Nursing home operators file suit to block new staffing requirements and profit cap

LONDON: Private care providers are fighting back against proposed minimum staffing ratios and a cap on profitability.

A federal lawsuit filed Wednesday by the operators of hundreds of nursing homes aims to overturn a recently enacted state law that would require them to spend at least 70 percent of their revenue on direct resident care, and at least 40 percent on staff who deal with residents.

The federal civil rights complaint, filed in U.S. District Court in Albany, claims the new requirements violate the U.S. Constitution as an improper “taking” of private property for a public purpose, and run counter to the Supremacy Clause by confiscating federal dollars flowing to nursing homes through Medicare, the federal health care program for the elderly.

The legal action also alleges numerous procedural missteps with the state’s implementation of the changes, and notes that New York has not received approval from the federal government to impose the new requirements, which go into effect Saturday.

More than 250 nursing homes as well as trade groups are named as plaintiffs, with state Health Commissioner Mary Bassett as the lone defendant. It seeks declaratory judgment to block the implementation of the changes.

The Health Department declined comment, citing the pending litigation.

The requirements were part of a budget deal reached last spring by state legislative leaders and then-Gov. Andrew M. Cuomo in response to concerns — pandemic-related and longer-term — over how nursing homes were spending their money. A union representing the state’s nursing home workers estimated the changes would lead to an extra $500 million being spent on resident care.

The agreement caps the profits that nursing home operators can make at 5 percent and requires them to redirect any excess funds into the state’s nursing home “quality pool,” which was established a decade ago to reward nursing homes that provide high-quality care to residents.

The lawsuit states that if the new law had been in effect in 2019, nursing homes would have had to pay approximately $824 million back to the state. The complaint also notes that despite the length of time since the budget was passed, the state has not yet crafted the regulations needed to enforce the new regulations, despite the imminent effective date.

The bulk of the 133-page complaint is an accounting of what each of the plaintiff facilities would be expected to pay under the new rules. One of several plaintiffs based in the Capital Region, the Troy Center for Rehabilitation and Nursing, would in 2019 have been expected to pay $337,599 to the state had the requirements been in effect — $27,434 based on the 5 percent profit cap and $310,166 based on the 70 percent/40 percent staffing rules, according to the lawsuit.

The Schenectady Center for Rehabilitation and Nursing would, based on its 2019 revenues and profits, have been assessed a penalty of $2.9 million under the staffing rules, the lawsuit states.

“Regardless of the quality of care a nursing home provides or whether it sustained losses in prior years or whether it has a positive or negative net worth, (the Department of Health) will confiscate any nursing home’s profits (or surplus for not-for-profit nursing homes) that exceed 5 percent in any year even if a nursing home complies with the 70 percent / 40 percent spending mandate,” the lawsuit states.

The new requirements were passed amid considerable controversy related to nursing homes. A state attorney general’s report published in January found a correlation between poorly staffed homes and increased COVID-19 deaths, and condemned the for-profit nursing home industry for bolstering their profits while leaving facilities understaffed. The same report roasted the Cuomo administration and state Department of Health for understating the number of New York nursing home residents who died of COVID-19.

Stephen Hanse, president and CEO of the New York State Health Facilities Association, which represents for-profit and other nursing homes, said in April that the new spending mandates don’t take into account the differing needs of nursing homes around the state.

“Instead of implementing specific policies to recruit and retain new workers and reverse years of nursing home disinvestment, the state implemented a one-size-fits-all law dictating how all nursing homes are to allocate their financial resources, ignoring the unique nature and resident needs of each nursing home,” he said.

Hanse’s organization is named among the plaintiffs in the lawsuit.