On March 20, 2025, a New York Supreme Court Justice in Albany County issued a decision and order declaring the New York State Department of Health (NY DOH)’s August 2024 implementation of an administrative rate reimbursement change for Fiscal Intermediaries (FIs) participating in the state’s Consumer Directed Personal Assistance Program (CDPA Program) “null and void.” The CDPA Program, funded through Medicaid, allows chronically ill and/or disabled individuals (“Consumers”) to engage and employ personal assistants (from recruitment through termination) to provide home health and personal care services for them, while the FI performs wage and benefit processing.

As previously reported, the CDPA Program has been the target of substantial changes throughout last year. One such change, which the NY DOH publicly announced on July 2, 2024, involved a significant adjustment to the manner in which Medicaid Managed Care Plans (MMCPs) would be required to submit claims for administrative expenses incurred by FIs that subcontract with MMCPs, effective August 1, 2024. Prior to this change, FIs that provided services pursuant to a subcontract with an MMCP billed the MMCP directly for both direct care and administrative service costs, the latter of which are defined as “the allowable costs incurred by a fiscal intermediary for the performance of [the statutorily defined] fiscal intermediary services.” 18 NYCRR § 505.28. The change mandated that three-tiered administrative rates would be based upon the number of direct care hours a Consumer received in a given month, thereby significantly reducing FI reimbursement rates, which threatened many FIs’ ability to continue providing services. The NY DOH did not, however, submit a notice of proposed rulemaking to the NY secretary of state for publication in the State Register and/or afford the public an opportunity to submit comments on the proposed rate reimbursement adjustment prior to implementing this change.

In July 2024, a group of FIs and the Consumer Directed Personal Assistance Association of New York (“Petitioners”) filed a petition and complaint challenging the NY DOH’s announcement and implementation of the rate reimbursement methodology, seeking a declaration that the actions of the NY DOH and its commissioner (“Respondents”) violated the State Administrative Procedure Act (SAPA) and the state constitution. Specifically, the Petitioners argued that the administrative rate methodology implemented by Respondents was a “rule” as defined by SAPA § 102(2)(a)(ii), in that it involved “the amendment, suspension, repeal, approval, or prescription for the future of rates,” and that the Respondents failed to comply with rule-making procedures set forth in the state constitution and the SAPA.

On August 5, 2024, the Petitioners sought a preliminary injunction against the Respondents, pending the court’s final decision with respect to the underlying petition. On October 10, 2024, the court denied the Petitioners’ motion, holding that the Petitioners had failed to establish that they would suffer irreparable harm, one of the three requisite elements for a preliminary injunction. The court reasoned that the “alleged harm is calculable, as petitioners can track the amount of time spent performing administrative services” and then, “[t]he difference between that and the reimbursement at the new, tiered rate can be compensable with damages.” Because the court found that the Petitioners had not demonstrated irreparable harm, it declined to consider the other two elements applicable to determining whether a preliminary injunction was appropriate.

The parties proceeded to litigate the underlying petition. The Respondents argued that the change to the reimbursement methodology was not rulemaking, but a discretionary action undertaken as a party to the model contract between the NY DOH and MMCPs. The court rejected this argument, finding that the NY DOH’s change to the reimbursement rate was a rule because the model contract between the MMCPs and the NY DOH provides that MMCPs are required to “comply with all applicable guidance contained within the Medicaid update publication issued by [the NY DOH],” and the NY DOH’s announcements and publications explicitly directed that FIs would be required to bill the MMCPs pursuant to the new methodology and directed MMCPs to pay FIs pursuant to the three-tier schedule. Accordingly, the court determined that Respondents were not exercising their discretion but adopting a “rigid quasi-legislative norm” by imposing a non-negotiable contractual term on all FIs contracting with MMCPs. The Respondents therefore were required to comply with the rulemaking procedures set forth in the SAPA. Ultimately, the court held that the Respondents’ determination to issue and implement the reimbursement rate change was contrary to law and lawful procedure, and was arbitrary, capricious, and an abuse of discretion. Therefore, the court declared Respondents’ August 1, 2024, change regarding the three-tiered reimbursement rate “null and void.”

Implications for FIs

The term “null and void” is a legal expression used to convey the complete invalidity and unenforceability of an action, agreement, or contract. When an action is declared to be “null and void,” it is considered to have no legal force or effect. A court’s declaration that an action is null and void typically involves restoring the affected parties to the positions that they would have been in had the nullified action never occurred. Here, because the NY DOH implemented the rate reimbursement change as of August 1, 2024, and this action was not declared unlawful until March 2025, FIs and MMCPs have been receiving reimbursement from the NY DOH at the adjusted rates for over seven months. The court’s decision and order suggests that all payments made under the invalid rates must be recalculated and adjusted according retroactively to the prior rates and that all services going forward should be reimbursed under the old methodology. Although the court did not explicitly direct the Respondents to issue monetary reimbursements to the Petitioners and/or all FIs affected by the NY DOH’s unlawful actions, as the court acknowledged in its October 10, 2024 decision and order, the harm “is calculable” and “can be compensable with damages.”

The Respondents have the ability to appeal this decision. Littler will continue to monitor this case all legal developments concerning the NY DOH’s actions related to the CDPA Program.