Proposed New York State Law Seeks Regulatory Oversight of Healthcare Transactions Involving Private Equity

Category: Client Alerts
Published: November 1, 2023


In February 2023, New York State proposed Senate Bill S4007, which aims to introduce regulatory oversight of certain healthcare transactions involving private equity firms. The proposed law would apply to various healthcare entities, including physician practices, home care agencies, providers of behavioral health services, physician groups, and MSOs, and requires parties to obtain prior approval from the Department of Health (DOH) before completing “material transactions” such as mergers, acquisitions, and affiliations involving the transfer of ownership or control.

More specifically, the bill defines a “material transaction” as a merger, acquisition, affiliation or contract formed between health care entities, or the formation of a partnership, joint venture, accountable care organization, parent organization, or MSO for the purpose of administering contracts with healthcare providers, health plans, third-party administrators, or pharmacy benefit managers as prescribed by the commissioner by regulation. Under this proposed law, such “material transactions” would require prior approval by the DOH in order to ensure that they are conducted transparently and with the best interests of patients in mind. The DOH would have the power to extract concessions as a condition of approval in the effort to foster a more transparent and fair healthcare system.

The DOH’s review process would require health care entities involved in material transactions to provide written notice and submit an application at least 30 days before the target closing date. The parties to the transaction would also need to submit supporting documentation, including copies of any definitive agreements governing the terms of the material transaction, pre- and post-closing conditions, and other information concerning the transaction that was traditionally viewed as privileged and confidential. If the DOH does not act upon the application within the 30-day timeframe, the transaction would be deemed approved.

In its review process, the DOH may consider several factors, including whether the parties can demonstrate that the potential positive impacts of the material transaction outweigh the potential negative impacts, such as increasing or maintaining services to underserved populations or stabilizing the operations of the existing delivery system. The DOH may also subject the transaction to public notice and comment during the 30-day period, which would include a summary of the proposed material transaction, an explanation of the groups or individuals likely to be impacted by the transaction, information about services currently provided by the health care entity, commitments by the health care entity to continue such services and any services that will be reduced or eliminated, and details about how to submit comments.

It is further important to note that, despite approval or disapproval of a material transaction, the DOH may notify the state attorney general of the department’s findings and analysis so that the attorney general may, if appropriate, conduct an investigation into whether such health care entity has engaged in unfair competition or anticompetitive behavior.

The purpose of the proposed law is to ensure that healthcare transactions are conducted transparently and with the best interests of patients in mind. The legislation seeks to protect patients from negative consequences associated with private equity investment, such as increased healthcare costs and reduced access to care. Supporters of the proposed law argue that regulatory oversight is necessary to prevent private equity firms from interfering in healthcare decisions. On the other hand, opponents of the proposed law contend that it may hinder innovation in the healthcare industry and impose undue burdens on healthcare providers and investors. They argue that private equity investment can also have positive effects, such as improved access to capital and increased efficiency.

While the proposed bill must still undergo legislative review and survive a vote by the state legislature, New York’s historically hostile stance toward private investment in healthcare suggests the bill has a good chance of becoming law. If passed, the proposed law would take effect in 2024, and it is part of a broader regulatory overhaul aimed at improving access to healthcare and reducing costs for New Yorkers. Governor Kathy Hochul has also proposed other initiatives, including measures to address staffing shortages and to promote telehealth.

Our dedicated and experienced team of healthcare attorneys are closely monitoring the development of this proposed law as it moves to the State’s Senate floor. In the meantime, if you are in need of expert healthcare counsel regarding the further sustainability of your practice, or if you have any questions regarding the outlook of your practice in light of this proposed law, do not hesitate to contact our knowledgeable and experienced attorneys at (212) 668-0200 or by email at