Barclay Damon Legal Alert, 12/21.2020

The NYS Office for People With Developmental Disabilities (OPWDD) issued a memorandum on August 21, 2020, stating the agency would place a 20 percent withhold on all local assistance payments effective immediately. While the withhold is intended to temporarily offset the state’s revenue loss during COVID-19, the memorandum cautions the withhold may be converted to a permanent cut, and there is no indication how long the withhold may last.

Providers among those most impacted are fiscal intermediaries for self-directing consumers under the Home and Community Based Services (HCBS) waiver and those participating in the OPWDD’s Family Support Services Family Reimbursement Program. These providers act as a pass-through for payments to families that opt for self-directed services. Despite the state’s unilateral reduction in payments, the intermediaries have received guidance suggesting payment at the full 100 percent level should be made, leaving the fiscal intermediaries in a state of unfunded limbo. Asking provider agencies to pass through funds they did not receive and that remain the state’s fiscal responsibility is problematic and subject to legal challenge as being beyond state authority.

There are numerous legal principles that Barclay Damon expects to be asserted if an equitable result is not reached—namely, requiring agencies to pay, or pass through, only those amounts received in funding from the state. At the same time, vulnerable individuals receiving Medicaid services are entitled to receive the full amount needed to pay for the sustaining and necessary services that must be provided as a matter of federal and state law. However, the improper shifting of this obligation to the pass-through intermediaries that have not actually received the promised funding is tantamount to an improper “taking” that is legally prohibited.

Barclay Damon’s Health Care Controversies Team intends to seek redress on behalf of these fiscal intermediaries as the OPWDD continues to implement de facto reductions in reimbursement that impact some of New York State’s most vulnerable residents during COVID-19. In addition to protecting themselves from future audit and enforcement activities, we encourage these providers to seek legal counsel regarding their rights and remedies with respect to this withhold.