- February 15, 2023
- Alerts
New York Proposes Law To Approve Transactions Involving Physician Practices and MSOs
The New York State Executive Budget for the fiscal year 2024 includes a proposed law to review and approve material transactions involving physician practices, management services organizations (“MSOs”), and other health care entities. Citing the proliferation of large physician practices being managed by investor-backed entities through transactions not subject to any regulatory review, the Budget proposes a new law with the intent of tracking and monitoring the impact of such transactions on access, quality, and competition. The proposal further specifies a concern that this trend has contributed to inflated health care costs.
The proposed law grants the Department of Health (the “Department”) the authority to review and approve material transactions such as mergers, acquisitions, affiliations, and joint ventures that involve health care entities such as physician practices, MSOs, and similar administrative or management organizations. The threshold for a “material” transaction would be defined in further regulation.
These health care entities would need to submit a written notice and application, along with supporting documentation, to the Department at least 30 days before the desired closing date of any material transaction. Information to be provided would, along with a non-refundable application fee, include names and addresses of those involved, copies of agreements governing the material transaction, a list of all locations where services are currently performed, and revenue generated in the state at each location along with a description of the nature and purpose of the pending transaction. Similar to the current certificate of need process, the law also proposes to require information on any plans to reduce or eliminate services or participation in plan networks and any impacts on services anticipated, along with the actions to be taken to mitigate those impacts.
The lack of a response by the Department within the 30-day timeframe will be deemed an approval of the transaction. However, once the parties submit the required information, the Department also has the right to post a public notice regarding the proposed transaction and allow public comments, which may extend the review process well beyond 30 days. The Department will consider the comments, along with other factors, when assessing the potential positive and negative impacts, including the likelihood of anticompetitive effects that may result from the proposed transaction. The Department may also, as a condition to approval, require the parties to make investments in their communities or contributions to state-controlled funds “to preserve access or to otherwise mitigate the impact of the material transaction on the health care delivery system.”
The proposal is now with the NYS Legislature, which will evaluate whether the proposal should stand unaltered or whether further considerations need to be incorporated. Garfunkel Wild will continue to monitor updates to the proposal as they develop.
For more information, please contact the authors or your regular Garfunkel Wild contact.
The proposed law grants the Department of Health (the “Department”) the authority to review and approve material transactions such as mergers, acquisitions, affiliations, and joint ventures that involve health care entities such as physician practices, MSOs, and similar administrative or management organizations. The threshold for a “material” transaction would be defined in further regulation.
These health care entities would need to submit a written notice and application, along with supporting documentation, to the Department at least 30 days before the desired closing date of any material transaction. Information to be provided would, along with a non-refundable application fee, include names and addresses of those involved, copies of agreements governing the material transaction, a list of all locations where services are currently performed, and revenue generated in the state at each location along with a description of the nature and purpose of the pending transaction. Similar to the current certificate of need process, the law also proposes to require information on any plans to reduce or eliminate services or participation in plan networks and any impacts on services anticipated, along with the actions to be taken to mitigate those impacts.
The lack of a response by the Department within the 30-day timeframe will be deemed an approval of the transaction. However, once the parties submit the required information, the Department also has the right to post a public notice regarding the proposed transaction and allow public comments, which may extend the review process well beyond 30 days. The Department will consider the comments, along with other factors, when assessing the potential positive and negative impacts, including the likelihood of anticompetitive effects that may result from the proposed transaction. The Department may also, as a condition to approval, require the parties to make investments in their communities or contributions to state-controlled funds “to preserve access or to otherwise mitigate the impact of the material transaction on the health care delivery system.”
The proposal is now with the NYS Legislature, which will evaluate whether the proposal should stand unaltered or whether further considerations need to be incorporated. Garfunkel Wild will continue to monitor updates to the proposal as they develop.
For more information, please contact the authors or your regular Garfunkel Wild contact.