By Mathew Levy, Esq. & Chaya Rosenbaum, Esq.
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Effective August 1, 2023 there is a new law that requires health care entities in New York, including physician practices, practice groups, insurance affiliates, facilities, and, notably, management services organizations contracted with medical practices, to file a notice with the state by thirty days before closing on a material transaction, such as a merger, acquisition, sale, joint venture, partnership, or affiliation, with another health care entity, that will result in more than $25 million in gross revenue.
New York’s Public Health Law was amended in a newly enacted law on May 3, 2023, with the aim of increasing the transparency of transactions between healthcare industry entities, including medical practices and management services organizations. However, it includes a thirty-day notice requirement for transactions that will close on that date, and the Department of Health is tasked with promulgating the rules for how the new law will be carried out. Interested industry parties do not have a lot of time to implement new processes that these rules will create before this July 1 deadline.
Who is Not Affected?
Exclusions include New York insurers, Pharmacy Benefits Managers, entities formed for clinical trials and graduate medical education, and entities that are already overseen by Article 28, such as through requirements to file a Certificates of Need. It is still unclear how other types of medical companies and professions may be affected.
The New Requirements
The details of how revenue will be considered and calculated in the imposition of this restriction on transactions are not yet apparent. The notice that must be submitted will include some type of application and supporting documentation that discloses the parties, details, description of healthcare services, and a statement about how the transaction will affect and what the party will implement to increase health access and equity in New York.
What This Means for Medical Practices and MSOs
One major effect of this law is the procedural burden it creates for entities affected, and how the timeline for closings may now have to be planned in consideration of this requirement. Additionally, this process limits the economic privacy that businesses were privy to in their transactions until now. Not only does this law require informing the Department of health about upcoming business deals, it also results in the sharing of this information with several Attorney General offices, such as those that oversee antitrust, healthcare, and charity. Additionally, the Department of Health will publish a condensed version of the upcoming transaction on their website for comment.
Although the Department of Health does not have authority to intervene with or prohibit a transaction, this new law will bring the focus of MSOs in front of government entities. Now, businesses must wait for the new rules to be published in anticipation of the first July 1 filing date.
Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, Medicare payment issues, bankruptcy and creditors’ rights, and commercial real estate transactions.
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