A group of fiscal intermediaries (FIs) on July 22, 2024, filed a lawsuit against the New York State Department of Health (DOH) and its commissioner, Dr. James McDonald, alleging that the defendants disregarded established administrative procedures, acted arbitrarily and misused their discretion in formulating and implementing a new reimbursement methodology for the Consumer Directed Personal Assistance Program (CDPAP). The lawsuit is the first aimed at the program since Gov. Kathy Hochul signed into law the New York State Budget for fiscal year 2024-2025, which, in an effort to cut ballooning costs, calls for a single FI to administer the program. There currently are approximately 700 home health agencies, independent living centers and other businesses that act as FIs.
The CDPA program allows New York State Medicaid beneficiaries who are chronically ill or physically disabled (Consumers) to self-direct their home care. This includes recruiting, hiring and supervising their own aides (Personal Assistants), who are often family members. The program serves approximately 250,000 Consumers and employs around 300,000 Personal Assistants. Among other duties, FIs manage the wages and benefits of these Personal Assistants, ensure compliance with tax and insurance requirements, and maintain comprehensive personnel and Consumer records.
Currently, reimbursement for FIs under Medicaid Managed Care (MMC) is based on a single hourly rate that encompasses both administrative and direct care costs negotiated between MMC plans and FIs. The new reimbursement methodology introduced by DOH calls for a bifurcated reimbursement structure: one component for direct care costs and another for administrative costs. The new methodology requires MMC plans to pay FIs for the administrative component of their rates according to the Fee-for-Service (FFS) Medicaid three tiers of reimbursement, with payment for each tier based on the number of direct care hours actually delivered to each Consumer. According to a June 28, 2024, PowerPoint presentation by DOH, the revised reimbursement methodology will reduce costs by 9.5 percent on average, depending on the region in New York state.
Allegations
The lawsuit alleges that this new reimbursement methodology, set to take effect on Aug. 1, 2024, was adopted without adhering to the procedural requirements of the State Administrative Procedure Act (SAPA). Specifically, the lawsuit claims that the change was implemented without the requisite notice of proposed rulemaking or opportunity for public comment, thus violating SAPA's procedural mandates. Instead, DOH announced this change at a monthly MMC policy and planning meeting with MMC plans held on May 9, 2024, to which FIs were not invited and, therefore, did not attend. Following a similar pattern, DOH reiterated the change at a June 28, 2024, meeting – again without the presence of, or invitation to, FIs. It wasn't until July 2, 2024, that DOH publicly announced the change through an online Medicaid Update, marking the first general public notification of the new methodology.
The lawsuit also contends that the new reimbursement methodology is arbitrary and capricious, conflicts with the existing FFS Medicaid fee schedule and lacks justification through a proper analysis of the reimbursement rates. Finally, the lawsuit asserts that the defendants were not offered any explanation for adopting a rate below the rate adopted five years ago for FI administrative costs under FFS Medicaid, which is determined by the number of direct care hours authorized per month for each Consumer.
The plaintiffs seek judicial intervention to invalidate the new methodology, enjoin its implementation permanently and grant additional relief as deemed appropriate by the court, including the recovery of legal costs and disbursements.
Holland & Knight attorneys will monitor the lawsuit, the court's decision and any other legal actions that may be taken to halt, modify or eliminate the new CDPAP structure going into effect April 1, 2025.
