MCN & CMIR FAQs

Who Must File: Definitions, Circumstances, Exemptions#

2.     How does a health care entity determine if it must file a Notice? [ii]#

Entities must first determine if they meet the regulatory definition of a health care entity.[iii]

If they do, a health care entity must determine if they meet the revenue or geographic thresholds established by regulation.[iv]  If a health care entity meets any one or more of the three thresholds, it must then determine if its proposed transaction meets the definition of transaction and any one or more of the transactional circumstances set forth in regulation.[v]

The online material change notice submission portal also asks a series of questions to determine if a health care entity meets these requirements before being allowed to file a notice. 

Each of these steps is described in questions 3-6 below.

3.     Does the entity meet the regulatory definition of a health care entity? [vi]#

The following entities meet the definition of a health care entity:

• Providers, including physician organizations with 25 or more physicians, health facilities, outpatient clinics, clinics and facilities exempt from state licensure, clinics eligible for state licensure, ambulatory surgery centers, clinical laboratories, and imaging facilities.
• Payers, including health care service plans, specialized mental health care service plans, health insurers, publicly funded health care programs, third-party administrators, and any other public or private entity other than an individual that pays for or arranges the purchase of health care services on behalf of employees, dependents, or retirees.
• Fully integrated delivery systems.
• Pharmacy benefit managers.[vii]
• Parents, affiliates, or subsidiaries that act in California on behalf of a payer and either controls or is controlled by the health care entity or is a subsidiary acting on behalf of another subsidiary. [viii]

Entities exempt from filing a Notice include physician organizations with less than 25 physicians. Please note, however, a health care entity entering into a transaction with a physician organization with less than 25 physicians may still be subject to the filing requirement. [ix]

4.     If the entity is a health care entity, does it meet any one or more of the revenue or geographic thresholds? [x]#

A health care entity meets revenue or geographic thresholds if they meet one or more of the following:

• The health care entity has annual revenue[xi] of at least $25 million or owns or controls California assets of at least $25 million;
• The health care entity has annual revenue[xii] of at least $10 million or owns or controls California assets of at least $10 million and is party to a transaction with any health care entity with $25 million in revenue or California assets; or
• The health care entity is located in a designated primary care health professional shortage area in California.[xiii]

5.     Does the proposed transaction meet the definition of transaction? [xiv]#

These are the required aspects of a transaction:

• It is a merger, acquisition, affiliation, or agreement;
• It impacts the provision of health care services in California; and
• It involves the transfer (sale, lease, exchange, option, encumbrance, conveyance, or disposition) of assets or a transfer of control, responsibility, or governance of the assets of the operations, in whole, or in part, of any health care entity to one or more entities.

6.     Does the transaction meet any one or more of the circumstances? [xv]#

If the transaction meets any one of the following circumstances, it is a material change transaction.[xvi]

• The proposed fair market value of the transaction is $25 million or more and the transaction concerns the provision of health care services.
  • The transaction is more likely than not to increase annual California-derived revenue of any health care entity that is a party to the transaction by either $10 million or more or 20% or more of annual California-derived revenue at normal or stabilized levels of utilization or operation.
  • The transaction involves the sale, transfer, lease, exchange, option, encumbrance, or other disposition of 25% or more of the total California assets of the submitter(s).
  • The transaction involves a transfer of control, responsibility, or governance, in whole or in part, of the submitter.  
  • The transaction will result in an entity contracting with payers on behalf of consolidated or combined providers and is more likely than not to increase the annual California-derived revenue of any providers in the transaction by either $10 million or more or 20% or more of annual California-derived revenue at normal or stabilized levels of utilization or operation. 
  • The transaction involves the formation of a new health care entity, affiliation, partnership, joint venture, or parent corporation for the provision of health care services in California that is projected to have at least $25 million in California-derived annual revenue at normal or stabilized levels of utilization or operation, or transfer of control of California assets related to the provision of health care services valued at $25 million or more.
  • The transaction is part of a series of related transactions for the same or related health care services occurring over the past ten years involving the same health care entities or entities affiliated with the same entities. The proposed transaction and its related transactions will constitute a single transaction for purposes of determining the revenue thresholds described in Question 4 and asset and control circumstances described in Question 5.
  • The transaction involves the acquisition of a health care entity by another entity and the acquiring entity has consummated a similar transaction(s), in the last ten years, with a health care entity that provides the same or related health care services. The proposed transaction and its related transactions will constitute a single transaction for purposes of determining the revenue thresholds described in Question 4 and asset and control circumstances described in Question 5.

7.     What transactions might be exempt from Notice?#

By statute,[xvii] the following types of transactions are excluded from the requirement to file a Notice with OHCA:

• Agreements or transactions involving health care service plans that are subject to review by the Director of the Department of Managed Health Care for cost impact or market consolidation.[xviii]
• Agreements or transactions involving health insurers that are subject to review by the Insurance Commissioner.[xix]
• Agreements or transactions where a county is purchasing, acquiring, or taking control, responsibility, or governance of an entity to ensure continued access in that county.
• Agreements or transactions involving nonprofit corporations that are subject to review by the Attorney General.[xx]

Entities exempt from filing a Notice include physician organizations with less than 25 physicians. However, a health care entity entering into a transaction with a physician organization with less than 25 physicians may still be subject to the filing requirement if it meets the other requirements. [xxi]

By regulation, a transaction is exempt from filing if: (1) the transaction is in the usual and regular course of business of the health care entity typical in the day-to-day operations of the health care entity; or (2) the transaction is one in which the health care entity directly, or indirectly through one or more intermediaries, already controls, is controlled by, or is under common control with, all other parties to the transaction, such as a corporate restructuring. [xxii]

8.     How does a health care entity calculate revenue for purposes of filing thresholds for Notices? [xxiii]#

Submitters should calculate revenue by totaling the average annual California-derived revenue received for all health care services by the submitter over the three most recent fiscal years. The revenue used in the calculation will depend on the type of health care entity filing the Notice. Some health care entities will use the revenue they previously reported to the Department of Managed Care (DMHC), Department of Insurance (CDI), or the Department of Health Care Access and Information (HCAI). Submitters must utilize the following types of revenue depending on the type of health care entity they are:   

• For health care service plans, revenue as reported to DMHC.[xxiv]
• For health insurers, revenue as reported to Department of Insurance.[xxv]
• For hospitals, net patient revenue as reported to HCAI in accordance with the “Accounting and Reporting Manual for California Hospitals.”
• For long-term care facilities, net patient revenue as reported to HCAI in accordance with “Accounting and Reporting Manual for California Long-Term Care Facilities.”
• For risk-bearing organizations required to register and report to DMHC, revenue as reported to DMHC.[xxvi]
• For other providers, revenue means net patient revenue which includes total revenue received for patient care as it was generated or occurred in California (rather than when it was booked, accrued, or taxed) including: prior year third-party settlements; revenue received (inclusive of withholds, refunds, insurance services, capitation, and co-payments) from a health care entity or other payer to provide health care services for all providers represented by the provider or provider organization in contracting with payers; fee for service revenue; and revenue from shared risk and all incentive programs.
• For pharmacy benefit managers, all payments and revenue received from health care entities to provide pharmacy benefit management services as it was generated or occurred in California.

9.     What if a health care entity must file notice of their transaction with another California state regulator? Do they still have to file a Notice with OHCA?#

By statute,[xxvii] the following types of transactions are excluded from the requirement to file a Notice with OHCA:

• Agreements or transactions involving health care service plans that are subject to review by the Director of the Department of Managed Health Care for cost impact or market consolidation.[xxviii]
• Agreements or transactions involving health insurers that are subject to review by the Insurance Commissioner.[xxix]
• Agreements or transactions where a county is purchasing, acquiring, or taking control, responsibility, or governance of an entity to ensure continued access in that county.
• Agreements or transactions involving nonprofit corporations that are subject to review by the Attorney General.[xxx]

The Department of Managed Care, Insurance Commissioner, or Attorney General may refer transactions filed with them to OHCA for review.

10. What if there is more than one health care entity in a transaction?#

Each party to the transaction must determine whether or not it is required to file a Notice. A single transaction may have multiple Notices filed by various parties who are health care entities that meet the threshold requirements.

Using the Online Portal – Account Creation, Document Upload, Confidentiality, Amending a Notice#

16. How does a health care entity submit a Notice to OHCA?[xxxv]  Does it have to pay a fee for the filing?#

A submitter must file a Notice through the submission portal (see Material Change Notice Submissions) located at: www.hcai.ca.gov/login. A submitter creates a portal account by inputting a first and last name, valid email address, display name, and password. Submitters can also sign in using other email or social media accounts, such as Microsoft, Google, Facebook, or LinkedIn.  After successfully creating an account and signing in, the submitter creates a Notice and enters all required information and submits all required documents regarding the transaction.

Submitters do not have to pay a filing fee to OHCA to submit Notices. However, by statute, OHCA is allowed to contract with experts or consultants for the review of the material change transaction and is entitled to reimbursement for actual, reasonable, and direct costs incurred in its review.[xxxvi] If costs are incurred during the review of the material change transaction, OHCA will inform submitters of the costs and submitters shall promptly pay OHCA.

17. What must a submitter include in a Notice?[xxxvii]#

A submitter must provide all information required by section 97438(b) and (c) of OHCA’s regulations. The portal includes questions and prompts to capture all required information. During the submission process, a submitter will advance through several screens and answer the applicable questions regarding the transaction. In the final screen, the submitter will upload the required documents listed in section 97438(c). Submitters must upload these documents in a machine-readable format with bookmarked sections.

The notice requires all of the following information as applicable:

(1) General information regarding the submitter:

(A) Business Name.

(B) Business Website.

(C) Business Mailing Address.

(D) Description of organization, including, but not limited to, business lines or segments, ownership type (corporation, partnership, limited liability company, etc.), governance and operational structure (including ownership of or by a health care entity).

(i) For health care providers or fully integrated delivery systems, include a summary of provider type (hospital, physician group, etc.), facilities owned or operated, service lines, number of staff, geographic service area(s), and capacity (e.g., number of licensed beds) or patients served (e.g., number of patients per county) in California in the last year.

(ii) For health care service plans, health insurers, risk-bearing organizations, and fully integrated delivery systems, include number of enrollees per county in the last year.

(E) Federal Tax Identification Number and tax status as for-profit or non-profit.

(F) List of current California health care-related licenses issued by regulatory agencies such as the Department of Managed Health Care, the Department of Insurance, and the Department of Public Health; state and local business licenses related to the provision of health care services; registration(s) with the Secretary of State held by the submitter, if any; and for any current health-care related license(s) held outside of California, identification of license type and state of issuance. For purposes of this subsection, provide the health care license type and numbers only for those facilities, services, and professions involved in the transaction. Individual professional license information is not required to be provided.

(G) Contact person, title, e-mail address, and mailing address for public inquiries.

(2) List of primary languages used by submitter when providing services to the public as well as any threshold languages, as determined by the Department of Health Care Services, used when providing services to Medi-Cal beneficiaries;

(3) Identification of all other parties to the transaction and indication whether any health care entities who are parties to the transaction will be submitting a notice. For each other entity that is a party to the transaction, to the extent the submitter has access to the information, describe the following:

(A) The entity’s business (including business lines or segments);

(B) Ownership type (corporation, partnership, limited liability company, etc.), including any affiliates, subsidiaries, or other entities that control, govern, or are financially responsible for the health care entity or that are subject to the control, governance, or financial control of the health care entity;

(C) Governance and operational structure (including ownership of or by a health care entity);

(D) Annual revenue for the three most recent fiscal years used in calculating revenue in accordance with section 97435(d);

(E) Current county or counties of operation;

(F) If a health care provider is party to the transaction, include a summary of provider type (hospital, physician group, etc.), facilities owned or operated, service lines, number of staff, geographic service area(s), and capacity (e.g., number of licensed beds) or patients served (e.g., number of patients per county) in California in the last year;

(G) Primary and threshold languages, as determined by the Department of Health Care Services, used;

(H) If a payer is a party to the transaction, include a list of all counties where coverage is sold, counties in which they are licensed to operate by the Department of Managed Health Care and/or the Department of Insurance, and the number of enrollees residing in each listed county in the year preceding the transaction; and

(I) Include the business addresses, if known, of all new entities that will be formed as a result of the transaction.

(4) Proposed or anticipated date of transaction closure;

(5) Description of transaction, which shall include the following:

(A) The goals of the transaction;

(B) A summary of terms of the transaction;

(C) A statement of why the transaction is necessary or desirable;

(D) General public impact or benefits of the transaction, including quality and equity measures and impacts;

(E) Narrative description of the expected competitive impacts of the transaction; and

(F) Description of any actions or activities to mitigate any potential adverse impacts of the transaction on the public.

(6) The submission date and nature of any applications, forms, notices, or other materials submitted or required regarding the proposed transaction to any other state or federal agency, such as, but not limited to, the Federal Trade Commission or the United States Department of Justice.

(7) Whether the proposed transaction has been the subject of any court proceeding and, if so, the:

(A) Name of the court;

(B) Case number; and

(C) Names of the parties

(8) A description of current services provided by the health care entity and expected post-transaction impacts on health care services, which shall include, if applicable:

(A) Counties where services are currently performed and any post-transaction changes thereto;

(B) Levels and type of health care services currently offered, such as the full range of reproductive health care and sexual health care services, specialized services for LGBTQ+ populations, labor and delivery services, pediatric services, behavioral health services, cardiac services, and emergency services, and any post-transaction changes thereto;

(C) Summary that includes the number and type of patients currently served, including, but not limited to, age, gender, race, ethnicity, preferred language spoken, disability status, and payer category, and any post-transaction changes thereto;

(D) Current community needs assessments, charity care, and community benefit programs, and any post-transaction changes thereto; and

(E) Whether Medi-Cal and Medicare patients are currently accepted and any post-transaction changes thereto.

(9) If this transaction is a merger or acquisition, description of any other prior mergers or acquisitions that satisfy all of the following:

(A) Involved the same or related health care services;

(B) Involved at least one of the entities, or their parents, subsidiaries, predecessors, or successors, in the proposed transaction; and

(C) Were closed in the last ten years.

(10) Description of potential post-transaction changes to:

(A) Ownership, governance, or operational structure of the parties to the transaction.

(B) The submitter’s employee staffing levels, job security, retraining policies, wages, benefits, working conditions, and/or employment protections.

(C) City or county contracts regarding the provision of health care services between the parties to the transaction and cities or counties.

(D) If a provider, comparable health care services currently offered by other health care entities within 20 miles of any location where the submitter offers health care services.

(11) Description of the nature, scope, and dates of any material change transactions between the submitter and any other entity that are either pending or planned to occur within 12 months following the date of the notice.

Documents to be submitted with the Notice include:

(1) If the submitter has filed notice of the transaction with the Federal Trade Commission pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and 16 C.F.R. Parts 801-803, a copy of the Premerger Notification and Report Form and any attachments thereto;

(2) Copies of all current agreement(s) and term sheets (with accompanying appendices and exhibits) governing or related to the proposed material change (e.g., definitive agreements, affiliation agreements, stock purchase agreements);

(3) Documentation sufficient to show the valuation of transaction;

(4) Contact information for any individuals signing or responsible for the transaction or side or related agreements;

(5) Any pro forma post-transaction balance sheet for any surviving or successor entity;

(6) A current organizational chart of the organization of any entity party to the transaction, including charts of any parent and subsidiary organization(s), and proposed organizational chart(s) for the same entities after the transaction;

(7) Existing documentation identifying the number of patients per county or enrollees per county in the last year;

(8) Certified financial statements for the prior three years and any documentation related to the liabilities, debts, assets, balance sheets, statements of income and expenses, any accompanying footnotes, and revenue of all entities that are parties to the transaction.

(9) Articles of organization or incorporation, bylaws, partnership agreements, or other corporate governance documents of all entities that are parties to the transaction, including any proposed updates that occur as a result of the transaction;

(10) Any documentation related to the mitigation of any potential adverse impacts of the transaction on the public; and

(11) Any analysis and/or documents supporting the submitter’s responses to the narrative answers provided pursuant to the Notice.

18. What if information or document(s) are responsive to multiple questions in the Notice? [xxxviii]#

If a submitter provides a document in response to a question in the Notice, it may reference the page number or section of that document in later questions so long as the reference completely answers the question.  

19. Are a Notice, supporting documents, or information considered public information? [xxxix]#

Information and documents provided through the portal will be treated as a public record unless OHCA deems it confidential or grants a request for confidential treatment. Information in the Notice that is not deemed confidential will be posted on OHCA’s website once OHCA determines the Notice is complete. Required documents submitted with the Notice will not be posted unless the transaction is required to undergo a CMIR.

OHCA will automatically deem the following documents as confidential: marked-confidential stock purchase agreements, compensation documents, contract rates, documentation sufficient to show the valuation of the transaction, and unredacted resumes. Confidential information and documents will not be released via a California Public Records Act request unless otherwise required by law. [xl]

Submitters may request confidential treatment of other information and documents through the Confidential Request Form. Submitters do not need to complete a Confidential Request Form for any document that is automatically deemed confidential.

20. How must a submitter request confidentiality for information and documents? [xli]#

For information and documents that are not automatically deemed confidential, a submitter may complete a Confidential Request Form to request confidential treatment. A submitter must also upload two versions of the information or documents it wants OHCA to treat as confidential: one public version with redactions for confidential portions and one nonpublic version with no redactions.

A submitter must also provide a detailed statement of the grounds for confidentiality, a statement of the specific time for which confidential treatment is necessary, and a statement that the information has been confidentially maintained. Bases for confidentiality include: the information is proprietary or of a confidential business nature; another state or federal agency deems the information as confidential; the information is confidential based on statute or other law; or that the public interest is served by withholding the information.

OHCA will notify a submitter in writing via the submission portal when it makes a determination regarding a submitter’s request for confidentiality. If OHCA grants a request for confidentiality, OHCA will designate the information confidential and keep it separate from the public file for the time in which it is to be treated as confidential.

21. When does OHCA consider a Notice complete? [xlii]#

A Notice is complete when all health care entities have submitted all information and documentation required by section 97438 of OHCA’s regulations – refer to Question 17. OHCA will review the Notice and supporting documents to confirm the submitter provided all required information and documents. After confirming to all submitters their Notices are complete, OHCA will start the review timer.

Submitters may partially complete a Notice and submit on a later date; however, OHCA will not review partially completed Notices.

22. What if a submitter doesn’t have access to all required information about other parties to the transaction?#

Notices filed with OHCA are made under penalty of perjury and must include information about parties and the transaction as required in regulations. Submitters must include information about other parties to the transaction to the extent they have access to it and must include a statement attesting that the information provided is accurate and true to the best of their knowledge at the time of submission.

23. What if a submitter needs to amend or withdraw a Notice after it submits it to OHCA? [xliii]#

Submitters must notify OHCA within five business days if the transaction is amended or cancelled. The portal allows submitters to message OHCA regarding any updates to the transaction. Submitters must communicate all changes to the transaction to OHCA within five business days. If a modification is material, the submitter may be required to re-submit the Notice.

The portal does not allow submitters to cancel a transaction. Submitters must message OHCA to request a withdrawal. Submitters may withdraw a Notice at any time for any reason until OHCA issues the final report. However, OHCA may still collect any actual, reasonable, and direct costs incurred during review. Withdrawing the Notice does not relieve the submitter of its obligation to submit a Notice of a material change transaction if required by OHCA’s regulations. If submitters request to withdraw a notice, but still intend to proceed with a material change transaction that includes different terms or different parties, they should inform OHCA and must submit a new notice because they withdrew the previous notice. OHCA would post notice of the withdrawal. And, if appropriate, OHCA would post the new notice of the material change transaction.