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Proposed Regulations Published on Nursing Home Minimum Direct Care Spending and Minimum Nursing Staff Hours

The Department of Health’s (DOH) proposed regulations setting minimums for nursing home direct care spending and nursing hours per resident day were published for comment in the Nov. 17, 2021 issue of the New York State Register. According to the regulatory publication, both sets of new requirements would take effect starting Jan. 1, 2022. LeadingAge NY will be submitting formal written comments on each of the proposals prior to the Jan. 16, 2022 deadline and is actively seeking member comments and questions.

LeadingAge NY and its members opposed the legislation that authorized these two sets of requirements, but we were ultimately unsuccessful. The draft regulations were considered by the Public Health and Health Planning Council (PHHPC) during its Oct. 7th meeting. LeadingAge NY submitted comments to the PHHPC and DOH on the regulations, focused on the inadequacy of Medicaid rates, the lack of available staff, and several fundamental and technical flaws in the statute and proposed regulations.

Below is a brief summary of each of these proposed regulations:

Minimum Direct Care Spending Requirement ("70/40") and Cap on Surplus

This regulation would: (1) require nursing homes to spend 70 percent of their operating revenue from all payers on direct resident care and 40 percent on "resident-facing staffing"; and (2) cap any surplus of operating revenue over operating and non-operating expenses at 5 percent of operating revenues. These requirements would apply to annual spending on and after Jan. 1, 2022. Continuing Care Retirement Community (CCRC) nursing homes and facilities that primarily care for medically fragile children, people with HIV, people requiring behavioral intervention, or people with neurodegenerative conditions are exempted from these requirements. Other facilities that offer specialty care may also be exempted.

Providers with surplus operating revenue exceeding 5 percent of operating revenues and those not meeting the minimum spending thresholds (in the absence of an exemption or waiver) would be required to remit the overage and/or the difference between the minimum spending requirement and the actual amount of spending to the State by Nov. 1st of the following year. The funding from these penalties would be added to the Nursing Home Quality Initiative (NHQI).

The proposed regulations define several key terms affecting how these requirements would be applied:

  • “Revenue” is defined as “total operating revenue from or on behalf of residents of the residential health care facility, government payers, or third-party payers, to pay for a resident’s occupancy of the residential health care facility, resident care, and the operation of the residential health care facility” as reported on annual Medicaid cost reports. The average increase in Medicaid capital reimbursement over the previous three years would be subtracted from revenue (this is aimed at excluding new capital expenditures from the calculation, although the duration of the exclusion is unclear).
  • “Direct resident care” would include most expenses reported in the Non-Revenue Support, Ancillary, and Program Services categories of the Medicaid cost report. However, administrative costs (other than nurse administration), capital costs, debt service, taxes (other than sales taxes or payroll taxes), capital depreciation, and rent and leases would not be counted as direct resident care spending, nor would spending on fiscal services, security, grounds, utilization review, or medical records.
  • “Resident-facing staffing costs” would include those reported in the Ancillary and Program Services categories of the Medicaid cost report (i.e., nursing, therapy, medical services).

To calculate the amount spent on direct resident care and on resident-facing staffing, "contracted out" nursing costs would be reduced by 15 percent. "Contracted out" is defined as "services provided by registered professional nurses, licensed practical nurses, or certified nurse aides who provide services in a residential health care facility through contractual or other employment agreement, whether such agreement is entered into by the individual practitioner or by an employment agency on behalf of the individual practitioner. Such agreement may be oral or in writing."

As previously noted, CCRC nursing homes are not subject to these requirements, nor are facilities that “primarily” care for designated specialty populations such as children, people requiring behavioral interventions or neurodegenerative services, or individuals with HIV/AIDS. "Primarily" is defined as at least 51 percent of a facility’s certified beds being designated for these specialty services. Facilities that serve other specialized populations are not automatically exempted, but could apply for a waiver from DOH.

DOH may also waive these requirements, if a facility experiences unexpected or exceptional circumstances. In determining whether to waive the spending requirements, DOH would consider factors such as whether the circumstances could have been anticipated, whether other facilities experienced similar circumstances but did not apply for a waiver, and whether the facility has implemented policies and procedures to ensure that the circumstances do not recur. In addition, DOH may also agree to exclude certain revenues and expenses from the calculation, if the facility demonstrates that the revenues and expenses were incurred due to a natural disaster; the receipt of extraordinary, non-recurring revenue that does not accurately reflect operating revenue, including, but not limited to, revenue received through insurance or legal settlements.

DOH will assess compliance with these requirements annually based on facility cost report filings. For this purpose, any nursing home that did not submit a 2019 Medicaid cost report will be required to provide DOH with data on the facility’s direct resident care and resident-facing staffing expenses, along with a written certification attesting that all such data is complete and accurate. If the data is not submitted within a reasonable timeframe, DOH would use the facility's previous cost report data.

Minimum Nurse Staffing Hours

Starting Jan. 1, 2022, nursing homes will be required to employ or retain, at a minimum, certified nurse aides (CNAs), registered professional nurses (RNs), licensed practical nurses (LPNs), or nurse aides in sufficient numbers to maintain the following staffing hours per resident day:

  • Effective during calendar year 2022, daily average staffing hours equal to 3.5 hours of care per resident per day by a CNA or “nurse aide,” RN, or LPN. Of the 3.5 hours, at least 2.2 hours must be provided by a CNA or nurse aide, and at least 1.1 hours must be provided by an RN or LPN. For this purpose, a nurse aide is an individual who is reported in the nurse aide hour component of the Centers for Medicare and Medicaid Services (CMS) Payroll-Based Journal (PBJ), but is not yet certified as a CNA (e.g., a nurse aide trainee or temporary nurse aide). A nurse aide does not include volunteers, paid feeding assistants, or non-licensed individuals who are approved by DOH to administer medications to residents.
  • Effective Jan. 1, 2023 and thereafter, the above requirements would continue, except that hours of care provided by nurse aides (as defined above) would no longer be counted toward the 3.5-hour overall requirement or the 2.2-hour minimum CNA requirement; only those furnished by certified nurse aides would be counted. 

In calculating hours of care, nurses and aides would not be counted as part of nursing staff while: (1) performing administrative services, as defined under PBJ requirements; or (2) attending training and unavailable to perform their primary job duties.

DOH would determine compliance on a quarterly basis by comparing the daily average of the number of hours provided per resident day using the most recent PBJ data and the facility’s average daily census to the minimum requirements. DOH would impose a civil penalty of up to $2,000 per day for each day in the quarter that a facility fails to comply with the minimum nursing staff requirements, unless mitigating or aggravating factors exist. Although the staffing requirements take effect on Jan. 1, 2022, these penalties cannot be imposed until April 1, 2022. DOH would be authorized to reduce penalties to as low as $300 per day, if it determines that the facility was affected by:

  • Extraordinary circumstances (e.g., a natural disaster, a declared emergency, a catastrophic event that physically damaged the facility or impaired staff access to the facility). However, the facility must first demonstrate that these circumstances could not have been prevented or mitigated by implementing the facility’s pandemic emergency plan and that the facility complied with the disaster and emergency preparedness requirements in regulations.
  • An “acute labor supply shortage” of aides and/or nurses in the facility’s locale. DOH would make quarterly determinations on whether there are acute labor supply shortages of aides or nurses in any Metropolitan or Nonmetropolitan Area of the State. Even if a facility were located in an area experiencing an acute labor supply shortage, it would need to demonstrate that it: (1) made reasonable attempts to procure sufficient staffing during the period of non-compliance; and (2) took steps to ensure resident health and safety in spite of the labor supply shortage, such as discontinuing admissions, closing units, or transferring residents to another appropriate facility.
  • A verifiable union dispute between the facility and nurse aides, CNAs, LPNs, or RNs employed or contracted by such facility, resulting in a labor shortage at the facility.

The enacted State Budget allocated $64 million for each of Fiscal Year (FY) 2022 (the current year) and FY 2023 to assist with the cost of this mandate. The proposed regulation directs DOH to determine which nursing homes are anticipated to be in compliance with the minimum direct care spending requirements (see above) and whether those homes must expend additional funds to comply with the minimum hours regulation. Those nursing homes that need to spend additional amounts to comply with the minimum hours regulation will be eligible to receive funding to underwrite some or all of these costs. DOH will be submitting a proposed Medicaid State Plan Amendment to CMS in the near future to secure matching federal funds for these adjustments.

Comments on the regulations are due on Jan. 16th and should be submitted here. LeadingAge NY is in the process of drafting formal comments on both the minimum direct care spending and minimum nurse staffing hours regulations. We are actively seeking member feedback on these proposals to inform our comments. Please direct your comments or questions to Karen Lipson by Dec. 22, 2021.

Contact: Karen Lipson, klipson@leadingageny.org, 518-867-8838