New York hits pause: Medicaid moratorium may reach far beyond new enrollments

New York State Medicaid Director Amir Bassiri announced a six-month moratorium on New York State Medicaid enrollment applications for several provider types, affecting not only new entrants to the market but also acquisitions of existing providers. According to oral remarks by Bassiri, the moratorium will apply to licensed home care service agencies; durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) suppliers; managed long-term care plans; laboratories; pharmacies; and applied behavior analysis providers. Providers with pending new enrollment or change of ownership applications, as well as those contemplating future enrollment, acquisition, or restructuring, should expect delays, more complex transactions, and increased regulatory uncertainty. Affected providers and investors should evaluate whether pending or contemplated acquisitions, restructurings, or other ownership changes could face approval delays, increased transaction costs, or additional regulatory uncertainty, as well as legal strategies to mitigate these adverse impacts.

Bassiri’s announcement comes amid heightened federal scrutiny of Medicaid provider enrollment, ownership disclosures, and program integrity safeguards. On March 3, 2026, Centers for Medicare & Medicaid Services (CMS) Administrator Mehmet Oz sent a letter to Governor Kathy Hochul raising concerns regarding the integrity of New York’s Medicaid program and requesting detailed information regarding New York’s Medicaid expenditures and program oversight activities. In April 2026, Oz directed state Medicaid agencies to review provider types that CMS views as presenting elevated fraud, waste, and abuse risks. On June 25, 2026, Bassiri testified before the House Energy and Commerce Subcommittee on Oversight and Investigations that New York would utilize provider moratoria to “stabilize the provider roster.”

In July 2026, the US Department of Health and Human Services announced a temporary suspension of federal funding for New York’s Medicaid Fraud Control Unit, citing concerns regarding enforcement performance and program integrity.

New York’s moratorium follows a series of recent federal enrollment restrictions in Medicare. Earlier this year, CMS implemented nationwide enrollment moratoria for certain DMEPOS suppliers, home health agencies, and hospices. Those moratoria apply not only to new enrollment applications but also to certain ownership transactions requiring new enrollments, reflecting CMS’s increasing reliance on enrollment restrictions as a program integrity tool. For an in-depth analysis of the federal enrollment moratoria and their implications for healthcare transactions, please see our prior client alert.

As of the date of this publication, the New York Department of Health (DOH) has not yet released a written announcement or guidance regarding the moratorium. Bassiri and DOH have not identified the legal basis for the moratorium, which may implicate both federal and state legal authorities and require certain administrative procedures before implementation. Finally, neither Bassiri nor DOH have clarified the scope of the moratorium as it relates to the Medicaid change of ownership process, which itself has undergone significant change in the past two years and only recently has required new enrollments for indirect equity ownership transfers.

Implications for providers and healthcare transactions

Although the details remain uncertain, the moratorium likely will impact transaction structuring and timelines, valuations, and strategic growth across the affected provider sectors.

Changes of ownership and transaction planning

The moratorium may have significant implications for certain transactions involving existing Medicaid providers – its implications are not limited to entirely new providers. In recent years, New York Medicaid has required enrolled providers undergoing a direct or indirect change in equity ownership to obtain new Medicaid enrollments. Although Bassiri justified the moratorium as “stabilizing” the provider roster, in fact, it would reduce the provider roster if DOH continues its current change of ownership procedures. Assuming current policy remains intact, existing providers that undergo equity changes of ownership would be unable to reenroll in New York Medicaid upon closing of the transaction, leading to termination of the providers’ enrollments.

In some cases, providers and investors may choose to wait to close change of ownership transactions until the moratorium lifts. Bassiri is reported to have indicated he does not intend to extend the moratorium beyond six months. This approach would delay New York Medicaid providers’ access to financial liquidity that may be necessary to maintain operations or growth strategies. Providers with multiple entities and enrollments may look to stage closings to first close on assets not subject to the moratorium before closing on assets subject to the moratorium. Other structuring options may include administrative or management services agreements for interim periods. The contours of these options will depend largely on how New York Medicaid operationalizes the moratorium and the structuring of the assets or equity under acquisition.

Considerations for pending transactions

The moratorium may be particularly disruptive for transactions currently in process. Providers and investors preparing enrollment or change of ownership applications, or awaiting action on pending applications, should consider the possibility that DOH may delay review or processing during the moratorium period. The impact may extend beyond applications submitted during the moratorium. Based on Bassiri’s announcement, DOH is expected to suspend processing of affected enrollment and change of ownership applications during the moratorium period regardless of their stage of review. As a result, parties with applications already pending before the DOH may experience delays.

Where Medicaid enrollment or change of ownership application approval is a condition to closing, parties may need to revisit transaction timelines, regulatory approval provisions, and overall transaction structure. In some cases, buyers and sellers may explore alternative structures designed to minimize regulatory risk or preserve operational continuity while awaiting agency action.

The moratorium may also affect transaction economics. Buyers, lenders, and investors may seek additional protections against regulatory delays, including extended outside dates, revised closing conditions, holdbacks, purchase price adjustments, enhanced interim operating covenants, or termination rights tied to failure to obtain regulatory approval within specified timelines. Accordingly, parties involved in pending or contemplated transactions should carefully assess the potential impact of the moratorium as early as possible and incorporate regulatory timing risk into transaction planning and diligence efforts.

Key business and regulatory consequences

Although many details remain uncertain, the reported scope of the moratorium suggests that its impact could be extensive. Affected providers and investors should consider the following potential implications:

• Delays to growth, expansion, and new service lines. The most immediate effect of the moratorium will be the inability of certain providers to obtain Medicaid enrollment approvals necessary to enter the New York market, expand existing operations, or launch new service lines. For providers whose business models depend heavily on Medicaid reimbursement, delays in enrollment could postpone operations, patient intake, and revenue generation. Providers pursuing de novo expansion strategies may be particularly affected if they continue incurring startup costs while awaiting enrollment approval.
• Increased transaction and investment risk. If the moratorium applies to change of ownership applications, its effects could extend to a broad range of healthcare transactions involving affected provider types. Uncertainty regarding which transactions require review and how long approval may take could complicate transaction planning and execution. Buyers, sellers, lenders, and investors may need to revisit assumptions regarding transaction timing, valuation, closing conditions, post-closing integration, and regulatory risk allocation. Increased regulatory uncertainty may lengthen transaction timelines, increase diligence obligations, and influence investment decisions.
• Potential financial and operational strain. The moratorium may create financial and operational challenges for organizations that have already invested in facilities, personnel, licenses, technology, or infrastructure in anticipation of enrollment approval or transaction completion. Delays in obtaining approval could increase carrying costs, extend transition periods, and require providers to maintain operational arrangements longer than originally anticipated. Similarly, parties engaged in pending transactions may incur additional legal, consulting, regulatory, financing, and administrative expenses as transaction timelines lengthen. In some cases, prolonged uncertainty may require restructuring of transaction terms or reevaluation of strategic growth plans.
• Heightened provider screening and program integrity oversight. The moratorium is one component of broader federal and state efforts to strengthen provider screening, revalidation, and program integrity. Existing providers should not assume that the moratorium affects only new applicants. Instead, providers should anticipate increased scrutiny of ownership structures, change reporting obligations, enrollment records, exclusion screening processes, and compliance controls. Providers should review the accuracy and consistency of information maintained across Medicare, Medicaid, National Provider Identifier, licensing, accreditation, and corporate records and ensure that ownership and control disclosures remain current. Organizations contemplating future transactions should also evaluate whether their current ownership structure and governance documentation would withstand enhanced regulatory review.

Conclusion

Although the DOH has not yet confirmed certain details regarding New York’s Medicaid enrollment moratorium, the reported scope of the moratorium could affect not only new enrollment activity, but also transactions and ownership changes involving affected provider types. Providers and investors should closely watch for any DOH guidance and assess whether pending or contemplated expansions, acquisitions, restructurings, or other ownership changes may be impacted. As part of a broader trend toward enhanced provider screening and program integrity oversight, the moratorium underscores the importance of proactive regulatory diligence and planning.

McDermott Will & Schulte will continue to monitor developments, including if the DOH publishes any information or guidance. If you have questions or would like to discuss any issues related to New York’s moratorium, contact your regular McDermott lawyer or one of the authors.

Ashley Anumba, a law clerk in the New York office, also contributed to this article.