The New York Nursing Home Certificate of Need Ad Hoc Committee
Earlier in 2025, the New York State Department of Health’s Public Health and Health Planning Council (PHHPC) appointed a Nursing Home Certificate of Need (CON) Ad Hoc Committee to study the current CON process and issue reform recommendations. This PHHPC initiative should be applauded as an opportunity to improve the CON process and facilitate transactions and operations in New York. Members of our firm attended the inaugural in person meeting on September 18th, 2025, as well as the two subsequent online meetings, on November 3, 2025 and January 7th, 2026. At the January 7th meeting, it was suggested that interested stakeholders submit comments for consideration at the final meeting of this committee, anticipated to take place in late January. The Committee is expected to make recommendations to the full Council at its February 19th meeting.
Accordingly, now is the time for nursing home operators to provide much needed meaningful input to DOH and the PHHPC, which we can assist with, or you can provide directly yourself. We’ll recap a few salient points discussed at the meetings, available for viewing in DOH’s archives here: https://www.health.ny.gov/events/webcasts/archive/.
It appears thus far that the Committee is focused on seeking to remedy symptoms of the problems with the current CON system rather than addressing the root causes of such problems. Further below we make some suggestions we believe better target the causes rather than the symptoms.
Some examples from the presentations at the first three meetings reflect these concerns:
1. In the first meeting, a significant amount of time was spent dissecting who or what is considered an “operator” for purposes of evaluating “character and competence” in the CON process, followed by a focus on the proposed addition of a 5-year experience requirement (in a leadership position at a health facility) as a criterion for character and competence review, irrespective of whether the experienced operator is a passive or active investor and irrespective of the experience of the professional staff tasked to oversee day-to-day facility operations, including resident care.
2. At the second meeting, one DOH presentation described CON “financial review” (capability and feasibility). There was some discussion about leases, the relationship of a landlord and tenant, and the relatively new DOH requirement that a nursing facility lease reflect fair rental value (FRV). DOH indicated that the FRV is substantiated by verified licensed realtors.
3. The New York State Attorney General, Office of the Medicaid Fraud Control Unit (MFCU) presented next. As the State’s criminal prosecutor charged with investigating and prosecuting health care crime, MFCU described for-profit operators as involved in fraudulent asset stripping, “up-front profit-taking, “inflated purported management” fees, and so on. Profits, MFCU suggests, lead to preventable patient neglect; an implicit if not explicit endorsement of non-profit and County owned facilities.
4. In the third meeting, on January 7, DOH proposed PHHPC approval “conditions and contingencies” as a means to prevent use of leases and management agreements as so called “workarounds” used to “circumvent” existing regulation and policy in order for unlicensed persons to share in profits of a nursing facility. Notably, when members of the Committee asked how long an application is typically with the Dep’t before it is presented to the PHHPC, DOH was unwilling to provide an answer. Industry insiders are well aware of the answer.
As illustrated above, the focus of the Committee discussions thus far has been to identify so-called industry workarounds and to seek more effective means to clamp down on said workarounds.
The Committee, PHHPC and DOH need to appreciate, however, that ownership arrangements, services arrangements and leases have evolved precisely to comply with inherently imperfect regulations, not the goal or preferred default system of operators. More rules will not be the solution.
It is critical that nursing home industry stakeholders communicate a different perspective, to compel the Ad Hoc Committee to see the forest through the trees and meaningfully reform the CON process.
The following are some suggested talking points for consideration based on our experiences and discussions with stakeholders.
In 2026, transparency, access to data, increased mobility, social media and AI tools are greater instruments than we’ve ever had before. Focus ought to be on using these as tools to assist consumers (in this case prospective nursing home residents and their loved ones) in evaluating and selecting a nursing home.
We best serve the interests of the public by deregulating the market. By focusing government resources on expediting CON approvals, improving access to information in hospital discharge processes, and easing the restrictions on ownership and management, not only will it eliminate operators’ use of so-called workarounds that are so frowned upon by the Dep’t., but it will force operators to be responsive to the demands of consumers.
While regulators indeed should step in when needed and add value to fix imperfect market systems, the overall goal should be to give nursing home residents and their families the opportunity to choose the best facility with the best care.
As has been famously stated of our great American federalist system, the states are the laboratories of democracy. New York should accordingly look to other states, particularly those with significantly scaled back CON processes. Does the data, empirically or anecdotally, demonstrate that the quality of care is worse in other states with less formal CON policies than New York’s heavily regulated CON system? Perhaps not. New York healthcare may have its own idiosyncrasies, but arguably nothing that the current CON system is meaningfully addressing.
Nursing home industry stakeholders have long noted the regulatory inefficiencies that harm the ability to conduct business in New York. For instance, the inability to negotiate a transaction to sell or acquire a nursing home when the transaction has to sit on hold for two plus years before it can proceed. Delays and lack of predictability impede the ability to finance a transaction or to value the price of a transaction. Who can know what reimbursement rates or census will look like at a closing that is two plus years away?
Historically, until ten years ago, almost all nursing home transactions involved a signed contract followed by a single closing, upon PHHPC approval. Since then, as CON approval timelines have stretched longer (notwithstanding the consolidation of SHRPC and PHC into the streamlined PHHPC) and markets have shifted ever faster, almost all New York nursing home transactions are structured as real estate acquisitions with interim arrangements pending PHHPC approval. In other words, the CON process itself is the cause of the bifurcated structure that DOH seeks to avoid.
Similarly, the Committee’s discussion about so-called phantom arrangements, where unlicensed individuals exercise phantom control, does NOT engender meaningful reform. Such “phantom” arrangements belie the problems that lead to such ownership arrangements. For example, an individual applicant might have an ownership interest in 10 or more facilities, with all but one facility operating well, with no survey issues. However, that one facility that has a bad survey can result in a CON application being on hold forever. Conversely, if an applicant has no ownership of record, there will be no approval delays. With no survey issues to show, such individuals will pass right on through character and competence.
The regulators and the industry have sought to outwit one another other for decades. Growing regulations, and as DOH states, growing workarounds, including services arrangements, “side agreements,” unclear ownership structures, and CON applications that are in process for years. The result is uncertainty for buyers and sellers, but worse, for residents and their families, for employees and their families.
Conclusion:
There is no dispute that regulations and regulators are a necessary part of our healthcare system, but when we view a regulatory framework as the baseline, so called “workarounds” will continue to proliferate.
Nursing home stakeholders should appeal to the Dep’t and PHHPC to reform a flawed approach to CONs, not by further efforts to clamp down on workarounds, but to implement meaningful reforms.
Rather than vilify for profit nursing home operators, the State ought to partner with operators. In 2026, regulators have an opportunity to improve consumers’ ability to choose a facility based on a reputation of delivering quality care. Operators should be choosing to spend money on resident care and good staff, not because the regulations mandate specific requirements. But because prospective residents demand it.