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August 27, 2025
Issue Brief
Nathan Hostert
Publication
Aug 26, 2025
Jul 9, 2025
Jun 30, 2025
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In the first half of 2025, states enacted numerous laws to strengthen their health care markets. These new laws address several recurring policy issues affecting states across the country, including skyrocketing health care costs, increased consolidation in the healthcare sector, and the heightened penetration of private equity in health care systems. This brief highlights trends in state health policy across four major themes and identifies states that have made significant reforms in each of these areas this year. The four themes are:
States across the country are struggling to control costs in their health care systems. Over the past two decades, the growth in hospital prices for commercially insured patients has been a key driver of increases in health care spending.1-5 One research-backed policy lever that states have begun to use to rein in health care costs is reference-based price caps for health care providers. These policies set upper limits—usually expressed as a percentage of Medicare rates — on the prices that hospitals can charge for medical services. In the 2025 legislative session, three states — Vermont, Indiana, and Washington — have taken action to expand reference-based price caps in their health care markets.
This policy has a proven track record in states where it has been deployed. In 2017, Oregon enacted legislation to establish a reference-based hospital price cap for its state employee health plan, limiting reimbursements to 200% of Medicare rates for in-network hospitals and 185% of Medicare rates for out-of-network hospitals. Within the first 27 months of the policy’s implementation, the policy saved the state more than $107 million.6 Similarly, Montana’s state employee health plan used reference-based price caps in its contract negotiation process with hospitals, yielding $47.8 million in savings over a three-year period.7 An analysis by the Center for Advancing Health Policy through Research at Brown University has calculated how much reference-based price caps would save each state’s employee health plan, at a variety of different reference rates. (The average state would save $150.2 million from the policy.)
Until this year, reference-based price caps have generally been restricted to state employee health plans and public option insurance plans. That changed in 2025. Two states, Vermont and Indiana, have established reference-based hospital price caps that apply across all payers. In addition, Washington state has followed Oregon’s lead, establishing a reference-based price cap for hospitals through the state’s employee health plan.
In June 2025, Vermont became the first state to establish reference-based hospital price caps for all hospitals and payers with S.126. The law directs the state’s Green Mountain Care Board (GMCB), an independent board responsible for regulating and evaluating the state’s health care system, to establish upper limits on the amounts that hospitals can accept as payment for health care services, based on a percentage of Medicare rates. These limits must be established by 2027. The law also directs GMCB to ensure that the savings are passed along to ratepayers through lower insurance premiums and to report on this annually. To increase investment in underfunded health care services, the law also permits GMCB to establish reference-based payment floors for services provided in non-hospital settings, such as primary care services.
The reference-based price caps in the Vermont law are temporary and serve as stepping stones toward establishing global hospital budgets, which GMCB must set across all hospitals by hospital fiscal year 2030. Global hospital budgets set a cap on the total patient revenue that a given hospital can receive in a year. Notably, this system was implemented by Maryland in 2014.
Like Vermont, Indiana also established a trailblazing reference-based hospital price cap that applies to all payers. However, Indiana’s approach is limited to nonprofit hospitals, and it involves a different mechanism for establishing the reference-based cap. HB 1004, which includes several policies aimed at controlling hospital price growth, first directs the state’s Office of Management and Budget to determine the statewide average inpatient and outpatient hospital prices. Then, the law requires nonprofit hospitals to bring their aggregate average inpatient and outpatient hospital prices under the statewide average prices by June 2029. If a nonprofit hospital fails to meet this requirement, the hospital must forfeit its nonprofit status until it can lower prices below the average.
As of this legislative session, Washington has become the second state to adopt an across-the-board reference-based hospital price cap for its state employee health plan. SB 5083 limits the plan’s reimbursements to 200% of Medicare rates for in-network hospitals and 185% of Medicare rates for out-of-network hospitals. The law also establishes a reimbursement floor for primary care and behavioral health services, requiring plans to reimburse these services at no less than 150% of Medicare rates. The law exempts critical access hospitals and other selected hospitals from the price cap, and it sets a reimbursement floor of 101% of Medicare allowable costs for services delivered at critical access hospitals. The law establishes separate reimbursement caps based on Medicaid rates for children’s hospitals, which vary depending on the hospital’s location and its network participation status. Finally, like the Vermont law, the Washington law mandates that expected cost savings resulting from the reimbursement caps are passed along to consumers via lower premiums.
Across states, there has been a significant increase in consolidation among health care providers in recent years.8 This consolidation has involved major health care entities merging or acquiring each other to increase market power or improve efficiency. Consolidation is occurring across all corners of the health care sector, but it is especially acute in the hospital market. As of 2016, over 90% of metropolitan statistical areas in the country had hospital markets that could be deemed “highly concentrated.”9 There has also been an increase in hospitals and other entities acquiring independent physician practices. As of January 2024, more than 77% of physicians in the United States were employed by hospitals or corporations — an increase of more than 15 percentage points from just five years before.10
There is clear evidence that consolidation among health care providers leads to increases in prices.11 Horizontal hospital consolidation has repeatedly been found to increase health care prices, with the Medicare Payment Advisory Commission concluding that “the preponderance of evidence suggests that hospital consolidation leads to higher prices.”12 Vertical hospital-physician consolidation has also been associated with a 14.1% increase in physician prices.13 And the increasingly common acquisition of health care entities by private equity firms poses an additional threat to this sector. Private equity acquisition of physician practices has been found to increase prices by 11% and service volume by 16%.14
Consequently, states have taken steps to rein in health care consolidation by bolstering their oversight of mergers and acquisitions. This is not a new frontier in state policy; dozens of states already have some form of review process for significant health care transactions. However, the extent of that review authority varies significantly among states.15 The policy approaches taken by states this session ranged from simply updating notification requirements (Colorado) to granting the state prior approval authority for proposed transactions (New Mexico).
New Mexico is so far the only state to enact a law this year requiring prior approval from a state entity for a significant health care transaction. HB 586 requires prior approval from the state for hospital mergers, changes in hospital control, and acquisitions of health care practices by provider organizations affiliated with a health insurer. The law outlines several key considerations that the state’s health care authority must weigh when evaluating a proposed transaction, including the likely impact of the transaction on essential services, patient costs, the health care workforce, and market competitiveness. The authority may only approve a transaction if the parties demonstrate that the transaction will benefit the public; will improve health outcomes; will not significantly harm the availability, accessibility, affordability, or quality of health care; and will not have anticompetitive effects that outweigh the transaction’s benefits.
Following the approval of a transaction, the acquiring entity must submit annual reports to the authority for a period of three years following the transaction. These reports must demonstrate compliance with any conditions imposed by the state, include descriptions of any service changes at the hospital, and provide analyses of the hospital’s cost trends and cost growth trends.
This new law repeals and replaces temporary legislation that the governor signed in March 2024, which also required prior approval for significant healthcare transactions. That law was set to expire in July 2025. With the new permanent law, New Mexico now has one of the strongest state laws for overseeing health care transactions in the nation. New Mexico’s law also follows Part I of the National Academy for State Health Policy’s model legislation for market oversight in health care, which provides a roadmap for how states can address corporate and private equity entry into health care markets, health care consolidation, and closures of key services or facilities.
While not as extensive as the New Mexico law, Maine also took significant action related to health care consolidation this session. In June, Maine enacted a short-term ban on the expansion of private equity in health care. The new law, LD 985, establishes a one-year moratorium on any private equity company or real estate investment trust acquiring or increasing ownership interest, operational control, or financial control in any hospital in Maine.
While stopping short of requiring prior approval, Colorado also enacted legislation this year to establish new notice requirements for significant health care transactions. SB25-126 requires Colorado-based businesses that are already required to file pre-merger notifications with the federal government to also file such notifications with the state.
As private equity becomes increasingly involved in the health care sector, states are seeking ways to bring transparency to the ownership structure of health care entities. Most states do not routinely collect information on the ownership of health care entities, leaving them without the ability to understand the penetration of entities like private equity firms in their health care systems. Before this year, Massachusetts was the only state to require the systematic disclosure of the ownership and control of health care providers.16 As concern is growing about the threats of private equity in the health care sector, other states have begun to adopt similar transparency rules.
With the signing of HB 1666 in May, Indiana effectively established a health care provider registry to obtain and publicize ownership information about health care providers. The law bolsters the annual reporting requirements for entities that provide health care services, including significantly more information on the ownership and financial status of the providers. In regular reports to the state, these entities must now include the names, business addresses, business websites, identification numbers, and ownership stakes of all persons or entities that have at least 5% ownership interest, a controlling interest, or an interest as a private equity partner in the entity. Hospitals must report this information annually, while all other health care entities must report on this biennially. The law also establishes identical reporting requirements for health insurers, third-party administrators, and pharmacy benefit managers —all of which must report this information annually to the state’s department of insurance. Finally, the state department must now report annually on all of the new information collected under this law.
As originally written, HB 1686 in Washington would have established annual reporting requirements for all health care entities in the state and created a publicly accessible provider registry portal. By the time it reached Governor Bob Ferguson’s desk in April, though, the bill was pared back. The final version directs the state’s department of health to develop a plan and provide legislative recommendations on how to create a “complete and interactive registry of the health care landscape in Washington.” In particular, the department is tasked with considering “strategies to fully understand and monitor the business structure, funding, and contractual relationships of health care entities,” including ownership status and affiliations between health care entities and other organizations, such as private equity firms. The department must provide a progress update to the legislature on this project by the end of 2027, and a final report must be submitted by November 2028. Even though the final version was less strong than the initial version, this law is still a significant step forward for health care transparency in the state of Washington.
As private equity continues to expand into health care, some states are considering ways to strengthen prohibitions on the corporate practice of medicine (CPOM). CPOM laws are state-level regulations that prohibit unlicensed lay corporations from owning or controlling medical practices or employing physicians. However, as this issue brief explains, legal workarounds are prevalent, with corporate entities frequently utilizing management services organizations (MSOs) to obtain de facto control of medical practices without formally owning them. Consequently, states are seeking out ways to close the loopholes in their CPOM laws.17
SB 951 restricts corporations’ ability to own medical practices by strengthening the state’s CPOM doctrine. The bill places several restrictions on MSOs and their contracting agreements with medical practices. Additionally, the bill prohibits non-compete and non-disparagement agreements for physicians and other medical licensees. The bill is not entirely comprehensive, though, as it does not apply to hospital-owned medical clinics or MSOs.
The Oregon legislature came close to enacting similar legislation in the previous legislative session. In 2024, the state’s House of Representatives passed the legislation, but the bill never made it to the Senate floor. The bill was consequently refiled in the 2025 legislative session, when it ultimately passed.
As states begin preparing for their 2026 legislative sessions, the successes of states in the 2025 legislative session illustrate the variety of approaches that states can take to bolster their health care markets. The states mentioned in this brief encompass just a small fraction of the dozens of states where similar policies were filed this year. Issues of rising costs, private equity influence, and increasing consolidation will continue to challenge states in the years to come.
The Center for Advancing Health Policy through Research (CAHPR) seeks to make fundamental contributions towards understanding and developing policies that increase affordability and value in US health care. The health economists and lawyers at the Center for Advancing Health Policy through Research at Brown University are available to provide technical assistance and economic analyses to state policymakers in support of research-backed and effective health policymaking.
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