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At the end of December, the Second Circuit joined several other circuit courts in holding that a plaintiff adequately pleads an Anti-Kickback Statute (“AKS”) violation when she states with the requisite particularity that at least one purpose of the alleged scheme was to induce fraudulent conduct, the “at-least-one-purpose” rule.

In United States ex rel. Camburn v. Novartis Pharmaceuticals Corp., Relator Steven Camburn alleged that Novartis violated the AKS, and the False Claims Act (“FCA”), in marketing its drug Gilenya, which is prescribed for multiple sclerosis (“MS”).  Since approving Gilenya in 2010, the FDA has imposed a first-dose observation requirement for new patients, who must be monitored by a doctor while attached to an electrocardiogram machine for six hours.

First-dose observation is burdensome for physicians, so Novartis sought to market Gilenya through a peer-to-peer speaker program during which physicians shared insights about Gilenya with other healthcare professionals.  Camburn alleged that these programs were a pretextual scheme through which Novartis offered remuneration to physicians in exchange for prescribing Gilenya to patients.

The Second Circuit held, as a matter of first impression, that “in relator-initiated actions, a defendant violates the AKS when at least one (rather than the primary or sole) purpose of the remuneration she provides is to induce purchase of a federally reimbursable healthcare product.”  The Court noted that this rule aligns with that of seven other circuit courts.  In addition, the Court held that a plaintiff pleading an AKS violation as a predicate to an FCA claim need not state a quid pro quo exchange.  As a result, Camburn needed only to allege that at least one purpose of the remuneration from Novartis was to induce prescriptions, without alleging a cause-and-effect relationship (a quid pro quo) between the payments and the physicians’ prescribing habits.

In determining whether the pleadings were sufficient, the Court noted that the analysis is always a “context-specific” exercise.  The Court determined that for three alleged categories, the Relator had pled factual claims with the requisite particularity to allow an inference that one of the purposes of Novartis’s conduct was to induce physicians to prescribe Gilenya at a higher volume.  These allegations involved: (1) speaker events with few or no legitimate attendees; (2) excessive compensation of speakers for canceled events; and (3) the selection of speakers to reward and influence high prescribers.  The Court found that “[t]ogether, these allegations give rise to a strong inference that one purpose of Novartis’s conduct was to illicitly compensate physicians in order to induce them to write a higher volume of prescriptions for Gilenya.” 

The Court upheld the district court’s dismissal of other factual allegations, because they did not have enough details to satisfy the at-least-one-purpose rule.  The Court stressed, however, that “our analysis is necessarily context-specific,” so that a future AKS-based FCA action based on similar allegations could survive if greater particularity led to a “strong inference of fraud.” 

The Second Circuit’s AKS decision is an important one, as it confirms that under the AKS: (1) a relator need only allege that one purpose of the remuneration is to induce the purchase of a healthcare product, and not the more demanding requirement of showing it to be the sole or primary purpose, and (2) a relator need not show a cause-and-effect relationship between the payment and the physician’s prescription.  However, whether a complaint survives a motion will be heavily dependent on the strength and particularity of the allegations, and the court’s “context-specific” analysis of the specific facts alleged in each case. 

The SDNY U.S. Attorney’s Office has targeted several labs and their principals for False Claims Act violations arising out of reimbursements for COVID-19 testing services.  In a complaint filed on June 13, the government sued LabQ Clinical Diagnostics, Dart Medical Laboratory, Community Mobile Testing, and their CEO, Moshe Landau.

In response to the COVID pandemic, Congress mandated that private health insurers cover COVID-19 testing and required government health care programs to also cover such testing.  For uninsured persons, Congress appropriated funds for a federal program to reimburse health care providers furnishing COVID-19 testing to uninsured persons (the “Uninsured Program”), administered by an agency within the Department of Health and Human Services.  Before seeking reimbursement, however, COVID-19 testing providers were required to confirm that the patients were uninsured and no one else would pay for the testing. 

The government alleges that the defendants violated the Uninsured Program and the False Claims Act by submitting claims when the testing had been or would be reimbursed by another payment source, and/or when the testing was provided to people who had health coverage.  Defendants allegedly billed for testing actually paid by other organizations, discouraged patients from providing insurance confirmation, and submitted claims where their records showed the patients had health coverage. 

Defendants’ testing business expanded dramatically during COVID-19, and from May 2020 to March 2022, LabQ and Dart Medical received approximately $130 million from the Uninsured Program.  Community Mobile Testing operated over 100 “LabQ Mobile Testing Sites” in New York City from 2020 through 2022.  Once the federal program’s funds were exhausted, however, Landau allegedly instructed LabQ employees to drastically cut all payrolls because the business could not continue without the Uninsured Program. 

The complaint alleges specifically that:

  • LabQ, Dart Medical, and Landau double-billed the Uninsured Program and other health care payors for the same testing;
  • LabQ and CMT employees frequently told patients that LabQ did not need insurance information;
  • LabQ, Dart Medical, and Landau submitted claim for patients for whom they had insurance information; and
  • LabQ, Landau and Dart Medical sought reimbursement from the Uninsured Program for patients with health care coverage where they believed the insurer might deny claims for reimbursement. 

The government has been aggressively pursuing fraud claims related to COVID pandemic funding, and in this case is asserting public harm because the funds improperly taken by defendants depleted the funds Congress made available for uninsured persons during the pandemic.  The defendants’ responses to the complaint will be due in mid-August. 

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Recently, in United States ex rel. Hart v. McKesson Corp., the Second Circuit clarified the standard for acting “willfully” under the federal anti-kickback statute (AKS).

False Claims Act relator Adam Hart alleged that the defendant violated the AKS by providing business management tools to its customers, without charge, to induce those customers to purchase drugs from them.  The tools helped providers to maximize profits and mitigate the risk that reimbursement rates would fall below the cost of the drugs to them.  One tool, the Margin Analyzer, compared profit margins for drugs considered to be interchangeable, and the second, the Regimen Profiler, provided margin information for an entire course of treatment as opposed to specific drugs.  The unlawful kickback, according to relator, was that the defendant did not offer these tools on a stand-alone basis, but only offered them to providers who agreed to use the defendant as their primary wholesaler of branded and generic drugs.  The defendant allegedly provided the tools as a kickback to induce drug sales. 

The Second Circuit first addressed the proper understanding of “willfulness” under the AKS.  The Court held that, in order to violate the federal AKS, a defendant must act knowing that the conduct is in some way unlawful but does not have to know specifically that the conduct violates the AKS.  The Court stated that this interpretation accords with the general goal of criminal law to punish only those who act with a “vicious will.”  Notably, in 2010, Congress amended the AKS to provide that a violation does not require actual knowledge of the AKS or a specific intent to violate the AKS.  Also, particularly with respect to the analysis of applications of AKS safe harbors to conduct, this interpretation also avoids unfairly sweeping innocent conduct under the reach of the criminal statute.

Continue Reading Second Circuit Defines “Willfulness” Standard Under Anti-Kickback Statute
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On January 9, 2024, the federal Centers for Medicare and Medicaid Services (CMS) finally approved New York State’s 1115 waiver amendment to establish the New York Health Equity Reform (NYHER) Program. That application, which is the successor to the state’s Delivery System Reform Incentive Payment (DSRIP) Program that expired in March 2020, was first described in a concept paper issued by the Department of Health (DOH) in August 2021, and was filed with CMS in September 2022. The approved waiver amendment, which expires on March 31, 2027, includes most of the features included in the original application, but not all.

The overall goals of NYHER include:

  • Health-Related Social Needs: Investments in health-related social needs (HRSN) via greater integration between primary care providers and community-based organizations, with a goal of improved quality and outcomes.
  • Health Equity: Improving quality and outcomes of enrollees in geographic areas that have a longstanding history of health disparities and disengagement from the health system, including through an incentive program for safety net providers with exceptional exposure to enrollees with historically worse health outcomes and HRSN challenges.
  • Integrated Care: Focus on integrated primary care, behavioral health, and HRSN with a goal to improve population health and health equity outcomes for high-risk enrollees, including kids/youth, pregnant and postpartum individuals, the chronically homeless, and individuals with substance use disorder (SUD).
  • Workforce: Workforce investments with a goal of equitable and sustainable access to care in Medicaid.
  • Regional Approaches: Developing regionally focused approaches, including new value-based purchasing (VBP) programs, with a goal of statewide accountability for improving health, outcomes, and equity.

These goals are embodied in four new initiatives: (1) HRSN, (2) a Health Equity Regional Organization (HERO), (3) Medicaid Hospital Global Budget Initiative, and (4) Strengthen the Workforce. Each will be examined in turn.

Continue Reading CMS Approves a New 1115 Waiver Amendment:  The New York Health Equity Reform (NYHER) Program
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As we head into a new calendar year, in the healthcare space it is worth reflecting on the events of the last few years, as a means of predicting what is likely to come.  Last year, the focus in healthcare policy was very much on what will come after COVID; this year, we finally have the opportunity to review what that is.  And we can confidently say that 2024 is likely to see a continuation of many of the trends in healthcare policy that we saw in 2023.

Continue Reading Healthcare Policy in 2024: What’s Next?

The Supreme Court will hear argument next week in two consolidated cases that will decide what standard applies when a doctor asserts a good faith defense to a criminal prosecution for unlawful drug distribution.  The argument on Tuesday, March 1, will address the convictions of two doctors accused of running “pill mills” and seeking to profit in the midst of the national opioid crisis.  According to the Government, “the petitioners simply cloaked themselves in medical garb while acting as drug dealers, lining their own pockets by dispensing addictive, dangerous, and lethal drugs, aware all the while that their profit-seeking came at the expense of their patients’ health.”

Yiulu Ruan was convicted in the Southern District of Alabama of conspiring to unlawfully distribute controlled substances, unlawfully distributing controlled substances, and other offenses, and was sentenced to twenty one years and two months imprisonment.  His conviction was affirmed by the Eleventh Circuit.  Shakeel Kahn was convicted in the District of Wyoming of conspiring to dispense and distribute controlled substances resulting in death, unlawfully dispensing controlled substances, and other offenses, and was sentenced to twenty five years imprisonment.  His conviction was affirmed by the Tenth Circuit.

The doctors argue that the trial courts failed to properly instruct the juries on their good faith defenses.  Ruan concedes that a physician otherwise authorized to prescribe controlled substances may be convicted of unlawful distribution if his prescriptions “fall outside the usual course of professional practice.” United States v. Moore, 423 U.S. 122, 124 (1975).  He argues, however, that he should have been permitted to advance a subjective “good faith” defense, so that he could not have been convicted where in good faith, he “reasonably believed” or “subjectively intended” that his prescriptions fell within the usual course of professional practice.  Ruan argues that a physician may not be convicted unless acting without a good faith medical purpose, meaning that “a physician who believes in good faith that her prescription serves a valid medical purpose may not be convicted simply because her belief proves to be unpopular.”

The Government argues that the Court should not allow a subjective standard to supply the basis for a good faith defense.  The Government’s standard would allow a conviction where the doctor “did not even make an objectively reasonable attempt to ascertain and act within the bounds of professional medicine.”  The Government argues that a doctor cannot have a good faith belief that his practices fall within the usual course of professional practice unless he makes an objectively reasonable “honest effort” to ascertain and adhere to professional medical boundaries, and the “wholly subjective” views of a doctor should not preclude conviction.  Petitioners argue that their trial court jury instructions did not even meet this test, and their cases must be remanded for a new trial even under the Government standard.

The Supreme Court’s decision could be narrowly focused on the specific trial court instructions, or it could set a broader good faith standard either strengthening or seriously hampering Government efforts to prosecute doctors for unlawful drug distribution.  The March 1 argument will be on live audio starting at 10 am on the Supreme Court website.

On March 31, 2021, Governor Andrew Cuomo signed the Marihuana Regulation & Taxation Act (MRTA) legalizing adult-use cannabis in New York State. In doing so, New York became the 15th state in the United States to legalize cannabis use.

As  a result of the enactment of the MRTA, New York established the Office of Cannabis Management (OCM). The OCM will regulate and control the cultivation, processing, manufacture, distribution, transportation, and sale of cannabis in New York. This includes medical cannabis, adult-use or “retail” cannabis and cannabinoid hemp.

Below we’ve gathered key facts about New York State’s adult-use and medical cannabis programs. These facts, and more information on the cannabis program in New York, can be found at the websites listed at the end of this post.

ADULT-USE MARIJUANA PROGRAM

  • Only adults 21 years of age or older may possess and use recreational cannabis.
  • Adults over 21 can possess up to 3 ounces of cannabis and 24 grams of concentrated cannabis (like vaporization oil or an edible).
  • Cannabis can be purchased only at state licensed dispensaries.
  • Cannabis cannot be consumed when operating a motor vehicle and it remains illegal to operate a vehicle in New York while under the influence of cannabis. Impaired driving can result in a charge of Driving While Ability Impaired By Drugs (DWAI) under Vehicle And Traffic Law Section 1192(4). This section states: “No person shall operate a motor vehicle while the person’s ability to operate such a motor vehicle is impaired by the use of a drug as defined in this chapter.” The world “drug” includes cannabis.
  • The smoking of cannabis is prohibited anywhere smoking tobacco is prohibited. In addition, landlords, property owners and rental companies can ban the use of cannabis on their premises.
  • Employers can enforce policies that prohibit cannabis impairment on the job.
  • Adults over 21 cannot cross state or international borders in possession of cannabis. It is also illegal to possess and use cannabis on federal lands or property.
  • Growing cannabis at home for personal use is not permitted under the new law until the Cannabis Control Board adopts regulations outlining the rules. It is expected that New Yorkers 21 years and older will be able to grow up to six plants in their home for personal use (3 mature plants and 3 immature plants) and a maximum of twelve plants per household (6 mature plants and 6 immature plants), even if there are three or more adults over the age of 21 in the residence. Home cultivated cannabis cannot be sold to anyone and is only intended for personal use.
  • Local municipalities may enact and enforce regulations relating to home cultivation of cannabis, however no municipality may completely ban or prohibit home cultivation.
  • The MRTA establishes three taxes on adult-use cannabis. There is a tax imposed at the distributor tier based on the milligrams (mg) of total THC in the cannabis product. There are different rates of tax depending on the cannabis product form.
  • On the retail sale to the consumer, there are two taxes: 9% state excise tax and 4% local excise tax.
  • All cannabis taxes will be deposited in the New York state cannabis revenue fund to administer the program and implement the law. The remaining funding would be split three ways: 40% to Education; 40% to Community Grants Reinvestment Fund; and 20% to Drug Treatment and Public Education Fund.
  • The MRTA will automatically expunge records for people with previous convictions for activities that are no longer criminalized. Individuals who qualify for expungement are not required to take any further action to have their records expunged.

MEDICAL MARIJUANA PROGRAM

  • New York’s medical cannabis law – Compassionate Care Act – was signed into law on July 5, 2014.
  • Medical marijuana is available for patients that have been diagnosed with one or more of the following severe debilitating or life threatening conditions: cancer, HIV infection or AIDS, amyotrophic lateral sclerosis (ALS), Parkinson’s disease, multiple sclerosis, spinal cord injury with spasticity, epilepsy, inflammatory bowel disease, neuropathy, Huntington’s disease, post-traumatic stress disorder, chronic pain (as defined by 10 NYCRR §1004.2(a)(8)(xi)), pain that degrades health and functional capability as an alternative to opioid use or substance use disorder.
  • The severe debilitating or life-threatening condition must also be accompanied by one or more of the following associated or complicating conditions: cachexia or wasting syndrome, severe or chronic pain, severe nausea, seizures, or severe or persistent muscle spasms, PTSD or opioid use disorder.
  • To obtain medical marijuana, patients must first be certified by a registered practitioner (which includes physicians, physician assistants, and nurse practitioners). A list of registered practitioners can be found at the New York State Department of Health (DOH) Public List of Consenting Medical Marijuana Program Practitioners.
  • Once certified, patients must register with the DOH. Patients may designate up to two caregivers during the registration process. After the patient’s registration is processed, the designated caregiver(s) must then also register with the DOH.
  • Pursuant to the Compassionate Care Act there is a $50 registration fee; the Department is currently waiving the $50 fee for all patients and their designated caregivers.
  • Once a patient or caregiver’s registration is approved, the DOH will issue a registry identification card which patients must bring to a registered organization’s dispensing facility in order to purchase approved medical marijuana products. A list of Registered Organization Locations can be found here.
  • Registered organizations must make available at least one brand that has an equal ratio of THC to CBD, and one brand with a low-THC-high-CBD ratio). Each Registered Organization will also offer other products that have varying ratios of THC to CBD.
  • Prices for medical marijuana products vary widely amongst the registered organizations. The Compassionate Care Act does not mandate a discounted Medical Marijuana pricing program, but allows Registered Organizations to provide discounted products. Some Registered Organizations may offer reduced prices for qualifying certified patients.
  • Like recreational marijuana, medical marijuana products may not be transported outside of New York State.
  • New York State does not accept certifications or registry ID cards from other states.
  • Patients may possess a 30-day supply of medical marijuana. They may refill their 30-day supply seven days before it runs out.
  • The excise tax on medical cannabis is a 7% tax on the gross receipts from medical cannabis sold or furnished by a registered organization to a certified patient or designated caregiver.
  • The tax is imposed on the registered organization, which must pay it to the Tax Department. The tax may not be added as a separate charge or line item on a sales slip, invoice, receipt or other statement or memorandum of the price given to the retail customer.

HELPFUL RESOURCES

SDNY Judge Jed Rakoff rejected Northwell Health’s bid for insurance coverage for its increased costs and business losses related to the COVID-19 pandemic in a recent decision.  As the COVID-19 pandemic unfolded, Northwell was inundated with new patients, had increased cleaning costs, and stopped offering outpatient care services and elective procedures.  In the ruling, Judge Rakoff held that Northwell was not entitled to coverage under two all-risks commercial property insurance policies.

The federal government declared a COVID-19 emergency on March 13, 2020, and New York State issued orders suspending or severely curtailing operations of certain businesses.   In its complaint, Northwell alleged that, while caring for over 100,000 COVID-19 patients, it incurred significant new costs, was forced to cease elective surgeries and close physicians’ practices, and saw fewer hospital admissions and visits.  Northwell alleged that the respiratory droplets carrying the coronavirus were “physical objects, carrying a physical substance, that attach to [and] cause harm to property.”  Examining several different policy provisions, the Court held that Northwell had failed to establish an entitlement to coverage.

Time Element Coverage

The Northwell policies provided “Time Element” coverage for lost earnings from the necessary “suspension” of business activities, if caused by “direct physical loss of or damage to Covered Property … caused by Covered Cause of Loss.”  The Court held there was no coverage under this provision because it required the cost or loss to be caused by direct physical loss or damage.  While Northwell alleged that the respiratory droplets carrying the coronavirus attached to surfaces, the Court concluded that the complaint failed to allege that the coronavirus compromised the physical integrity of objects by harming surfaces and structures, as opposed to harming the people who touched them.  The Court held that (1) the Northwell interpretation would collapse coverage for direct physical loss or damage into “loss of use” coverage; (2) the coronavirus did not “persist” on property, as the property could be usable when sanitized; and (3) the Northwell properties were not unusable, as they did continue to operate with extra precautions.

Interruption by Communicable Diseases Coverage

The Court found that Northwell had satisfied the first two conditions for Interruption by Communicable Diseases coverage, that Northwell ceased or slowed operations because of a governmental authority regulating the spread of a communicable disease.  The Court held that there was no coverage, however, because Northwell failed to allege that the government orders declared portions of its locations “uninhabitable,” as patients continued to “inhabit” hospitals and hospitals were not required to close buildings, although elective procedures were suspended.  “While the Orders certainly restrict access to hospitals, they fall short of ‘prohibiting’ access.”

Civil or Military Authority, Decontamination Costs, and Ingress/Egress Coverage

Judge Rakoff also rejected Northwell’s claims for coverage under the Civil or Military Authority, Decontamination Costs and Ingress/Egress policy provisions.  First, all three required the costs and losses to be caused by “physical loss and damage,” and he had already rejected Northwell’s argument for coverage under this definition.  He also found the claims under these provisions deficient for additional reasons.

Civil or Military Authority coverage requires an order prohibiting access in response to physical loss or damage to nearby property not belonging to the insured.  The Court held that the complaint did not allege nearby properties that caused a prohibition on access to Northwell facilities, and the facts did not support the allegation that any order prohibited access to Northwell facilities.

Decontamination Costs coverage applies to government-mandated costs to remove a virus or infected property, if the presence of an illness-causing agent was caused by physical loss or damage.  The Court held that the presence of COVID-19 was not caused by physical loss or damage, but by infected patients or visitors who released droplets containing the virus into the air.

In addition, the Court held that the Ingress/Egress coverage provision did not apply because it requires “physical obstruction,” and the government orders at issue were legal obstructions rather than physical barriers.

Exclusions to Coverage

Finally, the Court held that, even assuming there were coverage under the provisions above, an exclusion to coverage applied. The policy excluded coverage for a “release, discharge, escape or dispersal” of “contaminants or pollutants,” and defined “contamination” to include disease-causing viruses.  The Court found that there was a discharge or dispersal: “What is a sneeze or cough if not a discharge or dispersal?”  The Court also rejected Northwell’s argument that “discharge” or “dispersal” should be limited to environmental or industrial pollutants and contaminants because the policies specifically defined “contaminants to include viruses.”

Conclusion

Judge Rakoff’s decision addressed many issues concerning insurance coverage for the COVID-19 pandemic, and rejected Northwell’s arguments across the board.  The decision is likely to be appealed by Northwell, so ultimately the Second Circuit may rule on these important coverage issues.

By legislation enacted last month, on June 9, 2021, amending the New York Finance Law, Mental Hygiene Law and Executive Law, New York State established an opioid settlement fund (“OSF”).  Finance Law §99-nn(1).  The purpose of the OSF and the OSF advisory board created by the statute is to ensure that all opioid settlement monies are dedicated to the prevention and treatment of substance use disorders, and the recovery of substance use victims.  OSF will include money paid to NYS as the result of (i) the settlement or other resolution of litigation against manufacturers, distributors, dispensers or promoters of opioids on claims arising from the manufacture, distribution, dispensing or promotion of opioids and (ii) any judgment, decree or other resolution of claims against those and “related” entities “arising out of activities alleged to have contributed to increases in opioid addiction.”  Finance Law, §99-nn(4).  OSF monies will include the proceeds of these claims, whether the claims were filed or unfiled, actual or potential, legal or equitable.  Id. 

The NYS Comptroller and NYS Commissioner of Taxation will be joint custodians of the OSF.  OSF monies are required to be segregated and not commingled with any other funds held by the Comptroller.  Finance Law §99-nn(2).  OSF expenditures “shall be used to supplement and not to supplant or replace” any other federal or NYS funds which would other otherwise be used for substance use prevention, treatment, recovery and harm reduction services. Finance Law §99-nn(3).  The law specifies that general operating funds or baseline funding for substance use prevention, treatment and recovery will not be reduced due to amounts expended from OSF.  Id.  All amounts received by the OSF will remain there “unless and until directed by statute or appropriation.”  Finance Law, §99-nn(4).  Funding must be disbursed to provide adequate geographic distribution across NYS.  In addition to programs administered by the Office of Addiction Services and Supports (OASAS), OSF dollars may be used for programs of NYS agencies other than OASAS which oversee programs and services that are considered eligible OSF expenditures.  §99-nn(5).  Local governments and school districts may apply for OSF funding to the appropriate NYS agency. Mental Hygiene Law, §25.18(b).

The legislature may appropriate OSF monies for the purposes spelled out in the amended Mental Hygiene Law, which include programs to:

  • Prevent substance abuse disorders through youth-focused and school-focused public health education.
  • Develop public health campaigns to reduce the stigma against individuals with a substance use disorder, and provide information about the risks of substance abuse and how to locate services to treat it.
  • Provide substance use disorder treatment, emphasizing programs that include a continuum of care from screening and assessment, active treatment (such as medication-assisted, psychiatric medication, psychotherapy and family therapy), case management and relapse management for use disorders and co-occurring disorders, and related services such as vocational, literacy and family counseling.
  • Provide harm reduction counseling to reduce adverse health consequences such as overdoses and communicable diseases.
  • Provide housing services for people recovering from substance abuse.
  • Support community-based programs that reduce the likelihood of criminal justice involvement for individuals with substance abuse disorders.
  • Provide programs for pregnant women and new parents who have, or had, a substance abuse disorder, and newborns with neonatal abstinence syndrome.
  • Provide for educational and vocational training for those with or at risk of a substance abuse disorder.

Mental Hygiene Law, §25.18.

The statute creates an opioid settlement board under OASAS to make recommendations on how to allocate OSF funding, and recommendations to the legislature about adding or removing categories of expenditures eligible for funding.  Mental Hygiene Law, §25.18(c). The settlement board will have 19 members, including two appointed by the governor, four by the speaker of the Assembly and president of the Senate, two by the NYS Attorney General, one by the mayor of New York City and seven representing counties throughout NYS, plus the commissioners of OASAS, the Department of Health and the Office of Mental Health as ex officio, non-voting members.  The voting members will serve three-year terms without compensation but with payment of actual and necessary expenses.  Mental Hygiene Law, §25.18(c)(3).  The statute contains conflict of interest prohibitions for members. §25.18(c)(7).  The advisory board will meet quarterly, and make its recommendations for the appropriation of OSF funds on or before November 1 each year, starting this year, to the governor and the legislature, in a written report. §25.18(c)(9).  Beginning one year after the first deposit of amounts into OSF, the relevant agency commissioners, in consultation with the advisory board, are required to provide an annual report on OSF funding detailing, among other things, which entities received funding, the criteria used to make the awards, how the funds were used, and how effectively they were used. Id. 

In continuing efforts to address problems exposed by the COVID-19 pandemic, on June 18, 2021, the Governor signed legislation (S.1168-A/A.108-B) into law to address an urgent public policy priority related to clinical staffing in hospitals licensed pursuant to Article 28 of the New York State Public Health Law.  This legislation requires the establishment of clinical staffing committees to create plans to more effectively distribute staff throughout general hospitals.  The staffing committees must consist of at least fifty percent (50%) of registered nurses, licensed practical nurses, and ancillary staff providing direct patient care, and up to fifty percent (50%) of hospital administrators, including, but not limited to, the chief financial officer, the chief nursing officer, and patient care unit directors or managers or their designees.  The staffing committees shall create staffing plans with guidelines as to how many patients are assigned to each nurse, as well as how each unit is staffed with ancillary staff, based on patient needs and ratios, matrices or grids, which shall be used as the primary component of the general hospital staffing budget, provided that such staffing plans meet or exceed the terms of existing collective bargaining agreements.

The staffing committees are charged with the development of the staffing plans, and hospitals shall then adopt and submit the plans to the New York State Department of Health (“DOH”) by July 1, 2022.  The staffing plans must be reviewed internally semiannually, updated annually by July 1, and implemented thereafter by January 1 of the following year.  In addition, the staffing plans must be posted in publicly conspicuous areas in each patient unit of hospitals, and on the DOH hospital profile website.  The staffing committees are also charged with review, assessment and response to complaints regarding potential violations, staffing variations or other concerns.

This legislation also extends investigatory powers to DOH, as well as the ability to issue civil penalties, taking mitigating factors into account, for failure of hospitals to comply with or timely correct violations of the staffing plans.  DOH is also required to submit an annual report by the end of the year, which shall include the number of complaints submitted to DOH, the number of investigations, and the costs for such investigations, if any.  Prior to the submission of the annual report by DOH, it shall be reviewed by a stakeholder workgroup consisting of hospital associations, nursing unions and other ancillary members of frontline workers.

This legislation also requires the creation of an independent advisory commission composed of nine (9) experts in staffing standards and quality of patient care:  three (3) in nursing, three (3) representing nursing unions, and three (3) representing general hospitals, with each group consisting of appointments by the Governor, Speaker of the Assembly and/or the Temporary President of the Senate.  The advisory commission shall meet from time to time to evaluate the effectiveness of the staffing committees, as well as to review the annual report submitted by DOH.  The advisory commission shall submit a report with its recommendations to improve working conditions and quality of care in hospitals.

While this legislation attempts to address claims that hospitals have been understaffed for some time, it does not address the fundamental issue of the acute nurse labor shortage, which has been exacerbated by COVID-19.  There are limited exceptions for “unforeseeable emergency circumstances” (such as officially declared national, state, or municipal emergencies; the activation of disaster plans; or any unforeseen disaster or other catastrophic event that immediately affects or increases the need for health care services), and “special considerations” to avoid unreasonable burdens on critical access hospitals and sole community hospitals, however, the legislation specifically prohibits the defense by hospitals of the inability to secure sufficient staff if the lack of staffing was “foreseeable” and could be “prudently planned for” or involved “routine nurse staffing needs,” such as typical staffing patterns, absenteeism, or time-off requests.

As with other recently enacted healthcare reforms, the long term effects of this legislation, and the ability of hospitals to comply with the staffing plans, remain to be seen.