New York Governor Approves ACO Legislation; Vetoes Patient Referral Bill

On October 3, 2012, New York State Governor Andrew Cuomo acted on several health care related bills, including legislation dealing with accountable care organizations and patient referral laws.

The Governor approved by signing into law an act to amend the Public Health Law in relation to accountable care organizations (ACOs) (A.8869-B/S.6228-B), which is intended to regulate and promote the formation of ACOs and protect the public interest, as well as the interests of patients and health care providers. While New York State approved a demonstration program for ACOs in 2011, the new legislation removes both the “demonstration” designation of the ACO program, as well as the cap on the number of ACOs that may be authorized. The bill aligns the current State ACO Laws with the federal Medicare ACO regulations, and, among other provisions, provides a more complete legal structure for ACOs, requiring that the governance, leadership and management structure of the ACO reasonably and equitably represents the ACO’s participating health care providers, patients, and the community.

A bill relating to referrals of patients for health related items or services (A3551/S4660), which had passed in both the Assembly and Senate, was vetoed by the Governor. The bill would have amended the Public Health Law which currently prohibits, subject to certain exceptions, health care providers from referring patients to providers of health care services with whom the provider or an immediate family member has a financial relationship. The law would have conformed New York’s State health care practitioner referral law to the federal Stark Law by adopting exceptions to restrictions on physician self-referrals previously enacted by Congress, including creating additional exceptions to what constitutes a financial relationship.

“Given the concern with real and apparent conflicts of interest that this change would engender, I see no reason to upset New York’s rules for determining the propriety of practitioner referrals,” explained the Governor in his Veto Message. The practical effect of the vetoed bill is that New York healthcare providers will continue to encounter difficulty in analyzing and structuring referral relationships in compliance with both State and federal standards.

To learn more about the new accountable care organization legislation and how it impacts New York State healthcare providers, or for assistance regarding compliance with State and federal patient referral laws, please contact Gina R. Dolan, Esq. or Ron Lebow, Esq. at (516) 492-3390, or visit The HLP Website.