Appeals Court Upholds Executive Order #38 Regulations; Providers Reminded of Filing Requirements
As previously reported to members, State Supreme Court, Albany County issued a decision on Nov. 13, 2015 in the matter of LeadingAge New York et al v. Shah, a case we brought with other groups challenging Executive Order (EO) #38 and the associated regulations. The decision partially upheld our contention that the regulations inappropriately limit executive compensation. LeadingAge NY and the other plaintiffs are appealing the decision to the Appellate Division.
In our case, Acting State Supreme Court Justice Denise Hartman upheld provisions of the EO #38 regulations that limit the use of State funds or State-authorized funds for administrative expenses and executive compensation (the “Hard Cap”). However, the Court ruled against aspects of the EO38 regulations that impose limits on the use of both State and non-State funds for executive compensation (the “Soft Cap”). The Court declared that the Soft Cap aspect of the regulations was promulgated in excess of the Department of Health’s authority and, therefore, violated the Separation of Powers Doctrine.
Based on the Court’s “split decision” with respect to the challenge to the EO #38 regulations, both sides have filed appeals from the Decision & Judgment with the Appellate Division, Third Department. In addition, there are two decisions on other legal challenges to the EO38 regulations which have been issued by courts on Long Island. A Nassau County Supreme Court Justice annulled the regulations, while a Suffolk County Supreme Court Justice upheld the regulations. The Appellate Division, Second Department sided with the Suffolk County judge and upheld the regulations. The petitioners in the downstate cases initially filed a notice of direct appeal to the Court of Appeals, the State’s highest court. The Court of Appeals dismissed that appeal, without prejudice, based on lack of jurisdiction (none of the statutory bases for an appeal as of right were present). The petitioners in the Long Island cases subsequently filed the required motions for leave to appeal to the Court of Appeals, and are waiting for a decision on the motion.
It is possible the Court of Appeals will hold off on hearing the downstate EO #38 challenge until the Third Department issues a decision on the appeals in our case. While Judge Hartman’s decision in our case only annulled the “soft cap” portion of the regulations, it is much more thorough and well-reasoned than the perfunctory decision issued by the Second Department, and provides a better framework for appellate review of our challenge to these regulations. For this reason, we should continue to pursue the appeal in the Third Department. If the Third Department affirms Judge Hartman’s decision, or annuls the EO #38 regulations in their entirety, Court of Appeals review will be needed to resolve a conflict between the Second and Third Departments.
We will keep members posted on further developments. In the meantime, the regulations and filing requirements associated with EO #38 remain in effect throughout the State, with the exception of Nassau County where the earlier Supreme Court decision had stayed their implementation. As this issue of Intelligence goes to press, the EO #38 website still indicates that the stay remains in effect in Nassau County.
For Medicaid providers, the due date for EO #38 filings is the due date associated with the provider’s cost report. For nursing homes, the 2015 cost report is due July 15, 2016. The Department of Health has not released the cost report forms yet for home care agencies.
Contact: Dan Heim, dheim@leadingageny.org, 518-867-8866