Rhode Island Implements Material Transaction Notification Rule For Medical Practices

Rhode Island's Attorney General adopted a new rule requiring notification of certain transactions resulting in material changes to a medical-practice group's business or corporate structure. The new rule becomes effective January 28, 2026, and aims to address the agency's concern that market consolidation is increasing health care costs without an attendant increase in quality of care.¹

Scope and Applicability

A "medical-practice group" is defined as a single legal entity formed primarily for the purpose of being a physician group practice in any organizational form recognized by the state in which the group practice achieves its legal status. A "material change" includes any of the following:

• The merger, consolidation, or other affiliation of a medical-practice group with another medical-practice group, which results in a medical-practice group comprised of eight or more physicians, physician assistants, and/or nurse practitioners, or with a hospital, hospital system, captive professional entity, medical foundation or other entity organized or controlled by such a hospital or hospital system.
• The acquisition of all or substantially all of the properties, assets, capital stock, membership interests, or other equity interests of a medical-practice group by another medical-practice group that results in a medical-practice group comprised of eight or more physicians, physician assistants, and/or nurse practitioners, or by a hospital, hospital system, captive professional entity, medical foundation or other entity organized or controlled by such a hospital or hospital system.
• The employment of all or substantially all of the physicians of a medical-practice group by another medical-practice group, which results in a medical-practice group comprised of eight or more physicians, physician assistants, and/or nurse practitioners, or by a hospital, hospital system, captive professional entity, medical foundation or other entity organized by, controlled by, or otherwise affiliated with, such a hospital or hospital system.
• The acquisition of one or more insolvent medical-practice groups by another medical-practice group that results in a medical-practice group comprised of eight or more physicians, physician assistants, and/or nurse practitioners, or by a hospital, hospital system, captive professional entity, medical foundation or other entity organized by, controlled by, or otherwise affiliated with, such a hospital or hospital system.
• The formation of a partnership, joint venture, accountable care organization, parent corporation, management services organization (MSO), or similar entity that administers contracts with health insurance carriers or third-party administrators on behalf of medical-practice groups.
• Transactions involving a significant equity investor that result in a change of ownership or control of a medical-practice group. A "significant equity investor" is: (1) any private equity company with a financial interest in a medical-practice group or MSO; or (2) an investor, group of investors, or other entity with a direct or indirect possession of equity in the capital, stock, or profits totaling more than 10% of a medical-practice group or MSO.

Notification Requirements

Parties to a transaction that results in a material change to the business or corporate structure of a medical-practice group will need to notify the Attorney General of the transaction at least 60 days prior to the effective date of the transaction using the form that will be made available on the Attorney General's website. Information expected to be required includes the identities of the parties to the transaction, a description of the proposed material change, locations where health services are currently provided, any new services or locations contemplated by the transaction, anticipated effective date of the transaction, and contact information for all parties to the transaction.

The information submitted under this regulation is confidential and not subject to disclosure by the Attorney General, except as necessary for law enforcement purposes and in the public interest, in accordance with Rhode Island law.

Enforcement and Penalties

Failure to comply may result in penalties of up to $200 per day starting on the 59th day prior to the transaction's effective date, and up to $100,000 for failing to provide pre-merger notification after a transaction's effective date. The Attorney General also has the authority to seek injunctive relief to pause transactions until the parties are in compliance.

Key Takeaways for Health Care Businesses

The enactment of this rule expands the scope of health care transactions subject to regulatory review in Rhode Island, as the state already requires notification of certain hospital transactions under the Rhode Island Hospital Conversion Act. Medical-practice groups and investors considering transactions in Rhode Island should carefully review the new notification requirements and ensure timely compliance to avoid penalties and potential delays.

These laws are part of a larger, ongoing trend toward increasing state oversight and regulation of health care transactions and investments in the health care industry.

Footnotes

1. See State of Rhode Island Attorney General, Notice of Proposed Rulemaking: Pre-Merger Notification Rule for Medical-Practice Groups.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.