Nixon Peabody previously reported on the enactment of New York’s material transaction disclosure law (New York Public Health Law §§ 4550 et seq.) which went into effect on August 1, 2023, as well as proposed changes to New York’s material transaction disclosure law in Governor Hochul’s 2025–26 budget bill. Both reports highlighted uncertainty around the law, particularly with regard to the de minimis exception, which, if satisfied, exempts a transaction from disclosure.
Just weeks before it is anticipated that New York’s budget legislation will be finalized, the New York State Department of Health (NYSDOH) has issued long-awaited guidance on the material transaction disclosure law, in the form of frequently asked questions (FAQs). Although the soon-to-be enacted budget legislation may require NYSDOH to revise its guidance, for now the FAQs clarify how NYSDOH interprets and intends to apply the current law:
Definition of “Health Care Entity”
- The statutory definition of “health care entity” (which expressly includes physician practices and groups) does not clearly apply to several types of health care providers that are not mentioned in the law.
- NYSDOH indicates that it interprets the definition as including dental practices, clinical laboratories, pharmacies and wholesale pharmacies, independent practice associates (IPAs) and accountable care organizations (ACOs).
- NYSDOH notes that its expanded interpretation of the term “health care entities” is not exhaustive.
Out Of State Entities
- NYSDOH will treat out-of-state entities as equally subject to the material transaction disclosure law.
Definition of “Material Transactions”
- NYSDOH interprets the term “material transaction” to include a contract for services commonly provided through a management or administrative services agreement.
- This includes contracts for services with a management services organization (MSO) or similar services provider.
Exemptions
De Minimis Exemption
- NYSDOH clarifies that, to determine whether a transaction satisfies the de minimis exception (a less than $25 million increase in gross in-state revenue), transaction parties must perform a 12-month lookback, which is measured from the anticipated closing date (the “lookback period”).
- With a single transaction, the parties must assess and report transactions if the entity (or entities) to be acquired by, or merged into, a surviving entity will have $25 million or more of combined gross in-state revenue during the lookback period.
- For situations involving a series of related transactions, the parties must assess the revenue associated with each related transaction that took place, or that will take place, during the lookback period. If the total combined gross in-state revenue for the transactions is $25 million or more, the series of transactions must be reported.
Con/Insurance-Entity Exemption
- Transactions subject to the certificate of need (CON) or insurance-entity approval process remain exempt from the material transaction disclosure law.
- However, if portions of a transaction are not subject to such processes, they must be separately assessed to determine if the total in-state gross revenues from those portions of the transaction exceed the $25 million de minimis threshold.
Good Faith Assessment
Although NYSDOH has not yet released a form for submitting notices, the FAQs provide a non-exhaustive list of circumstances that parties should consider when conducting a good faith assessment of the anticipated impact of a transaction, including any:
- Increase or reduction of services, locations, or contracts with insurance carriers;
- Health care staffing changes;
- Changes to amount of services provided to underserved populations; or
- Expected increase in market consolidation.
Nixon Peabody will continue to monitor and report on continuing developments related to this law and any impact the forthcoming budget bill may have.