NYS DOH Publishes New Licensure Application for Licensed Home Care Services Agencies

The New York State Department of Health (DOH) on Aug. 17, 2022, released the long-awaited licensure application for licensed home care services agencies (LHCSAs) seeking approval in one of three categories: initial licensure, change in ownership and expansion of restricted license. The announcement included Frequently Asked Questions (FAQ) addressing anticipated questions related to the application process, as well as a Dear Administrator Letter briefly summarizing the new public need methodology and standards for financial feasibility. This Holland & Knight alert provides a brief overview of the application's key components and licensure process.

Background

On April 1, 2018, the DOH issued a moratorium on the processing and approval of licensure applications for LHCSAs, with an expiration date of March 31, 2020. During the moratorium, Article 36 of the Public Health Law was amended to consider public need and financial feasibility as part of the review process for applicants seeking to establish or own and operate a LHCSA. While regulations were implemented to address these requirements effective as of April 1, 2020 – simultaneously with the expiration of the moratorium – DOH was unable to release a new licensure application because of its focus on managing the COVID-19 pandemic. Thus, no new licensure applications were able to be filed for more than four years. In the interim, proposed buyers and sellers entered into management agreements, which are subject to DOH approval, to bridge the gap until full legal title to the LHCSA could pass to the buyer. Those looking to establish new LHCSAs had their hands tied. With the new LHCSA licensure application finally released, existing LHCSA operators can apply for approval to sell or expand their business, and proposed operators can seek approval to form a new LHCSA.

The New LHCSA Application

The new LHCSA application applies to applicants seeking establishment approval as a new LHCSA, those looking to undergo a change in ownership or control and those looking to expand the scope of their existing license, i.e., agencies affiliated with Continuing Care Retirement Communities (CCRC), Medicaid Assisted Living Programs (ALP), Nurse-Family Partnerships (NFP) and Programs of All-Inclusive Care for the Elderly (PACE) (each a Restricted LHCSA), and which now seek to serve patients outside the CCRC, ALP or NFP programs. Like most certificate of need applications for provider licenses in New York, including hospitals, ambulatory surgery centers, and diagnostic and treatment centers, the new application requires applicants to meet three criteria: public need, financial feasibility, and character and competence, which was part of the original licensure process.

• Public Need. Applicants seeking a change of ownership or control need not establish public need if the LHCSA is actively serving at least 25 patients. As well, a Restricted LHCSA is exempt from demonstrating public need if it only serves patients within its affiliated programs. All other applicants will need to overcome a rebuttable presumption that there is no public need for a new LHCSA or LHCSA expansion where there already exists at least five LHCSAs in the particular service area (i.e., the county). Applicants may overcome the presumption using evidence-based data to support their claim such as "a serious concern or difficulty accessing homecare services due to minority status, age, medical history, case complexity or payment source as specified in [the regulations]."
• Financial Feasibility. Each applicant's financial feasibility is determined based on DOH's review of two criteria: 1) its sources of available working capital, with a minimum requirement equal to at least two months of estimated operating expenses, and 2) projected operating costs. To comply with the first requirement the applicant will need to submit a written plan that identifies all funding sources that will support the LHCSA for at least two months following licensure, and a chart or description of projected operating expenses including salaries, office space, utilities, supplies and miscellaneous operating costs. If the applicant will utilize existing financial resources it will need to submit its most recent balance sheet. If the applicant intends to provide working capital by equity contributions, each member contributing equity – including non-natural person members – must submit personal financial statements. Funding may also be provided by a related or parent entity. In each case, a certified public accountant must be involved to review and confirm the funding. To comply with the second requirement, the applicant will need to summarize its current operating costs (if applicable), estimated operational costs for the first year of operations and estimated operational costs for the third year of operations.
• Character and Competence. Character and competence review consists of a detailed questionnaire that must be completed by all owners. Information disclosed includes education history, employment background, licenses held, health facility affiliations in and outside of New York and a record of legal action. For applicant affiliated with out-of-state health facilities, an out-of-state compliance review (i.e., a review by the state agency that oversees the out-of-state entity) must be completed and submitted to DOH.

Additional DOH Guidance

Many applicants submitted licensure applications that were put on hold during the moratorium. These applicants will need to refile for licensure using the new application. In addition, new parent organizations that were permitted to acquire the interest of an entity above the LHCSA operator during the moratorium utilizing an Affidavit of No Control must submit a licensure application within 30 days of the application's release, together with the affidavit that was previously filed with DOH.

Existing LHCSAs looking to add or remove a service, service area, office address or undergo name change need not file a new LHCSA application. Instead, they can complete a written request to the applicable regional office along with a checklist for processing.

Certain transfers in ownership only require 90 or 120 days prior notice, depending on the type of entity undergoing the change. Specifically:

• In the case of an limited liability company (LLC) or limited liability partnership (LLP):
• transfers of less than 10 percent to a new member or partner can be accomplished by submitting notice 90 days prior the transfer effective date
• transfers of less or more than 10 percent to an existing member or partner can also be accomplished with 90 days prior notice, unless the member or partner was not previously vetted by the Public Health and Health Planning Council (PHHPC) and the transfer puts them over the 10 percent threshold, in which case a full application must be filed
• In the case of a corporation:
• transfers of less than 10 percent to a new shareholder require a courtesy notice
• transfers of less or more than 10 percent to an existing shareholder require 120 days prior notice unless the shareholder was not previously vetted by the PHHPC and the transfer puts them over the 10 percent threshold, in which case a full application must be filed

Filing and Review Process

Applications must be filed electronically through the state's electronic certificate of need system (known as NYSE-CON), and still require a nonrefundable $2,000 application fee. They are reviewed first by DOH staff and then by the PHHPC, the members of which meet every two months in New York City and Albany on a rotating schedule. According to the FAQs, applications are reviewed in the order in which they are acknowledged within the NYSE-CON system. If an application receives contingent approval from the PHHPC, the applicant will be required to submit a policy and procedure manual to the appropriate regional office for review. Once the regional office deems it to be acceptable, a preopening survey will be scheduled and upon successful completion, a license will be issued. In the case of a change in ownership, the applicant may submit the LHCSA's previously approved policy and procedure manual which, according to the FAQs, will expedite the licensure process.

Next Steps

Given the years-long suspension of the LHCSA licensure process, it is reasonable to conclude that DOH will have its hands full over the next several months reviewing applications from existing and potential new LHCSA owners. That said, it is important for applicants to carefully read through all of the materials published by DOH prior to filing so as to ensure that its application is as complete, and raises as few questions, as possible in order to avoid approval delays. The FAQs and other posted materials provide valuable guidance, and DOH is making itself available to answer specific questions, all of which will go a long way in assisting applicants through this process.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.