Nearly half of New York’s nursing homes would be effectively exempted from a two-year-old minimum spending law under terms of a rollback passed by state lawmakers this week.

Enacted as a response to the coronavirus pandemic, the 2021 law required nursing homes to spend at least 70 percent of their revenue on patient care, including at least 40 percent on patient-facing staff. As a penalty, facilities that fail to meet this standard must forfeit the amount of any shortfall to the state.

The requirement only recently took full effect, after the Health Department completed its rule-making process in December.

Before it could be enforced, however, the Legislature unanimously voted to overhaul the law as part of its end-of-session rush. Jointly sponsored by the two Health Committee chairs, Assembly Member Amy Paulin, D-Westchester, and Sen. Gustavo Rivera, D-Bronx, the four-year “demonstration project”  passed the Assembly on Monday and the Senate on Wednesday. 

The stated goal is to incentivize nursing homes to limit their use of contract workers hired through staffing agencies, which is seen as compromising quality of care because temporary employees are less familiar with the residents’ individual needs and the facility’s particular procedures.

However, using contract workers is typically much more expensive than hiring full-time staff – so it’s unclear why operators would need a further financial incentive to use them as little as possible. Also, the new legislation does not explicitly require homes to hire regular employees as they shed agency workers.

Under the proposed revisions, homes that limit their use of agency workers to 10 percent or less of staffing hours in the first year could disregard their non-Medicaid revenue for purposes of the minimum spending standard. The 70 percent spending standard would apply only to the Medicaid portion of their revenue – which is roughly half of a typical nursing home’s total income.

According to nursing home payroll data gathered by the federal government, 48 percent of the state’s nursing homes would have qualified for this exemption during the last quarter of 2022.

If signed by Governor Hochul, the revised law would also roll back penalties. Homes that reduce their use of agency staff by at least 30 percent per year, for example, could keep half the amount they would otherwise have to forfeit under minimum-spending rule. This provision appears to apply regardless of the number of workers involved; a home that cuts its agency staff from 10 workers to seven would qualify for the same relief as a home that goes from 100 to 70.

The use of temporary health-care staffing agencies has surged nationwide in the aftermath of the pandemic, and it’s especially high among New York’s nursing homes.

According to the federal payroll data, agency workers accounted for 17 percent of New York’s nursing home staff hours in December 2022 – the eighth-highest rate among the 50 states.

At the same time, New York’s homes averaged just 3.32 hours of staff time per resident day, which was sixth-lowest among the states (see chart below).

A second law passed in 2021 nominally requires homes to provide at least 3.5 hours of staff time per resident day – a standard that three-quarters of homes were not meeting as of late last year.

The revisions to the minimum spending law were supported by 1199 SEIU, the influential health-care labor union which spearheaded a lobbying campaign for the original law in 2021.

The union proposed this year’s amendments in conjunction with the New York State Health Facilities Association, representing for-profit nursing homes – reportedly with the understanding that its members will renegotiate their contracts with 1199 if the bill becomes law.

This is the second time this year that 1199 has advocated rolling back a policy it previously helped to push through.

As part of the state budget enacted in April, the union successfully lobbied to cut wage supplements for home health aides and redirect part of the money to subsidize a union-operated health benefits fund. More detail on that deal can be found in this post from April.

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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