Mark Ustin

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our series highlighting recent activity by the NYS Legislature (introduced here) continues with a recap of bills passed in 2018 that relate to intellectual and developmental disabilities (I/DD). This synopsis follows previous summaries we have done concerning the pharmaceutical industry (here), hospitals (here), long term care and aging (here), and behavioral health (here).

In a session characterized by intermittent paralysis in the Senate, the Legislature was still able to come together on several key initiatives in the I/DD space. Many of these create additional burdens on the Executive (e.g., requiring the Executive to create identification cards for individuals with I/DD).  Others focus on curtailing Executive authority in the I/DD space (e.g., prohibiting any change of auspice in state-operated individualized residential alternatives or setting a statutory minimum for reinvestment of facility sale proceeds).  In particular, an increasing amount of legislative activity in the I/DD space focuses on the identification of and services for autism spectrum order.

The following bills in the I/DD space currently await action by the Governor:

Identification Cards (A249C by Assemblymember Santabarbara/S2565C by Senator Helming):  This bill would require the Commissioner of the Office for People with Developmental Disabilities (OPWDD) to develop an identification card denoting that a person has been medically diagnosed with a developmental disability, which can be presented to law enforcement, firefighters and medical services personnel as necessary.  The front of the card would have to indicate that it was issued by OPWDD and include the bearer’s name, address, date of birth, and a specific statement that the bearer has a developmental disability, may have difficulty following directions, and may become physically agitated.  The reverse of the card would have to include, at the bearer’s discretion, a contact name and phone number, and a space for inclusion of additional information.  OPWDD may charge a fee for the card.

Same Gender Transportation (A10708 by Assemblymember Gunther/S8592 by Senator Ortt):  Under a current law adopted in 1927, a female patient receiving services for mental disability who is being transported to or from a facility must be accompanied by another female, unless accompanied by her father, brother, husband or son.  This bill, which was introduced at the request of OPWDD, would amend that law to make it gender-neutral, make it permissive rather than mandatory, and provide that it is conditioned upon applicable staffing limitations and upon request.

Care Demonstration Program (A8990 by Assemblymember Gunther/S7291 by Senator Ortt):  This bill is an agreed-upon chapter amendment (see discussion of chapter amendments in our introductory post here) to Chapter 491 of the Laws of 2017, which was intended to codify OPWDD care demonstration programs originally developed and implemented in 2015, pursuant to which members of the state workforce provide community-based care to individuals with developmental disabilities.  The services provided by such programs include, but are not limited to, community habilitation, in-home respite, pathways to employment, supported employment, and community prevocational services.  The original bill requires OPWDD to monitor the quality and effectiveness of these programs, requires OPWDD to issue a report by December 31, 2020, and expires March 31, 2021.  This bill would eliminate the reporting requirement, make the selection of services provided by those programs permissive rather than mandatory, and change the expiration date to March 31, 2020.

Change of Auspice of State-Operated Individualized Residential Alternatives (A10442 by Assemblymember Gunther/S8200 by Senator Marcellino):  Current law imposes expansive notice requirements on any effort by OPWDD to close or transfer a state-operated individualized residential alternative (IRA), which is a type of community residence that provides room, board and individualized service options.  This bill would prohibit any change of auspice of any IRA currently operated by OPWDD, thus completely preventing OPWDD from outsourcing such IRAs to private entities.

Reinvestment of Sale Proceeds (A10951 by Assemblymember Lentol/S8633 by Senator Ortt):  This bill would require that 85% of the proceeds from the sale of any property that was previously used, operated or maintained by OPWDD be used exclusively to increase funding for state-operated residential or community-based services.

Study on Early Diagnosis and Long-Term Treatment of Autism (A261 by Assemblymember Abinanti/S3895 by Senator Parker):  This bill would require the Commissioner of OPWDD, the Commissioner of the State Education Department, the Commissioner of the Department of Health, the Commissioner of the Office of Children and Family Services, and the Commissioner of the Office of Mental Health to conduct a study to be performed on the future costs to the state for the early diagnosis and long-term treatment of autism spectrum disorder.  The report, along with legislative recommendations, is due to the Governor and the Legislature on or before April 1, 2021.

Autism Outreach to Minorities (A7976 by Assemblymember De La Rosa/S5534-A by Senator Hamilton):  This bill would require the Autism Spectrum Disorders Advisory Board established in 2016 to identify strategies and methods of improving coordination of services associated with autism spectrum disorders for minority group members, including but not limited to African American, Latino and Asian children.

Autism Screening for Children Aged 3 and Under (A9868A by Assemblymember Santabarbara/S8955 by Senator Ortt):  Current law requires the Commissioner of Health to establish best practice protocols for the early screening of children for autism screening disorder, which must incorporate standards and guidelines established by the American Academy of Pediatrics.  This bill would provide that those standards must include developmental screening for children aged 3 and under, and must be updated at least once every two years.

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For additional information on any of the foregoing bills, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.

The latest installation in our series on legislation recently passed by the New York State Legislature (introduced here) addresses legislation in the long term care and aging space.  It follows upon descriptions of legislation in the pharmacy space (here) and hospital space (here).  Like those areas, the long term care area was impacted by the same political turmoil that limited the number of bills passed – but some significant legislation was enacted nonetheless.

One of the more interesting aspects of the long term care and aging space is that it tends to be comprised of two very different regulatory regimes.  The first, primarily overseen by the Department of Health (DOH), regulates licensed long term healthcare providers like nursing homes, assisted living residences, home care and others.  The second, overseen by the State Office for the Aging (SOFA), focuses on the elderly more generally.  Sometimes, it can seem like these two agencies occupy two entirely different worlds; other times, they coordinate comprehensively and effectively.  Bills passed this year by the Legislature affect both agencies.

Except where otherwise indicated, these bills all await action by the Governor.

Assisted Living Programs and Hospice (A10459-A by Assemblymember Lupardo/S8353-A by Senator Hannon):  Continuing the State’s recent focus on expansion of assisted living program services (see our post on long term care provisions in the State Budget, here), this bill would allow hospice services to be delivered to individuals residing in assisted living programs.  Current Medicaid policy does not allow the delivery of hospice services in an assisted living program, requiring many residents to transfer to a nursing home in their last few weeks of life, compounding the issues they already face at the end of their lives.

Adult Care Facility Temporary Operators (A8159 by Assemblymember Wright/S766 by Senator Stewart-Cousins):  This bill would require the DOH to provide written notice when a temporary operator is appointed at any adult home, enriched housing program, residence for adults or assisted living program.  Temporary operators are entities appointed by DOH to operate a facility where an operator’s license has been suspended.

Deaths in Adult Care Facilities (A9034 by Assemblyman Gottfried/S7282 by Senator Alcantara):  This bill is a chapter amendment (see discussion of chapter amendments in our introductory post here) to Chapter 459 of the Laws of 2017, which added enriched housing programs to the list of adult care facilities that must report the death or attempted suicide of a resident or any felony committed against a resident to DOH, and to the Justice Center for the Protection of People with Special Needs, if they are receiving mental hygiene services.  That bill also reduced the time within which facilities must make such a report from 48 to 24 hours.  This bill eliminates the statutory time period in which a report must be made.  The bill was signed by the Governor on June 1, 2018.

Long Term Care Ombudsman (A11050 by Assemblymember Lupardo/S9002 by Senator Dilan):  This bill would make various changes to bring the provisions of state law establishing the Long Term Care Ombudsman Program (LTCOP) in line with federal statute and regulations.  The LTCOP investigates and resolves complaints made by or on behalf of residents, promotes the development of resident and family councils, and informs government agencies, providers and the general public about issues and concerns impacting residents of long term care facilities.  The bill would clarify (1) the structure of the LTCOP and the relationship between the LTCOP and the SOFA; (2) the required qualifications of the state ombudsman and assistant ombudsmen; (3) the state ombudsman’s duty to refer complaints to appropriate investigative agencies; (4) the state ombudsman’s duty to comment on actions pertaining to the health, safety, welfare, and rights of the residents of long term care facilities and services; (5) the state ombudsman’s duty to provide timely access to LTCOP services; (6) the state ombudsman’s duty to recommend changes to law, regulation and policy; (7) the state ombudsman’s duty to develop a certification training program and continuing education for ombudsmen; (8) the state ombudsman’s duty to provide administrative and technical assistance to ombudsmen; (9) the state ombudsman’s duty to support citizen organizations, resident and family councils, and other statewide systems advocacy efforts; and (10) the state ombudsman’s duty to advise SOFA in regard to plans or contracts governing local ombudsman entity operations.  The bill requires the state ombudsman to develop a grievance process to offer an opportunity for reconsideration of any decision regarding the appointment of any local ombudsman, and any decision of an ombudsman.  The bill also clarifies (a) the records to which ombudsmen must have access and the limitations on the use and further disclosure of such records; (b) that ombudsmen must be granted access to and cooperation from long term care facilities, and facilities may not retaliate against anyone for cooperating with ombudsmen; and (c) the conflict of interest rules applicable to the LTCOP.

Informal Caregiver Best Practices (A3958 by Assemblymember Dinowitz/S8730 by Senator Sepulveda):  This bill would require SOFA to develop a guide for businesses containing best practices for retaining employees who are also informal caregivers (i.e., who care for elders at home), and make that guide available on the agency’s website or via paper copy.

Veterans in Nursing Homes (A9981-A by Assemblymember Wallace/S8968 by Senator Helming):  This bill would add “assisted living” (presumably assisted living programs), assisted living residences, and adult care facilities to the list of entities which may report to SOFA on the veteran status or veteran spouse status of residents, so that SOFA may link them to counselors for review and potential linkage to veteran services.  SOFA would be required to include the number of such reports within its annual report.

Locator Technology Businesses (A1118-A by Assemblymember Rosenthal/S5221-A by Senator Stavisky):  This bill would require DOH to develop a list of businesses that manufacture, distribute or otherwise offer locator technology services designed to assist in the expedited location of individuals afflicted with Alzheimer’s disease or dementia who become lost or disoriented.  DOH must make the list available to physicians and the general public.  “Locator technology” includes, e.g., wrist transmitter tracking systems, software programs, data bases and products like necklaces and bracelets that contain identifying information.

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For additional information on any of the foregoing bills, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.

The scheduled 2018 New York State Legislative Session concluded last week amid many of the same speculations and controversies that have characterized all of the Legislature’s activities in recent years.  Once again, much of the activity turned on the Legislature’s tense relationship with the Governor, ongoing questions about control of the Senate, and a backdrop of corruption trials that continue to erode public confidence in State government.  This year, legislative activity was more constrained than usual, owing to the Senate’s inability to maintain a commanding majority on a consistent basis, which was attributable to the recent dissolution of the Independent Democratic Conference and the absence of one majority Senator serving in the United States Navy.  While the Senate was not entirely paralyzed, and at one point even accomplished a rare override of a gubernatorial veto, many legislative initiatives that were anticipated to move did not.

But even in this challenging year, many bills were passed in the health and mental hygiene space.  Examples include:

  •  Pharmacy:  The Legislature passed bills requiring manufacturers engaged in the manufacture of covered drugs sold in New York State to develop and operationalize a statewide pharmaceutical take back program, and authorizing the reclassification of controlled substances by regulation rather than by statute.
  •  Hospitals:  Legislation was passed that would require the Department of Health (DOH) to establish a sexual assault victim bill of rights, which hospitals must provide to every sexual offense victim presenting at the hospital.  Other legislation would authorize hospitals to establish standing orders for nurses caring for newborns, allow a nurse practitioner to witness and serve as a health care proxy, establish new standards for clinical laboratory supervision, and require the Office of Mental Health to supply educational materials to hospitals regarding discharge planning for individuals with mental health disorders.
  • Long Term Care:  Bills were passed related to virtually all aspects of the long term care continuum, including bills allowing residents of an assisted living program to access hospice services, requiring DOH to provide written notice to residents of adult care facilities when a temporary operator has been appointed, and clarifying the scope of the long term care ombudsman program.
  • Behavioral Health:  The Legislature approved bills related to maternal depression, the mental health impacts of tick-borne diseases, geriatric mental health services, and suicide prevention, among other mental health issues.  Bills passed in the substance use disorder space include a bill making it a crime for providers of substance abuse services to offer or accept kickbacks in exchange for patient referrals, a bill requiring the Office of Alcoholism and Substance Abuse Services to provide information to school districts regarding the misuse and abuse of alcohol, tobacco, prescription medication and other drugs, and a bill allowing the use of medical marijuana as an alternative to opioids.
  • Intellectual/Developmental Disabilities:  Bills passed in this space include bills to establish identification cards for individuals with developmental disabilities, to allow individuals with developmental disabilities to be accompanied by staff of the same gender when utilizing transportation, to require 85% of the proceeds from the sale of Office for People with Developmental Disabilities (OPWDD) property to be used for state-operated residential or community services, to prohibit OPWDD from changing the auspice of any individualized residential alternative that is operated by the state, and to study and improve outreach concerning autism spectrum disorder.
  • Public Health: A number of the bills passed this session did not deal with specific types of providers, but rather addressed more general public health concerns.  Among these bills were a bill prohibiting discrimination in the provision of insurance based on the fact that an insured is a living organ or tissue donor and authorizing family leave to provide care during transplant preparation and recovery, bills prohibiting smoking in private homes where licensed child care services are provided or within 100 feet of library entrances, further restricting minors’ access to tanning facilities, a bill restricting minors’ access to electronic cigarettes, and bills addressing prostate cancer, Lyme disease, lupus, lymphedema, and lead poisoning.

Each of the bills mentioned above, and many others, now await action by the Governor, and it remains possible that the Legislature will return this year – possibly even in the very near future – to act on additional priority legislation that could not be moved before the conclusion of the scheduled session.  Once a bill is passed by the Legislature, it can be sent to the Governor for action at any point prior to the end of the calendar year, and in practice the bills are sent in several batches over the remainder of the year.  The Governor and Legislature work together to coordinate the timing of those batches, to ensure that the Governor’s staff has adequate time to review each bill and brief the Governor on it.

Once a bill is sent, the Governor has ten days to either approve it or veto it (not including Sundays); if by some chance the Governor fails to act (a very rare occurrence), the bill becomes law.  The only exception to these rules occurs at the end of the year, when the Governor is given thirty days to act, and the failure to act constitutes a veto (the so-called “pocket veto”).

If he vetoes a bill, the Governor will produce a veto message explaining his position.  He may also provide an approval message explaining his position on bills he has approved.  Where a bill comes close to something that the Governor could approve, but the Governor does not want to approve it in its current form, it is not uncommon for the Governor to negotiate “chapter amendments” with the Legislature, pursuant to which the Governor agrees to sign the bill in return for a promise from the Senate and Assembly that they will pass additional legislation at the next available opportunity to amend the bill language to address the Governor’s concerns.

This article represents the first in a series that will review the key bills in each of the foregoing categories in more detail, including both the bills listed above and others.  At this time, in most cases it is impossible to say with certainty how the Governor will act on each bill, but where appropriate, we will provide our best guess.  In the meantime, if you have any questions concerning the foregoing, please do not hesitate to contact Farrell Fritz’s Regulatory & Government Relations Practice Group at 518.313.1450 or NYSRGR@FarrellFritz.com.

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.