Last month, the New York State Court of Appeals invalidated a state Department of Health (DOH) regulation that restricted certain health care providers contracting with the state from paying executives more than $199,000 annually, regardless of whether the funds came from the state or not. However, the Court upheld two other DOH regulations; one that limits providers from using public tax-payer money directly to pay executives in excess of $199,000 annually, and another that limits the amount of public funds used for administrative costs.

In January 2012, Governor Andrew Cuomo issued Executive Order 38 in response to media reports calling out high executive compensation rates among nonprofit health care organizations receiving funds from Medicaid. Executive Order 38 directed the DOH to regulate the use of state funds for executive compensation and administrative costs. Consistent with this executive order, the DOH implemented three regulations that imposed: (1) a “hard cap” prohibiting covered providers from using public funds directly to pay executives more than $199,000 (2) another “hard cap” limiting the percentage of public funds used for administrative costs to fifteen percent annually by 2015; and (3) a “soft cap” subjecting covered providers to penalties should they pay executives, with certain exceptions, more than $199,000, regardless of whether the money used to pay them came from public or private sources.

Shortly after the regulations were announced, a group of nursing homes, assisted-living programs, home-care agencies, and trade associations brought lawsuits challenging the DOH’s authority to issue the regulations. These lawsuits, arguing that the DOH exceeded its regulatory authority in promulgating the regulations, eventually made their way all the way up to the courts to the Court of Appeals.

The Court’s majority opinion in LeadingAge New York, Inc. v. Shah, authored by Chief Judge DiFiore, held that the hard cap regulations fell within the DOH’s regulatory authority and were valid agency actions. With regard to the soft cap, however, the majority concluded that the DOH did in fact exceed its authority, usurped the Legislature’s role, and violated the separation of powers doctrine. Accordingly, the soft cap regulation subjecting covered providers to penalties if they paid executives above the $199,000 threshold, regardless of the source of funds, was struck down by the Court.

In accordance with this decision, covered health care providers who contract with the state will no longer need to comply with the “soft cap” regulation or fear penalties for failure to do so. However, health care providers covered by the “hard cap” regulations will still need to comply with the limitations set under those regulations, absent an applicable exception.

On December 31, 2016, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction that prohibits the U.S. Department of Health and Human Services (HHS) from enforcing certain provisions of its regulations implementing Section 1557 of the Affordable Care Act that prohibit discrimination on the basis of gender identity or termination of pregnancy. This ruling, in Franciscan Alliance v. Burwell (Case No. 7:16-cv-00108-O), a case filed by the Franciscan Alliance (a Catholic hospital system), a Catholic medical group, a Christian medical association, and eight states in which the plaintiffs allege, among other allegations, that the Section 1557 regulations force them to provide gender transition services and abortion services against their religious beliefs and medical judgment in violation of the Religious Freedom Restoration Act (“RFRA”).

By way of background, the Section 1557 regulations prohibit discrimination on the basis of gender identify, which regulations define to mean “an internal sense of gender, which may be male, female, neither, or a combination of male and female, and which may be different from an individual’s sex assigned at birth.”[i]  The regulations prohibit a categorical insurance coverage exclusion or limitation for all health services related to gender transition and requires providers to provide transition-related procedures if the provider performs an analogous service in a different context.  The plaintiffs also alleged that because they perform certain procedures for miscarriages, the Section 1557 regulations will require them to perform such procedures for abortions to avoid discriminating on the basis of termination of pregnancy.

The court held that the Section 1557 regulations failed to incorporate the exceptions for religious institutions and abortions services that Congress provided in Title IX. The court also found that Title IX, which is incorporated by Section 1557 statute, only prohibits discrimination on the basis of biological sex. The court further noted that “the government’s own health insurance programs, Medicare and Medicaid, do not mandate coverage for transition surgeries; the military’s health insurance program, TRICARE, specifically excludes coverage for transition surgeries. . .”[ii]

Specifically, the court concluded that “the regulation violates the Administrative Procedure Act (“APA”) by contradicting existing law and exceeding statutory authority, and the regulation likely violates the [RFRA] as applied to Private Plaintiffs.” The court also agreed that the plaintiffs would likely suffer irreparable harm without the injunction as “one of the State Plaintiffs is already undergoing investigation by the HHS’s OCR, and entities similarly situated to Private Plaintiffs have already been sued under the Rule since it took partial effect on May 18, 2016” (emphasis added).  Conversely, the court found that HHS will not suffer any harm by delaying implementation of this portion of the Section 1557 regulations.  It should be noted that this is a ruling granting a preliminary injunction and a final ruling on the merits of a permanent injunction is still to come.

While an HHS appeal of this order would normally be expected, the impending change of Administration—including new leadership at HHS and an expected early Congressional push to repeal and replace the Affordable Care Act—makes it very uncertain whether an appeal will be filed, or ruled upon, prior to any possible changes in the regulatory scheme or underlying statute.

Health care entities should take note, however, that the remaining provisions of the Section 1557 regulations, including those that prohibit discrimination on the basis of disability, race, color, age, national origin, or sex (other than gender identity), are not impacted by the nationwide injunction and HHS can still enforce such provisions.  Indeed, HHS has issued a broadcast email specifically stating that:

“[OCR] will continue to enforce the law—including its important protections against discrimination on the basis of race, color, national origin, age, or disability and its provisions aimed at enhancing language assistance for people with limited English proficiency, as well as other sex discrimination provisions—to the full extent consistent with the Court’s order.”

Health care entities should closely monitor this area of law for further developments and ensure that their operations are compliant with the remaining provisions of the Section 1557 regulations.

Further information regarding Section 1557 and its accompanying regulations can be found in EBG Client Alerts and Webinars.

[i] 45 C.F.R. § 92.4

[ii] The court cited Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751, 2780 (2014).  The Supreme Court will consider whether Title IX covers gender identity in Gloucester Cty. School Bd. V. G.G., Sup. Ct. No. 16-273, during the current term.

On Monday, June 27, 2016, the U.S. Supreme Court declined to review a D.C. Circuit Court of Appeals decision upholding the new U.S. Department of Labor’s (DOL) requirement that home care providers pay the federal minimum wage and overtime to home care workers.  As we previously discussed, on August 21, 2015, the D.C. Circuit in Home Care Association of America v. Weil affirmed the validity of the Home Care Final Rule, which eliminated a long-existing prior regulation and barred third-party employers from claiming minimum wage and overtime exemptions for home care workers.

The U.S. Supreme Court’s decision not to grant review ends any hope that home care providers had that the implementation of the new regulation might be reversed. Accordingly, all home care providers should make sure that they are paying home care workers at least the federal minimum wage and overtime as well as any additional amounts required under state and local laws. Because Medicare, Medicaid and other government programs typically pay only at a flat hourly rate for home care services, providers will be forced to absorb the costs of any overtime or limit the number of hours home care providers work to avoid overtime costs.

Maxine Neuhauser
Maxine Neuhauser

In conjunction with unveiling its Final Overtime Rule, the DOL announced a Time Limited Non-Enforcement Policy (“Policy”) for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. Under the Policy, from December 1, 2016, to March 17, 2019, the DOL will not enforce the updated salary threshold of $913 per week for this subset of employers.

The Policy applies only to DOL enforcement actions. The FLSA, however, provides employees with the right to bring a private cause of action.  The Policy, which does not change the effective date of the rule for Medicaid-funded employers, provides no protection from such lawsuits (including class actions) by employees who have been paid less than the updated salary threshold.

Thus, Medicaid-funded employers “protected” by the Policy, will have the same legal obligation to comply with the new salary threshold as of December 1 as every other employer and back pay liability will begin accruing as of that date.

The statute of limitations for FLSA violations is 2 years, unless the violation is willful, in which case the statute of limitation is 3 years.  Keep in mind that the FLSA provides double damages for private litigants and also attorneys’ fees and costs.  Accordingly, employees whose employers misclassify and underpay them in reliance on the Policy, may be incentivized to wait to file suit until after March 17, 2019 – when their potential recovery will be the greatest.

As such,  the Policy does virtually nothing to provide relief to Medicaid-funded employers, who will remain between a rock (the DOL’s higher salary threshold) and a hard place (Medicaid contracts that contain no mechanism for additional funding to meet new salary obligations) – and arguably, will lull employers into a false sense of security that could prove quite expensive.

It should be an easy matter for an employer to determine which federal laws apply to it.  Not so, however, given the way in which the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) administers and enforces the federal affirmative action laws (Executive Order 11246, the Rehabilitation Act, and the Vietnam Era Veterans Readjustment Assistance Act).

In the last sixteen months, OFCCP has (a) issued an expansive and controversial new “Directive 293,” asserting broad and deep jurisdiction over health care providers who participate in TRICARE, FEHBP or Medicare and Medicaid programs; (b) been slapped on the wrist by Congress when it passed the 2012 National Defense Authorization Act (NDAA), which expressly exempts from OFCCP jurisdiction medical providers who participate in the TRICARE program; and (c) issued without substantial comment a notice that it is withdrawing Directive 293 along with two older directives exempting Medicare Parts A and B and Medicaid from coverage.

As OFCCP is wont to do, it has withdrawn directives without replacing them. It has simply announced that it is suspending reviews of TRICARE participants (pending an appellate decision on an open case), and that it will otherwise approach health care providers on a “case by case” basis. See Notice of Rescission Directive 293, Coverage of Health Care Providers and Insurers, issued December 16, 2010. (PDF)

Of course, given the provisions of the NDAA, it is not at all clear how OFCCP believes it may be able to assert jurisdiction based on TRICARE participation, regardless of the outcome of the pending case.

Ultimately, much will depend on the outcome of a case pending in federal district court, OFCCP v. UPMC Braddock. UPMC is an appeal of an Administrative Review Board (ARB) decision holding that three hospitals which did not directly contract with the federal government are, nonetheless, covered subcontractors subject to OFCCP jurisdiction.  The ARB found jurisdiction based on an HMO contract covering federal government employees, despite federal acquisition regulations excepting such contracts from the definition of covered “subcontractors.”

Under current circumstances, any health care provider that receives a notice of compliance review would be wise to closely examine the basis for OFCCP’s jurisdiction. If the review is based on participation in federal FEHBP, Medicare, or Medicaid programs, there is certainly reasonable doubt that OFCCP actually has jurisdiction.

For a detailed analysis of the history of OFCCP and the health care industry, see AHLA Connections, Vol. 15, Issue 5, May 2011 (“New Assertions of Jurisdiction by OFCCP”) .


Rock Center with Brian Williams recently featured a story about hospitals that were “overwhelmed by ‘permanent residents.’” The focus of the piece was individuals whose need for acute care in a hospital had long since been addressed, but who have no insurance or other way to pay for the long-term care they do need, in a nursing home or rehabilitation facility, or in their own home. Without a safe place to which discharge is available for these patients, hospitals must continue to provide for their care.

 One of the individuals profiled by the piece, and many of those who unnecessarily languish in hospital beds, are undocumented individuals without health insurance or access to government health care programs, including Medicaid. However, in various states around the country, including New York, there is a solution to the problem – a status called PRUCOL, short for permanently residing in the United States under color of law.  (PRUCOL is not an immigration status granted by the Department of Homeland Security, it is a public benefits eligibility category based upon a foreign national’s immigration status. Under what circumstances an individual will be considered to be PRUCOL, and eligible for Medicaid, is determined separately by each state program.)


Many people think that one must be a lawful permanent resident of the United States (i.e., have a “green card”) or be a refugee to be eligible for Medicaid. This belief is based upon the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (“PRWORA”)(commonly called “Welfare Reform”)(Pub. L. 104-193, codified in various sections of Titles 8 and 42 of the United States Code.)Generally speaking, aliens who are lawfully admitted for permanent residence, asylees, refugees, paroled into the United States for at least one year, having their deportation withheld, granted conditional entry, Cuban or Haitian entrants, or victims of battering or extreme cruelty by a family member are “qualified aliens” (see 8 U.S.C. §1641[b] – [c]) and are generally eligible for federal benefit programs, including Medicaid, if lawfully residing in the United States before August 22, 1996. Qualified aliens entering the U.S. on or after August 22, 1996 are eligible for federal Medicaid after five years. While other, “non-qualified” aliens are ineligible for federal Medicaid, states may pass laws subsequent to August 22, 1996 providing for their eligibility for state Medicaid. Notwithstanding the above, all aliens may receive state and federally funded emergency medical treatment. (see 8 U.S.C. §§ 1611 – 1613, 1621).  While New York, in response to PRWORA, actually passed legislation making aliens ineligible for Medicaid, that law was struck down as being violative of the New York State Constitution in Aliessa v. Novello, 96 N.Y.2d 418 (2001).


New York State Department of Health Informational Letters 07 OHIP/INF 2, March 15, 2007 (PDF); 08 OHIP/INF 4, August 4, 2008 (PDF); and Administrative Directive 04 OMM/ADM-7, October 26, 2004 (PDF) spell out the criteria for Medicaid eligibility for PRUCOL aliens, defined as aliens who are living in the United States with the knowledge and permission, or acquiescence, of the federal government, and whose departure the agency does not contemplate enforcing. This condition is considered satisfied if: (1) it is the agency’s policy or practice not to enforce the departure of aliens in a particular category; or (2) it appears that the federal immigration agency is permitting the alien to reside in the United States indefinitely. In addition to the many statuses listed in these two documents that have been granted by the United States Citizenship and Immigration Services (USCIS), applications pending for a reasonable time (generally six months) with USCIS or the Executive Office for Immigration Review for various statuses will qualify an alien for PRUCOL status, and thus eligibility for Medicaid, if other eligibility criteria are met, including applicants for:

– Adjustment of status;

– Asylum;

– Suspension of deportation or cancellation of removal;

– Temporary protected status;

– Any other status that permits the applicant to work in the United States.

– Suspension of deportation;

– Cancellation of removal; or

– Deferred action.

California also has broad PRUCOL eligibility for Medicaid.  Hawaii, Maine, Massachusetts, Pennsylvania, and Virginia has more limited eligibility, while New Jersey grandfathers eligibles in nursing homes as of June 30, 1996, and New Mexico grandfathers arrivals prior to August 22. 1996 (effective date of PRWORA).  Various states also have other specialized categories of Medicaid eligibility.


In sum, undocumented individuals who remain in a hospital for financial reasons after the need for acute care has been addressed generally have good arguments for eligibility for an immigration status, the pendency of which will provide the basis for a PRUCOL determination and Medicaid eligibility.  Often, discharge arrangements can be made with long term care providers  during consideration of the immigration application, while the situation ripens into PRUCOL status.   Like many other current initiatives, this leads to higher quality care, at less cost.