A contentious new bill proposed by New York Attorney General Letitia James is poised to drastically alter the landscape of debt collection for nursing homes, potentially equating them with “unscrupulous car salesmen” and other predatory businesses. The Fostering Affordability and Integrity through Reasonable Business Practices Act (FAIR) seeks to update the state’s 55-year-old consumer protection laws, a move that has sparked significant concern within the skilled nursing industry.
The crux of the bill targets nursing homes that “routinely sue relatives of deceased residents for their unpaid bills despite not having any basis for liability.” This comes at a precarious time, just six weeks after the Centers for Medicare & Medicaid Services (CMS) tightened restrictions on nursing homes’ ability to collect from third parties.
“The new CMS rules, combined with the rise of Medicare Advantage plans, which offer limited financial recourse, are already squeezing nursing home finances,” explains a healthcare finance analyst. “This proposed legislation could further exacerbate the problem, potentially forcing facilities to choose between absorbing significant debt or facing legal action.”
The FAIR Act aims to place nursing homes alongside entities like predatory car dealers and debt collectors who illegally seize Social Security benefits, allowing for civil penalties and restitution through lawsuits led by the Attorney General’s office.
“All too often we see seniors and their families fall victim to predatory business practices such as unfair debt collection by nursing homes, home repair scams, and financial exploitation,” said Karen Nicolson, CEO and executive director of the Center for Elder Law and Justice. “Our attorneys work tirelessly to help secure redress for our clients, but New York’s weak general consumer protection law — which notably does not ban unfair or abusive business activity — limits our ability to secure restitution.”
Industry Fears Increased Financial Strain
The proposed legislation arrives amidst a shifting regulatory environment. According to a recent report from the American Health Care Association (AHCA), “approximately 70% of nursing home revenue comes from government programs like Medicare and Medicaid, making the sector highly sensitive to regulatory changes.” The added threat of civil litigation under the FAIR Act could further destabilize already strained financial models.
Attorney General James argues that the bill is essential to protect consumers, especially given the perceived retreat of federal protections. She specifically mentioned an Executive Order that impacted the Consumer Financial Protection Bureau (CFPB), which has recently played an increasing role in nursing home debt collection oversight. Late last year, the CFPB prohibited credit-reporting bureaus from including medical debt in credit scores, making collection efforts more challenging for healthcare providers.
“The FAIR Business Practices Act will close loopholes that make it too easy for New Yorkers to be scammed, and will allow my office to go after anyone who violates the law,” James stated. “[I] look forward to working with my partners in state government to ensure that as Washington retreats from protecting consumers, New York steps up to lead.”
The bill, expected to be introduced by Senator Leroy Comrie (D) and Assembly Member Micah Lasher (D), has garnered support from consumer and patient advocacy groups. However, the nursing home industry is bracing for potential challenges, fearing that the legislation could inadvertently harm their ability to provide essential services to vulnerable populations.