New York Legislature Rejects Proposal to Grant Health Commissioner Authority to Appoint Board Members and Operators of Not-for-Profit Health Care Facilities

by Proskauer - Not for Profit/Exempt Organizations

Earlier this year, Governor Andrew Cuomo proposed changes to the New York Public Health Law which would have given the Commissioner of the Department of Health the power to remove managers of hospitals, diagnostic and treatment centers, and adult care facilities. The Commissioner would have also had the authority to appoint temporary members of the board of directors, and/or a temporary operator, of these facilities if the Commissioner deemed that there had been significant management failures that jeopardized existing or continued access to necessary services within a community (e.g., financial instability). These changes were presented in the Governor’s proposed 2012-13 Executive Budget and Reform Plan on January 17, 2012 (See the Governor’s proposal here, at page 57 – 66 and here, at page 15). The final Budget that was enacted on March 30, 2012, however, did not include the provisions which granted the Commissioner such powers over the not-for-profit health care entities. [Chapter 56 of the Laws of New York, 2012].

The relevant provisions sought to grant the Commissioner authority to:

(1)        Temporarily suspend or limit an operating certificate of a not-for-profit corporation participating in the Medicaid program without a hearing upon: a) repeated violations of PHL § 2806 (e.g., failure of a hospital to comply with the provisions of Article 28 of the public health law and the rules and regulations promulgated thereunder), b) the indictment on felony charges of any member of the hospital’s board of directors, or c) notice from the Attorney General of an action to remove a member of the corporation’s board of directors.

(2)        Temporarily appoint members of the board of directors of such not-for-profit entities during the term of the temporary suspension, as necessary, to preserve access to services within the community.

(3)        Revoke the operating certificate of an entity participating in the Medicaid program if a member of the board of the directors or a member of a limited liability company has been convicted of a class A, B or C felony, in order to ensure the effectiveness of the governing board of the facility.

(4)        Establish an operator of a general hospital, diagnostic and treatment center, or an adult care facility on a temporary basis to preserve the best interests of the residents or patients and community served by the facility when a statement of deficiencies has been issued by the Department of Health for that facility and upon a determination by the Commissioner that significant management failures exist in the facility, including but not limited to, administrative, operational or clinical deficiencies or financial instability.

Although these expansive powers were rejected by the legislature in this year’s Budget proposal, New York not-for-profit health care entities should continue to monitor proposed changes to legislation or regulations pertaining to this issue since this is not the first time that legislation aimed to expand the powers of the Commissioner over not-for-profit health care entity management has been proposed, and the issue may come up again in the future.

In addition, not-for-profit heath care entities should monitor the new reform plan initiatives proposed by Attorney General Eric Schneiderman which we summarized in a previous Blog entry. These initiatives, if enacted, may significantly impact the management and operations of not-for-profit entities in New York.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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