Case 1:22-cv-02267 Document 1 Filed 03/18/22 Page 1 of 22
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF NEW YORK
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`
`
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`Civil Action No.:
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`
`
`SAFE HAVEN HOME CARE, INC.,
`EVERGREEN HOMECARE SERVICE
`OF NY INC., ELIM HOME CARE
`AGENCY, LLC, DHCARE
`HOMEHEALTH, INC., SILVER LINING
`HOMECARE AGENCY, AND ANGEL
`CARE, INC.
` Plaintiffs,
`v.
`
`UNITED STATES DEPARTMENT OF
`HEALTH AND HUMAN SERVICES,
`XAVIER BECERRA, in his official
`capacity as Secretary of the United States
`Department of Health and Human Services,
`UNITED STATES CENTERS FOR
`MEDICARE & MEDICAID SERVICES,
`CHIQUITA BROOKS-LASURE, in her
`official capacity as Administrator of the
`U.S. Centers for Medicare and Medicaid
`Services, NEW YORK STATE
`DEPARTMENT OF HEALTH, MARY T.
`BASSETT, in her official capacity as
`Commissioner of the New York State
`Department of Health, BRETT R.
`FRIEDMAN, in his official capacity as
`Medicaid Director of the New York State
`Department of Health
` Defendants.
`___________________________________
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`COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
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`Plaintiffs are Licensed Home Care Services Agencies (“LHCSAs”) providing home care
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`
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`services to Medicaid beneficiaries residing in New York State and bring this complaint for
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`declaratory and injunctive relief against Defendants United States Department of Health and
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`Human Services (“HHS”), United States Centers for Medicare & Medicaid Services (“CMS”),
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`Case 1:22-cv-02267 Document 1 Filed 03/18/22 Page 2 of 22
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`New York State Department of Health (“NYSDOH”), and associated officials. In support
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`thereof, Plaintiffs state the following:
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`INTRODUCTION
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`1.
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`As part of the American Rescue Plan Act, Congress provided additional funding
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`for Medicaid Home and Community-Based Services (“HCBS”) during the COVID-19
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`emergency.
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`2.
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`New York State’s Medicaid Program estimates that this funding represents $2.15
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`billion of additional federal funds to support Medicaid HCBS in New York.
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`3.
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`The NYSDOH is tasked with implementing these funds, which must also be
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`matched by equivalent New York State funds. Its spending plan, as well as specific directed-
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`payments it makes under its spending plan, must be pre-approved by Defendant CMS.
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`4.
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`The NYSDOH’s first directed payment request to CMS was to approve $361
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`million to be distributed among LHCSAs providing Medicaid services in New York.
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`5.
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`Rather than distribute the funds equitably among providers, however, the
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`NYSDOH decided to give all the money to 212 specific LHCSAs out of approximately 800
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`LHCSAs, based solely on one factor—which were the biggest.
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`6.
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`Some LHCSAs were even big enough to receive multiple awards, as there are 235
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`awards for the 212 LHCSAs, an average of more than $1.7 million per LHCSA.
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`7.
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`CMS approved the NYSDOH’s request and the funding is set to go out on March
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`31, 2022 to the managed care plans, to be handed over to the 212 LHCSAs in April.
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`8.
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`CMS’ approval of the NYSDOH’s first directed payment is in violation of the
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`Medicaid Statute as the payment is not “made on an actuarially sound basis,” see 42 U.S.C. §
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`1396b(m)(2)(A)(iii), and is also contrary to CMS’ own regulations which require, among other
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`things, that directed payments be made “equally, and using the same terms of performance, for a
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`class of providers proving the service under the contract.” 42 C.F.R. § 438.6(c)(2)(ii)(B)
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`(emphasis added).
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`9.
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`If these funds are distributed as planned, the largest providers in New York—
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`those already winning the market share battle—will be given hundreds of millions of dollars to
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`“fund recruitment, retention, and training for personal care aides, home health aides, and
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`nurses,” all but assuring that many smaller providers (who often cater to culturally, racially, and
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`ethnically diverse populations) will be put out of business.
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`10.
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`This lawsuit seeks to stop that from happening.
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`JURISDICTION AND VENUE
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`11.
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`The Court has subject matter jurisdiction under 28 U.S.C. § 1331 as this action
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`arises under the American Rescue Plan Act, Pub. L. No. 117-2, the Medicaid Statute, Title XIX
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`of the Social Security Act, 42 U.S.C. § 1396 et seq., the Administrative Procedure Act (“APA”),
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`5 U.S.C. §§ 702 and 706, and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02. The Court
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`has personal jurisdiction over all Defendants because they are exercising their challenged
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`official duties in this District.
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`12.
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`Venue is proper in this Court under 28 U.S.C. § 1391(b) and (e).
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`PARTIES
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`13.
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`Plaintiffs are home care services agencies that are licensed pursuant to New York
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`Public Health Law § 3605.
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`14.
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`Plaintiff Safe Haven Home Care, Inc. is a LHCSA, located at 105-26 Flatlands 1st
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`Street, Brooklyn, New York 11236. It was organized as a corporation in the State of New York
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`in October of 2008, and it provides services in the following counties: Bronx, Kings, New York,
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`Queens, and Richmond.
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`15.
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`Plaintiff Evergreen Homecare Service of NY Inc. is a LHCSA, located at 149th Pl,
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`Flushing, New York 11354. It was organized as a corporation in the State of New York in May
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`of 2014 and it provides services in the following counties: Bronx, Kings, New York, Queens,
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`Richmond, and Westchester.
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`16.
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`Plaintiff Elim Home Care Agency, LLC is a LHCSA, located at 4131 163rd St Fl
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`1, Flushing, New York 11358. It was organized as a corporation in the State of New York in
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`January of 2013 and it provides services in the following counties: Bronx, Kings, Nassau, and
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`Queens.
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`17.
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`Plaintiff DHCare Homehealth, Inc. is a LHCSA, located at 172-15 Hillside Ave,
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`Jamaica, NY 11432. It was organized as a corporation in the State of New York in October of
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`2014 and it provides services in the following counties: Bronx, Kings, Nassau, New York,
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`Queens, and Richmond.
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`18.
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`Plaintiff Silver Lining Home Care Inc. is a LHCSA, located at 1115 Avenue U,
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`Brooklyn, New York 11223. It was formed as a corporation in the State of New York in
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`October of 2012, and it provides services in the following counties: Bronx, Kings, Nassau, New
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`York, Queens, and Richmond.
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`19.
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`Plaintiff Angel Care, Inc. is a LHCSA, located at 1580 Dahill Road, 2nd Floor,
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`Brooklyn, New York 11204. It was organized as a corporation in the State of New York in
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`February of 2010, and it provides services in the following counties: Bronx, Kings, Nassau,
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`New York, Queens, and Richmond.
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`20.
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`Defendant United States Department of Health and Human Services is a federal
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`cabinet-level department tasked with administering federal healthcare statutes. It is
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`headquartered at 200 Independent Avenue, S.W., Washington, DC, 20201.
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`21.
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`Defendant Xavier Becerra is Secretary of HHS and is sued in his official capacity.
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`Secretary Becerra’s office is maintained at HHS headquarters in Washington, DC.
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`22.
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`Defendant United States Centers for Medicare & Medicaid Services is an agency
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`within HHS that is responsible for administration of the Medicare and Medicaid programs. It is
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`headquartered at 7500 Security Boulevard, Baltimore, Maryland, 21244.
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`23.
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`Defendant Chiquita Brooks-Lasure is Administrator of CMS and is sued in her
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`official capacity. Administrator Brooks-Lasure’s office is maintained at CMS headquarters in
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`Baltimore, Maryland.
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`24.
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`Defendant New York State Department of Health is the single-state agency in
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`New York responsible for administering New York’s Medicaid program. It is headquartered at
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`Corning Tower, Empire State Plaza, Albany, NY 12237.
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`25.
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`Defendant Mary T. Bassett is the Commissioner of the NYSDOH and is sued in
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`her official capacity. Commissioner Bassett maintains her office at NYSDOH’s headquarters in
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`Albany, NY.
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`26.
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`Defendant Brett R. Friedman is the Medicaid Director of the NYSDOH and is
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`sued in his official capacity. Director Friedman maintains his office at NYSDOH’s
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`headquarters in Albany, NY and submitted NYSDOH’s request to CMS for approval of
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`NYSDOH’s first directed payment.
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`STATUTORY & REGULATORY OVERVIEW
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`American Rescue Plan Act
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`27.
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`Signed into law on March 11, 2021, the American Rescue Plan Act of 2021
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`(“ARPA”), Pub. L. No. 117-2, provided $1.9 trillion in federal funding for a range of programs
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`to address the public health and economic crisis created by the COVID-19 pandemic.
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`28.
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`Section 9817 of ARPA is titled “Additional Support for Medicaid Home and
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`Community-Based Services During the Covid-19 Emergency” and provides for a ten percent
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`increase in the Federal Medical Assistance Percentage (“FMAP”) with respect to expenditures
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`for HCBS between April 1, 2021 and March 31, 2022 (the “Improvement Period”). This
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`includes services such as home health care, personal care, case management, rehabilitation, and
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`others.
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`29.
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`Increased FMAP funds must be used by the State to supplement, as opposed to
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`supplant, existing State funding for HCBS, and must be used to implement or supplement the
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`implementation of one or more activities to enhance, expand, or strengthen HCBS under the
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`State Medicaid program. ARPA § 9817(b).
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`30.
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`The State’s enhanced funds are generated during the Improvement Period based
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`on HCBS spending; however, the State may expend these funds at any time prior to March 31,
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`2024. The NYSDOH has estimated that it will generate $2.15 billion in federal funds from its
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`HCBS spending during the Improvement Period. In addition, the State must use the state funds
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`equivalent to the amount of the enhanced FMAP (i.e., $2.15 billion in State funds) to implement
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`or supplement the implementation of one or more activities to enhance, expand, or strengthen
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`HCBS.
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`31.
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`The State is required to obtain approval from CMS for its spending plan of ARPA
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`funds, as well as adhere to existing Medicaid spending requirements, such as obtaining pre-
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`approval from CMS for any State directed payments pursuant to 42 C.F.R. § 438.6(c), described
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`further below.
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`The Medicaid Statute, 42 U.S.C. § 1396, et seq.
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`32.
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`The United States subsidizes health care expenditures for the elderly, disabled,
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`and persons of modest income, principally through the Medicare and Medicaid programs.
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`While the Medicare program is operated by the federal government, the Medicaid program is a
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`federal-state partnership in which the program is operated by the State but is also regulated,
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`overseen, and partially funded by the federal government—specifically Defendants HHS and
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`CMS.
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`33.
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`States need not join the Medicaid program, but those which do, such as New York
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`State, must comply with a long list of federal statutory and regulatory requirements.
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`34. Many states, including New York State, operate their Medicaid plans through
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`managed care organizations (“MCOs”). MCOs are health insurance plans or health care
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`systems that contract directly with the State and then, in turn, contract with health care
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`providers to provide an adequate network of services for their Medicaid members. MCOs are
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`typically paid a capitated per-member-per-month fee by the State to cover services for their
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`Medicaid members.
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`35. Managed Long Term Care (“MLTC”) Plans are a type of MCO that cover a range
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`of long-term care services to those who are chronically ill or disabled and wish to stay in their
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`homes or communities. The HCBS described above, and subject to ARPA’s enhanced FMAP
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`are among the long-term care services covered by MLTC Plans in New York.
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`36. Medicaid Advantage Plus (“MAP”) plans are another type of MCO that combine
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`Medicaid and Medicare coverage, and likewise cover the range of HCBS subject to ARPA’s
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`enhanced FMAP.
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`37.
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`The Medicaid Statute, as well as regulations implemented by CMS, provide a host
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`of requirements that apply to MCOs, as well as to States that utilize MCOs. One such
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`requirement, found at 42 U.S.C. § 1396b(m)(2)(A)(iii), is that States must make prepaid
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`capitation payments to MCOs “on an actuarially sound basis.” This means rates that are
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`projected to cover all reasonable, appropriate, and attainable costs that are required under the
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`terms of the contract between the State and the MCO for the time period and population
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`covered. 42 C.F.R. § 438.4.
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`38.
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`Because capitated rates paid to the MCOs must be sufficient to cover all
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`reasonable, appropriate, and attainable costs, States are prohibited from making pass-through
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`payments to providers. 42 C.F.R. § 438.6(a).
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`39.
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`Certain directed payments (i.e., payments in which the State directs the MCO) are
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`permitted, however those payments must meet specific criteria, and be pre-approved by CMS
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`through what is known as a Directed Payment Section 438.6(c) Preprint Application. 42 C.F.R.
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`§ 438.6(c). A directed payment which fails to comply with 42 C.F.R. § 438.6(c) is considered a
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`pass-through payment.
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`40.
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`Directed payments that fail to meet the “special contract provisions as specified in
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`§ 438.6” will not be approved as actuarially sound. 42 C.F.R. § 438.4(b)(7).
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`41.
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`As CMS has explained, “Section 1903(m)(2)(A)(iii) of the Act requires contracts
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`between states and MCOs to provide capitation payments for services and associated
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`administrative costs that are actuarially sound. The underlying concept of managed care and
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`actuarial soundness is that the state is transferring the risk of providing services to the MCO and
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`is paying the MCO an amount that is reasonable, appropriate, and attainable compared to the
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`costs associated with providing the services in a free market.” CMS Final Rule, 81 FR 27498,
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`at 27588, May 6, 2016. As such, states are “prohibited from making a supplemental payment to
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`a provider through a managed care plan, which is referred to as a ‘pass-through’ payment.” Id.
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`27589.
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`42.
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`CMS provides for limited exceptions at 42 C.F.R. § 438.6(c)(1)(i)-(iii) which
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`permit States to direct MCO payments to providers. One such exception is that the State may
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`require MCOs to “implement value-based purchasing models for provider reimbursement, such
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`as pay for performance arrangement, bundled payments, or other service payment models
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`intended to recognize value or outcomes over volume of services.” Id. § 438.6(c)(1)(i). Another
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`exception permits the State to direct “a uniform dollar or percentage increase for network
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`providers that provide a particular service under the contract.” Id. § 438.6(c)(1)(iii)(C). Prior to
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`implementing any such plan, however, the State must obtain written approval from CMS. Id. §
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`438.6(c)(2)(ii). In addition, to obtain CMS approval, a “State must demonstrate, in writing, that
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`the arrangement – (A) Is based on the utilization and delivery of services; [and] (B) Directs
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`expenditures equally, and using the same terms of performance, for a class of providers
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`providing the service under the contract,” among other requirements. Id. § 438.6(c)(2)(ii)(A)-
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`(B) (emphasis added).
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`43.
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`In November 2017, CMS published guidance, a related appendix with examples,
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`and a preprint for states to obtain approval of state directed payments under Section 438.6(c).
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`CMCS Informational Bulletin, “Delivery System and Provider Payment Initiatives under
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`Medicaid Managed Care Contracts,” (Nov. 2, 2017), available at
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`https://www.medicaid.gov/federal-policy-guidance/downloads/cib11022017.pdf.
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`44.
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`In May 2020, CMS issued specific guidance on Medicaid MCO options for
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`responding to COVID-19, including State directed payments to enhance provider payments.
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`CMCS Informational Bulletin, “Medicaid Managed Care Options in Responding to COVID-
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`19,” (May 14, 2020), available at https://www.medicaid.gov/federal-policy-
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`guidance/downloads/cib051420.pdf. CMS reminded States that directed payments must meet
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`the requirements under 42 C.F.R. § 438.6(c)(2) and expounded as to directed payments for a
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`“class of providers.” Id. It wrote that, “[h]istorically, CMS has deferred to states in defining
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`the provider class for purposes of state directed payment arrangements, as long as the provider
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`class is reasonable and identifiable, such as the provider class being defined in the state’s
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`Medicaid State Plan.” Id. at 6 (emphasis added). CMS further wrote that, “[e]xamples of state
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`directed payments for a target class or classes of providers providing services under the contract
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`could include dental, behavioral health, home health and personal care, pediatric, federally-
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`qualified health centers, and safety-net hospitals.” Id. Further, “[t]hese payments must be
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`directed equally, using the same terms of performance across a class of providers.” Id.
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`45.
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`LHCSAs, for example, would constitute a “class of providers” as they are a class
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`of provider defined by State statute, see N.Y. Pub. Health § 3602(13), issued licenses pursuant
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`to N.Y. Pub. Health § 3605, and discussed as a provider class throughout the New York
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`Medicaid State Plan. See e.g., State Plan, at TN#18-0047, Attachment 4.19-B; TN#20-0033,
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`Attachment 4.19-B; TN#12-05, Supplement 1 to Attachment 3.1-A; TN#86-7, Attachment 4.11-
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`A. See also https://profiles.health.ny.gov/home_care/pages/lhcsa.
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`46.
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`In January 2021, CMS issued additional guidance on state directed payments in
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`Medicaid managed care. State Medicaid Director Letter #21-001, “RE: Additional Guidance on
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`State Directed Payments in Medicaid Managed Care,” (Jan. 8, 2021), available at
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`https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/smd21001.pdf. Once again,
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`CMS stressed that “State directed payments are required under 42 C.F.R. § 438.6(c)(2)(ii)(B) to
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`direct expenditures equally, using the same terms of performance, for a class of providers
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`providing the service under the contract.” Id. at 6 (emphasis in original). CMS also noted that
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`states must provide an analysis with the Preprint Application that is specific to the defined
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`provider class, “[f]or example, if the state defined the provider class for a state directed payment
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`as primary care physicians, the analysis of the reimbursement levels would need to be specific
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`to primary care physicians; it should not include all physicians (primary care and specialty
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`physicians).” Id. at 7.
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`47.
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`Finally, in May 2021, CMS issued guidance specific to the implementation of
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`ARPA Section 9817. State Medicaid Director Letter #21-003, “RE: Implementation of
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`American Rescue Plan Act of 2021 Section 9817: Additional Support for Medicaid Home and
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`Community-Based Services during the COVID-19 Emergency,” (May 13, 2021), available at
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`https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/smd21003.pdf. CMS once
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`again reminded States that directed payments must be made in accordance with 42 C.F.R. §
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`438.6(c). Id. at 8-9.
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`FACTUAL ALLEGATIONS
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`48.
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`On July 8, 2021, the NYSDOH submitted to CMS its initial spending plan for use
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`of its ARPA Section 9817 enhanced FMAP funding. New York State Department of Health
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`Spending Plan for Implementation of American Rescue Plan Act of 2021, Section 9817 (July 8,
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`2021), available at
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`https://www.health.ny.gov/health_care/medicaid/redesign/hcbs/enhanced_funding/docs/2021-
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`07-08_hcbs_spending_plan.pdf. Its largest category of proposed funding represented $623
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`million in state funds equivalent (i.e., $1.246 billion total) to “Transform the Long-Term Care
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`Workforce and Achieve Value-Based Payment (VBP) Readiness.” Id. at 7-9. The NYSDOH
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`explained that it intended “to leverage a significant portion of additional FMAP to increase the
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`capacity and quality of its HCBS workforce, such that both this workforce, and the licensed
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`home services agencies (LHCSAs) or consumers working in conjunction with fiscal
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`intermediaries (FIs), are able to implement evidence-based care interventions, promote quality,
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`and participate effectively in value-based payment (VBP) arrangements.” Id. at 7.
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`49.
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`Further, “[p]ayment of the funds would tie to the utilization and delivery of
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`qualifying community-based long-term services and supports (CBLTSS) services by eligible
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`providers, but would be further conditioned on providers that develop the following workforce
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`transformation programs and strategies that assist in workforce capacity building and VBP
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`readiness [workforce retention strategies, training programs, innovative technology, diversity,
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`effective care management, and PPP stockpiles].” Id. at 8-9. The “initiatives implemented
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`during this period would support the growing need for HCBS by ensuring improved workforce
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`capacity, skill-level, and quality.” Id. at 9.
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`50.
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`Eligible provider classes were listed by the NYSDOH as “LHCSAs, FIs, Adult
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`Day Health Care providers, and Social Adult Day Care Providers.” Id. at 8. The plan also
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`contemplated tracking for “efficiency metrics that would allow providers to access additional
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`funding based on their progress in implementing and expending funding through this program.”
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`Id. at 9. Finally, MCOs “will be instructed to monitor and report to DOH on improvements in
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`quality outcomes against established long-term care quality metrics contained in the State’s
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`managed care quality strategy” and the NYSDOH proposed “an evaluation structure that is
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`based on pay-for-reporting in the first six-month period and then pay-for-performance standards
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`in subsequent contract periods.” Id.
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`51.
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`On August 25, 2021, CMS notified the NYSDOH of a partial approval to its
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`FMAP spending plan, including approval of NYSDOH’s proposal for transforming the long-
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`term care workforce and achieving VBP readiness. New York State Department of Health First
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`Quarterly Report: Spending Narrative for Implementation of American Rescue Plan Act of
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`2021, Section 9817, (Oct. 18, 2021), available at
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`https://health.ny.gov/health_care/medicaid/redesign/hcbs/enhanced_funding/docs/quarterly_rpt_
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`narrative.pdf., at 9. The NYSDOH memorialized this approval in its first quarterly report to
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`CMS on October 18, 2021, and further wrote that it would submit its Section 438.6(c) Preprint
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`in October or early November 2021 to CMS. Id. The NYSDOH also notified CMS that it had
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`increased its proposal of $623 million in state funds equivalent to $722.5 million (or $1.445
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`billion total) for this category of funding. Id. at 9.
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`52.
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`On or about November 17, 2021, the NYSDOH provided a webinar for providers
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`entitled “Long-Term Care Workforce and Value-Based Payment Readiness Implementation
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`Directed Payment Preprint Process Overview,” available at
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`http://leadingageny.org/home/assets/File/November%20Policy%20and%20Planning%20Meetin
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`g_Directed%20Payment_11_17_21.pdf.
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`53.
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`On the webinar, the NSYDOH provided an overview of its Section 438.6(c)
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`Preprint, which it had submitted to CMS on November 15, 2021. Id. at 9.
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`54.
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`Unlike its July 8, 2021 initial spending plan proposal to CMS, which asked for,
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`and received approval by CMS, of a long-term care workforce and VBP readiness plan that
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`would be equally available to LHCSAs, FIs, Adult Day Health Care providers, and Social Adult
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`Day Care Providers, the NYSDOH’s November presentation announced—via webinar—that all
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`funding under the long-term care workforce and VBP readiness plan ($1.461 billion) would go
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`to approximately 250 LHCSAs out of the approximately 800 LHCSAs providing Medicaid
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`services in New York. Id. at 2-4.
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`55.
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`The “provider class” was defined by the NYSDOH as “[o]nly LHCSAs with
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`managed care revenue* [2019 MLTC and MAP revenue] that meets or exceeds the revenue
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`threshold [66th percentile] in their respective regions.” Id. at 4. In other words, only the largest
`
`one-third of LHCSAs based on 2019 revenue would receive any funding. The already larger
`
`LHCSAs, however, would receive average awards, in two directed payments, of approximately
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`$5,844,000 ($1.461 billion divided by 250) which could be used for workforce retention,
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`training programs, innovative technologies, diversity initiatives, care management, and PPE
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`stockpiles. Id. at 8.
`
`56.
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`In addition, the previously described mechanism of MCO monitoring and
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`reporting to the NYSDOH on improvements in quality outcomes was eliminated, as well as any
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`pay-for-reporting or pay-for-performance concept. Id. at 6-7. Now, providers need not earn the
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`money at all, they would simply be given it and required to report quarterly on actual and
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`projected spending. Id. at 7.
`
`57.
`
`In short, the NYSDOH’s plan had changed radically and would have devastating
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`impacts on smaller LHCSAs throughout New York State. Not only would the smaller LHCSAs
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`throughout New York not even have an opportunity for funding, they would see their already
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`Case 1:22-cv-02267 Document 1 Filed 03/18/22 Page 15 of 22
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`larger competitors receive an influx of cash for recruiting, training, technology, and other
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`competitive advantages.
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`58.
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`Importantly, the NYSDOH’s new plan had lost any resemblance to a lawful
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`directed payment plan under 42 U.S.C. § 438.6(c), as it no longer had any “value or outcome”
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`focus, id. § 438.6(c)(1)(i), nor did it “[d]irect expenditures equally, and using the same terms of
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`performance, for a class of providers providing the service under the contract,” id. §
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`438.6(c)(2)(ii)(B).
`
`59.
`
`In January 2022, the NYSDOH provided another webinar with similar
`
`information to the November presentation, along with new FAQs. “Long Term Care Workforce
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`and Value-Based Payment Readiness Implementation Provider Webinar,” (Jan. 2022), available
`
`at https://nyshcp.org/common/Uploaded%20files/Public%20Policy/DSRIP-VBP-
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`MRT/LTC%20Workforce%20VBP%20Slides.pdf.
`
`60.
`
`The NYSDOH explained that there were “212 unique LHCSAs included in the
`
`eligible provider class for this current directed payment” and, because “[s]ome LHCSAs met the
`
`eligibility criteria in multiple regions, [this] result[ed] in a total of 235 potential awards.” Id. at
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`17. The NSYDOH also stated that award amounts among the 235 potential awards “were
`
`calculated based on each agency’s managed care utilization during the first six months of
`
`SFY22 (4/1/2021 – 9/30/21), limited to personal care services provided to Medicaid enrollees in
`
`MLTCP and MAP plans.” Id. In other words, awardees need not do anything to earn the award
`
`amounts—they were calculated based on the volume of personal care services already provided
`
`during the first six months of SFY22. In addition, even among the 212 LHCSAs receiving
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`awards, they were not provided equally as the largest of the larger LHCSAs would get a bigger
`
`share of the available pie.
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`61.
`
`On February 15, 2022, the NYSDOH released its second quarterly report which
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`described changes to its ARPA spending plan, including those discussed above. New York
`
`State Department of Health Second Quarterly Report: Spending Narrative for Implementation
`
`of American Rescue Plan Act of 2021, Section 9817, (Feb. 15, 2022), available at
`
`https://health.ny.gov/health_care/medicaid/redesign/hcbs/enhanced_funding/docs/2nd_quarterly
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`_rpt_narrative.pdf. The NYSDOH confirmed that the eligible “provider class” for transforming
`
`long-term care workforce and VBP readiness were “LHCSAs that fall into the top third of
`
`providers in their designated regions based on 2019 utilization and that contract with MLTCPs
`
`and MAPs: these providers offer home care services such as personal care services.” Id. at 12,
`
`15. The NYSDOH’s purported justification for the new “provider class” was “to maximize the
`
`impact of these funds on quality of care for Medicaid members by ensuring that the funds are
`
`adequate to enable meaningful and innovative workforce recruitment and retention initiatives
`
`and are available to LHCSAs providing the greatest number of hours of service in each region.”
`
`Id. at 12.
`
`62.
`
`Based on information and belief, the actual reason that the NYSDOH seeks to cut
`
`the majority of LCHSAs out of funding eligibility is because it wants the number of LHCSA
`
`providers in New York to shrink. This has been a priority of the NYSDOH for several years.
`
`See e.g., “Managed Long Term Care Rate Development” (Mar. 22, 2018), at 11, available at
`
`https://hca-nys.org/wp-content/uploads/2018/03/DOH-HCA-Presentation-03-22-18.pdf (“Limit
`
`the number of LHCSA . . . that Contract with MLTC Plans”). More recently, the NYSDOH has
`
`announced a LHCSA Request for Offer (“RFO”) that is anticipated to be implemented on May
`
`1, 2022, and will likely result in further efforts by the NYSDOH to eliminate providers. “MTR
`
`II Executive Summary of Proposals”, (Mar. 19, 2020), at 12, available at
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`Case 1:22-cv-02267 Document 1 Filed 03/18/22 Page 17 of 22
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`https://health.ny.gov/health_care/medicaid/redesign/mrt2/docs/2020-03-
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`19_executive_summary_of_proposals.pdf (“the State would issue a request for proposals to
`
`limit the number of licensed home care services agencies (LHCSAs) authorized to participate in
`
`the State’s Medicaid program.”); 2022-23 Executive Budget Briefing and Questions and
`
`Answers,” (Feb. 2022), at 4, available at
`
`https://www.health.ny.gov/health_care/medicaid/redesign/2022/docs/2022-
`
`23_exec_budget_presentation.pdf.
`
`63.
`
`The NYSDOH has taken similar actions already for the Consumer Directed
`
`Personal Assistance Program (“CDPAP”), which provides similar home health care services,
`
`however, permits consumers more flexibility in choosing their caregivers. There, the NYSDOH
`
`issued an RFO on December 18, 2019, and announced awards in early 2021 for only 68 of the
`
`approximately 450 Fiscal Intermediaries state-wide providing services under the CDPAP. See
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`“New York State Fiscal Intermediaries for the Consumer Directed Personal Assistance
`
`Program, Request for Offers #20039,” available at
`
`https://www.health.ny.gov/funding/rfo/20039/. The lawfulness of the NYSDOH’s CDPAP
`
`RFO is currently being challenged.
`
`64.
`
`It further appears that the NYSDOH is utilizing the enhanced ARPA funds as a
`
`mechanism to disadvantage smaller providers in the upcoming LHCSA RFO. In a presentation
`
`last month led by Defendant Director Friedman, the NYSDOH explained that it was “refining”
`
`the LHCSA RFO by “pre-qualifying” a selection of LHCSAs by service area based on their
`
`ability to “participate in value-based payment (VBP) arrangements with MMCOs,” the very
`
`subject of the first directed payment. 2022-23 Executive Budget Briefing and Questions and
`
`Answers,” (Feb. 2022), at 13, available at
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`Case 1:22-cv-02267 Document 1 Filed 03/18/22 Page 18 of 22
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`https://www.health.ny.gov/health_care/medicaid/redesign/2022/docs/2022-
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`23_exec_budget_presentation.pdf.
`
`65.
`
`Based on information and belief, in March of 2022, CMS approved the
`
`NYSDOH’s Section 438(c) Preprint application for a first directed payment of approximately
`
`$361 million, to be awarded only to the largest one-third of LHCSAs in New York.
`
`66.
`
`Based on information and belief, the NYSDOH plans to pay approximately $361
`
`million to the MCOs on March 31, 2022, to be distributed to the largest one-third of LHCSAs in
`
`April.
`
`67.
`
`Based on information and belief, the NYSDOH has not yet posted CMS’
`
`approval, or the NYSDOH’s final Section 438.6(c) Preprint application, on its web