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By: Michele Masucci & Barbara Asheld Nixon Peabody, LLP

The need for increased private capital investment in New York’s health care facilities is receiving serious attention during negotiation of the 2013–2014 New York State Budget. Governor Andrew M. Cuomo’s budget proposal contains language that authorizes two pilot programs, one in Brooklyn, allowing the Public Health and Health Planning Council to approve business corporations to own or operate hospitals.

Participating entities must affiliate with academic medical centers. These entities would also be permitted to own certified home health care agencies, licensed home care services agencies, and hospices. Specific existing requirements of the approval process relating to stock ownership would be waived.

The governor’s proposal would permit publicly traded companies to own and operate two hospitals in New York and permit for-profit investment in these entities. The New York State Senate proposal authorizes a maximum of ten entities to evaluate the establishment or restructuring of health care delivery systems through increased capital investment. The proposal requires one entity to be in Brooklyn. There would be two routes to approval under the Senate program. The first would build on the governor’s budget proposal but permit only “benefit corporations” to own and operate hospitals. It would continue the ban on investment by publicly traded corporations. The Senate bill would also authorize a second route to approval to test more flexible approaches under which hospitals would be permitted to access private capital. These vehicles would be designed to promote development of new sources of capital and to evaluate the impact private equity investment would have on quality of and access to care and its benefits to the hospital, its patients, and the community. Broader waiver of NYS Public Health Law Article 28 provisions addressing ownership structures would be authorized for the latter type of projects.

Although the bills appear to use the term “hospital” in the broad Public Health Law Article 28 sense and to permit nursing and other health care facilities to participate in the pilot program, they are not entirely clear. Those interested in establishing nursing facilities or diagnostic and treatment facilities under the pilot program may wish to confirm their eligibility by submitting comments. As of March 12, 2013, the NYS Assembly budget proposal contains no language addressing private investment.

Some observers are predicting early resolution of issues and “lock-down” of the budget before April 1, 2013, so time is of the essence for those wishing to submit comments to their legislators or to Governor Cuomo.

This article was contributed by Nixon Peabody, LLP. It does not constitute legal advice, and readers should not act upon the information in this publication without professional counsel. This may be considered advertising under some rules of professional conduct. The original brief can be found here.