Health Law Advisor

Roughly two years in the making, the New York State Department of Health (NYS DOH) has issued long-awaited guidance on its material transactions law. Notably, the guidance provides clarity on how to calculate the “de minimis” exception to the material transaction law requirement—including an indication that “related” transactions only need to have a single party in common, which is an important consideration for providers and investors pursuing a “roll-up” strategy.

N.Y. Pub. Health Law Article 45-A, “Disclosure of Material Transactions,” took effect on August 1, 2023, and requires “health care entities” involved in a “material transaction” to provide written notice to the NYSDOH at least 30 days prior the proposed closing of a transaction. As our colleagues wrote at the time, the legislation grew out of concerns with the “proliferation of large physician practices being managed by entities that are investor-backed” (e.g., private equity).

These concerns have only increased in the past two years; more than a dozen states including New York have enacted health care transaction notice requirements. Currently, several state legislatures are attempting to either amend existing requirements or create new ones. New York is one state that is potentially amending its existing notice requirement. As we noted in March, proposed legislative changes to the New York law would include an extension of the notice deadline to 60 days; a statement as to whether any party to the transaction owns any other health care entity that within the past three years has closed operations, is in the process of closing operations, or has experienced a substantial reduction in services; and a statement as to whether a sale-leaseback agreement, mortgage or lease, or other payments associated with real estate are a component of the proposed transaction.

On March 23, 2020, Governor Phil Murphy signed Executive Order 109, which “limit[ed] non-essential adult elective surgery and invasive procedures, whether medical or dental, [in order to] assist in the management of vital healthcare resources during this public health emergency.” The purpose of EO 109 was to “limit[] exposure of healthcare providers, patients, and staff to COVID-19 and conserve[] critical resources such as ventilators, respirators, anesthesia machines, and Personal Protective Equipment (‘PPE’) [that] are essential to combatting the spread of the virus.” At the time EO 109 was executed, coronavirus cases were rapidly increasing within the State. On March 23rd, New Jersey had 2,844 coronavirus cases in all 21 counties, an increase of 935 over the previous day, and at least 27 people had died.

In the weeks that followed, New Jersey saw the surge in cases for which it was preparing. On April 4, the three-day average of new confirmed positive COVID-19 cases peaked at 4,064 cases, and by April 14th, there were 8,084 of COVID-related hospitalizations and a staggering 1,705 patients on ventilators. But since that time, thanks to social distancing and New Jersey’s ability to flatten the curve, these numbers have fallen drastically. By May 11th, the three-day average of new, positive cases had fallen to 1,572 new cases—a 61 percent decrease. Likewise, the three-day average of new hospitalizations had fallen to 4,277 patients—a 48 percent decrease.

In light of this decreased burden on the healthcare system, Governor Murphy signed Executive Order 145, which allows for elective surgeries to resume as of 5 am on May 26, 2020. EO 145 provides that elective surgeries and invasive procedures may proceed at both licensed healthcare facilities and in outpatient settings not licensed by the Department of Health (e.g., health care professional offices, clinics, and urgent care centers), subject to limitations and precautions set forth in policies to be issued by the Division of Consumer Affairs, in consultation with the Department of Health, by Monday, May 18, 2020. EO 145 further states that the Department of Health and/or the Division of Consumer Affairs may issue supplemental or amended policies concerning elective surgeries and elective invasive procedures on or after Monday, May 18, 2020.

Last month, the New York State Court of Appeals invalidated a state Department of Health (DOH) regulation that restricted certain health care providers contracting with the state from paying executives more than $199,000 annually, regardless of whether the funds came from the state or not. However, the Court upheld two other DOH regulations; one that limits providers from using public tax-payer money directly to pay executives in excess of $199,000 annually, and another that limits the amount of public funds used for administrative costs.

In January 2012, Governor Andrew Cuomo ...