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Negative Treatment ReconsideredMcKinney's Public Health Law § 2808(5)(c). [977 N.Y.S.2d 148] Eric T. Schneiderman, Attorney General, Albany (Victor Paladino, Barbara D. Underwood and Andrew D. Bing of counsel), for appellants.
Harter Secrest & Emery LLP, Rochester (Thomas G. Smith, F. Paul Greene and John P. Bringewatt of counsel), for respondents.
LIPPMAN, Chief Judge.
[999 N.E.2d 511] Before us on this appeal as of right pursuant to CPLR 5601 (d) is a challenge to the facial constitutionality of Public Health Law § 2808(5)(c). That provision, in its present form enacted in 2010 as this case was being litigated in Supreme Court (L. 2010, ch. 109, part B, § 36), prohibits the withdrawal or transfer of residential health care facility equity or assets in an aggregate amount exceeding three percent of the facility's most recently reported annual revenue from patient care services, without the prior approval of the State Commissioner of Health: 
" The commissioner shall make a determination to approve or disapprove a request for withdrawal of equity or assets under this subdivision within sixty days of the date of the receipt of a written request from the facility ... In reviewing such requests the commissioner shall consider the facility's overall financial condition, any indications of financial distress, whether the facility is delinquent in any payment owed to the department, whether the facility has been cited for immediate jeopardy or substandard quality of care, and such other factors as the commissioner deems appropriate."
Nursing homes serve a particularly needy and vulnerable clientele and are largely compensated with public funds. Preserving their financial viability and capacity to provide care and treatment at mandated levels is thus a proper and uncontroversial subject of legislative concern. The particular concern addressed by the [999 N.E.2d 512] [977 N.Y.S.2d 149] presently challenged enactment— that precipitous withdrawals of substantial facility equity or assets for non-facility purposes may impair facility operations and thus occasion detriment to the welfare of an utterly reliant resident population— is not new. Public Health Law § 2808(5)(c) is only the most recent of several restrictions on the alienation of facility equity and assets contained in Public Health Law § 2808. Subdivision (5)(a), enacted in 1977 (L. 1977, ch. 521, § 1), requires an operator to obtain permission for the withdrawal of facility assets or equity when the facility is in a negative net worth position or when the withdrawal would give rise to such a position, and, as amended in 1984 to address widespread noncompliance with the pre-approval requirement, contains a clawback provision (L. 1984, ch. 969, § 6). Subdivision (5)(b), enacted in 2008 (L. 2008, ch. 58, part C, § 72, as amended by L. 2008, ch. 57, part OO, § 12) extended the Commissioner's oversight of facility asset/equity withdrawals to facilities in positive equity positions, by requiring across-the-board prior written notification of any withdrawal or transfer of facility equity or assets exceeding in the aggregate three percent of the facility's most recently reported annual revenue from patient care services. The presently challenged provision, subdivision
(5)(c), constitutes a further extension of the same regulatory agenda, adding a pre-approval requirement for any withdrawal for which notice would be required under subdivision (5)(b). Read in context, subdivision (5)(c) targets facilities that, although already subject to subdivision (5)(b)'s pre-withdrawal written notification requirement, were not previously subject to a pre-withdrawal approval requirement.
In granting plaintiffs summary judgment, declaring section 2808(5)(c) facially unconstitutional, Supreme Court reasoned that the statute's use of the catch-all phrase " and such other factors as the commissioner deems appropriate" afforded the Commissioner unbridled discretion to deny withdrawal/transfer applications, and in so doing impermissibly ceded legislative policy-making power to a regulatory agency situated in the executive branch ( see Matter of Medical Socy. of State of N.Y. v. Serio,100 N.Y.2d 854, 864, 768 N.Y.S.2d 423, 800 N.E.2d 728  ). The court also faulted the statute for infringing the substantive due process ...