Mark Ustin

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New York State healthcare policymakers have always had a lukewarm relationship with for-profit providers.  While in some sectors the for-profit provision of care is common (e.g., nursing homes and home care), in others, there are few to no for-profit providers (e.g., hospitals and primary care clinics).  In fact, some in the industry are under the impression that in some areas of healthcare the State has actually prohibited for-profit providers (for the most part it hasn’t, although the scope of state regulation can sometimes create that impression).  At the same time, there is more and more public scrutiny of not-for-profit providers, and as not-for-profit mega-systems continue to grow in New York and elsewhere it is sometimes difficult to distinguish them from for-profit enterprises in many ways.

Certainly, both for-profit and not-for-profit providers can be driven by a real sense of mission, and even the most mission-driven not-for-profit needs to be conscious of the bottom line (the oft-heard refrain being, “no margin, no mission”).  Thus, patients and potential employees in search of a mission-focused entity need to scrutinize both types of providers in some detail when looking for care or employment.  Similarly, new providers selecting the model they want to use need to take into account the unique characteristics of both models.

There is another model which might afford providers, patients and employees exactly the right mix of mission focus and profit-driven efficiency they are looking for.  While it has not received much attention in New York State healthcare to date, the worker cooperative model, in which the employees are the owners, provides an interesting alternative.  Article 5-A of the New York Cooperative Corporation Law (“CCL”) was enacted in 1985 to promote the creation of worker cooperatives and provide a means by which businesses may be democratically controlled and operated by their own workers.  The legislature expected that cooperative ownership would result in increased economic benefits to the worker owners, as well as the creation of new jobs (CCL § 80).

New York permits the formation of for-profit worker cooperatives to conduct any lawful business.  The model has been used in a variety of industries, including child care, cleaning, consulting, education, media, and restaurants (an interesting list can be found here), and it has been actively supported by the administration of New York City Mayor Bill DiBlasio (see here).  However, it is uncommon in the healthcare space – while the model was pioneered by a home health care agency based in the Bronx with more than 2,000 worker owners that says that it is the largest worker cooperative in the nation, it is not in wide use.  Nonetheless, under the right circumstances, it offers some intriguing possibilities.

Any corporation organized under the New York Business Corporation Law (BCL) may elect to become a worker cooperative by so stating in its certificate of incorporation or amending it (CCL § 82).  The election may be revoked by an amendment approved by two-thirds of the cooperative’s members (CCL § 86).  Curiously, a worker cooperative may not be classified as a non-profit or not-for-profit corporation (CCL § 83); thus, a worker cooperative is inherently a for-profit enterprise.

Members are individuals who are employed by the cooperative and own voting stock in the form of one membership share each (CCL §§ 81, 88).  All full- and part-time employees are offered membership after completing a probationary period.  The cooperative issues membership shares for a fee, the amount and payment terms of which are set in the by-laws (CCL § 88).  The certificate of incorporation or by-laws establish the qualifications for acceptance and termination of members (CCL § 88).  Only membership shares have voting power, except that non-member stockholders (apparently stockholders who are not workers and who owned stock at the time of the corporation’s election to become a cooperative) may vote on amendments to the certificate of incorporation that would adversely affect their rights as stockholders (CCL §§ 88, 89).

Members receive wages and profit distributions at the end of the calendar or fiscal year of the cooperative.  Profits are allocated to members on the basis of their “patronage”, a defined term meaning the amount of work performed by a member measured in accordance with the certificate of incorporation and by-laws.  Profits are apportioned based on the ratio of each member’s patronage to the total patronage of all members during the applicable period of time.  Profit distributions may be in cash, credits, written notices of allocation or capital stock issued by the cooperative (CCL § 90).  The cooperative may establish a system of internal capital accounts to reflect the book value and determine the redemption price of membership shares (CCL § 92).

The majority of the board of directors of the worker cooperative must be members, although non-members may serve on the board.  Non-members may serve as president, first vice president and other officers.  The by-laws contain the governance provisions for the worker cooperative, including election, terms, classification and removal of directors and officers consistent with the CCL or the BCL (CCL § 91).

A host of unique legal and practical issues are created by the model in general, and by its use in healthcare, in particular.  For instance, how is the confluence of employment and ownership handled for purposes of licensure and certificate of need?  Thus far, the Department of Health has been willing to limit character and competence review to board members only, but that may change if the model were to proliferate.  Similarly, the termination of a sufficiently large group of employees would presumably trigger certificate of need review if those employees represented 10% or more of the ownership of the provider.  In regard to practical concerns, a worker cooperative needs to be very careful in choosing the right leadership – it is a rare corporate executive who possesses the necessary business acumen, but is still comfortable in a setting where his/her employees are, in a very real sense, his/her bosses.

In spite of these challenges, the worker cooperative model may be attractive in settings with a union workforce, where it would represent the next step in the empowerment of workers.  Or, it might serve as an alternative to unionization for a non-unionized workforce looking to become more active.  But either way, it changes the traditional dynamics of the employer/employee relationship – and requires careful consideration before implementation.

If you have any questions about the worker compensation model in the context of healthcare, please do not hesitate to contact Marty Bunin at 646-329-1982 or mbunin@farrellfritz.com or Mark Ustin at 518-313-1403 or mustin@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.

 

 

 

A Renewed Focus: 2018-19 NYS Intellectual and Developmental Disabilities Budget Highlights

Since the beginning of the administration of Governor Andrew Cuomo, there has been a strong emphasis on reform of the acute, primary, and long term care systems, and, particularly with the recent focus on the opioid crisis, that attention has extended to the behavioral care system, as well.  In contrast, reforms in the developmental disabilities system have been slower in coming, attributable to a variety of factors, including historical issues surrounding service mix and reimbursement, and legitimate concerns about client safety and quality of life. In some ways, the developmental disabilities provisions in the 2018-19 Enacted Budget represent a return of focus on the developmental disabilities sector, with several provisions concentrating on how larger reform efforts – including the movement toward managed care, health homes, and telehealth – intersect with the developmental disabilities community. Highlights of key provisions follow.

Managed Care. The Enacted Budget includes language updating existing provisions related to the movement of developmental disabilities clients and services into managed care. First, it expands the list of individuals who may be required to enroll in managed care and revises provisions regarding eligibility to include individuals with developmental or physical disabilities who receive services via a federal 1115 waiver, and authorizes the Commissioner of Health, in consultation with the Commissioner of Developmental Disabilities, to submit an application for such waiver. The Enacted Budget also extends authority of the Office for People with Developmental Disabilities (OPWDD) to require enrollment in managed care from 2019 to 2023, and makes technical corrections to that authority. The OPWDD Commissioner will also assess the quality, outcomes, experience and satisfaction of managed care for individuals with developmental disabilities, and report to the Legislature by December 31, 2022.

Health Homes. The Enacted Budget amends the Public Health Law to require 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.

Telehealth. The Enacted Budget amends the Public Health Law to allow the use of telehealth by certified and non-certified day or residential health care facilities operated by OPWDD, residential health care facilities serving special needs populations, credentialed alcoholism and substance abuse counselors, and early intervention providers. Further, the Commissioner of the Department of Health, in consultation with the Commissioners of Office of Mental Health, OPWDD and the Office of Alcoholism and Substance Abuse Services may identify other providers that should be permitted to provide telehealth services. Additionally, DOH, OMH, OPWDD and OASAS will coordinate on a single guidance document that will identify the discrepancies in regulations and policies by state agencies, and assist consumers, providers and health plans to better understand and facilitate the use of telehealth to address barriers to care.

First Responder Training. The Enacted Budget agreement includes language to require the Commissioner of Mental Health, in consultation with the Department of Health, Office of Fire Prevention and Control, Municipal Police Training Council, and the Superintendent of the State Police, to develop a training program and educational materials to provide instruction and information to firefighters, police officers, and emergency medical personnel on appropriate recognition and techniques for handling emergency situations involving individuals with autism spectrum disorder and other developmental disabilities.

Care at Home Waivers. The Enacted Budget extends the Care at Home I and II waivers until March 31, 2023. These waivers provide community-based services to physically disabled children who require hospital or skilled nursing home level of care.

Extension of OMH Inpatient Psychiatry Demonstration. The Enacted Budget extends this demonstration program, which allows for three or more time-limited demonstration programs to test and evaluate new methods or arrangements for organizing, financing, staffing and providing services for individuals with intellectual or developmental disabilities, through March 31, 2021.

Independent Practitioner Services. The Enacted Budget amends Section 367-a of the Social Services Law to include independent practitioner services for individuals with developmental disabilities as covered services for insurance reimbursement.

Residents Use of Funds for Care and Treatment. The Enacted Budget extends Chapter 111 of the Laws of 2010 and Chapter 58 of the Laws of 2015 to extend the authority of state facility directors that act as federally appointed representative payees to use funds for the cost of a resident’s care and treatment in facilities through June 30, 2018.

For 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.

Periodically over the years, and consistently since 2005, the New York State Department of Health (DOH) has received funding through the New York State budget process to provide capital support for infrastructure improvements at institutional providers.  The rationale for this state funding has varied – at times, it has ostensibly been intended to incentivize certain actions (e.g., facility consolidation, development of information technology infrastructure, participation in value-based payment arrangements, etc.), but at other times, it has clearly represented a recognition of the fact that the depressed margins of healthcare providers often prevent them from making necessary investments in aging infrastructure.

These programs, including the original Healthcare Efficiency and Affordability Law for New Yorkers (HEAL-NY) Program, the Capital Facility Restructuring Program (CFRP), and the Essential Health Care Provider Support Program, among others, have usually focused on hospitals, but have included other Article 28 providers (nursing homes, clinics, etc.) as well as other types of providers more recently.  They have invariably included limitations on permissible uses of the funds, and have usually required some form of qualifying activity on behalf of applicants that may or may not relate directly to the use of the funds (e.g., bed closures or consolidations in the form of active parent relationships or full asset mergers).  They have also frequently included some form of non-capital support, either via non-capital appropriations supporting the program directly, or via allied programs offering some temporary relief from operating expenses.

Over time, DOH has refined its approach to such programs and the Request for Applications (RFA) language used to define that approach.  For a long time, the trend was toward limiting the pool of potential applicants to facilities facing some form of economic hardship.  More recently, however, DOH seems to have broadened the pool of potential applicants, and appears to be more comfortable using its capital programs as a general support for the New York State health care system as a whole.

The latest iteration, the Statewide Health Care Facility Transformation Program (“SHCFTP”) reflects this trend.  SHCFTP was first authorized in 2016, and has seen two iterations so far, with a third just having been approved as part of the 2018-19 New York State Budget.  All three iterations share some basic characteristics.  First, in all cases eligibility includes at minimum the following types of entities:

1.       General hospitals;

2.       Residential health care facilities;

3.       Diagnostic and treatment centers and clinics licensed pursuant  to  Article 28; and

4.       Clinics licensed pursuant to the Mental Hygiene Law.

Second, in making awards, in all cases the State was required to consider criteria including, but not limited to:

(a)                The extent to which the proposed capital project will contribute to the integration of health care services and long term sustainability of the applicant or preservation of essential health services in the community or communities served by the applicant;

(b)                The extent to which the proposed project or purpose is aligned with delivery system reform incentive payment (DSRIP) program goals and objectives;

(c)                 Consideration of geographic distribution of funds;

(d)                The relationship between the proposed capital project and identified community need;

(e)                The extent to which the applicant has access to alternative financing;

(f)                  The extent that the proposed capital project furthers the development of primary care and other outpatient services;

(g)                The extent to which the proposed capital project benefits Medicaid enrollees and uninsured individuals;

(h)                The extent to which the applicant has engaged the community affected by the proposed capital project and the manner in which community engagement has shaped such capital project; and

(i)                  The extent to which the proposed capital project addresses potential risk to patient safety and welfare.

Third, in all cases awards have been permitted to be made without a formal competitive bid, although in practice they were awarded competitively pursuant to Request for Applications (RFA) processes.

Beyond that, there have been some differences among the three iterations.  One difference is in the stated purpose of each.  The first iteration, which was authorized by Public Health Law § 2825-d, enacted in 2016 (“SHCFTP I”), provided that “[t]he program shall provide capital funding in support of projects that replace inefficient and outdated facilities as part of a merger, consolidation, acquisition or other significant corporate restructuring activity that is part of an overall transformation plan intended to create a financially sustainable system of care,” thus focusing very strongly on consolidation and sustainability.

In contrast, the second iteration, authorized by Public Health Law § 2825-e and enacted in 2017 (“SHCFTP II”), provides that funding is “in support of capital projects, debt retirement, working capital or other non-capital projects that facilitate health care transformation activities including, but not limited to, merger, consolidation, acquisition or other activities intended to create financially sustainable systems of care or preserve or expand essential health care services.”  In short, SHCFTP II has a broader scope than SHCFTP I, insofar as its purpose include “preserving or expanding essential health services” and it is not tied solely to restructuring or supporting failing systems.  It is also significant that SHCFTP II can be used for some non-capital expenses; while SHCFTP I was solely “for capital non-operational works or purposes,” the only analogous limitation on SHCFTP II is that it may not support “general operating expenses.”

The third iteration (“SHCFTP III”), just approved in the 2018-19 New York State Budget, expands that purpose even more.  It allows the program to provide funding in support of “capital projects, debt retirement, working capital or other non-capital projects that facilitate health care transformation activities including, but not limited to, merger, consolidation, acquisition or other activities intended  to:  (a) create financially sustainable systems of care; (b) preserve or expand essential health care services; (c) modernize obsolete facility physical plants and infrastructure; (d) foster participation in value based payments arrangements including, but not limited to, contracts with managed care plans and accountable care organizations; (e) for residential health care facilities, increase the quality of resident care or experience; or (f) improve health information technology infrastructure, including telehealth, to strengthen the acute, post-acute and long-term care continuum.”  Once again, grants are not available to support general operating expenses, but otherwise, this a far broader set of purposes than the prior iterations.

The second difference is that SHCFTP III adds some categories of eligibility.  In addition to general hospitals, residential health care facilities, diagnostic and treatment centers and clinics licensed pursuant to Article 28, and clinics licensed pursuant to the Mental Hygiene Law, SHCFTP III is available to adult care facilities, children’s residential treatment facilities, and assisted living programs.

The third difference is in the amount of funds in the program each year.  SHCFTP I allowed $200 million to be appropriated without a formal competitive bid, and required at least $30 million of those funds to be awarded to community-based health care providers.  SHCFTP II allows $500 million to be appropriated without a formal competitive bid, and requires at least $75 million of those funds to be awarded to community-based health care providers.  SHCFTP III allows $525 million to be appropriated without a formal competitive bid, and requires at least $60 million of those funds to be awarded to community-based health care providers.  It also provides that $45 million of those funds must be awarded to residential health care facilities and $20 million to new assisted living programs.

Significantly, the definition of “community-based health care provider” varies between the iterations:  SHCFTP I defines the term as Article 28 diagnostic and treatment centers, mental health clinics, alcohol and substance abuse treatment clinics, primary care providers, or home care providers.  SHCFTP II includes that list, but also includes “other purposes and community-based providers designated by the commissioner.”  SHCFTP III is the same as SHCFTP I, except that it also includes clinics serving people with developmental disabilities and hospices.

Taken together, the variations between SHCFTP III and the prior iterations reflects a continued movement away from using capital funding as a means of incentivizing desired behavior and toward simply providing necessary funding in the absence of private capital.  Perhaps more importantly, it reflects a stronger focus on long term care providers, and more generally, on smaller providers instead of the large hospital systems that have traditionally benefited from DOH’s capital programs.  It remains to be seen how this change in focus will be implemented in practice, and, on a practical basis, how many long term care providers (or smaller providers more generally) will be able to take advantage of the funding, insofar as the burdensome requirements of the grant process are often challenging for smaller providers.  Any such providers interested in pursuing the funding would be well-advised to seek assistance from counsel familiar with DOH’s grant requirements.

The creation of SHCFTP III represents a significant dedication of capital to healthcare providers during the 2018-19 fiscal year.  It is also important to remember that this program is separate from the $2 billion “Health Care Transformation Fund” previously discussed, which the State can dedicate to similar purposes.  These funds together present a significant opportunity for healthcare providers.

If you are interested in pursuing a grant under SHCFTP, the Heath Care Transformation Fund, or another state program, please feel free to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at (518) 313-1450, or email the Practice Group at 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.