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Judge: Public health law unconstitutional

A Monroe County Supreme Court justice last week ruled a relatively new state law is unconstitutional.

Judge Matthew A. Rosenbaum decided Thursday that Public Health Law §2808(5)(c), which deals with spending by nursing home owners, infringes on their rights.

“This is an important decision for all health providers, who are already the most regulated entities in the state,” said Thomas G. Smith, a Harter Secrest & Emery LLP attorney who represented five area nursing homes, the New York State Health Facilities Association and its residential health care facility members in the case, The Brightonian Nursing Home, et. al. v. New York State Health Commissioner Richard F. Daines, et. al., Index No. 2009-13213.

“The grievance concerned a new state law that essentially froze the bank accounts of private nursing home owners beyond a certain arbitrary threshold,” Smith said. “We felt strongly that this … was overreaching and terribly unnecessary.”

Assistant Attorney General J. Richard Benitez argued the complaint failed to state a cause of action on which relief could be granted. The state also sought to vacate a preliminary injunction granted Nov. 18 in a prior challenge.

A section of the Public Health Law that went into effect April 1, 2008 provided that nursing home owners could not withdraw equity or transfer assets totaling more than 3 percent of annual Medicaid revenue without prior written permission from the state health commissioner.

Smith’s clients challenged that section and a preliminary injunction against enforcement was granted.

The Legislature amended the law to state that nursing home owners could not withdraw equity or transfer assets exceeding 3 percent of all their total revenues before needing permission.

Smith’s clients argued the change would impose “a statutory freeze on nursing home owners’ private bank accounts by requiring them to apply for bureaucratic approval before withdrawal of equity or transfer of assets which cannot exceed … 3 percent of the such facility’s total revenue in the prior calendar year.”

The plaintiffs conceded the state has an interest in assuring nursing homes remain financially viable by avoiding a negative equity situation that could compromise patient care, but Smith said that interest already is protected under existing law.

Under the new law, the approval process could take 60 days, and nursing home owners are prevented from spending their own assets, in violation of their constitutional property ownership rights, Smith said.

Judge Rosenbaum agreed.

At presstime, it was unknown whether the state plans to appeal. The attorney general’s office did not respond to requests for comment.