A fourth lawsuit has been filed against New York state’s profit-cap mandate that directs any facility profits over 5% to a statewide pool. 

The newest lawsuit involves more than 130 nursing homes and includes arguments against the state’s 3.5 nursing hour per resident per day rule, which is also the subject of another lawsuit. The latest suit was filed by the law firm Harter Secrest & Emery LLP this month and is similar to a suit filed by LeadingAge New York in May 2022. 

The cases are being watched closely on the national stage. A first-ever federal minimum nursing home staffing law is expected to be announced within weeks, albeit apparently without a profit-cap provision. Also, other states could be tempted to follow New York’s lead on their own, depending on a number of factors.

LeadingAge New York President and CEO James Clyne told McKnights Long-Term Care News Friday that its case is expected before a judge in June for oral arguments. A report from a newspaper in upstate New York incorrectly reported last week that the LeadingAge case had been dismissed. 

The previous lawsuit filed by Harter Secrest & Emery was the case dismissed last year. An attorney listed on that firm’s most recent filing did not return a call to McKnight’s inquiring about differences among the cases.

At issue are provisions in state law mandating how nursing homes must spend their funds — 90% of which come from Medicare and Medicaid, Clyne said. The first requires facilities to spend 70% of their budgets on direct patient care, with at least 40% of that 70% for resident-facing staff. Additionally, SNFs that exceed 5% profits must turn over the excess to a state “quality pool” that is redistributed through Medicaid to all in-state nursing homes. Facilities that exceed 5% in profits are also fined $2,000 per day. 

The Harter Secrest & Emery suit described the 70/40 rule as “the most serious regulatory threat to the nursing home industry … in recent memory.”

The second major point of contention is the state’s minimum staffing requirement, which compels 3.5 hours of nursing care per patient per day that Clyne described as a “hoax on families and residents.” The Centers for Medicare and Medicaid Services is expected to release a federal staffing minimum soon, which could be achievable based on how the hours are defined, Clyne said. 

What staff qualify

New York’s staffing law counts only hours performed by registered nurses, licensed practical nurses, and certified nurse aides. If the federal requirement includes therapists and others involved in direct patient care, as lobbyists have urged, facilities could meet the standard, Clyne said. However, funding to retain and recruit staff is a fundamental component for the long-term care sector, which is in the midst of a workforce crisis. 

“They want to know why we can’t get staff. They need to look at themselves in the mirror and realize it’s because of them,” Clyne said, referring to New York’s Medicaid reimbursement rates, which are among the lowest in the country. 

The third active lawsuit on these issues was filed by the New York State Health Facilities Association/New York State Center for Assisted Living against the 70-40 rule in federal court in December 2021, arguing the state is unconstitutionally directing federal funding since it would require facilities to turn over a portion of Medicare dollars.

“It [the staffing law] was drafted behind closed doors without any input from the long-term care industry under the prior governor in the middle of COVID,” association President and CEO Stephen B. Hanse told McKnights on Friday. 

He added that requiring facilities to turn over what the state calls “excess” profits is a disincentive to invest in facilities that are aging and need renovations, especially in a post-COVID environment. 

That case — led by the Home for the Aged of the Little Sisters of the Poor — was filed in the US District Court for the Northern District of New York. Hanse said it is expected to go before a judge in early May.

Both the LeadingAge New York and Harter Secrest & Emery lawsuits were filed with the Supreme Court of New York.