Suffolk judge rules for Cuomo’s nonprofit pay cap

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Andrew Cuomo. (AP Photo/John Minchillo)
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ALBANY—A Suffolk County Supreme Court justice ruled Wednesday that a salary cap on nonprofit providers instituted by Governor Andrew Cuomo in 2012 is legal, dealing a blow to providers who said the cap was an overreach by the state’s health department and could impair providers’ ability to serve their patients.

The ruling comes a few months after a state court ruled the cap violated state law in a separate lawsuit filed against the regulation.

In a sixteen-page ruling issued July 30, Judge Emily Pines ruled the health department was clearly within its bounds when it instituted the cap, because it has the authority “to regulate the financial assistance provided by the State in connection with public health care activities.”

Cuomo created the salary cap through an executive order in January 2012, in response to a series of news reports about the salaries of executives at the Young Adult Institute, where two brothers, Philip and Joel Levy, ran a developmental disabilities home funded almost entirely by Medicaid, and earned $1 million salaries each year.

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The cap limited nonprofit executives’ salaries at government-funded entities receiving more than $500,000 and 30 percent of their revenue from the state to less than $199,000 a year. It also required providers to spend at least 75 percent of the government funding they received on services, and increase the amount spent on services by 5 percent each year, eventually requiring 85 percent of all government funding to be spent directly on services instead of administrative expenses by April 1, 2015.

Concerned Home Care Providers, the plaintiff in the Suffolk County case, filed a lawsuit over the cap in 2013. Another lawsuit, filed in Albany County by the New York State Health Facilities Association is still pending.

Pines noted in her decision that the salary cap isn’t exactly a true cap, because it can’t limit the amount of money providers pay their executives when the money is coming from non-state-government sources.

Pines wrote: 

"It must be emphasized that the regulations at issue in this case only limit the amount of State funds or State-authorized payments that can be used for executive ompensation and administrative expenses. They do not in any way restrict or limit the use of other funds or payments for executive compensation or administrative expenses.

"Thus, the regulations do not truly cap executive compensation or administrative expenses of entities that receive State funds or State-authorized payments. They only limit the amount of State funds or State-authorized payments that entities can use for such purposes."