/>iIn January 2025, New York Governor Kathy Hochul proposed legislation within her FY 2026 Executive Budget that could significantly reshape healthcare transactions in the state. This legislation introduces a “Cost Market Impact Review” (CMIR) process for material transactions involving healthcare entities, aiming to assess their effects on cost, quality, access, health equity, and competition. While the proposal has sparked conversations across the healthcare and private equity sectors, it offers a pivotal opportunity for strategic planning and collaboration if approached with foresight.
At its core, the CMIR process signals a broader regulatory shift prioritizing transparency and accountability in healthcare transactions. Under the proposed legislation, healthcare entities contemplating material transactions would face an extended pre-closing notice period, new annual reporting obligations, and the potential for lengthy delays due to comprehensive reviews by the New York Department of Health (DOH). For stakeholders, this represents both a challenge and an opportunity to align transactions with the state’s goals of improving healthcare outcomes and equity while ensuring compliance.
Understanding the Proposal’s Scope and Ambiguities
The legislation’s potential impact hinges on several undefined terms, such as what constitutes a “healthcare entity,” “material transaction,” and “de minimis exception.” Currently, healthcare entities broadly include physician practices, health systems, insurers, and management services organizations, among others. The law would apply to transactions that increase a healthcare entity’s gross in-state revenues by $25 million or more. However, how “in-state revenues” are calculated remains ambiguous, leaving room for interpretation.
The proposed legislation also empowers the DOH to require extensive documentation during its preliminary review and potential CMIR. While these measures aim to protect patients and communities by fostering competition and health equity, they may add layers of complexity and delay to transactions, particularly for private equity sponsors and healthcare systems accustomed to more streamlined processes.
Strategic Planning Amid Heightened Scrutiny
Private equity firms, hospital systems, and other stakeholders must adopt proactive strategies to address these regulatory changes. Given the increased focus on healthcare transaction transparency, due diligence will need to evolve. It will no longer suffice to simply evaluate the financial viability and operational synergies of a deal. Instead, stakeholders must incorporate a detailed assessment of a transaction’s impact on access, quality, and equity, as perceived by regulators.
This requires tailoring transaction structures to align with New York’s healthcare priorities. For instance, parties might emphasize commitments to underserved communities, bolster access to primary care, or invest in workforce development as part of their transaction narratives. Doing so not only mitigates regulatory risk but also positions the transaction as a partnership with the state in achieving shared healthcare goals.
Implications for Private Equity and Healthcare Systems
For private equity firms, the proposed legislation underscores the importance of long-term planning in healthcare investments. Firms will need to engage legal and regulatory experts early to navigate the complexities of compliance. Moreover, these firms should be prepared to articulate how their transactions contribute to innovation and sustainability in healthcare delivery.
Healthcare systems, on the other hand, may face challenges balancing transaction timelines with regulatory compliance. However, this moment also presents an opportunity for hospital systems to demonstrate leadership in addressing cost and quality challenges. By proactively engaging with state regulators, healthcare systems can set a collaborative tone, shaping CMIR outcomes in their favor.
Opportunities Amid Challenges
While the CMIR process may lengthen transaction timelines and require more robust documentation, it also opens the door for stakeholders to differentiate themselves. Transactions that clearly address New York’s objectives—whether by improving access to care, addressing social determinants of health, or enhancing health equity—will likely stand out in the regulatory process.
Furthermore, the proposal encourages healthcare entities to think beyond traditional metrics of success. Transactions that integrate advanced data analytics, innovative care models, or population health initiatives may not only meet regulatory requirements but also unlock new avenues for growth and patient impact.
Looking Ahead
The proposed legislation reflects a growing trend across the U.S., where states are increasingly scrutinizing healthcare transactions to ensure alignment with public policy goals. Massachusetts and Indiana have introduced similar requirements, and other states may follow suit. As such, the New York proposal serves as both a cautionary tale and a roadmap for stakeholders navigating this evolving landscape.
For private equity firms, hospital systems, and other healthcare stakeholders, now is the time to adapt. This means not only preparing for regulatory compliance but also embracing a more collaborative approach to transactions. By aligning with state priorities, stakeholders can turn regulatory challenges into opportunities to drive meaningful, sustainable change in healthcare delivery.
The road ahead requires careful navigation, but the potential rewards—improved healthcare outcomes, stronger partnerships with regulators, and enhanced community impact—make the journey worthwhile.
