A hospital lobbying group at the heart of scandals plaguing the Cuomo administration is again getting the governor’s help in pushing a late change to the state budget.

Aides to Governor Cuomo are quietly advancing a revision to the state insurance law known as “pay and pursue,” which would boost revenue to hospitals at the expense of higher costs for consumers. The proposal would require health plans to reimburse hospital claims without verifying in advance that the treatment is medically necessary—a routine check that insurers use to avoid waste and control costs.

The change is opposed by health plans, employers and labor unions, who say it would further drive up premiums that are already among the highest in the U.S.

But the proposal has the backing of the Greater New York Hospital Association, one of Cuomo’s biggest donors and closest allies, which has a track record of getting what it wants in Albany.

GNYHA played a central role in two of the Cuomo administration’s most controversial pandemic-related policies—a law providing liability protections for hospitals and other health-care providers, and a memo directing nursing homes to accept admission of COVID-positive patients being discharged from hospitals. Both decisions are among the subjects of an investigation by federal prosecutors and an impeachment inquiry.

How much those scandals have weakened the hospitals’ sway will be tested by the “pay and pursue” fight. 

Under current law, insurers can require hospitals to seek prior authorization before conducting non-emergency procedures. Plans can reject claims in advance if they deem the procedures not to be medically necessary, or if they believe treatment could be provided less expensively in a doctor’s office or outpatient surgery clinic rather than a hospital. A state-established system of “external review” is available to resolve disputes.

Under “pay and pursue,” plans would reimburse hospitals claims before subjecting them to review. If a procedure is found to have been medically unnecessary—or billed improperly or provided in the wrong setting—plans would have to seek a refund after the fact. Critics say this would effectively shift the burden of proof from hospitals to health plans, with costly consequences.

Both GNYHA and the Healthcare Association of New York touted the proposal in their budget testimony last month. In recent weeks, GNYHA has mounted a TV ad campaign to highlight hospitals’ role in fighting the coronavirus pandemic. The most recent spot touts the “pay and pursue” proposal and ends with the slogan: “Tell Albany: protect hospitals, not insurers.”

Their chief ally in this cause is the governor. At a meeting this past weekend, Cuomo administration officials told Assembly and Senate representatives that they want “pay and pursue” included in the budget due by the end of this month. The only evident impact on the budget would be to increase spending, because the new rules would apply to Medicaid managed care plans.

The proposal did not appear in the governor’s executive budget or in the so-called “30-day amendments” he was constitutionally authorized to offer last month. This may signal that Cuomo and GNYHA hope to slip the measure into one of the lengthy and complicated budget bills shortly before they come to a vote—a common strategy for avoiding public scrutiny and jamming the opposition.

The same tactic was used last year to expand legal immunity for hospitals and other health-care providers during the worst of the coronavirus outbreak last spring. That provision—based on a draft prepared by GNYHA—was inserted into a budget bill mere hours before it came to an early-morning vote. Some rank-and-file lawmakers said they did not realize what they were approving until it was too late—and have been clamoring to weaken or repeal the protections ever since.

GNYHA has also acknowledged that it conceived and requested the Health Department’s much-debated March 25 guidance memo, which directed nursing homes to accept COVID-positive discharges from hospitals without waiting for test results. That decision triggered one of the worst scandals of Cuomo’s term as governor—as critics blamed the policy for adding to a horrific death toll in nursing homes and the administration stonewalled requests for the relevant data

GNYHA also received unusual help from Cuomo in 2018, when it was seeking a boost in Medicaid payments and he was running for re-election. Cuomo used his leverage over the state budget to extract billions of dollars from Fidelis Care, a Catholic-affiliated health plan that was being taken over by a for-profit company. Later that year, after GNYHA quietly donated more than $1 million to his campaign, the governor used part of the Fidelis money to finance a Medicaid rate increase for hospitals and nursing homes. 

Critics say “pay and pursue” would represent a further valuable benefit for the hospital industry.

The proposal “is nothing more than a financial windfall for hospitals and a huge hidden tax on New York consumers,” said a joint letter from health plans, employers and labor unions.

Among the 29 signatories are the United Federation of Teachers, the 32BJ Health Fund, the Business Council of New York State, Associated General Contractors of New York State and two groups representing insurers: the New York Health Plan Association and the New York State Conference of Blue Cross and Blue Shield Plans.

During the pandemic, most hospitals lost revenue due to restrictions on elective procedures and consumer fear of infection. The hardest-hit facilities also faced unexpected costs for hazard pay, overtime and pandemic-related equipment and supplies. However, the industry has also reaped billions of dollars in federal relief that reduced or eliminated those losses for many facilities.

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

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