When it rains, it pours.
By now, the New York nursing home industry and related stakeholders are well aware that Governor Cuomo has signed into law legislation setting profit caps and direct patient care minimum spending ratios for New York nursing homes (new NY PHL § 2828). As if that weren’t enough, there are yet other laws recently enacted that the industry has been burdened with, which will also impact New York nursing operations and acquisitions. As we have previously reported, Assembly/Senate Bills A5684A/S4893, which are now law, amend certain NY PHL Article 28 laws and require immediate attention, as they impact operator change of ownership applications, retention of employees upon a change of operation, AND new patient and staff disclosures upon admission and changes in operation.
While we continue to assess the impact of new PHL § 2828 (profit caps and direct patient care minimum spending ratios) and strategize regarding ways to best address its effects and the viability of legal challenges, our complete analysis awaits Department of Health proposed regulations that will implement the law. We continue to monitor the development of those regulations and we intend to have a seat at the table to advocate on behalf of clients in shaping their scope and impact.
Below is a summary of the additional recently enacted laws that will have an immediate and tangible impact on nursing home operations and ownership:
C.O.N. APPLICATIONS
New subdivision 2-b added to NY PHL § 2801-a, which includes the following:
· Notice of application to the public on DOH website and other agencies.
· For existing homes, notices also to residents, staff, and their representatives in writing or electronically.
· Application review mechanism and 90-day period for submitting comments electronically to the Public Health and Health Planning Council (PHHPC) regarding applications; applicant can testify at public for proposed application disapprovals.
New subdivision 3-b to NY PHL § 2801-a, which includes the following:
· Applications will be disapproved unless applicants (i.e., controlling persons, principal corporate stockholders or LLC members) can establish, for at least the previous three years, under rules and regulation to be established by the PHHPC, satisfactory character, competence, and standing in the community; and nursing homes owned have provided a consistently high level of care.
· A facility owned by the applicant will be considered not to have a consistently high level of care, and the PHHPC will not approve an application, where the facility had any of the following:
o a CMS two star rating or less;
o recurrent violations of immediate jeopardy or actual harm to patients or directly affecting their health, safety, or welfare; or that were not promptly corrected (i.e., repeat deficiencies for same or similar violations over a three-year period or entire duration of ownership of less than three years);
o other issues (i.e., a receivership, closure due to decertification or license revocation; or involuntary termination from the Medicare or Medicaid program in the prior five years).
· If an applicant has previously taken over a facility with such issues and promptly corrected such deficiencies, the PHHPC can consider such application.
NOTIFICATIONS TO DOH, RESIDENTS, STAFF and LTC OMBUDSMAN; DELEGATION; AND WORKER RETENTION FOR SIXTY DAY TRANSITION PERIOD
Revisions to NY PHL § 2803-x, which include the following:
· Previously, operators were required to notify DOH of any common or familial ownership of any corporation, other entity, or individual providing services to the operator or the facility.
Such notifications are now also required:
o at least ninety days prior to such ownership or services being provided;
o for all prospective residents in residency agreements and existing residents in addendums to residency agreements and their respective representatives;
o for all staff and their representatives; and
o for the NY State office of the long-term-care ombudsman.
· Previously, operators were required to notify DOH at least ninety days prior to executing a letter of intent or other contract related to the sale, mortgage, encumbrance or disposition of facility real property.
Such notifications are now also required for:
o the management, operations, staffing agency or other entity to be involved in the facility’s operation; and
o for all residents, staff, their representatives, and the NY State office of the long-term-care ombudsman, within five days of signing.
· Any new owner, operator or management company of a nursing home must retain all existing employees for at least sixty days, except for the administrator, the director of nursing, or any controlling person, corporate stockholder or LLC member. During such sixty-day transition period, no wages or benefits shall be reduced or any terms and conditions of employment (economic or otherwise) modified except for cause.
The new worker retention provision described in the last bullet above, NY PHL § 2803-x(8), could have potentially serious ramifications for prospective buyers of New York nursing homes. The issue involves whether such buyers will be forced to assume a seller’s union collective bargaining agreement (CBA) and employees even beyond the sixty-day transition period now required by law. The National Labor Relations Board (NLRB) has previously decided in cases with similar laws in other industries that such buyers are bound by seller CBAs permanently even though the buyer was forced by law to assume such CBA and employees on a temporary basis during a mandated transition period.
Whether such previous NLRB rulings will have an impact on future sales of New York nursing homes is unclear, due to legal considerations that are beyond the scope of this client advisory. Therefore, any clients concerned about this issue are advised to speak to their labor counsel.
We are available to discuss any concerns you may have related to the new legislation. Additionally, if you require our assistance in updating your admission agreements and addressing other now required disclosure obligations, please contact us immediately to address them.