More than 250 New York nursing homes and three major industry trade groups recently filed a lawsuit to block a new state law set to go into effect on Jan. 1 that would create stricter rules and regulations on how nursing homes can spend their revenue.

But at least for the next 30 days the law won’t be enforced following an executive order issued by the governor on Dec. 31.

Gov. Kathy Hochul temporarily suspended the law through Jan. 30, holding off enforcement of it for the first month of the year.

The new law seeks to set new limits on how much nursing homes spend on residential care, stipulating that 70% of a nursing home’s revenue is to be spent on direct resident care and at least 40% spent on staffing.

The law also states that nursing home operators in New York will be required to return all profits in excess of 5% to the state, regardless of the quality of care or whether the operator sustained losses in prior years.

Stephen Hanse, New York State Health Facilities Association president and CEO, hopes the temporary suspension is just the start.

The association joined more than 250 long-term care providers across the state who filed a federal lawsuit that claimed the signed legislation was unconstitutional

“This law is not the right solution for New York nursing homes,” Hanse told Skilled Nursing News. “It does not address the two fundamental issues negatively impacting long-term care in New York: the workforce crisis and New York’s nation-leading underfunding of Medicaid.”

He said that New York has the largest Medicaid shortfall in the nation at $56 per patient per day.

“It fails to address the workforce issue, it fails to address over 12 years of disinvestment in long-term care and only exacerbates those issues,” he added. “This law, which was inherited by the current administration and enacted behind closed doors without the provider community, fails to address issues that need to be addressed.”

The law was first introduced by former Gov. Andrew Cuomo in April as a way to improve nursing home transparency and hold bad actors accountable.

Operators from across the state were named in the lawsuit, including the King David Center for Nursing and Rehabilitation in Brooklyn, which would have been assessed a penalty of over $3.6 million had the law been in effect in 2019, based on previous revenues and expenses.

Of the $3,603,231 penalty the facility would have incurred, $1,527,619 would have been confiscated under the 5% profit cap and $2,075,612 under the 70/40 spending mandate, the lawsuit claims.

The complaint also states that if the new law had been in effect in 2019 it would have cost nursing homes approximately $824 million, which they would have had to pay back to the state.

“The nursing homes listed in the lawsuit are negatively impacted and include not-for-profits, proprietary homes, government-sponsored homes and are based on 2019 data,” Hanse said. “We are just waiting for the 2020 cost report that I would argue probably adds hundreds more nursing homes that will be negatively impacted.”

Though the law continues to receive backlash from the provider community, others see it as a step in the right direction.

One of the largest health care unions in the country, 1199 SEIU United Healthcare Workers East, expressed “disappointment” in the sector’s response to the law.

“The legislature acted in response to numerous concerns about low staffing and poor quality in our state’s nursing homes by passing a law to ensure that a largely for-profit industry spends the majority of its revenue on the residents in their care,” Yvonne Armstrong, senior executive vice president at 1199SEIU Long Term Care Division, said in a statement. “It is disappointing that the industry is focusing its energy and attention on fighting these reasonable standards rather than working with all stakeholders to address common challenges and improve quality of care.”

Dennis Short, a senior policy analyst for the union, told SNN the law “does the right thing” by giving the legislature and the taxpayers some control over how public money is spent.

“I think we’re disappointed that [the industry] wanted to go down this road,” he said. “We think there’s a good opportunity with this law and the staffing standards that we passed last year to really address some of the fundamental challenges in the industry.”

In his estimation many operators are already meeting the standards set forth in the law.

“If you’re spending less than 70% on resident care or your profits are exceeding 5%, the easiest way to meet the standard is simply investing more in staff,” Short explained. “It provides a pretty clear roadmap on how to meet the standard.”

He admitted that the law serves as a “stick” to force nursing homes to reinvest the majority of their revenue back into their facilities but felt it was “necessary” because too many providers are not spending the public dollars as they were intended.