State officials overstepped their authority when they capped executive pay and expenses at organizations that provide services to the aged and infirm in New York, according to a lawsuit filed in state Supreme Court.
More than 200 individual nursing homes, assisted-living programs and home-care agencies across the state are plaintiffs in the case, as are six of their statewide associations.
Their 60-page complaint, filed Sept. 25 in Albany County, names state Health Commissioner Nirav Shah and Gov. Andrew Cuomo as defendants.
The suit contends the men trampled on the Legislature’s power to make laws by authorizing regulations that determine how much state money can be directed to administrative expenses and pay at the nonprofit and for-profit service providers.
“By issuing the executive order and regulations, respondents have exceeded their authority, circumvented the legislative process and improperly usurped the legislative function in an attempt to nullify existing statutory protections and impose their own views about how and to what extent the state should have a role in regulating the internal decisions of for-profit and not-for-profit entities in New York state,” the lawsuit states.
Seeking enforcement end
The suit wants the state blocked from enforcing the regulations, which took effect July 1.
The Health Department had no comment on the lawsuit Friday afternoon.
Cuomo, who last year issued the executive order that spawned the regulations, said at the time that the goal was to “prevent public funds from being diverted to excessive compensation and unnecessary administrative costs, and will ensure that taxpayer dollars are being used to help New Yorkers in need.”
The lawsuit claims the new regulations stem from a bill Cuomo submitted in January 2012 with his proposed executive budget that reflected his concern over high pay and expenses at nonprofits. It followed a 2011 New York Times article on a Brooklyn group that received state Medicaid funds.
The bill required that any organization receiving state money direct at least 75 percent of it to care and services, rather than to internal expenses. None of the state money was to be used to pay any portion of executive salaries that exceeded a $199,000 cap, according to the lawsuit.
The proposal met “an immediate outcry from for-profit and not-for-profit businesses and other stakeholders,” according to the lawsuit, which led Cuomo to recognize it could face rough sledding in the Legislature.
The governor subsequently issued Executive Order 38, which the suit says “was virtually identical” to the budget bill. (Ultimately, the bill was not passed as part of the 2012-13 state budget, according to the lawsuit.)
The lawsuit contends the state already has laws governing the management of nonprofit and for-profit organizations, which places that duty with boards of directors.
“The Legislature has explicitly provided that the authority to manage the affairs of these entities belongs to the entity, which is exercised through the governing board,” the lawsuit states. “This includes the right to hire and fix compensation for the entity’s officers, directors and employees.”
When Cuomo and Shah — members of the executive branch — “act inconsistently with the policy determinations of the Legislature and impose rules which conflict with legislative policy, they violate the separation-of-powers doctrine,” the lawsuit claims.
It also alleges the regulations conflict with payment mechanisms already in place under the state’s Medicaid program, which is supported in part by the federal government. According to the lawsuit, the state never sought U.S. Department of Health and Human Services approval for any changes.
“The executive order and regulations challenged herein are pre-empted by the federal Medicaid Act and state law, which determine how nursing homes, providers of assisted living services and providers of home health care services are to be reimbursed under the Medicaid program, and have been promulgated without obtaining prior federal approval of a state plan amendment, as required by the Medicaid Act,” the suit states.
Plaintiffs in the lawsuit include the trade associations LeadingAge New York Inc. in Latham, formerly the New York Association of Homes & Services for the Aging; New York State Health Facilities Association Inc. in Albany; Southern New York Association Inc. in New York City; Greater New York Health Care Facilities Association Inc. in New York City; Empire State Association of Assisted Living Inc. in Clifton Park; and Home Care Association of New York State in Albany.
The associations have hundreds of members statewide, including the 200 individual nursing homes, adult care facilities, home health care providers and others that are named plaintiffs in the complaint.
They are represented by David Luntz of Hinman Straub P.C. and Cornelius Murray of O’Connell and Aronowitz, both law firms in Albany.
A day after the providers’ lawsuit was filed, a handful of nonprofit health plans serving elderly and low-income New Yorkers indicated they intend to bring a similar lawsuit naming Shah and the Department of Health as defendants, according to a filing in Albany County Supreme Court.