New York State Court of Appeals, Albany, New York

Earlier this Summer, the Court of Appeals overturned the Appellate Division Third Department’s (the “Third Department”) unanimous decision in The Matter of Anonymous v. Molik, where it ruled that the New York State Justice Center for the Protection of People with Special Needs (“Justice Center”) exceeded its authority by substantiating a report against a facility or provider agency based upon a “concurrent finding” of neglect.[i]  With its decision, the Court of Appeals has not only clarified the Justice Center’s scope of authority, but also reopened the floodgates to a large number of investigations and appeals that have been existing in a state of limbo since the Third Department’s June 2, 2016 decision.[ii]

Pursuant to Executive Law §§ 551-562 and Social Services Law §§ 488-497, the Justice Center was established in 2013 to protect “vulnerable persons who receive care from New York State’s human services agencies.”[iii] It was created to protect all vulnerable persons, or those “who, due to physical or cognitive disabilities, or the need for services or placement, [are] receiving services from a facility or provider agency.”[iv]

All reportable incidents, including any allegation of neglect,[v] must be reported by a facility to the Statewide Vulnerable Persons’ Central Register (“VPCR”)[vi], whereby the Justice Center is mandated to investigate the allegation(s) and submit its findings to the VPCR.[vii]  The Justice Center’s findings are “based on a preponderance of the evidence and indicate whether the alleged abuse or neglect is substantiated in that it is determined the incident occurred and the subject of the report, facility or provider agency are responsible; or the allegation is found to be unsubstantiated because the event did not occur, or the subject of the report was found not responsible.”[viii] Additionally, the Justice Center may make “a concurrent finding . . . that a systemic problem [at the provider agency or facility] caused or contributed to the occurrence of the incident.”[ix]

In Molik, a male resident engaged in inappropriate sexual conduct with a female resident after two staff members momentarily left a common room at the Petitioner’s facility.[x] This assault was the third incident in a six month period, with the previous two assaults being known to the Petitioner.[xi]  The Justice Center investigated the incident, but did not substantiate a report of neglect against the two individuals because “there were no policies or requirements in place prohibiting staff from leaving the room unattended while residents were gathered there.”[xii] However, since the male resident had previously engaged in similar conduct, the Justice Center substantiated a concurrent finding of neglect against the Petitioner, the operator of the residential facility, “for failing to implement clear staff supervision protocols and for failing to modify [the male resident’s] care plan to increase his level of supervision after the first two attacks.”[xiii]

The Petitioner requested that the Justice Center amend its finding to unsubstantiated, which was denied, leading to the Petitioner’s Article 78 action where it received unanimous support from the Third Department.[xiv]  In its decision, the Third Department overturned the Justice Center’s concurrent finding, stating that it did not have to “defer to the Justice Center’s interpretation of the statutory provisions in question . . . [but rather defer to the] pure statutory interpretation dependent only on accurate apprehension of legislative intent.”[xv] “[T]he only circumstance under which the Justice Center could substantiate a report of neglect against a facility or provider agency is where an incident of neglect has occurred but the subject cannot be identified — a situation that is plainly not present here.”[xvi] The Third Department continued by saying, while the Justice Center does, in fact, have the authority to make a concurrent finding, “the only concurrent finding that may be made is that a systemic problem caused or contributed to the occurrence of the incident.”[xvii] Accordingly, since the controlling statute did not provide the Justice Center with the clear ability to categorize a concurrent finding it necessarily followed that such a finding could not constitute neglect on the part of a provider agency.[xviii]

The Court of Appeals, however, did not share in the Third Department’s view, stating that courts may look beyond the literal text of a statute when “the plain intent and purpose of the statute would otherwise be defeated.”[xix] Consequently, the Court viewed the Petitioner’s, and the Third Department’s, narrow interpretation of the law as “leav[ing] the Justice Center powerless to address many systemic issues, defeating the purpose of the Act and preventing the Justice Center from protecting vulnerable persons where it is most critical to do so.”[xx]  The Court, in light of the particular underlying events in Molik, ruled that to uphold this construction “would perversely allow this dangerous cycle to continue: employee conduct could not be substantiated because it does not violate facility policies, but facility policies would remain ineffective because the Justice Center lacks authority to implement change.”[xxi]

In her dissenting opinion, Judge Rivera stated that she agreed with the majority that “[i]t would lead to absurd results if [N.Y. Soc. Serv. Law § 493(3)(a) were interpreted] to permit a facility or provider agency to be found responsible in those situations where an incident occurs and no subject can be identified, but not where an identified subject is found not responsible for a confirmed incident of abuse or neglect.”[xxii]  However, Judge Rivera points out that a ‘concurrent’ finding should be viewed as an ‘adjunct’, requiring that an initial finding of neglect must be made before a provider agency could be found to have concurrently committed neglect, even if the initial subject is ultimately found not responsible.[xxiii]  In Molik, as reasoned by Judge Rivera, the initial step of establishing a finding of abuse or neglect was never reached because the allegation of neglect against the two identified subjects was declared unsubstantiated; therefore, a ‘concurrent’ finding could not be made.[xxiv]

In a post-Molik world, it is imperative that all provider agencies subject to Justice Center oversight review their internal policies, procedures, and processes, understanding that they too are now clearly within the Justice Center’s reach.  Provider agencies should evaluate previous incidents that occurred within the facility to determine whether the necessary corrective actions have been taken or if further steps are needed.  Furthermore, staff training curriculum should be reevaluated to determine whether opportunities for improvement exist.

If you have any questions or would like additional information regarding the Justice Center, or would be interested in assistance reviewing, developing or revising your policies, processes, and training programs, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com

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[i] Anonymous v. Molik, 2018 WL 3147607 (N.Y. Jun. 28, 2018).

[ii] Matter of Anonymous v. Molik, 141 A.D.3d 162, (App. Div. 3 Dep’t, June 2, 2016)

[iii] 14 N.Y.C.R.R. § 700.1(a).

[iv] N.Y. Soc. Servs. Law § 488(14).

[v] 14 N.Y.C.R.R § 624.3(b)(8).

[vi] N.Y. Soc. Serv. Law § 492(1)(a).

[vii] Id. at (3)(c)(i); Id. at (3)(c)(viii); N.Y. Soc. Serv. Law § 493(1).

[viii] N.Y. Soc. Serv. Law § 492(3)(a).

[ix] Id. at (3)(b).

[x] Molik, 2018 WL 3147607 at *1.

[xi] Id.

[xii] Id.

[xiii] Id.

[xiv] Id. at *2.

[xv] Molik, 141 A.D.3d. at 166 (internal citations omitted).

[xvi] Id. at 167 (citing N.Y. Soc. Serv. Law § 492(3)(a)).

[xvii] Id. at 167–168 (internal citations and quotations omitted).

[xviii] Id.

[xix] Id. at *4.

[xx] Molik, 2018 WL 3147607 at *5.

[xxi] Id.

[xxii] Id. at 8

[xxiii] Id. at 9.

[xxiv] Id. at 10.

In United States ex rel. Wood v. Allergan, Inc., the Second Circuit addressed the issue of whether a violation of the False Claims Act’s “first-to-file” rule compels dismissal of an action or whether it can be cured by the filing of an amended or supplemental pleading. The Court’s acceptance of the interlocutory appeal was addressed here in a post last year. In August, the Second Circuit reversed the District Court, holding that a violation of the first-to-file bar cannot be remedied by amending or supplementing the complaint.

Relator John Wood brought FCA claims against Allegan, a pharmaceutical company that develops and manufactures eye care prescription drugs. Wood alleged that Allergan violated the FCA and the Anti-Kickback Statute by providing large quantities of free medical products to physicians to entice them to prescribe Allergan drugs. When Wood brought his action, two other actions alleging similar FCA violations were pending.

The Initial Qui Tam Complaint Violated the “First-to-File” Bar

The FCA’s “first-to-file” rule states that once a qui tam action has been brought, no person other than the Government may intervene or bring a related action based on the same facts. The first-to-file rule ensures that only one relator shares in the Government’s recovery and encourages potential relators to file their claims promptly. Because two prior actions were pending when Wood filed his qui tam complaint, it ran afoul of the first-to-file bar.

The Wood complaint, however, was under seal, and while it remained under seal, the two prior actions were dismissed. When the government declined to intervene in the Wood action and the case was unsealed, there were no longer any prior-filed pending actions. Wood thereafter filed a third amended complaint. Allergan moved to dismiss on several grounds, including the “first-to-file” bar, because when the Wood qui tam complaint was commenced, there were two pending actions alleging the same factual allegations.

The Second Circuit first held that the first-to-file rule applied, rejecting Wood’s argument that the earlier actions failed to adequately allege an FCA claim. Even if Wood’s allegations were broader than the prior complaints, the claims were related, as the alleged schemes were sufficiently similar, and the Government would have been equipped to investigate them. In addition, the Court rejected as unworkable the argument that the Judge in a later-filed case could address the sufficiency of an earlier-filed case pending before a different Judge, potentially even before the first Judge had done so.

An Amended Pleading Cannot “Cure” a First-to-File Violation

In Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, the Supreme Court had held that “an earlier suit bars a later suit while the earlier suit remains undecided but ceases to bar that suit once it is dismissed,” dismissing the later filed action without prejudice. Wood therefore would have been able to commence a new action once the two prior actions had been dismissed. However, due to the passage of time, statutes of limitation would have barred a new action.  Wood argued that the first-to-file bar could be “cured” by amending or supplementing the complaint after dismissal of the earlier actions. Other Circuits have split on this question.

The Second Circuit followed a D.C. Circuit decision to hold that Wood’s “action was incurably flawed from the moment he filed it.” The Court found that the plain language of the FCA provides that no individual may bring a related action when an FCA action is pending, and that the plain language required dismissal. The Court determined that Wood’s position—a first-to-file violation can be cured by a later amendment—is inconsistent with the language of the statute. The Court reasoned that the statute bars a person from bringing a related action when a prior FCA action is pending; it does not provide for the second action to be stayed until the first-filed action is no longer pending. An amended or supplemented pleading could not change the fact that Wood brought the action when another related action was pending.

The Court also posited several inefficiencies from Wood’s suggested approach: inequities among Relators with later-filed complaints depending on the happenstance of when their complaint was dismissed or whether their case was stayed; questions as to which later-filed case would proceed; and a potential lineup of later-filed cases waiting to take the place of a dismissed earlier action. Finally, the Court found support in legislative history, indicating that the primary, if not sole, purpose of the first-to-file rule is to help the Government uncover and fight fraud. The Court found it unlikely that Congress would have invited an inefficient process prone to anomalous outcomes, dependent on the chance considerations of one Court’s backlog and another Court’s timeliness of dismissal.

This Second Circuit decision, following the D.C. Circuit, now conflicts with a First Circuit decision finding the argument that amendment cannot cure a first-to-file violation to be “untenable.”  The Supreme Court may be called on to decide this Circuit split.

 

Just over one year ago, I wrote about the Department of Health and Human Service’s (“HHS”) $105 million award to support 1,333 federally qualified health centers (“Health Centers”) across the United States improve the quality of comprehensive care provided to patients. It seems like déjà vu, as it was announced last month that HHS set aside $125 million in quality improvement grants to be allocated among 1,352 Health Centers. A list of recipients can be found here.

Health Centers receive funding through the Health Resources and Services Administration (“HRSA”), a branch of the federal government with a primary purpose of delivering comprehensive healthcare to patients who cannot otherwise afford such care. Treatments offered at Health Centers, include, without limitation, physician services, homebound visits by nurses in geographic locations where home health agencies are sparse, and clinical psychology services. The overarching goals set by HRSA with respect to Health Centers are to:

  • Make available high quality healthcare treatments and ancillary services, including education and transportation to facilities;
  • Offer care at affordable rates and charge patients in accordance with a practical scale;
  • Have community stakeholders serve on the governing boards to communicate the specific needs of the locality; and
  • Create a patient-centered foundation to address the diverse needs of the medically underserved.

In accordance with those goals, the grants are designed to improve Health Centers. Specifically, the funds will be used for “[e]xpanding access to comprehensive care, improving care quality and outcomes, increasing comprehensive care delivery in a cost-effective way, addressing health disparities, advancing the use of health information technology, and delivering patient-centered care.”

Speaking on the new grants and reflecting on the preceding year, HRSA Administrator George Sigounas, MS, Ph.D., said “[n]early all HRSA-funded health centers demonstrated improvement in one or more clinical quality measures from the year prior, and these funds will support health centers’ work to improve the quality of care they deliver in their communities around the country.”

As healthcare costs continue to rise in many parts of the country, eligible patients have an alternative route to obtain affordable healthcare without the burdens associated with visiting the local hospital. Health Centers are a bright spot in an otherwise gloomy healthcare system.

 

 

 

 

 

 

As the battle over the future of the Affordable Care Act (the “ACA”) continues, New York State scored a big victory earlier this month with the federal court decision of UnitedHealthcare of New York, Inc., et al. v. Vullo.

The controversy centered on New York State’s risk adjustment program, which is designed to prevent insurers from competing for only the healthiest enrollees. The program requires insurers with enrollees of above-average health for any given plan year to make payments into a common fund.   Those funds are, in turn, used to subsidize insurers who incurred higher claim costs due to having enrollees of below-average health.

 

From 1993 through 2013, New York State had its own risk adjustment program. When the ACA was enacted in 2010, it called for the development of a federal risk adjustment program (the “FRAP”), which the Department of Health and Human Services (“HHS”) was authorized to develop. Although states meeting certain requirements are permitted to administer the FRAP themselves, New York State opted to have HHS implement the FRAP on its behalf.

 

In 2016, HHS published an interim final rule addressing the implementation of the FRAP, wherein HHS acknowledged that certain issuers, including some new and smaller issuers, owed substantial risk adjustment charges that they did not anticipate and encouraged states to examine local approaches to ease these growing pains in the new health insurance market landscape. In response, the New York State Superintendent of Financial Services promulgated an emergency regulation allowing the Superintendent to collect up to 30% of the funds received by carriers in New York State from the FRAP and to redistribute such funds to other carriers in the State pursuant to a State-specific risk adjustment methodology.

The plaintiffs in the action were health insurance companies who offer insurance policies in New York State and who have been, and expect to continue to be, the recipients of risk adjustment payments under the FRAP. The plaintiffs objected to New York State’s emergency regulation, which in part required insurers to turn over funds they had received from the FRAP to the Superintendent so the Superintendent could redistribute such funds to other insurers in New York. The insurers’ primary argument was that the New York State regulation is preempted by the ACA.

 

The District Court for the Southern District of New York found that, under the plain language of the ACA, state regulations are not preempted unless they “prevent the application” of the ACA, which the New York State regulation does not do. The Court further found that there was nothing in the ACA requiring New York State to obtain HHS approval of its emergency regulation. Moreover, statements made by HHS and the Centers for Medicare and Medicaid Services made clear that states are intended to have an ongoing role in risk adjustment policies. All of this, according to the Court, was evidence that the ACA does not preempt the New York State regulation. Accordingly, the Court dismissed the action, allowing the Superintendent to redistribute the FRAP funds paid to New York insurers as the Superintendent deems appropriate.

This post is written in connection with my colleague Vanessa Bongiorno’s recent post, where she eloquently summarized the New York Department of Health’s (“DOH”) findings of the multi-agency study on the impact of regulated adult-use marijuana in New York.

In the report, DOH found that even though marijuana use does contain risks, there are benefits associated with implementing a regulated adult-use marijuana program, including positive impacts on New York’s criminal justice system and an alternative to opioid use, which has long impacted so many New Yorkers and their families. The DOH report concluded with, among other things, a recommendation that New York establishes a workgroup of subject matter professionals with relevant public health experience to debate the details of a regulated marijuana program and offer solutions consistent with reducing harm and educating the public.

Governor Andrew M. Cuomo accepted the recommendation and recently announced the creation of a workgroup to help draft legislation for regulated adult-use marijuana, which will be overseen by Alphonso David, an advisor to the Governor. The workgroup consists of professors of major New York educational institutions, law enforcement representatives, governmental stakeholders, and mental health experts, to name a few. A full list of workgroup members can be found here.

Speaking on the development, Governor Cuomo stated “[t]he next steps must be taken thoughtfully and deliberately. As we work to implement the report’s recommendation through legislation, we must thoroughly consider all aspects of a regulated marijuana program, including its impact on public health, criminal justice and State revenue, and mitigate any potential risks associated with it.”

It is abundantly clear that New York is serious about adopting a regulated marijuana program. While the details of such program are beginning to be hashed out, New York’s long anticipated debate over regulated adult-use marijuana appears to be coming to a resolution.

 

As we previously reported, the 2018-19 New York State Budget passed in March includes significant provisions intended to reduce the number of Licensed Home Care Services Agencies (LHCSAs) around the state. Among these provisions are a two-year moratorium on the establishment of new entities, a limit on the number of LHCSAs with which Managed Long Term Care Plans can contract, and a new requirement that in the future LHCSA applicants will need to demonstrate public need and financial feasibility for a post-moratorium certificate of need. Additional information was provided by the Department of Health (DOH) in early May, when it released a new guidance document, as well as a new Certificate of Need (CON) application and instructions. These documents provide a fairly clear road map to assist LHCSAs in navigating the CON process during the moratorium, which is set to expire on March 31, 2020.

DOH has recently taken the next step in implementing the 2018-19 Budget provisions, and given the long term care community an opportunity to impact what the LHCSA landscape will look like after the expiration of the moratorium. In July, DOH issued a Request for Information (RFI) to gather input for the new need methodology that will apply when the moratorium ends.

An RFI is a mechanism commonly used by state agencies to obtain stakeholder feedback on pending state actions. It is not a Request for Proposals or Request for Applications – no award is made in connection with an RFI, and it would be highly unusual for the state to declare a “winning” methodology. Rather, responses to the RFI will allow stakeholders to outline their positions on what the new methodology should look like. Proposals received from stakeholders and/or portions of those proposals can be accepted or rejected at DOH’s discretion. The presumption is that DOH will use the information obtained from stakeholder submissions to craft a methodology that will implement the applicable statutory mandates as effectively as possible.

This does not mean that DOH is looking for a methodology that is agreeable to the LHCSA community. However, this does provide an excellent opportunity for LHCSAs to point out potential pitfalls to be avoided in the development of the new methodology. Specifically, DOH will likely be most interested in avoiding actions that would undermine the goals of the CON process and/or DOH’s more general goal to ensure that patients have a robust selection of quality providers.

It should be noted that the information sought by the RFI goes beyond what is normally considered to be part of a need methodology. Traditionally, CON review is intended to ensure four things: (1) public need for the services in question, (2) the character and competence of the proposed provider(s), (3) the fiscal feasibility of the proposed project, and (4) compliance with architectural and other regulatory standards. A “need methodology” generally relates primarily to the first item – whether or not there is a public need for the services. This is often presented as a mathematical function, based on the typical number of patients in the service area and the number of services already present in that area. In practice, there is almost always a significant discretionary element that allows DOH and the Public Health and Health Planning Council (which must approve all new establishments) substantial leeway in determining whether a particular provider is necessary.

The RFI seeks information not only on how to assess public need for LHCSA services, but also on character and competence and other potential elements of a CON application. Until now, LHCSAs were not subject to formal public need or fiscal feasibility analysis, which is part of what makes the new legislation so significant – and which makes this opportunity to impact the new rules so important. It is therefore a good thing that DOH has written the RFI so expansively.

In regard to traditional need analysis, DOH is seeking information on all the elements of a typical need methodology, including:

  1. Planning Area: This is part of the denominator of the need methodology equation – should need be determined by county (as is often the case), multiple counties, regions, etc. DOH references issues impacting this analysis, including driving time, availability of public transportation and availability of existing service providers.
  2. Need Factors: This is the other part of the denominator – within the planning area, should need be weighed against total population, population based on demographics (e.g., age), disease and disability prevalence, capacity of existing providers, etc.
  3. Timing: How often should need be recalculated? This is potentially significant. Traditionally, the CON process has been a snapshot in time – applications are judged based on need at the time of application, and that is all. Conceivably, DOH could opt instead to reevaluate overall need at periodic intervals, which could place even existing providers at risk. Other open questions specifically asked by DOH include whether the need methodology should apply in regard to potential service expansions or change of ownership. And while all the foregoing relates to the question when the need methodology should be applied, DOH also asks the related question of how frequently the need methodology itself should be reviewed, and if necessary revised.
  4. Exceptions: As noted, there are almost always exceptions to any formulaic need methodology. These exceptions can go both ways. On the one hand, should there be an arbitrary cap on the number of LHCSAs in a particular planning area? On the other hand, should the provision of specialized services (DOH mentions Traumatic Brain Injury and Nursing Home Transition and Diversion waiver services, pediatrics, IV infusion, and flu shot services in particular) be exempt from the general rule and/or be subject to a special rule? Similarly, DOH asks whether applicants proposing to provide only personal care services be treated differently from other applicant – suggesting that this is an option under consideration.

In regard to character and competence, DOH asks a few questions, as well:

  1. Experience: DOH seeks input on what type of experience should be required of a LHCSA operator. This reflects an issue that has plagued the CON process for a long time – namely, the fact that an applicant with absolutely no experience, who therefore has a pristine record, may have a better chance of being approved that a competent provider of long standing, who inevitably has had some compliance issues. This can be ameliorated by requiring some baseline experience in applicants.
  2. Performance: In addition to evaluating what an applicant has done, DOH asks for input concerning the extent to which it ought to review how successful the applicant has been. In particular, DOH asks whether any quality measures should be considered when reviewing an application for licensure or change of ownership, and whether applications for service area expansions should consider character and competence (which also implicates the timing issue mentioned above).

Finally, the RFI includes a more general catch-all question, giving responders the opportunity to opine on any other factors that might be appropriate to include in the CON process. DOH even goes so far as to suggest a couple:

  1. Staffing: LHCSA staffing can be cyclical (given the nature of the work, more staff tends to be available when the economy as a whole is worse), but in some places staffing shortages are persistent. DOH asks whether the availability of staff should be considered when determining public need. It also asks the inverse question – whether an applicant proposing to provide training programs for personal care aides and home health aides should be prioritized.
  2. Medicare/Medicaid: DOH also asks whether the extent to which an applicant intends to serve Medicare or Medicaid beneficiaries should be taken into account. In general, the CON process has historically favored the provision of care to Medicaid beneficiaries and individuals who otherwise cannot pay for such care, even going so far as to require applicants to promise to provide a particular amount of such services in some instances. Presumably, DOH would be more inclined to approve a LHCSA applicant offering a high percentage of its services to such individuals.

While the question of services for Medicaid beneficiaries certainly carries implications for the fiscal feasibility of applicants, it is interesting that fiscal feasibility by itself is not a strong focus of the RFI. This may simply be a function of the fact that, unlike some other DOH licensees, LHCSAs do not require an extensive bricks and mortar presence – so the ability of an applicant to make significant capital investments is less important. But DOH still has an interest in not approving LHCSAs that cannot sustain their business model – and so fiscal feasibility should be important.

The other surprising absence from the RFI is any specific discussion of cultural competency. The RFI refers to services for “special populations”, and presumably this would include racial, ethnic and national groups as well as individuals with particular disabilities or illnesses and other distinct populations (as opposed to distinct services), but that is not stated explicitly. It remains an open question whether a particular demographic group constitutes a “special population” sufficient to define the target population for a needs analysis, to justify an exception to the general needs analysis, or to otherwise be considered during the CON process.

In general, LHCSA providers who are considering responding to the RFI would be well-advised to consider all the factors that make their services unique, honestly evaluate whether those factors are appropriate for inclusion in the CON process, and respond accordingly. They might also consider additional outreach to state policymakers, either alone or in collaboration with other similarly-situated providers, and either through any of the several excellent trade associations that serve the LHCSA sector, or, where their interests diverge from their competitors, via separately retained counsel. Responses to the RFI are due no later than October 12, 2018.

If you have any questions or would like additional information on any of the above-referenced issues, or would be interested in assistance in responding to the RFI, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com

This past July 26, 2018 was the 28th anniversary of the Americans with Disabilities Act (“ADA”), landmark civil rights legislation designed to protect the rights of individuals with disabilities. Specifically, the ADA prohibits discrimination on the basis of disability in employment, state and local government, public accommodations, commercial facilities, transportation and telecommunications. It protects anyone with a “disability”, defined as “a physical or mental impairment that substantially limits one or more major life activities,” which include but are not limited to “caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.” This is clearly a broad list – and consequently, the ADA impacts many individuals and organizations on almost a daily basis.

ADA requirements impact the healthcare sector no less than any other sector, and more than most. In particular, the 2002 Supreme Court case of Olmstead v. L.C., 527 U.S. 581 (1999), held that the ADA requires individuals with disabilities receiving services from the state to be served in the most integrated setting appropriate to their needs –meaning in practice that they must be served in community settings rather than institutions if that (1) is appropriate, (2) is not opposed by the recipient, and (3) can be reasonably accommodated taking into account the resources available to the state and the needs of others. That case specifically addresses individuals with mental disabilities residing in a psychiatric hospital, but courts subsequently extended the principle to individuals with other disabilities in other settings, and has helped to drive healthcare policy nationwide, particularly in the long term care space.

To coordinate the implementation of the Olmstead decision, in late 2002 New York State established the Most Integrated Setting Coordinating Council, an interagency council comprised of representative of various state agencies that attempted to address the Olmstead mandate in a coordinated way. Governor Cuomo expanded on that effort in 2012, when he issued an Executive Order establishing the Olmstead Plan Development and Implementation Cabinet, a similar collection of agency representatives charged with issuing recommendations on how best to implement the Olmstead mandate. The Cabinet issued a report in October 2013 that identified four areas of focus: (1) the need for strategies to address specific populations in unnecessarily segregated settings, including psychiatric centers, developmental centers, intermediate care facilities, sheltered workshops and nursing homes; (2) the general need to increase opportunities for people with disabilities to live integrated lives in the community; (3) the need to develop consistent cross-systems assessments and outcome measurements regarding how New York meets the needs and choices of people with disabilities in the most integrated setting; and (4) the need for strong Olmstead accountability measure. This report informed many of the subsequent reforms implemented by Governor Cuomo in the health and human services space.

On July 26, 2018, the Governor expanded the State’s commitment to the ADA and furthered the State’s Olmstead compliance by announcing the first phase of the “Able New York” agenda, a series of regulatory initiatives designed to enhance the accessibility of a variety of state programs and services. This first phase focuses on the Department of Health (DOH), and includes a series of policy initiatives aimed at supporting community living for individuals with disabilities. Specifically, the Governor has charged DOH to take the following actions:

  • Dear Administrator Letter: DOH will issue a “Dear Administrator Letter” (DAL) to all nursing facilities reminding them of their obligations to provide assistance to any resident that wishes to return to the community. DALs are a form of subregulatory guidance used by DOH to set policy without issuing a formal regulation.
  • Immediate Need Program: DOH will issue new guidance to Local Divisions of Social Services regarding the immediate need program for authorizing personal care services. The Immediate Need Program, which was established pursuant to legislation enacted in 2015, is not a separate program so much as a set of procedures requiring expedited eligibility and assessment determinations for individuals who (1) have no informal caregivers, (2) are not receiving needed assistance from a home care services agency, (3) have no third party insurance or Medicare benefits available to pay for needed assistance, and (4) have no adaptive or specialized equipment or supplies that meet their need for assistance. In such cases, Medicaid eligibility must be determined within seven days. DOH has been instructed to intervene in counties that are not complying with the program.
  • MLTC Housing Disregard: DOH will provide education to nursing homes, adult homes, local governments, and Managed Long Term Care (MLTC) plans about the MLTC Housing Disregard, which provides nursing home residents who are discharged back to the community with additional housing allowance should they join a MLTC plan.  The Housing Disregard was established in 2013, and allows individuals to retain a dollar amount per month for housing without jeopardizing their Medicaid eligibility. The amount varies by region. In order to be eligible for the disregard, a person must (1) be at least 18 years of age, (2) have been a resident of a nursing home for at least 30 days, (3) have had nursing home care paid by Medicaid; (4) require community-based care for more than 120 days; and (5) have a housing expense such as rent or mortgage.

In addition to the foregoing, DOH will also “explore” (but presumably not necessarily implement) the following measures: 

  • Certification of Assessment & Discharge Education: DOH might require Medicaid-enrolled nursing homes to certify each year that they have (a) assessed all residents’ functional capacity; (b) asked residents about their interest in receiving information regarding returning to the community; and (c) provided sufficient preparation and orientation to residents to ensure safe and orderly discharge from the facility.
  • HCBS Evaluations as Part of Certificate of Need Review:  DOH might require any new application for additional nursing home beds or change of ownership to include, as part of its business plan, an assessment of the home and community based services (HCBS) in the service area, a description of its current or planned linkages to such HCBS services, and how its admission policies will ensure that residents are placed in the most appropriate and least restrictive setting. 
  • Discharge Rights Letter and Notice: DOH might require all nursing homes to inform residents and their families and representatives in writing of their discharge rights, including information on HCBS and community transition programs. DOH might also require all nursing homes to publicly post information regarding available resources and services that can assist residents in moving to the community, and explore additional ways to highlight discharge options. DOH may also engage the Long Term Care Ombudsman Program on this effort.
  • Nursing Home Discharge Incentive: DOH might incentivize nursing home discharges by developing a quality metric that rewards facilities that discharge long stay residents to the community, provided those residents are successfully maintained in the community for at least 90 days.

Thus, the new guidance to be issued by DOH to nursing homes and other long term care provider could be significant, particularly if it includes a new quality incentive for discharges. Even if DOH opts not to implement any of the proposed new initiatives, the obligations to be outlined in the new DAL could still impose significant new regulatory requirements on nursing home administrators.

We will continue to monitor the implementation of this phase of the Able New York agenda, as well as future phases. For additional information on this or other legislative or regulatory matters, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.

The recent New York Court of Appeals decision in Stega v. New York Downtown Hospital provides strong support for defamation claims arising out of witness testimony in investigations and quasi-judicial hearings. In Stega, the Court held that statements made in administrative proceedings that allegedly defame a person are not absolutely immune where the person has no recourse to challenge the accusations.

The plaintiff, Dr. Jeanetta Stega, a medical scientist and employee of New York Downtown Hospital, was chair of the hospital’s Institutional Review Board (IRB). She assisted Dr. Leonard Farber in arranging a clinical trial of a compound Luminant Bio-Sciences had developed to treat patients with metastatic cancer, which included human subjects. Dr. Stega recused herself from the Downtown Hospital IRB decision approving the trial.

The clinical study went awry as conflicts developed between Dr. Farber and Luminant. Dr. Farber made several allegations against Dr. Stega, including that she had stolen Luminent study money from him, that she had taken funds that did not belong to her, and that the drug compound was toxic and unsafe for patients. Downtown Hospital accused plaintiff of taking funds that did not belong to her and engaging in a conflict of interest by seeking IRB approval when she was a member of the IRB board. Downtown Hospital terminated Dr. Stega after concluding that she had violated the hospital’s conflict of interest policy and improperly taken Luminent money.

Dr. Stega submitted a complaint to the FDA. FDA inspectors interviewed Dr. Stega as well as officials from Downtown Hospital. The FDA inspection report included statements from the Downtown Hospital Acting Chief Medical Officer, Dr. Stephen Friedman, that Dr. Stega was terminated because she channeled Luminent funds to a research group using her home address and added patients to the study that the IRB would not approve, and because the IRB and their approvals were tainted.

After becoming aware of the FDA inspection report, Dr. Stega commenced a defamation action against Downtown Hospital, Dr. Friedman, and others.   Defendants contended that Dr. Friedman’s statements were protected by an absolute privilege because the FDA inspection was a quasi-judicial proceeding.

The Court of Appeals, in a decision by Judge Fahey, held that the statements were not protected by absolute privilege. The Court held that, for absolute immunity to apply in a quasi-judicial context, the process must make available a remedy for the allegedly defamed party to challenge the defamatory statements. The Court focused on the fact that Dr. Stega was not entitled to participate in the FDA’s review and therefore could not challenge Dr. Friedman’s accusations against her. As the FDA investigation process did not provide Dr. Stega with procedural safeguards to contest what was said against her, absolute privilege did not apply. In the Court’s words, “The absolute privilege against defamation applied to communications in certain administrative proceedings is not a license to destroy a person’s character by means of false, defamatory statements.”

Judges Rivera and Garcia dissented, arguing that whether an absolute privilege applies in a quasi-judicial proceeding depends on the nature of the proceedings rather than the status of the subject of the communication. Judge Rivera opined that the majority decision undermined the public policy of encouraging greater openness in communications with government officials. The dissenters would have applied absolute immunity, on the ground that the statements were made in a quasi-judicial proceeding, a federal investigation regarding clinical trials involving human subjects and treatment of life-threatening conditions.   The interesting oral argument before the Court of Appeals can be found here.

For the question of whether absolute immunity applies, the Stega decision places the focus on the allegedly defamed person rather than the nature of the proceedings.  Witnesses who are giving statements or testimony in administrative proceedings and investigations should be counseled to take care in what they say and how they say it, as absolute immunity may not protect them if their comments lead to a defamation claim.

 

In January 2018, during the Executive budget address, Governor Cuomo directed the Department of Health (DOH) to review the health, criminal justice and economic impacts of regulating recreational marijuana in New York. In doing so, he requested DOH to act in consultation with other NYS agencies and to evaluate the experience, consequences and effects of legalized marijuana in neighboring states and territories.  Seven months later, on July 13, the DOH released their highly anticipated assessment and recommendations.  The report follows DOH’s recent promulgation of emergency regulations that added opioid use as a qualifying condition for medical marijuana and allowing medical marijuana to be used as an alternative treatment for pain relief in lieu of opioids.  Additionally, the Governor recently directed the Department of Financial Services to issue guidance to encourage NYS chartered banks and credit unions to consider establishing banking relationships with medical marijuana-related businesses in New York that are operating in full compliance with all applicable State laws and regulations, including the Compassionate Care Act.

DOH’s report reviews the current landscape of state laws surrounding marijuana usage in the United States: Twenty-nine states and Washington D.C. have adopted medical marijuana programs, and 8 states and Washington D.C. have legalized marijuana for regulated recreational use by adults.  The report concedes the recent activities in surrounding states and Canada have prompted the need for New York to consider the legalization of marijuana thoughtfully and responsibly.  The report examines how the prohibition of marijuana led to a significant number of arrests for possession of marijuana and caused adverse and disproportionate economic, health, and safety impacts for individuals with low incomes and communities of color.  Additionally, the report highlights several studies that have illustrated reductions in opioid prescribing and overdose deaths with the availability of marijuana products.    

While the report acknowledges marijuana use is not without its risks, it concludes that the benefits of an adult regulated marijuana program would have significant health, social justice and economic benefits that outweigh any potential negative impacts for New York.  The report recommends harm reduction strategies and principles be incorporated into the regulated marijuana program to help ensure consumer and industry safety.  For example, a regulated adult-use only marijuana program should prohibit use by youth (those under 21 years of age) and simultaneously implement strategies to reduce youth use of marijuana.  Regulating marijuana would allow for laboratory testing, product labeling, guidance and consumer education at dispensaries.  This would allow consumers to be better informed about the products they are purchasing, understand the dosage options, various ingestion methods, what products and techniques may work best for them, as well as understand potential adverse consequences and potential harms of marijuana use.  An adult regulated marijuana program could also help promote marijuana as an effective alternative pain treatment to opioids.  Additionally, a regulated marijuana program should create guidelines to ensure packaging is child proof and contains appropriate warning labels to avoid accidental consumption.    

The report outlines the impact marijuana legalization would have on the criminal justice system.  In 2010, the marijuana arrest rate in New York was the highest in the country and twice the national average.  Unfortunately, despite equal marijuana use among racial groups, black individuals were nearly four times more likely than whites to be arrested for possession.  Subject matter experts echoed similar sentiments to DOH and stated the most appropriate way to rectify this issue would be to legalize marijuana.  Marijuana-related convictions have a lasting impact on individuals, their families and the communities where these individuals live.  Individuals with a criminal record typically experience lifelong challenges with securing stable employment, housing and economic stability.  The DOH report indicates if marijuana was regulated, there would be a reduction of expenditures related to enforcement, prosecution and punishment for illegal marijuana offenses.  This would allow law enforcement to devote more of their time to community oriented policing and other more pressing focus areas.

The DOH study illustrates that NYS would be one of the largest regulated marijuana markets in the country and that there is great potential for tax revenue for the State.  DOH stated this funding could be used to help provide financial support for other programs, such as public health, community reinvestment, education, transportation, research, law enforcement, workforce development, and employment initiatives.  The report estimates there is projected to be 1,290,000 consumers in NY that would access regulated marijuana within the first year.  Based on certain inputs, assumptions, and average retail prices for marijuana, the estimated revenue for the first year could be between $1.7 billion and $3.5 billion annually – based on the sale of 6.5-10.2 million ounces being sold at $270 – $340 per ounce.  It should be noted, however that the average price of an ounce of marijuana in the United States, according to a recent Forbes article is around $247 an ounce.  Thus, these projections are arguably inflated.   Furthermore, depending on the retail tax rate that is ultimately imposed (the analysis used 7% and 15% for comparison purposes), NYS could receive between $248 million to upwards of $677 million in tax revenue annually.  However, the higher the tax rate imposed, the more likely users will continue to resort to the black market to obtain marijuana.          

The report acknowledges the implementation of a regulated marijuana program would require legislative and regulatory actions to appropriately address the diverse geographic needs throughout New York.  NYS must determine what type of licenses to offer under the regulated marijuana program and whether or not vertical integration would be allowed.  DOH recommends NYS limit the number of licenses available initially, and adopt a licensure model that is similar to Massachusetts, which prioritizes applicants for licensure based on providing equal opportunities for individuals who meet certain criteria (those living in areas of disproportionate impact, employment of residents in such areas, employment of people with drug-related criminal offender record that are otherwise employable, and ownership by persons of color).  Additionally, NYS would need to develop regulations and requirements for each element of the supply chain, cultivation and production practices, laboratory guidance, packaging and tamper proofing of products, and how marijuana will be retailed.  DOH recommends NYS place limits on the amount of THC allowed in marijuana, the types of products that may be offered for sale, and limit the maximum amount an individual may purchase to one ounce.

Regarding the taxation of regulated marijuana products, DOH recommends NYS begin with a low taxation rate, between 7% and 10%, to help encourage users to transition to the legalized market.  The report also emphasized that the workforce needs for this emerging industry must be addressed as the program continues to be developed to ensure safe working conditions.

Lastly, the DOH report recommended NYS convene a workgroup of subject matter experts, with relevant public health expertise, to: (1) contemplate the nuances of a regulated marijuana program; (2) review existing legislation; and (3) make recommendations to the State that are consistent with the overarching goals of harm reduction and public education.

For additional information on this report or other legislative or regulatory matters, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.

Check out and subscribe to Farrell Fritz’s NY Health Law Blog at https://www.nyhealthlawblog.com

Unlike most other types of employment arrangements involving physicians, physicians acting as a medical director are compensated purely for the performance of administrative services related to patient care services. That is not to say that a medical director does not play a crucial role in the operation of a health care provider. In fact, the New York State Department of Health recommends, or even requires, medical directors be put in place for certain types of providers, and federal law similarly requires medical directors for certain types of services and facilities.

 

Because medical directors are not performing medical services, many physicians feel comfortable entering into medical directorship with little or no written documentation. However, physicians should proceed with caution when undertaking a medical director role. In particular, medical director arrangements are often scrutinized by the Office of the Inspector General (“OIG”) of the U.S. Department of Health and Human Services to determine whether the arrangement is, in reality, being used as a vehicle to provide remuneration to physicians for patient referrals. For this reason, where the contracting provider participates with federal payors and the physician may refer patients to the contracting provider, the physician should enter into a written medical director agreement that is structured to fall within an exception (or safe harbor) to the federal Stark and anti-kickback statutes.

Most often, the exception used under both Stark and anti-kickback laws will be the “personal services” safe harbor. Although slightly different under each statute, some key elements in complying with the “personal services” safe harbor are as follows:

 

  • Written Agreement: The agreement between the physician and the provider should be in writing, with a term of not less than one year. [1]
  • Duties: The agreement should provide for all of the services which the physician is expected to perform.[2]
  • Commercially Reasonable: The services provided by the medical director should be necessary to the provider and not exceed the amount of services required by the provider. This analysis is focused not only on whether the contracting physician’s services in and of themselves are necessary, but also whether there are other medical directors and whether numerous medical directors are performing duplicative services.[3]
  • Compensation: [4]
    • Fair Market Value – The physician should be paid fair market value for the services provided. To this end, it might be helpful to obtain a fair market value analysis, taking into account the geographic location, the experience of the physician, the certification of the physician, and they type of facility. While having such an analysis is not an absolute defense in an investigation, it is useful to demonstrate that fair market value was analyzed and that the remuneration falls within what was believed to be an acceptable range.
    • Hourly Rate – It is recommended that the medical director be paid on an hourly basis, with such hourly rate being paid at the fair market value rate.
    • Cap on Compensation – it is also recommended that the aggregate compensation a physician can earn for his documented hours be capped, to further ensure reasonableness.[5]
  • Documentation: The physician should keep daily time logs of services performed and the time spent on each service. This shows that the physician is performing real work, for which he or she is being paid fair market value, and also can be used to demonstrate that the services being performed are necessary for the facility.

While it is always best to consult with an experienced professional before entering into medical director arrangement, adhering to the criteria set forth above can offer protection for both the physician and the facility.

[1] 42 CFR 1001.952(d)(1): “The agency agreement is set out in writing and signed by the parties.” 42 CFR 1001.952(d)(4): “The term of the agreement is for not less than one year.” 42 U.S.C. 1395nn(e)(3)(A)(i): “the arrangement is set out in writing, signed by the parties, and specifies the services covered by the arrangement.” 42 U.S.C. 1395nn(e)(3)(A)(iv): “the term of the arrangement is for at least 1 year.”

[2] 42 CFR 1001.952(d)(2): “The agency agreement covers all of the services the agent provides to the principal for the term of the agreement and specifies the services to be provided by the agent.” 42 U.S.C. 1395nn(e)(3)(A)(ii): “the arrangement covers all of the services to be provided by the physician.”

[3] 42 U.S.C. 1395nn(e)(3)(A)(iii): “the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement.”

[4] 42 CFR 1001.952(d)(5): “The aggregate compensation paid to the agent over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.” 42 U.S.C. 1395nn(e)(3)(A)(v): “the compensation to be paid over the term of the arrangement is set in advance, does not exceed fair market value, and . . . is not determined in a manner that takes into account the volume or value of any referrals of other business generated between the parties.”

[5] In OIG Advisory Opinion No. 01-17 (2001), the OIG said that even though total aggregate compensation over the contract has not be set in advance, the totality of facts and circumstances in the specific circumstances at hand yield a conclusion that there is no significant increase in risk of fraud and abuse – however, this finding was likely due to the presence of a monthly payment cap. In 2003, in Advisory Opinion 03-8, the OIG found that a proposed arrangement does not qualify for protection under the safe harbor because the aggregate compensation paid under a management agreement would not be set in advance.