New York State Health Care Reform Act (HCRA)

May 13, 2005

Dear Payor/Provider:

Re: New York State Health Care Reform Act (HCRA)of 2000

This letter provides a summary of some of the major statutory changes made to the New York State Health Care Reform Act (HCRA) of 2000 as part of the enacted 2005-2006 State Fiscal Year Budget (i.e., Budget Bill).

The Budget Bill extends HCRA from July 1, 2005, through June 30, 2007, and continues the deregulated hospital ratesetting system which allows most payors to negotiate rates for inpatient hospital services. The Budget Bill also continues the existing statutorily based ratesetting methodology for inpatient hospital services paid by New York State Medicaid, other New York State governmental agencies, New York State's local county governments for services provided to inmates of local correctional facilities, and payments made for such services under the New York State Workers' Compensation Law, Comprehensive Motor Vehicle Insurance Reparations Act, Volunteer Firefighters' Benefit Law and Ambulance Workers' Benefit Law.

Previously authorized hospital assessments on inpatient service revenues and payor surcharges on payments made for general hospital and certain freestanding clinic services are also continued. Enacted increases in the surcharge percentages for services provided on and after January 1, 2006, are detailed in the enclosed chart which specifies the surcharge percentages for each applicable HCRA period. The Budget Bill also continues the requirement for certain payors to contribute to a Professional Education Pool (PEP) through additional surcharges on inpatient hospital services, or through covered lives assessments paid directly to the Department's pool administrator.

In addition, the Bill requires that all HCRA Pool collections be transferred to the Office of the State Comptroller (OSC). OSC will now disburse funds for all programs funded by HCRA except for provider formulaic subsidies which will continue to be disbursed by the Office of Pool Administration following receipt of applicable funds from OSC.

The enclosed overview provides a summary of the specific statutory revisions which are important to payors and providers of health services regarding their HCRA pool funding obligations. For additional information, please refer to the Department's website at:

Questions may also be directed to:

Mr. Richard Pellegrini, Director
Bureau of Financial Management and Information Support
Room 984, Corning Tower
Albany, New York 12237-0719
(518) 473-4653


Mark H. Van Guysling
Assistant Director
Division of Health Care Financing


Overview of Recently Enacted HCRA Revisions Impacting Payor and Provider
Pool Payment Obligations/Responsibilities

  • HCRA Surcharges

    The surcharge percentages imposed on payments made to New York State general hospitals and diagnostic and treatment centers providing comprehensive primary care or ambulatory surgery services have been revised for services rendered on and after January 1, 2006. The enclosed, entitled Attachment #4, Indigent Care and Health Care Initiatives Surcharges by Payor, outlines the existing surcharge percentages for services rendered on and after January 1, 1997, through December 31, 2005, and the revised surcharge percentages applicable to services provided on and after January 1, 2006.

  • Professional Education Pool (PEP) Covered Lives Assessments

    Recent amendments to HCRA maintain the statewide aggregate mandated PEP funding for 2005 at the 2004 funding level of $725 million. In 2006, the mandated PEP funding level is increased to $775 million. For the six-month period of January 1, 2007, through June 30, 2007, the PEP funding level will be $387.5 million. Allocation of this funding requirement by region will continue to be based on methods prescribed under prior statutory provisions which have been extended.

    Effective in 2006, annual regional covered lives assessments will be calculated to reflect these increases in funding requirements. This will be in addition to existing adjustments which occur each year to reflect corrections to previous year over or under collections of each region's funding target.

  • Alternative Per Unit of Service PEP Surcharges

    PEP surcharges applicable to inpatient hospital payments made by affected non-electing payors for services provided on and after January 1, 2006, through June 30, 2007 have also been increased.

    A separate correspondence will be sent at a later date, outlining the revised Graduate Medical Education (GME) surcharges and assessments for periods on and after January 1, 2006.

  • HCRA Compliance Audits

    Sections 2807-j and 2807-t of the Public Health Law have been amended to subject designated providers of services and third-party payors to audit for a period of six years following the close of the calendar year in which HCRA Pool payments and reports are due. Civil penalties of up to $10,000 per occurrence can be imposed for failure to produce data or documentation requested on audit. Specified monthly records which are required to be retained for audit verification purposes include, but are not limited to, the source records generated by supporting information systems, detailed claims information, detailed patient revenue information, capitation arrangements, financial accounting records, relevant correspondence, addresses and dates of coverage for individuals and family units, and other records as may be required to prove compliance with HCRA Pool Payment obligations for the period under audit.

  • Student Policy Exemption from Covered-Lives and Alternative GME Assessment

    Effective on and after April 1, 2005, any person covered under a student policy issued pursuant to Article 43 of the Insurance Law or a blanket student accident, blanket student health, or a blanket student accident and health insurance policy, is exempt from any covered-lives or alternative GME assessment obligation.