § 9773(g)(3).
[22] See H.583 HCA Presentation, supra note 2 (noting that the Commonwealth Fund and Ropes & Gray independently concluded that Vermont effectively does not directly regulate private equity transactions in health care).
[23] For related legislative developments in other jurisdictions, see, e.g., Connecticut Enacts Restrictions on Hospital Sale-Leaseback Transactions and Private Equity Governance, Sheppard Healthcare Law Blog (May 2026); New York FY 2026-27 Executive Budget Advances Proposed Expansion of Healthcare Transaction Oversight, Sheppard Healthcare Law Blog (Mar. 12, 2026).