FY 2027 Budget Enacted: Key Provisions for Upstate and Rural Hospitals

FY 2027 Budget Enacted: Key Provisions for Upstate and Rural Hospitals

Last Wednesday, May 27, the Legislature passed the FY 2027 state budget, totaling $268 billion. This is the latest enacted budget in more than 15 years and nearly two months past the April 1 deadline.

The final budget includes meaningful investments for Upstate and rural providers. IHA began advocating for these priorities last fall, emphasizing the urgent need for state action to preserve access to care in communities already facing workforce shortages, rising operational costs, and mounting uncertainty from federal healthcare policy changes and H.R. 1. We are grateful to the Governor and Legislature for their continued partnership and commitment to protecting access to care in upstate and rural communities. These investments reflect the importance of hospitals and health systems as both healthcare lifelines and economic anchors in their communities.

Key Healthcare Provisions Included in the Final Budget

Medicaid rate investments through the Healthcare Stability Fund

$706 million for hospital services effective April 1, 2026
- Comprising $606 million for inpatient rates and $100 million for outpatient rates
$250 million dedicated to hospital quality incentive payments
$480 million for nursing home services
$80 million for Federally Qualified Health Centers (FQHCs)
The Division of the Budget retains authority to suspend or terminate if the pool is deemed underfunded.

MCO Tax Amendments

The budget preserves the Managed Care Organization tax structure through December 31, 2026, while authorizing the state to seek CMS approval for a revised structure beginning January 1, 2027. If approved, the current per-member-per-month assessment would be replaced with a flat 0.35% tax on total premium revenue. The revised structure is expected to generate significantly less revenue than the current tax and because the rate investments above flow through the Healthcare Stability Fund, which the MCO tax primarily funds, DOB retains authority to suspend or terminate payments if the fund is deemed underfunded. IHA will keep members informed as the approval process unfolds.

Safety Net and Distressed Provider Support

Restoration of the proposed $500 million cut to the Vital Access Provider Assurance Program (VAPAP)
Continued support for VAP, DPT and global budgeting initiatives
$1 billion in capital funding and $330 million in operating support for the Safety Net Transformation Program (SNTP)

Capital Rate Restoration

Hospital capital cuts reduced from 20% to 10%, restoring approximately $94 million
Nursing home capital reductions restored from 15% to 10%, restoring approximately $29 million

Rural Health Transformation Program (RHTP)

Authorization for the Department of Health to distribute $190.9 million of the first-year appropriation from the $212 million federal RHTP award. Procurement requirements have been waived to accelerate distribution. Funding is directed toward provider integration, telehealth, primary care, workforce development, technology and cyber security.

Prior Authorization and Utilization Review Reforms

Utilization review for chronic conditions limited to once annually for outpatient courses of treatment, unless the provider recommends a change in treatment
Expanded continuity-of-care protections, including extension of transitional care periods from 60 to 90 days
Increased formulary transparency requirements

Workforce and Scope of Practice

NP modernization and pharmacist scope of practice flexibilities extended through July 1, 2030
PA scope of practice flexibilities extended through July 1, 2030
New DOH authority to regulate temporary healthcare staffing agencies, including rate-setting, expanded reporting, audit authority, and potential profit limitations. Effective one year after enactment. When setting agency rate caps, DOH will be required to factor in geographic need and staffing adequacy across different regions and provider types, which provides some protection against caps that could reduce agency availability in rural markets. Home care agencies are excluded from these provisions.

Other Notable Provisions

Permanent continuation of the school-based health center Medicaid managed care carve-out.
Codification of hospitals and healthcare facilities as protected “sensitive locations”, allowing facilities to deny ICE access to nonpublic areas without a judicial warrant

Absent from the Final Budget

Notably absent were IHA-supported priorities related to 340B anti-discrimination protections, broader scope-of-practice expansions, community paramedicine, hospital-at-home authority and a comprehensive Essential Plan transition strategy to address impacts by federal coverage changes.

The legislative session is scheduled to conclude this Thursday, making advancement of unresolved priorities increasingly difficult as lawmakers return to their districts and shift focus on upcoming elections. IHA’s advocacy efforts will remain focused on advancing policies that strengthen healthcare access and long-term sustainability for providers across upstate and rural New York.

Thank you for your continued leadership, advocacy, and commitment to serving your communities throughout this extended budget process.

Questions can be directed to a member of IHA’s advocacy team:

Lauren Ford, Vice President, Government Relations and Strategy, lford@iroquois.org, 518-935-7171
Grace Rust, Associate Director, Government Relations and Member Engagement, grust@iroquois.org, 518-345-7435