New York City Department of Health reviews senior care program

In December 2022, New York Governor Hochul signed legislation establishing a new, streamlined licensing process for the Program for All-Inclusive Care for the Elderly (PACE) under New York Public Health Law Section 29-EE. The Department of Health (DOH) reviewed the proposed implementing regulations from the Commissioner of Health at the Public Health and Health Planning Council (PHHPC) in June 2024. The proposed regulations will be subject to the state’s Administrative Procedure Act procedures, which require publication in the State Register and a public comment period.

Background

The PACE program, overseen by DOH and the Centers for Medicare and Medicaid Services (CMS), provides comprehensive medical and social services to older adults and provides an alternative for those who prefer not to move into a nursing home but need higher levels of specialized, coordinated care. The hallmark of PACE programs is the comprehensive services provided through an interdisciplinary team approach to patient care organized around a PACE site (usually a clinic). In New York, this approach spans multiple areas of the Public Health Law (PHL): Section 44 (managed care), Section 28 (hospitals, clinics, and nursing homes), and Section 36 (home care agencies). As a result, the PACE process has historically been lengthy and complicated, with entities filing multiple applications for multiple licenses. The new law and proposed regulations are intended to streamline the application process in New York.

New PACE Application Process

The proposed regulations would establish a new, unified licensing process to meet the requirements of PHL Articles 44, 28, and 36, such that a new applicant would submit a single application but would be licensed separately as Article 44 and Article 28 under the new regulatory framework. Under the proposed regulations, DOH would develop a unified PACE license application, and the unified applications must receive final approval from the PHHPC.

At the same time, the proposed regulations indicate that the program requirements of PHL Article 29-EE, as well as the provisions of Articles 28, 36, and 44, would apply to the new process. This raises questions about how the new law would apply these requirements to the new applicant and creates a potential conflict between the new application process and existing PACE entity restrictions.

Who can apply for the PACE program?

Previously, to apply for PACE, an applicant had to be an “eligible applicant,” which is defined under PHL as an entity controlled or wholly owned by a clinic (Section 28), home care agency (Section 36), managed care organization (Section 44), or nonprofit organization with a history of providing or coordinating health care and long-term care services to older and disabled persons.

The proposed regulations do not impose such restrictions on applicants, allowing nonprofit corporations, business corporations, partnerships and limited liability companies to apply for the program.

Profit-oriented applicants and holding company structure

Since 2015, CMS has permitted for-profit organizations to operate as PACE organizations, and under the proposed New York regulations, an applicant may also be a for-profit entity. DOH staff confirmed during the review of the proposed regulations at PHHPC that PACE applicants may be for-profit entities under the proposed regulations. While PACE entities in New York have traditionally been nonprofit, the capital requirements discussed below may result in new applicants using a for-profit structure.

• Holding Company Issues – DOH historically required a single entity to have both an Article 44 (managed care organization) license and an Article 28 (clinic) license to operate a PACE program in New York. Additionally, New York required clinic owners to be “natural persons” or business entities owned or controlled by natural persons. As a result, this policy made it difficult to use a holding company structure for clinics, and therefore, PACE programs, in New York State.

Main requirements

The proposed regulations would continue to require that a PACE organization meet the financial solvency requirements of section 4403(1)(c) of the PHL and part 98 of the DOH regulations, including a contingent reserve that must be funded by a cash deposit. These financial solvency standards require a significant financial commitment by the applicant, which typically amounts to millions of dollars based on the expected premium that will be paid to the PACE applicant.

Service Area

The proposed regulations expressly authorize DOH to exclude from designation any geographic service area that is already covered by the PACE program in order to “avoid unnecessary duplication of services” and “avoid compromising the financial and service viability of the existing PACE program.” Adding the impact of PACE competition to the application process extends the application considerations beyond the applicant to potential competitors. And because the PHHPC is now the final decision-maker, the board’s public approval process invites participation from a broader group of stakeholders, potentially broadening the grounds for objection and complicating (and perhaps lengthening) the PACE approval process.

Application

The proposed regulations would create a unified application path, but would also indicate that existing substantive PHL provisions would continue to apply. Because these substantive provisions are sometimes difficult to reconcile, the proposed regulations may require careful review and interaction with DOH to resolve issues raised by the proposed regulations. Stakeholders, including existing PACE organizations and entities considering PACE licensing, should utilize the public consultation process to obtain clarification on the new PACE licensing process.