Ninety-two nursing homes have filed a federal lawsuit against the New York State Department of Health (DOH), as the agency approved no reimbursement for older facilities needing capital improvements in 2025. This is an addendum to the state’s 10% reduction for the industry approved in April.

The cost-cutting amendment adopted by the state DOH and its Commissioner, Dr. James V. McDonald, is unconstitutional as it violates facility equal protection rights, according to the lawsuit filed on Dec. 24.

State operators are seeking a halt in implementation of the capital reimbursement reduction, unless the DOH determines a funding level or mechanism that doesn’t violate equal protection rights, and discloses the methodology and justification for the change while including a comment period.

The state DOH published “notice rates” in November, which indicated that in 2025 or soon after, no reimbursement would go toward ongoing and necessary capital costs for facilities that have exceeded or are about to exceed their “useful life” of 40 years, as determined by the state.

Older facilities are being singled out, the nursing homes involved in the lawsuit said.

“The State’s term, ‘useful life’ is a misnomer, because – upon information and belief – the majority of facilities in New York have exceeded or will soon exceed this milestone, but these facilities remain vibrant, necessary providers in the senior care continuum,” the operators said in the lawsuit filing. “They also remain duly licensed by the State and many of them are among the highest-quality providers in both the state and nation.”

The state DOH doesn’t comment on pending or ongoing litigation, a spokesperson for the agency said in an email to Skilled Nursing News.

Capital improvement projects that fall under such funding include replacing major fixed equipment like an HVAC system; replacing or refurbishing patios, parking lots or sidewalks; upkeep and replacement of the roof, windows, masonry, doors or wiring; and expansion investments.

“These ongoing capital costs are necessary for all nursing homes, but are even more necessary for [older nursing homes], given the age of their facilities, and their thousands of vulnerable residents,” the operators said. “Of course, the older a building is, the more necessary costs accrue for upkeep and refurbishment of the building.”

Meanwhile, construction of new nursing homes in New York has “ground to an effective halt,” according to the complaint. Approval delays are “out of control” and only a few new facilities have been constructed in recent years.

Construction of a new nursing home is “vastly more expensive” than refurbishing an existing facility, which would normally be covered or at least supplemented by capital cost reimbursement. And, new construction doesn’t fall in line with the state’s overall Medicaid plan to reduce the cost of necessary care, the nursing home providers said in the filing.

Before announcing the change in capital reimbursement, the state DOH did not determine what level of capital reimbursement is necessary for the ongoing operation of facilities, the nursing home providers allege.

“Had he done so, the Commissioner would have determined that in no respect can $0 of reimbursement for ongoing and necessary capital costs be considered proportionate, reasonable, and adequate for the provision of residential care to Plaintiffs’ frail and vulnerable residents,” operators said.