NY Enacts Scaled-Back Version of Hochul’s Health Care Transactions ProposalMay 4, 2023 | Benjamin P. Malerba | Jeffrey Ehrhardt | |
Following extended New York State budget negotiations, lawmakers have enacted a significantly modified version of Governor Hochul’s proposed health care transaction review bill, which we discussed in prior posts, here and here.
The bill, as originally proposed, included a comprehensive Department of Health review process, and required the Department of Health’s pre-approval to close certain health care transactions. That process has been replaced by a comparatively streamlined notice and disclosure requirement.
While the modified law is less onerous, its applicability and impact should still be carefully assessed by stakeholders in the health care industry.
The new law, by its terms, takes effect August 1,2023. However, the regulations implementing and perhaps clarifying the law will be finalized by the Department of Health at some point in the future and are not yet in effect.
The new law requires “health care entities” engaging in “material transactions,” as defined, to provide the Department of Health written notice and supporting documentation regarding the material transaction at least 30 days before the closing date. The notice must include the names and addresses of the parties involved, copies of any definitive agreements governing the terms of the transaction, identification of all locations where health care services are currently provided by each party and the revenue generated in the state from such locations, the closing date of the transaction, and any plans to reduce or eliminate services or participation in specific plan networks. It must also include a brief description of the nature and purpose of the transaction, including its anticipated impact on cost, quality, access, health equity, and competition in the impacted markets, and any commitments by the health care entity to address anticipated impacts. Parties must notify the Department of Health upon the closing of the transaction.
As defined in the law, the term “health care entity” includes, “but shall not be limited to” a physician practice, group, or management services organization providing administrative or management services under contract to one or more physician practices, provider-sponsored organizations, health insurance plans, or any other health care facility, organization, or plan providing health care services in New York. However, a “health care entity” does not include insurers authorized to do business in New York, or pharmacy benefit managers registered or licensed in New York; importantly, the definition does include non-insurance subsidiaries and non-insurance affiliated entities of insurance companies. The definition is not a model of clarity. For example, whether non-physician practitioners and practice groups (i.e., dentists, nurse practitioners, chiropractors, etc.) are subject to the law remains to be seen.
The law defines “material transaction” as any of the following, occurring during a single transaction or in a series of related transactions that take place within a rolling 12-month time period:
- A merger with a health care entity;
- An acquisition of 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; or
- 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.
The law exempts “de minimis transactions,” which is defined as a transaction or a series of related transactions that results in a health care entity increasing its total gross in-state revenues by less than $25 million. The law also does not apply to any transaction that is already subject to review under Public Health Law Articles 28, 30, 36, 40, 44, 46, 46-a, or 46-b. In addition, a material transaction does not include a clinical affiliation of health care entities formed for the purpose of collaborating on clinical trials or graduate medical education programs.
The documentation submitted to the Department of Health regarding the transaction will not be subject to disclosure under New York’s Freedom of Information law. However, during the 30-day period prior to closing, the Department of Health will post on its website a summary of the transaction, an explanation of the groups or individuals likely to be impacted by the transaction, information about services currently provided by the health care entity, any commitments by the health care entity to continue such services, whether any services will be reduced or eliminated, and information about how to submit comments.
Failure to comply with the new law may result in civil penalties under the Public Health Law, ranging from $2,000 to $10,000 for each day the violation continues.
Finally, it is important to note that the new law requires the Department of Health to immediately send electronic copies of the written notices and supporting documentation to the antitrust, health care, and charities bureaus of the New York State Attorney General’s Office. As discussed in our prior posts, questions regarding the corporate practice of medicine could be, and have been, implicated in proceedings brought by the Attorney General’s office. While this authority in the Attorney General is not new, the notice and disclosure requirements of the new law may put this and other issues in the Attorney General’s plain sight.
- Benjamin P. Malerba
- Jeffrey Ehrhardt