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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.

March 31, 2022

NYS Executive Order 38 Sunset: NYS Agencies Begin to Repeal Regulations Governing Limits on Administrative Expenses and Executive Compensation

Two NYS agencies have announced the proposed repeal of regulations that place limits on administrative expenses and executive compensation paid by entities that receive state funds or state-administered funds in compliance with NYS Executive Order 38 (EO 38).i  Other NYS agencies that issued regulations implementing EO 38 have yet to signal the repeal of their EO 38 regulations.

EO 38 was issued by former NYS Governor Andrew Cuomo in January 2012. It applied to all entities that receive state funds or state-administered funds, such as health care providers reimbursed by Medicaid. By its terms, EO 38 ordered NYS agencies that provide state financial assistance or state-authorized payments to providers to issue regulations requiring that providers devote at least 75 percent of these payments to operational costs rather than administrative expenses and capping executive compensation paid by these providers at $199,000 per year. The NYS Department of Health (DOH),ii Office of Mental Health (OMH),iii Office for People With Developmental Disabilities (OPWDD),iv  Office of Addiction Services and Supports (OASAS), Office of Children and Family Services (OCFS),  Office for the Aging,vii  and the Division of Criminal Justice Servicesviii issued regulations implementing EO 38. 

In October 2021, NYS Governor Kathy Hochul issued NYS Executive Order 6 (EO 6), which revoked all prior executive orders except for those listed in EO 6 as being continued. EO 38 was not included on the list of continued executive orders. At the time that EO 6 was released, it was unclear whether the governor intended to repeal the limitations on administrative expenses and executive compensation or whether the failure to continue EO 38 merely reflected it was no longer needed because the agencies had carried out its directive by issuing the EO 38 regulations.

On March 2, 2022, the OPWDD proposed the repeal of its regulations implementing EO 38. The OPWDD’s announcement in the New York State Register stated that the proposed repeal “is necessary to comply with state law” because “executive order 38 is not being extended.”ix  On March 16, 2022, the NYS Office for the Aging also proposed the repeal of its regulations implementing EO 38.x  The repeal of these regulations will be effective 60 days after the date of publication in the New York State Register. As of the date of this writing, neither the DOH, OMH, OASAS, OCFS, nor the Division of Criminal Justice Services have announced the repeal of their regulations implementing EO 38.

Based on the foregoing, it appears that EO 38 will cease to apply to entities regulated solely by the OPWDD, the Office for the Aging, or both. For now, any entity that is subject to regulation by the DOH, OMH, OASAS, OCFS, or the Division of Criminal Justice Services remains subject to the those agencies’ regulations implementing EO 38. On the theory that all state agencies should interpret executive orders consistently, it is reasonable to expect the DOH, OMH, OASAS, OCFS, and the Division of Criminal Justice Services to follow the lead of the OPWDD and the Office for the Aging by repealing their regulations implementing EO 38.

Attorneys on Barclay Damon’s Health & Human Services Providers Team will continue to monitor the New York State Register for further developments.

If you have any questions regarding the content of this alert, please contact the Bridget Steele, associate, at bsteele@barclaydamon.com; Ray McCabe, partner, at rmccabe@barclaydamon.com; Melissa Zambri or Margaret Surowka, co-leaders of the Health & Human Services Providers Team, at mzambri@barclaydamon.com and msurowka@barclaydamon.com, respectively; or another member of the firm’s Health & Human Services Providers Team. 

                                              

i9 NYCRR § 8.38 (Limits on State-Funded Administrative Costs & Executive Compensation).
ii10 NYCRR Part 1002.
iii14 NYCRR Part 513.
iv14 NYCRR Part 645.
v14 NYCRR Part 812.
vi18 NYCRR Part 409.
vii9 NYCRR Part 6656.
viii9 NYCRR Part 6157.
ixNew York State Register, Volume XLIV, Issue 9, March 2, 2022, page 26.
xNew York State Register, Volume XLIV, Issue 11, March 16, 2022, page 1.

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