New York to Cap Nursing Home Profits at 5%, Require Operators to Spend 70% of Revenue on Direct Care

Starting in January 2022, nursing home operators in New York will be required to return all profits in excess of 5% to the state — while also spending set percentages of revenue on specific care categories — under a new budget deal reached this week.

“Now, more than ever, it is important that nursing homes are staffed to provide high quality care and safety for their residents,” the office of embattled Gov. Andrew Cuomo said in a statement announcing the new budget. “These initiatives will have a positive impact on nursing home residents and staff, delivering the quality of care needed for the most vulnerable New Yorkers in a safe environment.”

The budget makes good on a pledge that Cuomo made earlier this year.


“Facilities have put profits over care for far too long and as we look forward, we must learn from the past and prepare for the future,” Cuomo said in a late February statement. “These facilities must be transparent and we have to have the tools necessary for holding bad actors accountable — that is the only way families will have peace of mind and I won’t sign a budget that doesn’t include these common-sense reforms.”

The 5% profit cap applies to the difference between total revenues and all operating and non-operating expenses, according to an analysis of the budget from the law firm Garfunkel Wild PC.

“Excess revenues recouped by the state will be deposited into the existing nursing home quality pool for further investments for nursing homes to meet high quality standards,” Cuomo’s office observed.


The budget will require operators to spend 70% of revenues on direct patient care costs, including 40% on staffing; the so-called “minimum spending requirement” applies to expenses such as laundry, housekeeping, nursing, and ancillary services, according to Garfunkel Wild.

The new rules also specifically exclude expenses “related to any related party transaction or compensation that exceeds fair market value, as well as any employee compensation for any person not actively engaged in or providing services at the facility,” the law firm noted.

The news came the same day that Cuomo signed a formal repeal of COVID-19 liability protections granted to nursing homes, hospitals, and other health care providers.

The governor had faced criticism for supporting the lawsuit shields, with the scrutiny intensifying over the past several months amid revelations that his administration may have undercounted nursing home deaths by as much as 50%; both state and national lawmakers have also hounded Cuomo over a controversial March 2020 order requiring nursing homes to admit residents from hospitals regardless of COVID-19 status.

The budget itself requires passage by the state legislature and Cuomo’s signature.