By: Marc Beckman and Ben Goldberg
New York State is poised for a significant shift in healthcare oversight with the amendments to the state’s Disclosure of Material Transactions law proposed in Governor Kathy Hochul’s FY 2026 Executive Budget. Previously, with the introduction of PHL Article 45- A, which took effect on August 1, 2023, the New York State Department of Health (“DOH”) was authorized to scrutinize healthcare transactions taking place in New York State. These legislative changes are designed to further regulatory scrutiny over healthcare transactions, aiming to curb rising costs and ensure market stability.
Governor Hochul’s proposed legislation introduces the Cost Market Impact Review (“CMIR”), a framework modeled after similar regulatory mechanisms in states like Massachusetts. The CMIR would empower state regulators to assess healthcare transactions, particularly those involving consolidations, mergers, and acquisitions, to evaluate their potential impact on cost, access, and competition. One change that should be immediately noted is the extension of the required notice of a “material transaction” provided to DOH, which was 30 days under the PHL Article 45- A, and would be increased to 60 days.
Among the components of the CMIR are pre-transaction review, assessment of market impacts, and enforcement measures. During the pre transaction review, healthcare entities engaging in significant transactions will be required to submit documentation for state review. If the “material transaction” will increase a healthcare entity’s gross in state revenue by $25 million or more, notice will have to be provided to the New York State Department of Health (“DOH”) and documentation submitted to the DOH for review. Material transactions include but are not limited to mergers, acquisitions, assignments, sales, other conveyances of assets, voting securities, and membership or partnership interests. It is also important to note that material transactions include contracts, if they increase the revenue by $25 million or more, and entities like managed services organizations that provide administrative services to healthcare entities, even if they don’t provide healthcare services themselves. The $25 million will be based on a 12 month lookback period. This is somewhat straightforward if the transaction is a single transaction. However, should there be a series of related transactions, the revenues associated with each of the transactions will be added together to determine the total impact on New York’s healthcare markets.
Since the intent of the review is to analyze whether a proposed transaction could lead to increased prices, reduced competition, or diminished healthcare access, the notice given to New York’s DOH will include, among other things:
• the names of the parties conducting the transaction and their current addresses,
• copies of any definitive agreements governing the terms of the material transaction, including pre- and post-closing conditions, in-state revenue from practice or operating locations in New York,
• plans to reduce or eliminate services and/or participation in specific plan networks,
• a brief description of the nature and purpose of the proposed transaction
• the anticipated impact of the material transaction on cost quality, access, health equity, and competition in the market locations where the transaction is taking place.
When a transaction is found to have negative cost or market implications, regulators may impose conditions or even prevent the transaction from proceeding.
Key Proposed Amendments Include:
Lowered Reporting Thresholds:
More transactions subject to mandatory disclosure, ensuring greater regulatory oversight.
Expanded Scope: Nonprofit and for-profit healthcare entities, including physician groups and private equity backed organizations, will face increased scrutiny.
Stronger Enforcement Mechanisms:
The state may impose penalties for non-compliance and require additional corrective actions from healthcare organizations.
Potential Impact on Healthcare Providers and Patients
The implementation of PHL Article 45-A and the proposed amendments to the Disclosure of Material Transactions law could significantly reshape the healthcare landscape in New York State. Providers facing increased regulatory oversight may slow down consolidation efforts, leading to more rigorous due diligence before executing transactions. While enhanced scrutiny could help prevent monopolistic practices and cost increases, among the concerns for patients is that providers may delay or abandon transactions that could improve healthcare access and efficiency.
With heightened scrutiny regarding these transactions, private equity firms and large health systems may face more barriers to market entry and expansion, altering investment strategies in the state’s healthcare sector. Reading the changes to the Disclosure of Material Transactions law generously, it appears the intent behind Hochul’s proposed regulatory reforms is to ensure healthcare transactions do not compromise affordability, access, or market competitiveness. While these measures align with broader national efforts to curb healthcare costs, their implementation will require careful balancing to prevent unintended consequences.
Stakeholders in the healthcare industry should prepare for increased regulatory compliance obligations. As with similar frameworks used to analyze business transactions—such as antitrust statutes and certificate-of-need applications—it is uncertain how forcefully New York will enforce these new CMIR assessments if they are passed by the legislature. Furthermore, it remains unclear what appetite the DOH will have for prohibiting or limiting such transactions.
However, whether or not the DOH takes an aggressive stance if Governor Hochul’s proposals become law, healthcare entities will still need to comply with the submission of notice and the concomitant documents to DOH and should prepare accordingly.
If you have questions pertaining to the proposed legislation and how it may impact you, please reach out to Marc S. Beckman (mbeckman@lippes.com), Benjamin W. Goldberg (bgoldberg@ lippes.com) or a member of the Lippes Mathias Health Care Practice Team.