State Supreme Court Rules in Providers’ Favor on CMI Challenge

Acting Supreme Court Justice Kimberly O’Connor today issued a decision in LeadingAge New York, Inc., et al. v. Zucker, et al. which invalidates a change to the Medicaid case-mix index (CMI) determination process that the Department of Health (DOH) had applied to July 2019 nursing home rates. The decision follows a Nov. 7, 2019 temporary injunction ordered by Judge O’Connor that had prohibited the State from implementing a retroactive change in CMI calculations for the July 2019 Medicaid rates until the Court was able to rule on the merits of the case.

Judge O’Connor’s decision granted our petition (and two other similar suits) “…only to the extent of annulling the Department’s case mix adjustments effective July 1, 2019, and enjoining the respondents-defendants from using the ‘average calculation’ method they adopted effective July 1, 2019 for the case mix adjustment and directing respondents-defendants to continue using the method for calculating the case mix adjustment in effect as of June 30, 2019, until the ‘average calculation’ method is adopted as a rule in accordance with the State Administrative Procedure Act” (p. 54 of the decision).

Judge O’Connor did not decide on any other arguments in the cases, stating that they were “moot and/or have been rendered academic by this decision” (p. 55 of the decision). She did, however, criticize DOH’s handling of the legislatively mandated Nursing Home Acuity Workgroup, which was supposed to deliberate and make recommendations on any changes to the CMI methodology. Her decision noted that “[b]y failing to engage the Workgroup in the process as the Legislature plainly intended, the Commissioner and Department wholly failed to comply with their statutory obligation, and that, in the Court’s opinion, is inappropriate and disregards the mandate of the Legislature” (p. 54 of the decision).

Following issuance of the temporary injunction in November 2019, DOH reversed the CMI adjustments that had been made to the July 2019 rates to restore the prior methodology, which is based on CMI determined as of a “picture date” each six months. DOH has discontinued its previous practice of announcing the picture dates to providers beforehand but made no further efforts to actually implement the proposed new method of taking an average CMI for all Medicaid patient assessments conducted during each six-month period. DOH did publish proposed regulations in January 2020 to make this change to the methodology but has not yet finalized them. In addition, the Centers for Medicare and Medicaid Services (CMS) has yet to act on the Medicaid State Plan Amendment that the State submitted in June 2019. LeadingAge NY and other groups have urged CMS to not approve these regulations.

The LeadingAge New York lawsuit was filed in October 2019 and alleged that New York health officials and DOH had violated federal and state law and various regulations by reducing Medicaid funding to nursing homes by $352 million annually through the CMI change. An upcoming memo from Hinman Straub, LeadingAge NY’s general counsel, will summarize the decision in further detail.

Contact: Dan Heim, dheim@leadingageny.org, or Darius Kirstein, dkirstein@leadingageny.org