Providing Care at Home

As we reported in our annual series highlighting the various healthcare related provisions of the 2018-19 New York State Budget (here), the Enacted Budget reflects the state’s overall policy towards consolidation of the home care marketplace.  Nowhere is the effort to force consolidation more apparent than in the Licensed Home Care Services Agencies (LHCSA) space.  The Enacted Budget has imposed a two-year moratorium on new approvals, a limit on the number of LHCSAs with which Managed Long Term Care Plans (MLTCP) 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.  As explained below, however, there may yet be hope for LHCSA applicants and projects that were in the pipeline prior to the moratorium if they fit within one of the three narrow statutory exceptions to the moratorium.  In this article we explore the recent history of LHCSAs in New York, as well as the recent guidance offered by the New York State Department of Health (“DOH”) on how these new restrictions will be implemented.

LHCSAs were subject to a prior moratorium until 2010, when that moratorium was ended by DOH.  The rapid growth in number of LHCSAs since that time can be attributed to a number of factors, including New York’s aging population, the trend away from inpatient long-term care, the “age in place” movement, and the fact that, up until this year, there was no “public need” or “financial feasibility” requirements in order to obtain a certificate of need for a LHCSA.  There are currently over 1,400 LHCSAs authorized to provide hourly nursing care, assistance with activities of daily living and other health and social services to New York’s low-income elderly and disabled populations – though the number actually providing services is unknown.  As noted by Crain’s Health Pulse on April 23, 2018, the most recent employment figures for the home care industry, which includes Certified Home Health Agencies (CHHA), show the sector has been growing at a breakneck pace.  In the past five years alone, home health employers have added 72,600 jobs in New York.  And, for the first time ever, the number of people employed in the home health sector in New York City (167,000) has surpassed the number employed by private hospitals in New York City (166,300).  In contrast, and highlighting the increasing demand for homecare services over inpatient long term care services, nursing home employment is on the decline.

As a result of this growth, the general sentiment among DOH officials appears to be that there are once again too many LHCSAs; hence the reforms included in the 2018-19 Enacted Budget.  Ostensibly, DOH believes that fewer providers will reduce waste, inefficiency, and the opportunity for fraud.  Industry advocates, on the other hand, maintain that efforts to consolidate the industry ignore the fact that home care is provided locally and should therefore be locally run, and that various cultural and special needs communities require individualized boutique services that larger consolidated firms may not be able to accommodate.

While the general effort to consolidate the LHCSA marketplace and home care in general was not unexpected, the rather abrupt implementation of these provisions has clearly caught the industry’s major stakeholders off guard.  If the colloquy among the members of the Public Health and Health Planning Committee’s (PHHPC) Establishment and Project Review Committee (EPRC) at its April 12, 2018 meeting is any indicator (click here for the video and transcript), neither the EPRC nor the estimated 350 or so LHCSAs with applications pending before the PHHPC or in the pipeline were aware that these changes were forthcoming.  Indeed, less than three weeks earlier, at a meeting of the EPRC on March 22, 2018, the EPRC approved some 22 LHCSA applications for presentation to the full PHHPC for final approval.  On April 12, however, the EPRC was asked to consider a motion withdrawing that approval and deferring action on those applications, and 12 additional applications, until the DOH had time to consider them in the context of the moratorium.  After some confusion, the motion was withdrawn without comment and the 22 previously approved applications were sent to the full PHHPC, where they were ultimately deferred pending evaluation under then yet-to-be drafted guidelines on exceptions to the moratorium.  There was one new piece of information offered at the meeting – in response to concern that the two-year period of the moratorium seems arbitrary, Deputy Commissioner Sheppard noted the period was “specifically determined as the period of time that the Department would need to develop and promulgate regulations establishing a full need methodology for the approval of LHCSAs, including a determination of public need and financial feasibility.”  It is also clear that DOH intends to use the two-year period to collect data under the Enacted Budget’s new registration and cost reporting provisions, which went into effect to “better understand” the existing LHCSA marketplace and as part of its public need and financial feasibility formula moving forward.

It is worth noting that this is not the first time that a moratorium affecting submitted and future applications has been imposed.  The DOH imposed a moratorium on CHHAs between 1994-2000, as well as a moratorium on LHCSAs between 2008-2010 (as noted).  In 2000, the DOH imposed a moratorium on the processing of all pending nursing home applications which had yet to receive final approval and begin construction in order to study public need in light of perceived oversupply.  The nursing home moratorium was challenged multiple times in State Supreme Court by aggrieved applicants and repeatedly upheld by the Second and Third Departments.  See, e.g., Matter of Urban Strategies v. Novello, 297 A.D.2d 745 (2d Dept. 2002) and Jay Alexander Manor Inc. v. Novello, 285 A.D.2d 951 (3d Dept. 2001).  One interesting distinction between previous moratoria on LHCSAs, CHHAs and nursing homes and the instant moratorium on LHCSAs is that the former were imposed by the DOH under its discretionary enforcement and regulatory authority, whereas the latter was enacted by the Legislature through its inherent power to regulate health and welfare.  Whether the instant moratorium, which will arguably be more difficult to defeat given its origin, will face a court challenge remains to be seen.

Until the expiration of the LHCSA moratorium on March 31, 2020, however, only those applications which fit within one of three exceptions will be processed: (1) the ALP Related Exception; (2) the Change of Ownership Related Exception; and (3) the Serious Need Exception.  In early May, the DOH released guidance documents, as well as new applications and instructions related to these three statutory exceptions.  The statutory language containing the exceptions and the recent guidance provided by DOH are summarized below.

  • ALP Related Exceptions.

Statutory Language:

(a) an application seeking licensure of a licensed home care services agency that is submitted with an application for approval as an assisted living program authorized pursuant to section 461-l of the social services law.

Additional information from DOH Guidance and Revised Application:

  • The ALP application must have been submitted to the Department and an application number issued, that number must be included in the applicant’s submission.
  • Ownership of the LHCSA must be identical to the ownership of the ALP.
  • Approval will be limited to serving the residents of the associated ALP. Therefore, the application may request only the county in which the ALP resides as the county to be served.
  • The application must include an attestation acknowledging that the approval will be limited to serving the residents of the associated ALP.

 

  • Change of Ownership Related Exceptions.

Statutory Language:

(b)  an  application seeking  approval  to  transfer  ownership for an existing licensed home care services agency that has been licensed and operating for a  minimum of  five years for the purpose of consolidating ownership of two or more licensed home care services agencies.

Additional information from DOH Guidance and Revised Application:

  • Only changes in ownership that consolidate two or more LHCSAs may be accepted during the moratorium. Consolidate means reducing the number of LHCSA license numbers, not a reduction in the number of sites operated under a license number.  A LHCSA license number, for this purpose, is the first four digits, before the “L”.  The application must include all sites of the to‐be‐acquired agency.
  • LHCSAs to be acquired must be currently operational and have been in operation at least five years.
  • The application must request approval to acquire all of the sites of the existing agency.
  • The application must include an attestation and statistical report data verifying the seller(s) is/are operational and has/have been for a minimum of five years, which shall include:
    • the number of patients served in each county for which they are approved to serve and the number and types of staff employed, currently and in each of the previous five years.
    • A statement that reads “In accordance with the requirements of 10 NYCRR 765-2.3 (g) {Agency Name} will promptly surrender their Licensed Home Care Services Agency license(s) to the NYS Department of Health when they cease providing home care services.”
    • A statement that that indicates the operator understands that the actual transfers of ownership interest may not occur until after all necessary approvals are acquired from the DOH and the PHHPC
  • If an existing LHCSA is purchasing one or more LHCSAs, the buyer must also currently be operational per 10 NYCRR Section 765‐3(g).  The application must include an attestation and statistical report data verifying the buyer is currently operational, which shall include:
    • the number of patients served in each county for which they are approved to serve and the number and types of staff employed, currently and in each of the previous five years.

Examples of Qualifying Change of Ownership Applications  

  • An existing LHCSA purchases one or more separately licensed existing LHCSAs. Upon approval, the purchased LHCSAs licenses must be surrendered and their sites become additional sites of the purchasing LHCSA.
  • A new corporation (not currently licensed as a LHCSA) purchases two or more existing LHCSAs. One new license is issued, with the purchased LHCSAs licenses being surrendered and their sites becoming sites of the newly licensed LHCSA.

Examples of Non‐Qualifying Changes in Ownership Applications  

  • A new proposed operator replaces the current operator of a LHCSA.
  • A new controlling entity is established at a level above the current operator.
    • During the moratorium, the change or addition of controlling persons above the operator does not qualify under the exception criteria. As such, if the controlling person/entity chooses to submit an affidavit attesting they will refrain from exercising control over the LHCSA (see 10 NYCRR Section 765-1.14(a)(2) for required affidavit language) until the moratorium is lifted and an application can be submitted, processed, and approved, then the corporate transaction may proceed. Within 30 days of the moratorium being lifted, the agency must submit an application for PHHPC approval of the controlling person.
  • A partial change in ownership requiring Public Health and Health Planning Council approval.
    • Transfers of ownership (full or partial) due to the death of an owner, partner, stockholder, member without the consolidation of LHCSA licenses, does not qualify under the exemption criteria. However, in accordance with section 401 of the State Administrative Procedure Act (SAPA), the LHCSA may continue to operate until the Moratorium is lifted and an application may be submitted, unless other sections of regulation or law require otherwise.
  • Serious Concern Exceptions:

Statutory Language:

(c)  an  application  seeking licensure  of  a  home  care  services agency where the applicant demonstrates  to  the  satisfaction  of  the  commissioner  of  health   that submission  of  the application to the public health and health planning council for consideration would  be  appropriate  on  grounds  that  the application addresses a serious concern such as a lack of access to home care services in the geographic area or a lack of adequate and appropriate  care,  language and cultural competence, or special needs services.

Additional information from DOH Guidance and Revised Application:

  • There is a presumption of adequate access if there are two or more LHCSAs already approved in the proposed county.
  • Approved LHCSAs include those that are operational and those approved but not‐yet‐
  • If there are two or more LHCSAs in the requested county:
  • the applicant must articulate the population to be served for which there is a lack of access to licensed home care services;
  • the applicant must submit substantial, data‐driven proof of lack of access to the population (demographics, disposition and referral source for targeted patient population, level of care and visits required, payor mix, etc.);
  • the applicant must provide satisfactory documentation that no existing LHCSA in the county can provide services to the population;
  • if more than one county is requested, the application must include all required material for each county individually;
  • the applicant may request to operate in up to five counties, only.

 

The first round of applications to be processed under this framework occurred at the May 17, 2018 meeting of the PHHPC  (Link to video and agenda).  Those of us looking for additional insight on how the new guidance would be applied by DOH and evaluated by the PHHPC in practice were left wanting, as the entire discussion regarding LHCSAs encompassed less than two minutes of the nearly three-hour meeting.  Notably, the five applications considered and approved at the hearing (as a batch) were all within the ALP Related Exception.  They included:

Elderwood Home Care at Wheatfield

Elderwood Home Care at Williamsville

Western NY Care Services, LLC

Home Care for Generations, LLC

Magnolia Home Care Services

While it may be coincidence, this suggests that DOH and PHHPC have either prioritized LHCSA applications fitting within the ALP Related Exception, or that these types of applications are the simplest to identify and review.

In addition to the guidance on exceptions to the moratorium, DOH has also recently released guidance on the Enacted Budget’s limitations on the number of LHCSAs with which MLTCPs can contract.  As noted in our previous post (here), beginning October 1, 2018, the Commissioner of Health may limit the number of LHCSAs with which an MLTCP may contract, according to a formula tied to (1) MLTCP region, (2) number of MLTCP enrollees,  and (3) timing (the number changes on October 1, 2019).  Exceptions are allowed if necessary to (a) maintain network adequacy, (b) maintain access to special needs services, (c) maintain access to culturally competent services, (d) avoid disruption in services, or (e) accede to an enrollee’s request to continue to receive services from a particular LHCSA employee or employees for no longer than three months.

DOH guidance issued on April 26 to plan administrators (link here), explains the formula that will be used to calculate the number of LHCSAs with which an MLTCP can contract. MLTCPs operating in the City of New York and/or the counties of Nassau, Suffolk, and Westchester may enter into contracts with LHCSAs in such region at a maximum number calculated based upon the following methodology:

  1. As of October 1, 2018, one contract per seventy-five members enrolled in the plan within such region; and
  2. As of October 1, 2019, one contract per one hundred members enrolled in the plan

within such region.

MLTCPs operating in counties other than those in the city of New York and the counties of Nassau, Suffolk, and Westchester may enter into contracts with LHCSAs in such region at a maximum number calculated based upon the following methodology:

  1. As of October 1, 2018, one contract per forty-five members enrolled in the plan within such region; and
  2. As of October 1, 2019, one contract per sixty members enrolled in the plan within such region.

Additionally, the DOH confirmed that in instances where limits on contracts may result in the enrollee’s care being transferred from one LHCSA to another, and in the event the enrollee wants to continue to be cared for by the same worker(s), the MLTC plan may contract with the enrollee’s current LHCSA for the purpose of continuing the enrollee’s care by that worker(s). These types of contracts shall not count towards the limits mentioned above for a period of three months.

The next big revelation expected from the DOH vis a vis LHCSA restrictions are the parameters by which “financial feasibility” and “public need” will be determined for purposes of issuing certificates of need once the moratorium is over.  As those regulations become available, we will provide a further update.  If you have questions about whether your project may satisfy the requirements of one of the above exception, or you would like to be part of the conversation with the DOH as the framework for the new CON methodology is developed, contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.

 

The Broadest Impact:  2018-19 NYS Managed Care Budget Highlights

This, the last of our posts on the 2018-19 New York State Health Budget (the “Enacted Budget”), focuses on an area of healthcare that has perhaps the broadest impact of the sector as a whole — managed care.  A prior post in the series (here) discussed the central role that hospitals have traditionally played in healthcare reform efforts, but even they have less influence (at least, as a matter of policy) than managed care, which controls the funding that fuels virtually every other part of the healthcare system.  For purposes of this article, “managed care” really means Medicaid managed care in all its various guises, since that is the funding most directly controlled by the State – while the various forms of Medicare managed care (Medicare Advantage, Medicare Part D, etc.) and commercial managed care are important, and even critical, to the healthcare system in New York, they are generally not a focus of State budgeting (at least directly).  So this post will focus on the various forms of Medicaid managed care, including managed long term care (MLTC) that provide long term care services, fiscal intermediaries for consumer-directed consumer assistance, mainstream managed care plans that provide acute and primary care services, health homes that coordinate care for people with chronic illnesses, and others.  Note that one species of Medicaid managed care, Development Disabilities Individual Support and Care Coordination Organizations, are not addressed in this post, but were addressed in a prior one (here).

Just a quick word before examining the key provisions impacting managed care:  this series has not pretended to be a comprehensive analysis of all the healthcare provisions in the 2018-19 New York State Health Budget.  It has merely provided a survey of the highlights of certain key areas in the healthcare space.  Inevitably, some areas have not been directly addressed; particular ones that come to mind include primary care, professional practice, life science research and others.  In part, this was due to the lack of significant reforms in those areas; however, it was also true that the sectors we did address often included references to those other sectors.  Nowhere is this truer than in regard to managed care, which, as noted, touches on every other area of healthcare.  Key provisions in the managed care space are summarized below.

Managed Long Term Care & Fiscal Intermediaries

Managed Long Term Care (MLTC) Eligibility.  Since 2012, adults have been eligible for MLTC enrollment if they require community-based care for more than 120 days.  The Enacted Budget provides that, effective April 1, such individuals are only eligible if that 120 days is a continuous, not aggregate, period.

Changing MLTC Plans.  Effective October 1, 2018, the Enacted Budget allows MLTC enrollees to switch plans without cause anytime within 90 days of notification or the effective date of enrollment (whichever is later), but thereafter, the Department of Health (DOH) is authorized to prohibit changing plans more than once every 12 months, except for good cause.  “Good cause” includes poor quality of care, lack of access to covered services, and lack of access to providers “experienced in dealing with the enrollee’s care needs,” and may include other categories identified by the Commissioner of Health.

Nursing Home Resident Eligibility.  Effective April 1, 2018, the Enacted Budget provides that individuals who are permanently placed in a nursing home for a consecutive period of three months or more will not be eligible for MLTC, but instead will receive services on a fee-for-service basis.  In a side letter, DOH has promised to provide guidance highlighting information about an individual’s rights as a nursing home resident, nursing home and MLTC plan responsibilities, and supports for individuals who wish to return to the community.

Plan Mergers.  Effective April 1, 2018, surviving plans in a plan merger, acquisition or similar arrangement must submit a report to DOH within 12 months providing information about the enrollees transferred, a summary of which DOH will make available to the public.

Licensed Home Care Services Agency (LHCSA) Contracting.  As discussed in a prior post (here), beginning October 1, 2018, the Commissioner of Health may limit the number of LHCSAs with which an MLTC plan may contract, according to a formula tied to region, number of enrollees and timing (before or after October 1, 2019), with some exceptions.  In a side letter, DOH has indicated that it will issue guidance to assist both MLTC programs and LHCSAs in minimizing the disruption of care for Medicaid members and the impacted workforce from this initiative.

Fiscal Intermediary Advertising.  The Enacted Budget includes provisions that limit the advertising practices of fiscal intermediaries under the Consumer Directed Personal Assistance Program (CDPAP).  CDPAP provides chronically ill and/or physically disabled Medicaid enrollees receiving home care services with more flexibility and freedom of choice to obtain such services.  Fiscal intermediaries help consumers facilitate their role as employers by: providing wage and benefit processing for consumer directed personal assistants; processing income tax and other required wage withholdings; complying with workers’ compensation, disability and unemployment requirements; maintaining personnel records; ensuring health status of assistants prior to service delivery; maintaining records of service authorizations or reauthorizations; and monitoring the consumer’s/designated representative’s ability to fulfill the consumer’s responsibilities under the program (in this regard, they are not truly managed care, although there are some similarities).  The Enacted Budget prohibits false or misleading advertisements by fiscal intermediaries.  Furthermore, fiscal intermediaries are now required to submit proposed advertisements to DOH for review prior to distribution, and are not permitted to disseminate advisements without DOH approval.  The DOH is required to render its decision on proposed advertisements within 30 days.  In the event DOH has determined the fiscal intermediary has disseminated a false or misleading advertisement, or if an advertisement has been distributed without DOH approval, the fiscal intermediary has 30 days to discontinue use and/or remove such advertisement.  If DOH determines a fiscal intermediary has distributed two or more advertisements that are false or misleading or not previously approved by DOH, the entity will be prohibited from providing fiscal intermediary services and its authorization will be revoked, suspended or limited.  Additionally, DOH will maintain a list of these entities and will make this list available to local departments of social service, health maintenance organizations, accountable care organizations and performing provider systems.  These limitations apply to marketing contracts entered into after April 1, 2018.

Fiscal Intermediary Reporting.  The Enacted Budget allows the Commissioner of Health to require fiscal intermediaries to provide additional information regarding the direct care and administrative costs of personal assistance services.  DOH may determine the type and amount of information that will be required, as well as the regularity and design of the reports.  These cost reports must be certified by the owner, administrator, chief administrative officer or public official responsible for the operation of the provider.  The DOH must provide at least 90 days’ notice of this report deadline.  If DOH determines the cost report is not complete or inaccurate, it must notify the provider in writing and specify the correction needed or information required.  The provider will have 30 days to respond to DOH’s request for supplementary information.  In the event a provider cannot meet this filing deadline, DOH may provide an additional 30 day extension if the provider sends written notice prior to the report due date which details acceptable reasons beyond their control which justify their failure to meet the filing deadline.

Mainstream Managed Care and Health Homes

Quarterly Meetings on Medicaid Managed Care Rates.  In a side letter, the Executive has committed to providing quarterly updates to the Legislature regarding Medicaid managed care rates, including the actuarial memorandum which, pursuant to statute, is provided to managed care organizations 30 days in advance of submission to the federal Centers for Medicare and Medicaid Services (CMS).  This is intended to increase the transparency of Medicaid managed care rates.

Separate Rate Cells or Risk Adjustments for Specific Populations.  In a side letter, DOH has committed to exploring separate rate cells or risk adjustments for the nursing home, high cost/high need home and personal care, and Health and Recovery Plan (HARP) populations.  DOH will re-engage CMS regarding this reimbursement methodology with the assistance of health care industry stakeholders impacted by these changes (e.g. advocates, providers and managed care organizations).  This will hopefully lead to a fairer rate structure for plans serving higher-risk patients.

Health Homes Targets.  The Enacted Budget requires the Commissioner of Health to establish reasonable targets for health home participation by enrollees of special needs plans and other high risk enrollees of managed care plans to encourage plans and health homes to work collaboratively to achieve such targets.  The DOH was also empowered to assess penalties for failure to meet such participation targets where they believe such failure is due to absence of good faith and reasonable efforts.

Health Home Criminal History Checks.  The Enacted Budget requires criminal history checks for employees and subcontractors of health homes and any entity that provides community-based services to individuals with developmental disabilities or to individuals under 21 years old.

Health Home Reporting.  Similar to fiscal intermediaries (above) and LHCSAs (here), the Enacted Budget allows the Commissioner of Health to require health homes to report on the costs incurred to deliver health care services to Medicaid beneficiaries.

***

So that concludes our series on the 2018-19 New York State Healthcare Budget.  If you have any questions or would like additional information on any of the above referenced issues, or any of the other items covered (or not covered) in the series, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.

 

 

Small Issues with Big Impacts:  2018-19 NYS Hospital Budget Highlights

There are probably few in the healthcare community in New York State who would disagree that, among provider types, hospitals have typically received the most attention from policymakers.  The hospitals themselves might argue the point, or point out that having the attention of policymakers is not always a good thing (e.g., the attention on pharmaceutical manufacturers in this year’s budget, discussed here).  Payors might argue that they are more frequently the focus of policy efforts.  And of course, patient advocates would be quick to point out that the real focus of healthcare policy should be on patients (a principle with which no one disagrees, at least in theory).  But it is hard to argue against the contention that, more than any other provider, hospitals have been the focus of policy reform efforts since there was such a thing as healthcare policy.

With that in mind, one of the more interesting aspects of the 2018-19 New York State Enacted Budget is the relative lack of hospital-focused reform efforts.  To be sure, hospitals were, as always, a significant part of the debate, and several hospital reform initiatives were discussed that did not make it into the final budget agreement.  And, of course, the hospitals were a major force behind, and are expected to be major beneficiaries of, two huge funding pools established in the final agreement:  the third iteration of the Statewide Health Care Facility Transformation Program (discussed here) and the Health Care Transformation Fund being funded in connection with the acquisition of a New York-based payor (discussed here).  But beyond that, there are no huge system-wide reforms in the Enacted Budget that directly impact hospitals.

However, there are two relatively small items that are likely to have significant long-term impacts:  a series of provisions related to indigent care funding, and a new requirement regarding sexual assault kits.  Both are discussed below.

Indigent Care Funding:  DSH and ICP

2018 began with a great deal of uncertainty regarding the fate of New York’s safety net hospitals.  This uncertainty was fueled in part by wariness over potential cuts to Medicaid Disproportionate Share Hospital (DSH) subsidies at the federal level, as well as sustained pressure from advocacy groups demanding changes in the state’s Indigent Care Pool (ICP) reimbursement methodology, which opponents claim inequitably favors large financially stable providers serving predominantly insured patients over hospitals that provide the greatest amount of charitable care to the neediest populations.  Thanks in part to a last-minute decision by the Federal Government not to cut DSH payments this year, the Enacted Budget largely maintains the status quo with respect to DSH payments and the ICP methodology – however, the Department of Health has agreed in a side letter with Senate Health Committee leadership to convene a working group on DSH reform.  The Enacted Budget also provides $100 million dollars in enhanced Medicaid payments to a specific subset of safety net hospitals.

Critics claim that the current ICP reimbursement methodology, which reimburses hospitals for charitable health spending through a combination of state surcharges on health insurance and a portion of federally funded Medicaid DSH dollars, has consistently failed to adequately reimburse the institutions which actually provide the most free care to the poorest populations.  Part of the reason for this imbalance is the formula used to calculate ICP distributions.  The ICP, and its prior iteration, the Hospital Bad Debt and Charity Care Pool, traditionally allowed hospitals to seek reimbursement for both “charity care” (free medical services provided to the poor) and “bad debt” (including unpaid copayments and deductibles of commercially insured patients).   Challengers of the current system claim that this results in some of the largest reimbursement payments going to the least charitable hospitals.

In 2013, and in response to provisions in the federal Affordable Care Act penalizing states that allowed DSH dollars to be used for the reimbursement of bad debt, the Legislature amended the ICP’s reimbursement formula to a “needs based calculation.”  However, the 2013 amendment also included a “transition adjustment”, which severely limited the amount each hospital’s grant could be increased or decreased from its pre-2013 levels – in its current version payments may not decrease by more than 2.5% year over year.   As noted in a September 2017 Report by the Empire Center, the transition adjustment has stymied the intended redistributive effect of the needs based formula, and “[t]here [remains] a negative correlation between the overall poverty of a hospital’s patients and the relative size of its indigent care grant.”

The Enacted Budget does not alter the current ICP or DSH frameworks, but rather extends the existing framework through March 31, 2020, and maintains previous funding rates through 2019 of: (a) $139,400,000 as Medicaid DSH payments to major public general hospitals; and, (b) $994,900,000 as Medicaid DSH payments to eligible general hospitals other than major public general hospitals.  Additionally, the Enacted Budget increases the cap on reductions in ICP payments for the calendar year beginning January 1, 2019 from the prior rate of 15% to 17.5%.  In a side letter agreement with Senate Health Committee Leaders, the Department of Health has agreed to establish a temporary workgroup on hospital indigent care methodology which will make recommendations regarding DSH and ICP funding.  The workgroup will convene no later than June 1, 2018 and create a report on its findings no later than December 1, 2018.

While the Enacted Budget does not tackle the larger issues plaguing the ICP methodology, it does provide for $100 million in enhanced Medicaid rate payments – which are administered outside of the ICP and DSH – to a newly-designated class of Enhanced Safety Net Hospitals (“ESNH”).  A hospital will qualify as ESNH if it falls into any of the following categories:

  1. It serves a high percentage of Medicaid and uninsured patients (specifically, in any of the last three years: (a) not less than 50% of the patients treated receive Medicaid or are medically uninsured; (b) not less than 40% of its inpatient discharges are covered by Medicaid; (c) 25% or less of its discharged patients are commercially insured; (d) not less than 3% of the patients it provides services to are attributed to the care of uninsured patients; and, (e) it provides care to uninsured patients in its emergency room, hospital based clinics and community based clinics including the provision of important community services such as dental care and prenatal care).
  2. It is a public hospital (operated by a county, municipality, public benefit corporation or the State University of New York).
  3. It is a federally-designated Critical Access Hospital (CAH).
  4. It is a federally-designated Sole Community Hospital (SCH).

Payments made under the ESNH program may be added to rates of payment or made as aggregate payments to eligible general hospitals.  The 2018-19 Enacted Budget appropriated $50 million under the ESNH program for high Medicaid/uninsured and public hospitals, and another $50 million for CAHs and SCHs.

It remains to be seen how the current ICP framework will hold up in the event that Federal DSH payments are cut at the federal level, whether the $100 million ESNH program will provide sufficient funds to shore up the state’s most vulnerable facilities, and what the indigent care workgroup will recommend for a more permanent solution.  But these various elements could ultimately result in a fundamental change in the way indigent care is reimbursed in New York State

Sexual Assault Kits

The Enacted Budget includes significant amendments surrounding the responsibilities of hospitals with respect to the collection and storage of sexual assault evidence.  Most significantly, beginning April 1, 2018, hospitals are responsible for ensuring that sexual offense evidence is kept locked and secure – refrigerated where necessary – until April 1, 2021.  After April 1, 2021 (or earlier if deemed feasible by the Director of the Budget), the evidence will be turned over to a state appointed custodian.  The state appointed custodian will be responsible for storing the evidence until twenty years from the date of its collection. The new provisions also spell out specific chain of custody requirements (marking and identification of evidence). Hospitals will have the option of entering into third-party contracts for the storage of sexual assault evidence off site between now and the appointment of a state custodian.  After April 2, 2021, new sexual assault evidence must be transferred to the state appointed custodian within ten days of collection.

The Enacted Budget further mandates that hospitals are responsible for ensuring sexual assault survivors are not billed for sexual assault forensic exams and are notified orally and in writing of the option to decline to provide private health insurance information and have the office of victim services reimburse the hospital for the exam. Nonetheless, a sexual assault survivor may voluntarily assign any private insurance benefits to the hospital, in which case the hospital may not charge the office of victim services for the exam, provided, however, that such health insurance coverage shall not be subject to annual deductibles or coinsurance or balance billing by the hospital.  Additional provisions in the Health Insurance Law clarify that such treatments shall not be subject to annual deductibles or coinsurance.

Alone, these changes in the manner in which hospitals handle and are paid for work with sexual assault victims do not seem to have the same kind of systemic impact as changes in the way indigent care is funded.  However, they represent the latest addition to the panoply of standards governing hospital record-keeping – and in an area that can have extremely significant consequences if a hospital fails to meet the applicable standard.  It is not hard to envision litigation resulting from the mishandling of evidence under the new statute, and the agreed upon need for a more permanent solution in 2021 promises additional regulation in this space in the future.

So in short, while both reforms are relatively small in the short term, they may have significant impacts in the long term.  Hospitals are faced with the choice of waiting to see what those impacts might be, working to adjust operations to anticipate those impacts, or actively engaging with the State to try to affect the outcome.  If you have any questions concerning either of those issues, or are interested in engaging with the State to impact them, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.

New York increases Assisted Living Beds in 2018-19 Enacted Budget

While much of the public attention this year on healthcare budget negotiations in New York State was drawn to the pharmaceutical and managed care sectors, the Enacted Budget for 2018-19 also includes some very significant reforms in the long term care space. Continuing its ongoing efforts to rationalize what even the most ardent supporters of New York’s long term care system acknowledge to be an unnecessarily complicated structure, provisions in the Enacted Budget related to Licensed Home Care Service Agencies, Assisted Living Programs, Residential Health Care Facilities and Hospice reflect New York State’s continued efforts to combat fragmentation, inconsistent quality of services and waste across the continuum of care. This year, that has yielded policy outcomes that to the untrained eye can appear inconsistent, or even contradictory – but there is a method to the madness. The following is a list of some the key long term care reforms included in the 2018-19 Enacted Budget.

HOME CARE

Licensed Home Care Services Agencies (LHCSAs) appear to be on the frontline of the battle for consolidation of the community based long term care marketplace in New York. The 2018-19 Enacted Budget clearly articulates a policy in favor of encouraging fewer, larger LHCSAs instead of the current, heavily fragmented LHCSA market, via measures such as:

Limitations on MLTCP Contracting

Beginning October 1, 2018, the Commissioner of Health may limit the number of LHCSAs with which a Managed Long Term Care Plan (MLTCP) may contract, according to a formula tied to (1) MLTCP region, (2) number of MLTCP enrollees,  and (3) timing (the number changes on October 1, 2019).  Exceptions are allowed if necessary to (a) maintain network adequacy, (b) maintain access to special needs services, (c) maintain access to culturally competent services, (d) avoid disruption in services, or (e) accede to an enrollee’s request to continue to receive services from a particular LHCSA employee or employees for no longer than three months.

For more about MLTCPs, look for our upcoming blog analysis of the overall Managed Care provisions in the 2018-19 Enacted Budget.

Moratorium on New LHCSAs

Effective April 1, 2018, there is a new statutory moratorium on the awarding of new LHCSA licenses until March 31, 2020.  This will not apply to:  (i) LHCSA applications submitted as part of an Assisted Living Program application; (ii) application for transfers of LHCSAs licensed for at least five years for the purposes of consolidating one or more LHCSAs; or (iii) applications that address a serious concern reflecting the same considerations that would justify an exception to the new MLTCP contract rule.

Expanded Certificate of Need for LHCSAs

The Public Health and Health Planning Council (PHHPC) must now consider public need, financial feasibility and other factors in addition to character and competence when evaluating a LHCSA application (previously, LHCSAs were technically exempt from those considerations).

Registration Requirements for Existing LHCSAs

Existing LHCSAs must register with the Department of Health, and presumably meet those new CON requirements, by January 1, 2019, and any failing to register for two years may have their licenses revoked.

The question remains whether these regulations will produce the desired effect, i.e., a consolidation of the LHCSA marketplace, and whether that consolidation will occur through large providers formally acquiring smaller providers, or the gradual disappearance of smaller providers altogether as they struggle to maintain market share.

Cost Reporting Requirements for Existing LHCSAs

Under the new provision, the Commissioner is authorized to require LHCSAs to report on costs incurred by the LHCSA in rendering health care services to Medicaid beneficiaries. The commissioner must give the LHCSA 90 days’ notice of the need for the report, and an additional 30 days to correct any perceived inaccuracies. LHCSAs must certify the accuracy and completeness of the reports.

ASSISTED LIVING PROGRAMS

Assisted Living Programs (“ALP”) appear to be the biggest winner among long term care providers in the Enacted Budget. In contrast to the state’s efforts to consolidate and centralize the LHCSA providers, the Enacted Budget authorizes a general expansion of existing ALP providers and encourages the establishment of new beds. Key provisions include:

New ALP Beds at Existing ALP Providers

Each existing ALP provider may apply to DOH for approval of up to nine additional ALP beds. To be eligible, the existing ALP provider must: (a) be in good standing with the DOH; (b) be in compliance with applicable state and local requirements; (c) not require any major renovation or construction to accommodate the new beds; and (d) agree to dedicate new beds to serve only individuals receiving Medicaid.

The number of new ALP beds approved under this program will be based on the total number of previously awarded beds either withdrawn by applicants or which were previously denied. The commissioner is obligated to approve applications under this section on an expedited basis – specifically, within 90 days of the receipt of a satisfactory application.

ALP providers licensed on or before April 1, 2018 will be eligible to apply during a time period to begin no later than June 30, 2018 and ALP providers licensed on or after April 1, 2018 will be eligible to apply during a time period to begin no later than June 30, 2020.

New ALP Beds in Counties with Few ALP Providers or High Utilization

The Commissioner of Health is authorized to create up to 500 new ALP beds in counties where there are one or fewer existing ALP Providers based on criteria to be determined by the Commissioner. The Commissioner is also authorized to solicit and award applications for an additional 500 ALP beds in counties where utilization of existing ALP beds exceeds 85%. To be eligible, the applicant must commit to: (a) dedicate the beds to serve only individuals receiving medical assistance; (b) develop and execute collaborative agreements with at least one of each of the following entities: an adult care facility; a residential health care facility; or a general hospital, within 24 months of applying to DOH; and (c) enter into an agreement with an existing managed care entity. ALP beds sought by, but not awarded to, providers in counties with one or fewer ALP providers may be issued to ALP providers in counties where utilization exceeds 85%.

New ALP Beds Based On Public Need

After April 1, 2023, the Commissioner of Health is authorized to approve additional new beds on a case by case basis wherever a public need exists. In determining whether a public need exists, the Commissioner may consider, but is not limited to, regional occupancy rates for adult care facilities and ALP occupancy rates and the extent to which the project will serve individuals receiving Medicaid. Existing ALP Providers will be eligible for up to 9 additional beds under this provision.

ALP for Individuals with Alzheimer’s or Dementia

The Commissioner is authorized to issue up to two hundred vouchers for Medicaid ineligible people living with Alzheimer’s or dementia covering up to 75% of the cost of ALP based on the average private pay rate in the respective region.

RESIDENTIAL HEALTH CARE FACILITIES

The Enacted Budget includes a mix of quality control and increased support measures directed at Residential Health Care Facilities (RHCFs):

Medicaid Reduction for Underperforming Facilities

The Enacted Budget includes a provision directing the Commissioner to reduce Medicaid revenue to any RHCF in a given payment year by 2%, where that RHCF performed in the lowest two quintiles of facilities based on its nursing home quality initiative data in each of the two most recent payment years for which data is available, and was ranked in the lowest quintile in the most recent payment year. The Commissioner has the authority to waive this provision in the event the Commissioner deems the facility to be in “financial distress”.

Funding For Capital Projects

As discussed in greater detail in our earlier post regarding the Statewide Health Care Facility Transformation Program (SHCFTP), $45 million is dedicated to RHCFs to increase the quality of resident care or experience, or to improve their health information technology infrastructure, including telehealth, to strengthen the acute, post-acute and long-term care continuum, but not for general operating expenses.

Telehealth

The Enacted Budget also expands the definition of an “originating site” for purposes of telehealth to include RHCFs treating populations with special needs.

HOSPICE

The Enacted Budget requires the Commissioner to establish a methodology as of July 1, 2018, subject to federal financial participation, that will ensure a 10% increase in the Medicaid reimbursement rates for hospice providers for services provided on or after April 1, 2018. Furthermore, the Enacted budget carves hospice providers out of the Opioid Drug provisions requiring a care plan for pain lasting more than three months (discussed here).

Hospice facilities shall be eligible for up to $60 million in funding dedicated to community-based providers through SHCFTP (discussed here).

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

Governor Cuomo's 2018-19 Healthcare Budget
New York State Healthcare Budget 2018-19

In the wee hours of the morning on March 30, almost two days ahead of the April 1 deadline, the Legislature passed and the Governor signed a $168.3 billion State Budget for the 2018-19 fiscal year. The Enacted Budget maintains a self-imposed cap of 2% on spending increases, and averts a predicted $4.4 billion spending gap.  As in prior years, a significant portion of this year’s spending has been devoted to healthcare, and particularly Medicaid.

One of the key issues faced by the healthcare sector in New York State during budget negotiations this year was whether and how to address potential future cuts in federal financial support. The Enacted Budget addresses that general concern in two ways.  First, at the prompting of the Greater New York Hospital Association and 1199SEIU (the health care workers union), the Enacted Budget creates a new “Health Care Transformation Fund.”  The fund will be supported in part by a portion of the proceeds of the sale of Fidelis, a not-for-profit Medicaid managed care plan acquired by Centene, a national for-profit insurer, as well as a portion of Fidelis’ excess reserves, for a total expected amount of around $2 billion.  Moneys in the fund will be available for transfer to any other fund in the State to “support health care delivery, including for capital investment, debt retirement or restructuring, housing or other social determinants of health, or transitional operating support to health care providers.”  This amounts to a very significant source of funds which can be deployed by the State in a very flexible manner.

Second, the Enacted Budget includes language providing that, where federal legislation, regulation or other executive or judicial action in federal fiscal year 2019 is expected to reduce federal financial participation in Medicaid or other federal financial participation by $850 million or more in state fiscal years 2018-19 or 2019-20, the Director of the Division of the Budget must submit a plan to the Legislature identifying the resulting cuts to be made in State spending. The Legislature will then have 90 days to adopt an alternative plan; if it does not, then the Division of the Budget’s plan will go into effect immediately.  In short, this language could, in effect, completely undo the budget just adopted by the Legislature, with minimal legislative input.

The 2018-19 Enacted Budget includes a plethora of other financial and policy reforms affecting virtually every segment of the healthcare sector. Some highlights include:

  • Health Care Facility Capital Funds: The Enacted Budget includes $525 million for the latest iteration of the Statewide Health Care Facility Transformation Program, which provides capital grants to healthcare providers.
  • Pharmacy: The Enacted Budget makes a variety of changes to address the opioid crisis, including establishing a $100 million “Opioid Stewardship Fund” to be supported by manufacturers and distributors of opioids, which will be used to support a variety of opioid-related programs.
  • Mental Hygiene: The Enacted Budget expands and clarifies the ability of mental health, substance use disorder and developmental disabilities services providers to offer integrated services, and provides $1.5 million for the creation of a new Independent Substance Use Disorder and Mental Health Ombudsman to assist individuals in receiving appropriate health insurance coverage.  It also includes a variety of provisions related to the transition of developmental disabilities services to managed care.
  • Long Term Care: The Enacted Budget sets out a plan for limiting the number of licensed home care services agencies that a managed long term care plan may contract with, effectively forcing consolidations in that sector.  It also allows the Commissioner of Health to reduce reimbursement to poor-performing nursing homes.  At the same time, it makes a significant number of additional assisted living program beds available at the discretion of the Commissioner.
  • Hospitals: The Enacted Budget establishes a new category of “Enhanced Safety Net Hospitals” that would be eligible for additional reimbursement.
  • Managed Care: The Enacted Budget includes a variety of reforms related to health homes, and makes a variety of changes to the rules governing managed long term care eligibility and enrollment.

These highlights are just the tip of the iceberg. Over the next several days, we will provide additional detail on each of the areas outlined above.  In the meantime, any questions about the 2018-19 New York State Healthcare Budget can be addressed to Farrell Fritz’s Regulatory & Government Relations Practice Group at (518) 313-1450 or NYSRGR@FarrellFritz.com.