TEXAS: An introduction to Healthcare
The Texas healthcare industry is strong despite traditional headwinds including a high uninsured population and a limited state-sponsored medical assistance program. The Texas Medical Center, is one of the world’s largest medical complexes and continues to pioneer and perfect new advancements in healthcare services while growing its life science and pharmaceutical sector. Generally, the state remains business-friendly with low taxes and limits on personal injury liability.
Against this backdrop, the 2025 Texas Legislature meets for its biennial assembly and appears primed to implement new legal requirements on the business of healthcare. Areas of potential new and/or increased state government regulation include employment, anti-competitive business activities, data privacy and security, and the use of Artificial Intelligence (“AI”).
Ensuring a Safe Workplace
In 2023, Texas emerged as a leader in healthcare workplace violence protection being one of the first states in the country to require healthcare facilities, including hospitals, nursing homes, and ambulatory surgery centers to:
(1) adopt a written workplace violence prevention policy and plan;
(2) encourage confidential reporting of workplace violence; and
(3) protect employees from retaliation.
The Texas healthcare facility licensing authority is promulgating regulations to implement these mandates.
Eliminating Anti-Competitive Business Practices
This year, following the Federal Trade Commission’s unsuccessful attempt to eliminate virtually all covenants not to compete for employees in the United States, the Texas Legislature is revisiting the subset of non-compete agreements that involve the practice of medicine. The proposed legislation builds on existing protections allowing for the continuation of a course of treatment and access to patient lists with new requirements that limit physician non-competes to a duration of one year following the termination of employment or service agreement and a geographical area of five miles from the physician’s primary practice site. In addition, the bill would amend the current statute’s buy-out provision by capping the price for such a buyout at one year of the physician’s then current salary and wages. The proposed bill also extends these protections to other “health care practitioners,” such as dentists, nurses, and physician assistants.
In addition, 2025 may see Texas join states such as California and Massachusetts in enacting anti-trust inspired legislation requiring companies in the healthcare sector to report “Material Change Transactions.” Both legislative chambers have introduced bills in this regard that are aligned on the basic premise, but diverge in several material respects. Both bills require companies to report mergers, acquisitions, joint ventures, practice management arrangements, and similar transactions involving healthcare entities to the Texas Attorney General (“Texas AG”). Both bills also expressly apply to management service organizations (“MSOs”) which are involved in most physician practice acquisitions in the state because of Texas law on the corporate practice of medicine. From there, the two bills differ as to timing of notification, either upon execution of the transaction or 90 days before; size of transaction, either all transactions regardless of size, or only those involving a target enterprise value (assets and revenue) of USD10 million or more; ongoing financial reporting requirements; and other matters. Any final legislation will likely be a hybrid of the two bills with a minimum value threshold and less onerous reporting requirements to the Texas AG.
The Ongoing Battle over Data Privacy
The Texas AG also has a prominent role in enforcing data privacy protection laws. In 2024, the Texas AG announced a “first-of-its-kind” settlement involving allegations of deceptive practices against an AI healthcare technology company regarding the promotion and sale of data aggregation software to hospitals for acquiring and summarising patient data. In 2025, the Texas AG filed the first lawsuit under the new Texas Data Privacy and Security Act. The suit alleges an automobile insurer and its subsidiary illegally obtained customers’ personal information by integrating its software into other mobile location-tracking applications in violation of the act.
At the federal level, the Texas AG continues its aggressive resistance to the U.S. Department of Health and Human Services’ (HHS) regulations on the privacy of patient healthcare information. In 2024, a Texas federal court enjoined HHS’s attempts to enforce recent regulations to bolster privacy protections for “reproductive health care” information against a health provider in Texas. The Texas AG’s office is now seeking to invalidate this recent regulation and challenge HHS regulations from 2000 that limit the state’s ability to compel healthcare providers to produce information in response to an administrative subpoena.
The AI Conundrum
As with other states across the country, Texas is facing the seemingly unlimited promise and risk of AI. In 2025, the Legislature has introduced no fewer than 10 bills on the topic. Of this group, two seem most likely to be enacted into law in some form or fashion. The first, known as the Texas Responsible AI Governance Act, seeks to impose comprehensive standards requiring human oversight, assessments, and reporting of AI systems. The second bill targets the health insurance industry and would prohibit reliance on AI algorithms as the sole basis to deny, delay, or modify a claim for medical necessity.
Other Notable Developments
Medical Marijuana. Despite what appears to be a successful attempt by the state Senate to ban the sale of THC in Texas the relatively modest Compassionate Use Program will stay in place allowing use of low-THC cannabis for treatment of a limited number of conditions including epilepsy, autism, cancer, and PTSD.
Medical Spas. As a sign of the ongoing success and proliferation of medical spas in the state, the Texas Medical Board adopted new rules in 2025 requiring disclosure of the supervising physician’s identity and clarifying the scope of what that physician can and cannot delegate to non-physician providers.