On April 19th, 2021 Governor Andrew Cuomo (D) signed the state’s Budget for Health and Mental Hygiene (A3007C/S2507C), which includes several significant changes impacting the state’s nursing home operators and investors. Most notably, the legislation’s principal provisions require reinvestment of revenue into each nursing home facility and a cap on the profit the facility can make calculated on an annual basis.

More specifically, every residential health care facility is required to spend a minimum of 70 percent of revenue on direct resident care, and spend a minimum of 40 percent of revenue on resident-facing staffing. Notably, the amounts spent on resident-facing staffing may be included in the amounts spent on direct resident care. In addition, any residential health care facility whose total revenues exceed its total operating costs by more than five percent or which fails to reinvest the required percentage must pay the applicable amount in excess or by which the facility failed to meet the percentage, to the State of New York for deposit into the nursing home quality pool.

Although the legislation is not effective until January 1, 2022, it has already caused anxiety in the nursing home industry. For additional information on these legislative changes, please see our recent client alert  by Reed Smith partners Alfred G. Kyle and Joseph Marger.