More Than 200 New York Nursing Homes Sue State Over Freezing Case-Mix Adjustment Rates

Over 200 nursing homes in New York have united in a legal challenge against the state’s Department of Health over alterations to Medicaid reimbursement formulas that they argue have unfairly deprived them of funding.

The lawsuit centers on case-mix adjustments used to calculate Medicaid reimbursements based on the intensity of care.

Traditionally recalculated every six months, the case-mix adjustment aims to incentivize nursing homes to admit and care for residents requiring higher levels of care, thereby alleviating hospital burdens and reducing health care costs. However, the controversy arose when the Department of Health decided, through a notice in the state Register, to freeze the case-mix adjustment rates starting on April 1, neglecting adjustments for the preceding three months.

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Stephen Hanse, president and CEO of the New York State Health Facilities Association (NYSHFA), told Skilled Nursing News that there’s a great likelihood that the nursing homes will win the case to receive the funds. 

“We have a very strong case because the statute that was passed in the [New York state] budget freezes the case mix at the beginning of April. However, all the existing laws that are in place speak to January 1st,” he said. “So we feel very optimistic that the law favors our petition for those three months, to be paid on the January 1st case mix.”

Hanse said granting adjustments for those three months would maintain budget neutrality for most of New York’s 610 nursing homes. Some facilities would see increased reimbursements due to caring for higher-acuity patients, while others might receive less due to caring for patients needing less intense care.

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However, the 206 nursing homes that are part of the lawsuit will lose money due to the freeze.

“They’re losing money because they had a higher acuity patient population for that period,” said Hanse.

The financial impact to these nursing homes is unclear at this time, Hanse said.

These nursing homes argue that the frozen adjustment unfairly penalizes their facilities that actively accommodated patients with greater care needs during the contested period. This, they said, contradicts the intended purpose of the case-mix adjustment formula, which is to financially support nursing homes that take on patients with more intensive care requirements.

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