Consolidating Healthcare: New York is the Latest State to Review Healthcare Transactions 

Updated on May 26, 2023

Authors: Jane Yoon, Stacy Hopkins, Dhara Satija, Henry Finkelstein and Jennifer Yount

On May 3, 2023, New York joined a growing number of states to enact legislation aimed at providing increased oversight of and visibility into healthcare transactions at a time when federal review has been rigorous.  The amendment to Article 45-A of the New York Public Health Law (“NYPHL”)—which goes into effect on August 1, 2023—requires “health care entities” to provide notice of certain information to the New York State Department of Health (“NYDOH”) prior to closing “material transactions.”  This trend of state law scrutiny has compliance and enforcement implications for private equity firms in the healthcare space.

NYPHL Article 45-A

Article 45-A only applies to “material transactions” involving “health care entities.”  “Material transactions” are defined as any of the following, occurring during a single transaction or in a series of transactions occurring during a one year period:

·         A merger with a healthcare entity;

·         An acquisition of one or more healthcare entities, including but not limited to the assignment, sale, or other conveyance of assets, voting securities, membership, or partnership interests or the transfer of control;

·         An affiliation agreement or contract formed between a healthcare entity and another person; or

·         The formation of a partnership, joint venture, accountable care organization, parent organization, or management services organization for the purpose of administering contracts with health plans, third-party administrators, pharmacy benefit managers, or healthcare providers as prescribed by the commissioner by regulation.[1]

Expressly excluded from the definition of “material transactions” are:

·         Certain transactions involving healthcare entities affiliated with clinical trials or graduate medical education programs;

·         Transactions already subject to the NYPHL’s or Insurance Laws’ certificate of need or insurance approval process; and 

·         “De minimis” transactions, which are defined as transactions resulting in a healthcare entity increasing its total gross revenues by less than $25 million.[2]

“Health care entities” are defined as physician practices, physician groups, management service organizations (“MSOs”) or similar entities, provider-sponsored organizations, health insurance plans, and healthcare facilities.  Expressly excluded from the definition of “health care entity” are pharmacy benefit managers (“PBMs”) and insurers licensed to do business in the state of New York.

If a transaction triggers Article 45-A, a “health care entity” must provide at least 30-days’ notice of the following to the NYDOH prior to closing the transaction:

·         Names and addresses of the parties to the material transaction;

·         Copies of definitive agreements governing the terms of the material transaction;

·         Identification of all locations where healthcare services are currently provided by each party and the revenue generated in the state from such locations;

·         Any plans to reduce or eliminate services and/or participation in plan networks;

·         The material transaction’s closing date; and

·         A brief description of the nature and purpose of the material transaction.[3]

Trend of Increased State Scrutiny

New York is the latest state to enact or propose legislation targeted at providing regulatory oversight of healthcare-related transactions.  Over the last decade, at least ten states—California, Connecticut, Delaware, Georgia, Massachusetts, Nevada, New Jersey, Oregon, Rhode Island, and Washington—have enacted similar legislation.  In 2023 alone, at least six additional states—Illinois, Maine, Minnesota, North Carolina, Pennsylvania, and Texas—have proposed similar legislation.

Private Equity and the Consolidation of the Healthcare Sector

This recent slate of state laws evidence a growing trend towards state involvement in a historically federal space of antitrust enforcement, and they come at a time of great change for—and mixed messages in—federal antitrust oversight into a sector with increased consolidation and private equity interest.  Both federal and state regulators have been taking note.

According to the Office of Inspector General for the Department of Health and Human Services (“HHS OIG”), over the past decade, private equity has engaged in approximately 8,000 deals in the healthcare sector worth more than $1 trillion.[4]  In 2020, healthcare was the second leading sector for private equity investments, totaling 18 percent of all private equity funding.[5]  In 2022, over 450 private equity firms engaged in buyouts and acquisitions in the healthcare sector.[6]  This increased consolidation of the healthcare sector has caught the eyes of state and federal regulators keen on protecting local and national healthcare markets.

In June 2022, Deputy Assistant Attorney General of the U.S. Department of Justice (“DOJ”) Antitrust Division Andrew Forman indicated that the DOJ and the U.S. Federal Trade Commission (“FTC”) were “thinking a lot about enhancing antitrust enforcement around a variety of issues surrounding private equity [in the healthcare space] . . . [including] private equity ‘roll-ups’ … [and] private equity investments that may chill fierce competition.”[7]  In August 2022, the FTC released a Policy Paper regarding hospital mergers, in which it noted that “[i]n the long run, hospital mergers [] often lead to higher prices and reduced quality from unconstrained provider market power.”[8] 

While in February 2023 the DOJ withdrew three antitrust policy statements related to enforcement in healthcare markets dating back to 1993,[9] the federal government’s willingness to review healthcare transactions involving private equity firms has not slowed.  On April 24, 2023, HHS Inspector General Christi Grimm noted that “[p]rivate equity investment in nursing homes and other sectors is prompting tough questions about its impact on the quality of care that is provided, as well as the potential for profit considerations to take priority over patient care.”[10]

Beyond the federal government, states have also indicated a willingness to review private equity’s involvement in the healthcare sector.  For example, on April 26, 2023, James G. Sheehan, the Chief of the New York Attorney General’s Office’s Charities Bureau, presented on “Health Care and Private Equity,” noting certain compliance risks associated with, and the impacts of, private equity ownership of healthcare organizations.[11]

Increased Risk and the Importance of Due Diligence and a Strong Compliance Program

Federal and state regulators are now both closely monitoring transactions in the healthcare sector, and it remains to be seen whether states will use these new laws to take action, and how so, relative to the federal government, including referring certain transactions to federal regulators for increased review and scrutiny.  As private equity firms continue to invest across healthcare sectors, and regulatory interest heightens, compliance has become a greater focus area within the context of due diligence efforts.  While financing transactions are not expressly included as “material transactions,” lenders need to appreciate the additional level of scrutiny when financing a “material transaction” of a “health care entity.”  Having subject matter specialists at the diligence table will be critical to protect transaction value, profitability, and reputation while assessing and reducing the risk of potential liability and enforcement actions related to acquisitions (and the financing thereof).  Further, it is imperative to have robust compliance oversight of post-acquisition integration activities to ensure appropriate oversight and alignment across key operational, financial, compliance, and clinical care priorities.  Whether it’s an investment in a healthcare company or financing thereof, Paul Hastings lawyers are available to assist in navigating the continually-increasing federal and state healthcare regulatory oversight.

Jane Yoon (litigation partner), Stacy Hopkins (corporate of counsel), Henry Finkelstein  (litigation associate) and Jennifer Yount (litigation partner) are all lawyers with Paul Hastings. Dhara Satija is director of the firm’s Life Sciences Consulting Group.

[1] NY Pub. Health L. § 4550(4)(a).

[2] NY Pub. Health L. § 4550(4)(b).

[3] NY Pub. Health L. § 4552(1).

[4] Christi A. Grimm, Inspector General, HHS, Keynote Speech at HCCA Compliance Institute in Anaheim, CA (April 24, 2023),

[5] Andrew Forman, Deputy Assistant Attorney General, DOJ, Keynote Address at the ABA’s Antitrust in Healthcare Conference: The Importance of Vigorous Antitrust Enforcement in Health Care (June 3, 2022),

[6] Private Equity Stakeholder Project, Recent Trends in Private Equity Healthcare Acquisitions (February 2023),

[7] Supra note 5.

[8] Federal Trade Commission, FTC Policy Perspectives on Certificates of Public Advantage (August 15, 2022),

[9] U.S. Dep’t of Justice, Justice Department Withdraws Outdated Enforcement Policy Statements: The Withdrawal Best Serves the Interests of Healthcare Competition (February 3, 2023),

[10] Supra note 4.

[11] James G. Sheehan and David Hoffman, Presentation at the 27th Annual HCCA Compliance Institute: Health Care and Private Equity: Compliance, Control, Ethical and Mission Risks (April 26, 2023).