Nursing and Residential Care facilities

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.

By Julia E. Lloyd and Eric J. Conn

Last week, the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”) launched a new National Emphasis Program targeting Nursing Homes and Residential Care facilities (“Nursing Home NEP”).  In an accompanying Press Release, OSHA announced that the Nursing Home NEP aims to protect workers from safety and health hazards “common in medical industries.”  Effective upon its announcement and for a three-year period thereafter, the NEP focuses on ergonomic hazards (e.g., strains and sprains from patient  handling), exposure to bloodborne pathogens (e.g., needlestick injuries), workplace violence (e.g., assaults by patients or others), and other hazards commonly found within nursing homes and residential care facilities (e.g., exposure to hazardous chemicals or infectious diseases).

By way of background, the Nursing Home NEP is not the first of its kind.  Nearly a decade ago, in September 2002, OSHA issued a virtually identical Nursing Home NEP, which targeted the same types of employers and all of the same hazards except for workplace violence.  Today’s OSHA evaluated the need for a new health industry NEP, and reviewed 2010 data from the Bureau of Labor Statistics.  That review revealed that nursing and residential care facilities still had one of the highest DART rates of all industries.  Specifically, the DART rate for nursing and residential care was nearly three times the national average.

Reacting to this data, the Assistant Secretary of Labor for OSHA, David Michaels, declared: “These are people who have dedicated their lives to caring for our loved ones when they are not well. It is not acceptable that they continue to get hurt at such high rates. . . .  Our new emphasis program for inspecting these facilities will strengthen protections for society’s caretakers.”

As was the case with the 2002 NEP, the new Nursing Home NEP focuses primarily on ergonomic stressors relating to resident handling, exposure to blood and other potentially infectious materials, exposure to tuberculosis, and slips, trips and falls.  This NEP also addresses workplace violence, which was not part of the 2002 NEP.

What’s most interesting about the Nursing Home NEP, especially as compared to OSHA’s other Special Emphasis Programs, is its intended heavy reliance on the General Duty Clause; i.e. the catch-all duty in the OSH Act requiring all employers to provide a workplace free from “recognized hazards that are likely to cause death or serious physical harm.”  There are no specific OSHA standards for two of the primary hazards targeted by this NEP — (1) Ergonomics; and (2) Workplace Violence — so citations related to those two hazards will have to fall under the General Duty Clause.

In determining which facilities to inspect under the Nursing Home NEP, OSHA has prepared a list of Skilled Nursing Care, Immediate Care, and Nursing and Residential Care facilities with DART rates at or above 10.0 as reported in the CY 2010 OSHA Data Initiative (some 700 sites).  Each OSHA Area Office must conduct at least three Nursing Home NEP inspections per year.  The Nursing Home NEP also continued a recent trend by mandating that all approved State Plan OSHA Programs also adopt the NEP, and also conduct at least three Nursing Home NEP inspections per year.

 Although the scope of this NEP covers only nursing homes and residential care facilities, practically speaking, it will have a major impact on the healthcare industry as a whole.  The reason is, a major component of the NEPs launched under the current OSHA leadership has been extensive training of OSHA’s compliance safety and health officers (CSHOs), who conduct the NEP inspections.  The training related to the Nursing Home NEP will arm CSHOs all over the country with a better understanding of the OSHA standards and General Duty Clause application to the supposed hazards common in nursing homes.  Those hazards happen also to be the same hazards that impact hospitals, doctors’ offices, rehab centers, and other healthcare workplaces.  The same broad impact was seen in the chemical industry after OSHA developed its Petroleum Refinery PSM NEP.  OSHA suddenly had a much larger group of CSHOs who understood the complex PSM Standard, and knew what to look for in PSM covered processes.  Even before the Chemical Facilities PSM NEP launched, chemical manufacturers were already seeing a surge in PSM enforcement because of the new army of PSM-knowledgeable CSHOs borne out of the Refinery NEP.  The healthcare industry will see the same surge.

To prepare for increased scrutiny under the Nursing Home NEP, industry stakeholders should evaluate and enhance their internal programs and policies as they relate to the hazards we know OSHA will be targeting.  A good starting point would be cross-check the programs against the NEP Directive and the referenced Guidance Documents within, such as OSHA’s:

(1)  Guidelines for Nursing Homes: Ergonomics for the Prevention of Musculoskeletal Disorders;

(2)  Directive on Enforcement Procedures for Investigating or Inspecting Workplace Violence Incidents;

(3)  Enforcement Procedures for the Occupational Exposure to Bloodborne Pathogens Standard; and

(4)  Nursing Home eTool.

Likewise, employers should be sure they are prepared to properly manage an OSHA inspection.  Epstein Becker Green’s national OSHA Group prepared an OSHA Inspection Checklist to help guide employers through the steps necessary to prepare in advance for a visit from OSHA, and to effectively manage an inspection once it begins.