Material Health Care Transactions in New York Subject to DOH Disclosure and Public Comment
A new Article 45-A, titled “Disclosure of Material Transactions,” was added to the New York Public Health Law as part of the 2024 New York State Executive Budget law that Governor Kathy Hochul signed on May 3, 2023. This new legislation will substantially increase regulatory oversight by the New York State Department of Health (“DOH”) over large health care transactions.
It applies to “health care entities,” which are broadly defined to include physician groups, management services organizations (“MSOs”), health insurance plans, and any other health care facility, organization or plan providing health care services in the state, subject to specified exclusions. Starting August 1, 2023, health care entities must provide written notice to DOH of “material transactions” at least thirty (30) days prior to the closing of the proposed transaction. The final legislation does not include a provision in earlier versions of the legislation that would have required health care entities to receive DOH approval prior to closing such transactions.
A “material transaction” includes a single transaction or series of related transactions within a rolling twelve-month period, involving: health care entity mergers, acquisitions, affiliations, the formation of partnerships, joint ventures, accountable care organizations, parent organizations or management services organizations “for the purpose of administering contracts with health plans, third party administrators, pharmacy benefit managers, or health care providers.” Article 45-A specifically excludes from state oversight under the new law a “de minimis transaction,” which would result in a health care entity increasing its total gross in-state revenue by less than $25 million.
Written notice of such transactions shall include:
- the names of the parties to the material transaction and their current addresses;
- copies of any definitive agreements governing the terms of the material transaction, including pre- and post-closing conditions;
- identification of all locations where health care services are currently provided by each party and the revenue generated in the state from such locations;
- any plans to reduce or eliminate services and/or participation in specific plan networks;
- the closing date of the proposed material transaction;
- a brief description of the nature and purpose of the proposed material transaction including: (i) the anticipated impact of the material transaction on cost, quality, access, health equity, and competition in the impacted markets, which may be supported by data and a formal market impact analysis; and (ii) any commitments by the health care entity to address anticipated impacts.
After written notice is provided, DOH will post a summary of the proposed transaction and other information provided on its website to permit the public to comment on the proposed transaction prior to closing. Health care entities that fail to comply with the new law are subject to civil penalties for each day in which the violation persists.
The new legislation takes effect on or about August 1, 2023, and grants DOH the authority to implement regulations regarding the disclosure process. Healthcare entities subject to the new law should evaluate planned transactions and keep apprised of subsequent DOH guidance to ensure compliance and avoid penalties.
For more information on navigating these new requirements and other regulatory guidance, please contact Robert Braumuller or Zaina S. Khoury, at RBraumuller@bpslaw.com or ZKhoury@bpslaw.com.