70/40 Staffing Requirement: Anything But “Reform”

The 2021-22 Executive Budget includes a provision to limit nursing home profit margins by requiring that a minimum of 70% of nursing home revenue be spent on direct resident care, including 40% for resident-facing staff. All nursing homes subject to the 70/40 staffing requirement that fail to comply with this provision on an annual basis, or whose total operating expenses are greater than their expenses by more than 5%, are responsible to remit the excess revenue to New York State by no later than November 1st of the following year.

Although the 70/40 staffing requirement takes effect on January 1, 2022, a recent Department of Health briefing indicates that the full impact of this provision will not be known until the second or third quarter of 2023, as it is anticipated that the RHCF data employed for the 70/40 staffing requirement will not be available and analyzed until 2023 and will then be applied retroactively to the beginning of 2022.

While there are nursing homes that are exempt from the 70/40 staffing requirement including, but not limited to, nursing homes who primarily serve fragile children and continuing care retirement communities, there is the possibility that nursing homes that are subject to this provision can obtain a waiver from the Commissioner of Health if the nursing home can prove that it experienced unexpected or exceptional circumstances that prevented compliance. In the alternative, nursing homes may receive a waiver if, due to a natural disaster, it incurred extraordinary revenue and capital expenses. Of course, neither of these scenarios sound as if they will be likely, let alone commonplace.

In short, although couched by the State Legislators as a nursing home reform designed to improve the quality of care, it is anything but. When the overwhelming majority of nursing home residents are Institutional Medicaid recipients, cuts to nursing home Medicaid reimbursement rates and “reforms” like the 70/40 requirement will likely have the opposite effect the legislators intended.

Please feel free to contact our office should you have any questions or require further clarification.  You can reach Partner Ken Kern at 631.390.5000 or at KKern@conalaw.com.