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Are You Ready? Starting August 1st, New York Imposes New Review Process for Material Transactions Involving Health Care Entities
Tuesday, July 18, 2023

On May 3, 2023, New York Governor Kathy Hochul signed into law Article 45-A, amending the New York Public Health Law (“Article 45-A”). Under this new Article 45-A, health care entities in New York State are now required to provide notice of material transactions to the New York State Department of Health at least 30 days prior to the closing of the transaction. By adopting this new statute, New York joins other states such as California, Illinois, Nevada, Washington and Massachusetts in requiring prior notification of material health care transactions. Article 45-A shall become binding law in New York State on August 1, 2023.

The following entities are considered a health care entity under Article 45-A and are subject to its new reporting requirements:

  • A physician practice, group or management services organization or similar entity that provides all or substantially all the administrative or management services that are under contract with at least one physician practice.

  • A provider-sponsored organization.

  • A health insurance plan.

  • Any other kind of health care facility, organization, or plan that provides health care services in New York.

Article 45-A does not apply to insurers or pharmacy benefit managers already subject to regulation by the New York State Department of Financial Services.

Health care entities must give notice to the New York State Department of Health for all material transactions. A material transaction under Article 45-A constitutes one of the following, in either (1) a single step, or (2) a series of related transactions over the course of a rolling 12-month period:

  • A merger with any health care entity.

  • An acquisition of at least one or more health care entities, including but not limited to the assignment, sale or other conveyance of assets, voting securities, membership or partnership interest, or the transfer of control.

  • An affiliation agreement or contract formed between a health care entity and another person.

  • The formation of a partnership, joint venture, accountable care organization, parent organization or management services organization for the purpose of administering contracts with health plans, third-party administrators, pharmacy benefit managers, or health care providers, as prescribed by the commissioner by regulation.

However, the following transactions are not considered material and are exempt from Article 45-A’s notice requirement:

  • A clinical affiliation of health care entities formed for the purpose of collaborating on clinical trials or graduate medical education programs.

  • Any transactions already subject to the Certificate of Need process or an insurance-entity approval process under the New York State Public Health Law or Insurance Laws.

De minimis transactions, which constitute a transaction or series of transactions that result in a health care entity increasing its total gross in-state revenues by less than $25 million.

Under Article 45-A, the New York State Department of Health was directed to “adopt a process for the disclosure and notice" that is required under Article 45-A, presumably by promulgating regulations. However, it is not anticipated that any such regulations will be in effect by August 1st, 2023 when Article 45-A becomes binding law. At the very least, the Article 45-A requires that the notice to the New York State Department of Health contain the following information:

  • The names of the parties 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 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:

    • 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

    • any commitments by the health care entity to address anticipated impacts.

Although the New York State Department of Health has no approval rights under Article 45-A, the New York State Department of Health has the ability, if it deems it necessary, to notify the New York Attorney General's office of its findings regarding the transaction.

Additionally, Article 45-A directs the New York State Department of Health to publish the proposed transaction on its website for notice and comment from the public. The website publication will include the following information:

  • A summary of the proposed transaction.

  • An explanation of the groups or individuals likely to be impacted by the proposed transaction.

  • Information about services currently provided by the healthcare entity, commitments by the healthcare entity to continue such services, and any services that will be reduced or eliminated.

  • An explanation of how to submit comments in the notice and comment process.

Although it is not anticipated that regulations will be in effect by the time the amendment takes effect on August 1, 2023, the New York State Department of Health will likely issue regulations in the near future to provide further guidance for Article 45-A’s notice and disclosure requirements. Notwithstanding the absence of regulations by August 1st, 2023, transactions subject to Article 45-A should submit notice of the material health care transaction to the New York State Department of Health containing information required by Article 45-A itself. We will be available to provide comments on behalf of any interested parties during the notice and comment periods once the proposed regulations are made available to the public.

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