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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

June 26, 2020

COVID-19: The Perfect Storm – How Below-Cost Reimbursement Models for OPWDD Providers Will Make a Bad Situation Worse

Even prior to COVID-19, NYS health care providers found themselves operating with Medicaid reimbursement rates so low they had no choice but to go to court on the issue. As part of our Health Care Controversies Team, our rate litigation attorneys have been at the forefront of many of these challenges, including an injunction obtained just last month enjoining the state’s recoupment against a provider servicing the disabled in the Hudson Valley.

With COVID-19 in full swing, these below-cost reimbursement methodologies have only made an already bad situation much worse, straining the resources of many types of providers still reeling from the increased COVID-19 costs they’ve incurred to keep consumers and residents as safe as possible.

While many of these disputes can be resolved pre-litigation, not all can—and in a post-COVID-19 budget environment of extreme deficits, the situation is unlikely to improve. Most recently, Barclay Damon’s Health Care Controversies Team obtained a preliminary injunction on behalf of an Office for People With Developmental Disabilities (OPWDD) provider enjoining the state’s retroactive recoupment of disputed overpayments while the courts were almost completely shut down as a result of COVID-19. We were able to demonstrate that the OPWDD provider was being reimbursed below cost pursuant to the July 1, 2019 reimbursement calculations. This, along with the immediate effect of the state seeking retroactive recoupment, were shown to pose a threat to the financial and operational health of its program services that supported the provider agency’s consumers.

As with many complex reimbursement issues, the devil is in the details of the methodology employed. According to federal law, OPWDD providers must be reimbursed at a rate that allows them to cover their actual costs of providing high-quality care. Some providers are finding themselves, however, in situations where their rates were reduced to a below-cost level.

For example, the room and board supplement of the July 1, 2019 reimbursement rates was drastically cut by 12 percent for residential habilitation providers, including supervised and supportive individualized residential alternatives. These sudden cuts (which took effect prior to the pandemic) have pushed some providers into financially precarious conditions, with providers being forced to borrow and use reserves and funds earmarked for operating costs to maintain quality care for their residents. For residents, this means, inevitably, a restriction on services, staffing, and other direct care costs—to pay for capital costs that’ve been historically fixed and represented to be fully reimbursed by the state.

The cost-cutting trend is far from over. Facing an unprecedented deficit, the state is also impacting the rates of these providers by proposing more reimbursement cuts beginning on October 1 by amending the home and community based services waiver to eliminate the occupancy adjustment and reduce retainer days and therapeutic leave days. As a new OPWDD rate year commences on July 1, these cuts could extend well into the unknown of the fall and beyond. While many hope the cuts will be postponed, avoiding a potential legal showdown between these critical providers and the state seems likely given the current trajectory.

Barclay Damon’s health care litigation attorneys are ready to assist OPWDD providers with navigating legal challenges to these inadequate reimbursement rates as this perfect storm continues to develop. If you or your agency would like a free individual or group consultation regarding our efforts to help providers respond to this growing financial crisis, please don’t hesitate to contact us, as strict legal deadlines may apply.

If you have any questions regarding the content of this alert, please contact Linda Clark, Health Care Controversies Team Leader, at lclark@barclaydamon.com; Mary Connolly, associate, at mconnolly@barclaydamon.com; or another member of the firm’s Health Care Controversies Team.

We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. Please contact Yvonne Hennessey, COVID-19 Response Team leader, at yhennessey@barclaydamon.com or any member of the COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com.

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