Governor Cuomo Continues Focus on Controlling Excessive Compensation and Administrative Costs for Service Providers

By Mitchell Pawluk

Yesterday’s presentation of the 2012-13 Executive Budget by Governor Andrew Cuomo highlighted a number of new initiatives.  One of the most notable initiatives for health care providers was Governor Cuomo’s continued focus on controlling the compensation of executives for not-for-profit organizations who receive money from the state.

As outlined in his 2012-13 Executive Budget & Reform Plan, Governor Cuomo has proposed three reforms to be addressed in this year’s budget:

  1. Requiring at least 85 percent of every public dollar to be spent on direct services, not administration;
  2. “Capping” reimbursement for any executive’s compensation at $199,000; and
  3. Allowing for excess compensation to be a basis for rejection of a provider.

The reaction to Governor Cuomo’s proposals has been swift, with Crain’s healthcare blog “Pulse” calling Cuomo a “salary-slayer,” and other outlets posing the question of whether the $199,000 limit on compensation will also include CEOs of hospitals. 

The proposals may be foreshadowing yet-to-be released recommendations by the Governor’s Task Force on Not-for-Profit Entities, an entity created less than six months ago to review executive compensation at taxpayer supported not-for-profits.  The task force was announced on August 18, 2011, only a day after a detailed New York Times article exposed million dollar salaries for executives of a Medicaid-financed not-for-profit serving the developmentally disabled.

On August 25, 2011, Benjamin Lawsky (superintendant of the Department of Financial Services and chair of the task force) sent audit-like letters to boards of directors for not-for-profits across the state (available here).  In addition to the letters inquiring into executive compensation, the task force has also indicated it may hold public hearings and issue a report containing recommendations for reform.  While the task force does not have subpoena power, state agencies such as the Department of Health do have the power to remove organizations from the Medicaid program—a death sentence for many nonprofit healthcare organizations.

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