Overview
On January 21, 2025, New York Governor Kathy Hochul released the FY 2026 New York State Executive Budget, which proposed to impose a “cost market impact review” (CMIR) for certain “material transactions” involving “health care entities” in New York. The New York State Assembly and Senate must now review the proposed legislation and may propose revisions to, or removal of, the proposal before approving the final FY 2026 state budget.
If enacted as proposed, the governor’s proposed legislation would delay timeframes for closing certain large material transactions involving healthcare entities in New York and would subject the parties to these transactions and the transactions themselves to heightened regulatory scrutiny. The proposed legislation does not clarify the central definitions that establish the scope of the notice requirement.
In Depth
CURRENT LAW
New York law currently requires “health care entities” to submit to the New York State Department of Health (DOH) a written notice at least 30 days prior to closing a “material transaction” with a healthcare entity. The notice must provide basic information regarding the transaction, including the names of the parties to the material transaction, any plans to eliminate services and/or participation in specific plan networks, and the transaction’s anticipated impact on cost, quality, access, health equity, and competition in the affected markets.
The law defines a “health care entity” as including, with certain exceptions:
- A physician practice, group, or management services organization or similar entity providing all or substantially all of the administrative or management services under contract with one or more physician practices
- A provider-sponsored organization
- A health insurance plan
- Any other kind of healthcare facility, organization, or plan providing healthcare services in this state.
“De minimis” material transactions with healthcare entities are not considered material transactions subject to the notice requirement. A de minimis transaction is a transaction that results in a healthcare entity increasing its total gross in-state revenues by less than $25 million. The law does not explain how “in-state revenues” are to be counted.
Although the law authorized DOH to add, amend, or repeal any rule or regulation necessary to implement the requirement as of its effective date (August 1, 2023), to date DOH has not taken any such regulatory action, nor has DOH issued subregulatory guidance explaining its interpretation of the law and its requirements.
THE PROPOSED LEGISLATION
The governor’s proposal would extend the pre-closing notice timeframe to 60 days and allow DOH to require parties to the transaction, as well as their parents and subsidiaries, to submit additional documents and information. Such additional data requests may be made by DOH to the extent necessary to:
- Conduct DOH’s preliminary review of the transaction
- Assess the impacts of the transaction on cost, quality, and access to healthcare, health equity, and competition
- To verify or clarify information previously submitted by the parties.
Upon submission of the notice, DOH would conduct a “preliminary review” of the transaction to determine whether a full CMIR was required. If DOH requires a CMIR, the parties may be required to delay the closing of the proposed transaction for up to 180 days from the date of the preliminary review so that DOH can complete the CMIR. During the CMIR, DOH may again require any party or its subsidiaries and parent entities to submit additional documentation and information to the extent such additional information is necessary for DOH to conduct the CMIR.
The proposed legislation would also require parties to a material transaction to annually notify DOH of factors and metrics to assess the impacts of the transaction on cost, quality, access, health equity, and competition. DOH may require parties to submit additional documents and information in connection with the annual report, to the extent such additional information is necessary to assess the impacts of the transaction on cost, quality, access, health equity, and competition, or to verify or clarify information submitted in support or as part of the annual report.
The proposed legislation would protect documentation, data, and information submitted by the parties from New York’s Freedom of Information Law disclosure, but data submitted in annual reports, information submitted in conjunction with a CMIR, and CMIR findings may be used as evidence in investigations, reviews, and other actions by DOH or the New York State Attorney General, including evaluating certificate of need applications.
DOH may assess the parties to material transactions all costs (without cap) incurred by DOH in reviewing and evaluating the notice and performing the CMIR.
ANALYSIS AND TAKEAWAYS
If enacted, the proposed legislation would expand the authority given to DOH to review material transactions involving healthcare entities in New York state. Although the proposed legislation would not grant DOH express authority to approve or disapprove proposed material transactions, DOH could significantly delay these transactions by declining to recognize a notice as complete without the production of the information and documents it requests.
The proposal does not shed additional light on key aspects of the existing law that remain subject to interpretation, including questions regarding the definition of a “health care entity,” “material transaction,” and the de minimis exception. DOH has not yet published regulations or subregulatory guidance on these topics, which has created ambiguity and differing interpretations that this proposal does not appear to address. Accordingly, these key aspects of the material transactions law will remain subject to interpretation by parties to such transactions unless and until DOH promulgates regulations and provides additional guidance.
The proposed legislation will be subject to refinement in the coming legislative budget process, during which the New York State Senate and Assembly may revise or remove portions of the governor’s executive budget. The state budget, reflecting the revisions to the governor’s executive budget approved by the State Senate and Assembly, is required to be signed into law by April 1, 2025, although in recent years the budget has not been finalized until several weeks later.
