In late November, New York State Governor Kathy Hochul signed into law a bill that amended and significantly limited the applicability to hospitals and health care professionals of two long-established principles pertaining to the enforcement of money judgments in New York State: (1) the automatic creation of a judgment lien by filing with a county clerk a judgment awarding money damages and (2) the ability to enforce a money judgment by execution against the judgment debtor’s income.
Generally, in New York State, by statute, the entry and docketing of a money judgment against a natural or other person (judgment debtor) in the office of a county clerk creates a 10-year lien on all real property owned by the judgment debtor in that county. A judgment lien subjects the real property to which it is attached to being executed against and sold by a county sheriff to fully or partially satisfy the underlying judgment. Even property that is a natural person’s homestead is not exempt from an execution sale by a sheriff, although a certain dollar amount of a debtor’s equity in that property—dependent on the county in which the property is located—is exempt from application to a money judgment.
Another New York State statute entitles the owner of a money judgment, upon delivering an appropriate execution document to a county sheriff, to obtain payment of up to 10 percent of a judgment debtor’s income that exceeds a certain statutorily determined amount. This process is commonly known as a wage garnishment. (Income that does not exceed the statutory minimum is exempt from execution.)
The new law signed by Governor Hochul significantly limits the application of the two previously mentioned statutes to certain hospitals and health care professionals. It prohibits the creation or enforcement of a judgment lien against a judgment debtor’s primary residence in any action arising from a medical debt brought by a hospital licensed under Article 28 of the Public Health Law (including both for-profit and not-for-profit hospitals) or a health care professional authorized under Title VIII of the Education Law. Similarly, the new law prohibits these hospitals and health care professionals from asking a sheriff to execute against a judgment debtor’s income or money from any source.
The new law will significantly reduce the alternatives hospitals and health care professionals of the designated types will have to collect any portion of their fees for services to patients that are not covered by insurance or voluntarily paid by their patients.
It is generally accepted that New York State has an interest in protecting patients of hospitals and health care professionals from potentially catastrophic health care expenses in the event a health care crisis occurs. Nevertheless, all of the entities impacted by the new law, many of which actively opposed its passage, will potentially suffer financial harm as a result of its enactment. Particularly, nursing homes fear that because Medicaid eligibility and reimbursement for nursing home care is structured differently than for hospital services, the application of the new law will have unintended and inequitable results for them. They also fear the new law will enable affluent New York State residents to receive nursing home care essentially free of charge. Additionally, the new law may allow unscrupulous representatives of nursing home residents to divert resident assets and resources for their own use—instead of used to pay for the residents’ care—without the threat that the nursing home will be able to obtain a money judgment that will become a lien on the resident’s homestead real property and potentially enable it to execute against non-exempt income being received by the resident or to which the resident is entitled. These new limitations on a nursing home’s ability to recover its fee for the care it provided to its residents in no way limit the requirement that it provide care to its patients.
Presently, it is difficult to predict the various ways the new law could negatively impact the hospitals and health care professionals to which it applies. Our attorneys will monitor future developments with respect to the new law and report on legal actions that may be commenced to avoid or mitigate the negative impact of the new law.
The Thought Leadership Committee of Barclay Damon’s Restructuring, Bankruptcy & Creditors’ Rights Practice Area issues alerts and blogs on an ongoing basis to keep clients, colleagues, and friends up to date on important developments in the insolvency space. If you have any questions regarding the content of this alert, please contact the author, Frank Heller, partner, at fheller@barclaydamon.com, or Janice Grubin or Jeff Dove, co-chairs of the Restructuring, Bankruptcy & Creditors’ Rights Practices Area, at jgrubin@barclaydamon.com and jdove@barclaydamon.com.