veterinary practices; ownership; oversight

HB4019 - 572R - I Ver

REFERENCE TITLE:
veterinary practices; ownership; oversight

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 4019

Introduced by

Representative
Mathis

AN
ACT

amending title 44, chapter 11, arizona
revised statutes, by adding article 2.1; relating to business regulations.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 44, chapter 11, Arizona
Revised Statutes, is amended by adding article 2.1, to read:

ARTICLE 2.1. VETERINARY
MEDICINE PRACTICE

START_STATUTE
44-1617.

Definitions

In this article, unless the context otherwise
requires:

1. "Licensee" means a
natural person who is licensed pursuant to title 32, chapter 21.

2. "Management services
organization" means any organization or entity that contracts with a
licensee or veterinary practice to perform management or administrative
services that relate to, support or facilitate a provision of veterinary care
services.

3. "Veterinary medicine"
has the same meaning prescribed in section 32-2201.

4. "Veterinary practice"
means a corporate entity or partnership that is organized for the purpose of
practicing veterinary medicine.
END_STATUTE

START_STATUTE
44-1617.01.

Licensees; ownership of veterinary practices; violation;
classification; civil penalty; attorney general; enforcement

A. A person in this state may not do
any of the following unless the person is a licensee:

1. Own a veterinary practice.

2. Receive compensation to practice
veterinary medicine.

3. Engage in the practice of
veterinary medicine.

4. Employ an individual who is
licensed pursuant to title 32, chapter 21.

5. Advertise in a manner that
demonstrates a lawful ability to practice veterinary medicine.

B. An owner of a veterinary practice
must be licensed pursuant to section 32-2212 and be substantially engaged
in providing veterinary medicine.�

C. A person may not interfere with,
control or otherwise direct the professional judgment or clinical decisions of
a licensee unless the person is licensed pursuant to section 32-2212.

D. A director of a veterinary
practice is subject to removal based on a consideration of the director's
course of conduct and the inadequacy of other available remedies.� A veterinary
practice may be dissolved or its charter or certificate of authority revoked if
it is established that the entity violated this section.

E. Within twelve months after the
death of an owner of A veterinary practice, all of the owner's ownership
interest must be acquired by the veterinary practice or by a person allowed to
own the ownership interest, or a combination of both.

F. A veterinary practice may employ
licensees and engage in the practice of veterinary medicine if:

1. The licensees hold a majority of
each class of voting shares.

2. The licensees are located in this
state and are a majority of the managers.

3. The officers are licensees, except
for the secretary and treasurer, as applicable.

G. A shareholder, director or officer
of a veterinary practice may not:

1. own or control shares in, serve as
a director or an officer of, be employed by, act as an independent contractor
for or otherwise participate in the management of both the veterinary practice
and a management services organization.

2. receive substantial compensation
or remuneration from a management services organization in exchange for
ownership, control or management interest in the veterinary practice.

H. Subsection F, paragraph 1 of this
section does not apply to the shareholders, directors or officers of a
veterinary practice if the veterinary practice is owned by a majority of the
interest in the management services organization or a separate legal entity.

I. A veterinary practice may not
transfer or relinquish control over:

1. The sale, restriction on the sale
or an encumbrance of the veterinary practice's shares of assets.

2. The issuance of shares of stock in
the veterinary practice, any subsidiary of the veterinary practice or any
entity that is affiliated with the veterinary practice or the declaration or
payment of dividends.

J. A noncompetition agreement between
a licensee and another person is void and unenforceable unless the licensee
owns or controls an ownership or membership interest of at least twenty-five
percent of the total ownership or membership interest in that other
person. this subsection does not restrict any cause of action with
respect to a statement that constitutes libel, slander, a tortious interference
with contractual relations or another tort.

K. A nondisclosure agreement or
nondisparagement agreement between a licensee and a management services
organization is void and unenforceable.�

L. A management services organization
or other legal entity that is not the veterinary practice may not advertise the
veterinary practice's services under the name of an entity other than the
veterinary practice.�

M. The attorney general shall enforce
this section and may adopt rules to implement this section.

N. The attorney general may subpoena
any records that are necessary to enforce or to investigate suspected
violations of this section.

O. The attorney general may impose a
civil penalty of not more than $10,000 per day for each violation of this
section.� The attorney general may dissolve or revoke the charter or
certificate of authority of any veterinary practice that has violated this
section.

P. A person who violates subsection
A, B or C of this section is guilty of a class 3 misdemeanor and shall pay a
fine of not more than $5,000 for each offense of a violation.� Each day of a
violation is a separate offense.
END_STATUTE

START_STATUTE
44-1617.02.

Reporting of ownership and control of veterinary practices;
exceptions; rules; annual report

A. Each veterinary practice shall
report to the Arizona state veterinary medical examining board, on an annual
basis and when a veterinary practice makes a material change that involves the
veterinary practice, on a form and in a manner as prescribed by the Arizona
state veterinary medical examining board that includes the following:�

1. The name of the veterinary
practice's legal entity.

2. THe veterinary practice's business
address.

3. The veterinary practice's
locations of operation.

4. The veterinary practice's business
numbers, as applicable, including:

(
a
) The
taxpayer identification number.

(
b
) The
Employer identification number.

(
c
) The
national association of insurance commissioner's identification number.

(
d
) A personal
identification number that is associated with a license that is issued by the
department of insurance and financial institutions.

5. The name and contact information
of a representative of the veterinary practice.

6. The names of each INDIVIDUAL or
person that:

(
a
) Has
ownership or investment interest in the veterinary practice.

(
b
) Has a
controlling interest in the veterinary practice.

(
c
) manages the
veterinary practice, if the veterinary practice is managed by a management
services organization.�

(
d
) Is a
significant equity investor in the veterinary practice.

(
e
) Is included
on a current organization chart, including:

(
i
) Any entity
listed in subsection E of this section.

(
ii
) Any
affiliate, including an entity that controls or is under the common control of
a veterinary practice.

(
iii
) Any
subsidiary.

7. The compensation amount for any
governing board of the veterinary practice.

8. A comprehensive, final report of
the veterinary practice and any ownership and control entities, including
audited financial statements, cost reports, annual costs, annual receipts,
realized capital gains and losses, accumulated surplus and accumulated
reserves.

B. A veterinary practice that is
owned by at least two licensees is exempt from this section.

C. The Arizona State veterinary
medical examining board may adopt rules to implement this section and may
establish fees in rule.

D. Information in this section is not
confidential.

E. Beginning December 31, 2027 and
each year thereafter, the Arizona state veterinary medical examining board
shall post on the board's publicly available website a report that contains the
following information from the previous calendar year that includes all of the
following:

1. The number of veterinary practices
during the reporting year with each business structure or entity identified.

2. The names, addresses and business
structures of any entity that has ownership or controlling interest in each
veterinary practice.

3. Any change in ownership or control
for each veterinary practice.

4. Any change in the tax
identification number of a veterinary practice.

5. As applicable, the names,
addresses, tax identification numbers and business structures of other
affiliates that are under common control or that are subsidiaries and
management services entities of the veterinary practice and an analysis of
trends in horizontal and vertical consolidation, disaggregated by business
structure and provider type.
END_STATUTE

START_STATUTE
44-1617.03.

Notice; proposed material change transaction; posting preliminary
review; comprehensive review process; approval authority

A. Before a veterinary practice may
make any material change transaction, the veterinary practice shall submit
written notice to the attorney general's office at least one hundred eighty
days before the date of the proposed material change transaction is to take
effect.� The written notice shall include information the attorney general
deems required.� The veterinary practice may include additional information
that supports the written notice of the material change transaction.� Notice is
complete when the attorney general receives all of the required information.�
Information received by the attorney general's office is public information and
is not confidential.� On receiving written notice of the material change
transaction, the attorney general shall post on the attorney general's publicly
accessible website information about the material change transaction that
includes:

1. A summary of the proposed
transaction, including the identity of the parties to the transaction.

2. An explanation of the group or
individuals that are likely to be impacted by the material change transaction.

3. INformation about services
currently provided by the veterinary practice, any commitments made by the
veterinary practice to continue providing veterinary medical services and any
services that will be reduced or eliminated.

4. Details about any public meetings,
if applicable, and how to submit comments.

5. Any other information that the
attorney general determines would be in the public interest.�

B. Within thirty days after receiving
notice described in section A of this section, the attorney general shall
Complete a preliminary review of a material change transaction and shall do any
of the following:

1. Approve the material change
transaction and NOTIFY the parties.

2. Approve the material change
transaction subject to conditions set forth by the attorney general and notify
the veterinary practice in writing of the conditions of approval.

C. If the material change transaction
qualifies pursuant to subsection E of this section, the attorney general notify
the veterinary practice in writing that the transaction is subject to a
comprehensive review.� The attorney general may request additional INFORMATION
necessary to perform a comprehensive review under subsection E of this section.

D. Within ninety business days after
determining a material change transaction is subject to a comprehensive review,
the attorney general shall conduct one or more public hearings or public
meetings, as applicable, one of which shall be in the county where the
veterinary practice is located to hear comments from interested parties to
comment on any of the following:

1. The market share of any
transacting party and the likely effects of the transaction on competition.

2. Any previous transaction involving
a transacting party, including acquisitions or mergers that were similar to the
material change transaction even if the acquisitions or mergers occurred out of
state.�

3. The prices charged by either of
the transacting parties for services, including their relative prices compared
to other prices for the same services in the same geographic area.

4. The quality of services provided
by any veterinary practice, including patient experience.

5. The cost of trends of the
veterinary practice in comparison to total veterinary care EXPENDITURES
statewide.

6. The availability and accessibility
of services that are similar to what is performed by the veterinary practice
WITHIN the veterinary practice's service area and surrounding areas.

7. The impact of the material change
transaction on competing options for the delivery of veterinary services within
the veterinary practice's service areas and surrounding service areas.

8. Consumer concerns, including
complaints or other allegations that the licensee or veterinary practice has
engaged in any unfair method of competition or any unfair or deceptive act or
practice.

9. The parties' compliance with prior
conditions and legal requirements related to competitive conduct, as
applicable.

10. The impact of the transaction on
the veterinary workforce, including wages, staffing levels and supply.

11. The impact of a real estate sale
or lease agreement on the financial condition of the veterinary practice and
the veterinary practice's ability to maintain animal care operations.

12. In the case of a proposed closure
or discontinuance of a veterinary practice, the impact of the closure on
veterinary care access, outcomes, costs and equity for those in the veterinary
practice's service area and the veterinary practice's plan for ensuring
equitable access, quality, affordability and availability of veterinary
practices within the service area.

13. Any other factor that the
attorney general determines to be of public interest.

E. A comprehensive review is required
if any of the following applies:

1. The material change transaction
will result in the transfer of assets valued above $20,000,000.

2. The material change transaction
occurs in a highly consolidated market for any line of services that are
offered by any party to the material change transaction.

3. The material change transaction
will cause a significant change in market share, such that any resulting
veterinary practice possesses market power on completion.

4. The material change transaction
will otherwise lessen competition, including effects of vertical or cross-market
transactions AMONG different product of geographic markets.

5. EITHER PArTY to the material
change transaction possesses market power prior to the transaction.

6. The attorney general, at its sole
discretion, determines that the material change transaction is likely to have a
material impact on the cost, quality, equity or access to veterinary medicine
services in any region in this state.

F. For the purposes of this section:

1. "Market power" means
possessing thirty percent or more market share in any line of service in the
relevant geographic area or under other criteria that the attorney general may
define in rule.

2. "MATERIAL CHANGE
TRANSACTION":

(
a
) Means a
SINGLE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS WITHIN A CONSECUTIVE
FIVE-YEAR PERIOD THAT INVOLVES A VETERINARY PRACTICE THAT HAS TOTAL
ASSETS, ANNUAL REVENUES OR ANTICIPATED ANNUAL REVENUES FOR NEW ENTITIES OF AT
LEAST $2,000,000, INCLUDing BOTH IN-STATE AND OUT-OF-STATE
ASSETS.

(
b
) Includes
any of the following:

(
i
) A CORPORATE
MERGER, INCLUDING ONE OR MORE VETERINARY PRACTICES.

(
ii
) AN
ACQUISITION OF ONE OR MORE VETERINARY PRACTICES, INCLUDING INSOLVENT VETERINARY
PRACTICES.� FOR THE PURPOSES OF THIS item, "ACQUISITION" MEANS THE
DIRECT OR INDIRECT PURCHASE IN ANY MANNER THAT INCLUDES A LEASE, TRANSFER,
EXCHANGE, OPTION, RECEIPT OF A CONVEYANCE, CREATION OF A JOINT VENTURE OR ANY
OTHER MANNER OF PURCHASE SUCH AS BY A VETERINARY PRACTICE, PRIVATE EQUITY
GROUP, HEDGE FUND, PUBLICLY TRADED COMPANY, REAL ESTATE INVESTMENT TRUST,
MANAGEMENT SERVICES ORGANIZATION or INSURANCE CARRIER, OR ANY SUBSIDIARIES
THEREOF, OF A MATERIAL AMOUNT OF ASSETS OR OPERATIONS OF A VETERINARY PRACTICE.

(
iii
) ANY
AFFILIATION, ARRANGEMENT OR CONTRACT THAT RESULTS IN A CHANGE OF CONTROL FOR A
VETERINARY PRACTICE.� FOR THE PURPOSES OF THIS item "CHANGE OF
CONTROL" MEANS AN ARRANGEMENT IN WHICH ANY OTHER PERSON, CORPORATION,
PARTNERSHIP OR OTHER ENTITY THAT ACQUIRES DIRECT OR INDIRECT CONTROL OVER THE
OPERATIONS OF A VETERINARY PRACTICE IN WHOLE OR IN SUBSTANTIAL PART.� FOR THE
PURPOSES OF THIS item, "ARRANGEMENT" INCLUDEs ANY AGREEMENT,
ASSOCIATION, PARTNERSHIP, JOINT VENTURE, MANAGEMENT SERVICES AGREEMENT, PROFESSIONAL
SERVICES AGREEMENT, STAFFING COMPANY AGREEMENT OR OTHER ARRANGEMENT THAT
RESULTS IN A CHANGE OF GOVERNANCE OR CONTROL OF A VETERINARY PRACTICE OR any
DEPARTMENT OR SUBSIDIARY OF A VETERINARY PRACTICE.

(
iv
) THE
FORMATION OF A PARTNERSHIP, JOINT VENTURE, PARENT ORGANIZATION OR MANAGEMENT
SERVICES ORGANIZATION FOR THE PURPOSE OF ADMINISTERING CONTRACTS WITH CARRIERS,
THIRD-PARTY ADMINISTRATORS OR PROVIDERS.

(
v
) A SALE,
PURCHASE, LEASE, AFFILIATION OR TRANSFER OF CONTROL OF A BOARD OF DIRECTORS OR
GOVERNING BODY OF A VETERINARY PRACTICE.

(
vi
) A REAL
ESTATE SALE OR LEASE AGREEMENT INVOLVING A MATERIAL AMOUNT OF ASSETS OF A
VETERINARY PRACTICE.

(
vii
) THE
CLOSURE OF A VETERINARY PRACTICE.

(
c
) DOES NOT
INCLUDE:

(
i
) A CLINICAL
AFFILIATION OF VETERINARY PRACTICES FORMED SOLELY FOR THE PURPOSE OF
COLLABORATING ON CLINICAL TRIALS.

(
ii
) GRADUATE
VETERINARY MEDICINE EDUCATION PROGRAMS.

(
iii
) THE OFFER
OF EMPLOYMENT or hiring a single veterinarian.�

(
iv
) SITUATIONS
IN WHICH THE VETERINARY PRACTICE DIRECTLY OR INDIRECTLY THROUGH ONE OR MORE
INTERMEDIARIES ALREADY CONTROLS IS CONTROLLED BY OR IS UNDER COMMON CONTROL
WITH ALL OTHER PARTIES TO THE TRANSACTION, SUCH AS A CORPORATE RESTRUCTURING.
END_STATUTE