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18 May 20236 minute read

New York to require regulatory review of certain healthcare transactions

Earlier this month, as part of the 2023-2024 budget, New York enacted a requirement for certain healthcare entities, including physician practices and physician practice management service organizations, to disclose certain material transactions to the New York State Department of Health (DOH) at least 30 days prior to closing (together, the new legislation is hereinafter referred to as the Notice Requirement). The Notice Requirement goes into effect August 1, 2023. We previously discussed New York’s proposal for such a requirement in a February alert.

Below, we describe how the Notice Requirement differs from the proposal, the scope of the Notice Requirement, and its required contents. Failure to comply with the Notice Requirement will result in civil penalties of up to $5,000 per day.

Proposal vs final legislation

We note that Notice Requirement marks a departure from New York’s initial proposal in two important ways.

First, DOH does not require notice for “de minimis” transactions where a healthcare entity (as defined) does not increase its total gross in-state revenues by more than $25 million dollars due to the transaction.

Second, while the proposal allowed DOH to both review and approve of certain transactions, the Notice Requirement does not have an approval process. However, importantly, we note that from a process standpoint, once DOH receives the content of the notice, it submits the notice and supporting documentation to the antitrust, healthcare, and charities bureaus of the New York attorney general (AG). Accordingly, at a minimum, we expect the Antitrust Bureau to increase its scrutiny in the space, and it could potentially intervene in transactions even though the Notice Requirements do not require DOH approval. This may result in an additional layer of antitrust review in transactions subject to federal merger control requirements, as well as scrutiny of deals that are not reportable federally.  Based on the content requirements (set forth below), New York appears focused on whether these material transactions will result in the reduction or elimination in services, or participation with certain payors, and the impact of these transactions on cost, quality, access, health equity, and competition.


Similar to the initial proposal, the Notice Requirement applies to “health care entities” engaging in certain “material transactions.” Specifically, the Notice Requirement defines “health care entities” to include, but not be limited to:

  • physician practices
  • group, or management services organizations or similar entities that provide all or substantially all of the administrative or management services under contract with one or more physician practices
  • provider-sponsored organizations
  • health insurance plans
  • any other kind of healthcare facility, organization, or plan providing healthcare services.

"Health care entity" does not include insurers authorized to do business in New York or a pharmacy benefit manager registered or licensed in New York. Next, we note that the Notice Requirement defines “material transaction” to include any of the following during a single transaction, or multiple within a rolling twelve-month period:

  • merger with a healthcare entity
  • acquisition of one or more healthcare entities, including, but not limited to, assignment, sale, or other conveyance of assets, securities, membership, or partnership interest, or transfer of control
  • an affiliation agreement or contract formed between a healthcare entity and another person
  • the formation of a partnership, joint venture, accountable care organization, parent organization, or management service organization for the purpose of administering contracts with health plans, third-party administrators, pharmacy benefit managers, or healthcare providers.

In addition to the exclusion of de minimis transactions, the Notice Requirement also does not apply to transactions that are otherwise subject to review in New York, including, Article 28 transactions (hospitals, diagnostic treatment centers, ambulatory surgery centers), emergency medical services, and certain long-term care transactions.

Lastly, we note that “control” under the Notice Requirement means “the possession, direct or indirect, of the power to direct or cause the direction of the management, administrative functions, and policies of a health care entity, whether through the ownership of voting securities or rights or control, either directly or indirectly, by contract . . . , or otherwise.” Further, the definition of control presumes that control exists if any person indirectly owns, controls, or holds the power to vote 10 percent or more of the voting securities of a health care entity.

Notice requirements and process

While DOH will adopt a specific process for the Notice Requirement, yet to be formalized via guidance, the notice will include, at a minimum, the following supporting documentation: (i) the names of the parties involved; (ii) copies of definitive agreements; (iii) identification of all locations where the entities involved provide healthcare services; (iv) plans for the healthcare services, including any proposed reduction, elimination, or participation with specific plans; (v) the anticipated impact of the transaction on cost, quality, access, health equity, and competition, which may include a formal market impact analysis; and (vi) any commitments to address any such anticipated impacts. A healthcare entity also must submit a notice to DOH once the transaction closes.

As far as confidentiality, given the sensitive nature of these transactions, while the full transaction documents themselves are not subject to review by the public, after submission of the Notice, DOH will publicly post a summary of the proposed transaction with an explanation of the likely impacted groups and individuals, information about the current services and any expected changes to such services, and details on how to submit comments to DOH. This is a much higher level of transparency than currently exists for these transactions.

What’s next

The new Notice Requirements will apply to all transactions closing on or after August 1, 2023.[1] Accordingly, we expect DOH to release additional guidance regarding the Notice Requirements in the coming weeks. Healthcare entities with New York material transactions in the pipeline should prepare to expend resources to assemble the required documentation for the Notice Requirements, understand that the transaction will be made public to some degree once the notice is submitted, and expect to engage with DOH as to any specific questions that arise during the process.

If you have any questions about the New York Notice Requirements or related matters, please contact your DLA Piper relationship partner, the authors of this alert, or any member of our Corporate or Healthcare Industry groups.

[1] As discussed in the February client alert, other states are also considering and enacting similar legislation.  Additionally, antitrust enforcers have been both proponents of and provided testimony in support of this type of legislation, and they have testified that any violations of such notice requirements could result in antitrust challenges to proposed transactions.