New York Nursing Home Providers Could See CON Tax Hike on New Buildings

Health care providers — including skilled nursing operators — in New York could see a new 3% surcharge on all new facilities under the governor’s proposed budget for fiscal 2021.

The New York Post first reported the news earlier this week.

The 2020-2021 executive budget proposes setting a certificate of need (CON) fee of 3% of the total value of the facility construction application for Article 28s — or new hospitals, nursing homes, diagnostic centers and others — according to a memorandum of support for the health and mental hygiene section of the bill.

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In addition, the proposal prevents the fee from being eligible for reimbursement, and the surcharge is in addition to the existing application fee, which the Post cited at .55%.

The New York Department of Health (DOH) must approve a CON application for new medical facilities, and the fiscal 2021 budget briefing outlines the imposition of a CON fee — which, the state government estimates, would bring in an additional $70 million in revenue in each of the fiscal years 2021 and 2022.

“Increased Certificate of Need fees will be assessed on hospital construction projects to provide resources needed under the Medicaid program to administer necessary hospital-related function,” the budget briefing indicates.

But the term “hospital” in the Public Health Law can include facilities like nursing homes, clinics and community health centers, Assembly Health Committee Chairman Richard Gottfried told the Post.

“There are some wealthy hospitals that could afford to pay an extra $3 million for approval of a $100 million project,” Gottfried said. “But there are many for which this fee would be a serious burden and hardship, especially facilities heavily dependent on Medicaid.”

Cuomo’s office countered that it has been a decade since the fee was adjusted by the state.

“[T]his 3% adjustment simply aligns the structure to recognize operational expenses associated with this significant investment,” Cuomo budget division spokesman Freeman Klopott told the Post.

The New York State Health Facilities Association (NYSHFA), which represents nursing homes in the Empire State, opposes the surcharge proposal, president and CEO Stephen Hanse told Skilled Nursing News via e-mail.

Nursing homes across the country rise or fall at the mercy of Medicaid reimbursement, as a recent report from consulting firm Plante Moran made clear.

“The financial viability of long-term care services is directly correlated to Medicaid funding, and negative operating margins in many regions of the United States suggest more facilities may be forced to close without rate increases,” the firm said in its benchmarking report for SNFs.

SNFs in New York are no exception, and providers in the state sued the DOH in October last year over a proposed change to how Medicaid reimbursement is calculated — arguing that among other problems, the move by the state would increase the number of facilities operating at a loss.

The change would have altered how the state calculates the case mix used to determine a given facility’s Medicaid reimbursement.

Citing cost report numbers from 2017, operators argued that 41% of all nursing homes in New York operated at a loss that year. If the changes in case mix calculation were implemented, the provider coalition argued, that would grow to 56% of facilities.

The move would have led to millions in cuts for provider reimbursement, with New York projecting $246 million in gross budgetary savings.

The state also recently finalized a decision to take long-term SNF residents out of its managed Medicaid program, while seeking more cuts as part of its efforts to slow Medicaid spending.

In addition, New York slashed Medicaid payments for a multitude of operators — including SNFs — at the start of January. The 1% cut took effect January 1, for an estimated reduction of $124 million for state Medicaid expenditures in fiscal year 2019-2020.

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