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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.

January 7, 2022

New York State Quietly Diverts $1.6 Billion in Federal Pandemic Funds to a Small Group of Large Home Care Providers

As a result of the American Rescue Plan (ARP), New York State is slated to receive $1.6 billion in funding to enhance, expand, and strengthen home and community-based services (HCBS) through the state Medicaid program. The funds will be distributed in two waves. The first wave of $361 million, which is to be used for qualified expenses, is subject to Centers for Medicare & Medicaid Services (CMS) approval and is set to be distributed to the Department of Health (DOH) as early as January 2022. A second wave of $1.1 billion is set for distribution—under different criteria—as early as April 2022.

Rather than evenly distributing funds to HCBS providers throughout the state, the DOH has elected to provide enhanced funding to only 235 of approximately 1,479 licensed home care services agencies (LHCSAs), representing less than 20 percent of statewide providers. Providers receiving these funds were notified on December 23, 2021, that they qualified for ARP funding. During its webinar on January 6, 2022, the DOH stated that agencies that believe they are qualified but did not receive an award letter should email the DOH at LHCSA.FMAP@health.ny.gov

Significantly, New York State’s proposed spending plan fails to provide funding for smaller providers and fiscal intermediaries who play an integral role in the delivery of HCBS while funding only the largest LHSCAs. In a November 2021 policy meeting, the DOH noted the standards were based solely on revenue—only providing federal aid to LHCSAs with managed care revenue set at the 66th percentile of providers in specified regions based on Medicaid Advantage and managed long-term care plan revenue.

The DOH has yet to provide a rationale for funding only the largest LHCSAs or information on the impact this disparate funding will have on smaller providers that deliver critical HCBS to rural and culturally diverse patient populations.

Interestingly, the Medicaid program, including HCBS, are subject to ongoing Medicaid redesign, which has taken a toll on Medicaid providers as the state attempts to reduce overall Medicaid spending by $2.5 billion annually. As part of this redesign, the DOH has taken concrete steps to trim the Medicaid network without improving program efficiency or enforcing program standards. For example, the DOH’s Request for Offers #20039 is slated to reduce the fiscal intermediary network by as much as 80 percent—decreasing access for individual consumers and straining remaining network providers. To date, New York State is poised to implement network-wide reductions without properly assessing impact on patient care.

Importantly, the ARP contains a maintenance of effort (MOE) provision which explicitly prohibits the state from implementing changes that will further restrict or limit access to services while the state spends the additional federal funds. The proposed spending plan, which relies primarily on direct payments to large LHCSAs, will allow the state to reduce the period it adheres to the MOE provision in the ARP, allowing it to continue reducing the Medicaid network as soon as funds are spent. According to the state’s proposed spending plan, the funds will be used to (1) support and strengthen the direct care workforce, (2) build HCBS capacity through innovations and system transformation, and (3) invest in digital infrastructure. According to the DOH’s January 6, 2022, webinar, signing bonuses are allowable for new employees as long as they are not hired from another LHCSA as well as reimbursement for the completion of PCA/HHA training just prior to hiring. The state’s proposed plan omits over 80 percent of state providers from these initiatives, creating disparities within the provider network and the patients they serve.

The infusion of $1.6 billion to only the largest LHCSAs will give these entities a competitive advantage in the Medicaid market while inhibiting smaller providers’ efforts to modernize and expand their services and adequately compensate their workforce. Rather than expanding and enhancing access to HCBS services, New York State’s spending plan will further restrict access to essential health care services by reducing the provider network.  

Barclay Damon’s Health Care Controversies Team is comprised of cross-trained health care attorneys who are ready to assist providers in assessing the impact these federal funds will have on their organizations moving forward.

If you have 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; Samuel Chubb, associate, at schubb@barclaydamon.com; or another member of the firm’s Health Care Controversies Team.

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