OMH-01-14-00013-EP Rates of Reimbursement - Hospitals Licensed by the Office of Mental Health

1/8/14 N.Y. St. Reg. OMH-01-14-00013-EP

NEW YORK STATE REGISTER

VOLUME XXXVI, ISSUE 1

January 08, 2014

RULE MAKING ACTIVITIES

OFFICE OF MENTAL HEALTH

EMERGENCY/PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. OMH-01-14-00013-EP

Filing No. 1242

Filing Date. Dec. 20, 2013

Effective Date. Dec. 20, 2013

Rates of Reimbursement - Hospitals Licensed by the Office of Mental Health

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:

Proposed Action:

Amendment of Part 577 of Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 7.09 and 43.02

Finding of necessity for emergency rule:

Preservation of public health, public safety and general welfare.

Specific reasons underlying the finding of necessity:

The amendments are the result of an administrative action consistent with Chapter 56 of the Laws of 2013 (the 2013-2014 enacted State Budget). Effective January 1, 2014, the proposal reduces the growth rate of Medicaid reimbursement for private psychiatric hospitals licensed pursuant to Article 31 of the Mental Hygiene Law. These regulatory amendments are the result of an extensive review of the rate methodology and cost reports by not only the Office of Mental Health, but also the Department of Health, in its role as the new rate setting entity. Therefore, OMH was not able to use the regular rule making process established by the State Administrative Procedure Act because there was not sufficient time to develop and promulgate regulations prior to January 1, 2014. Because all health care providers need to operate within the constraints of the enacted State budget, managing the growth of Medicaid is critical to maintaining essential health services during the budget year. Therefore, this rule is being adopted on an emergency basis until such time as it has been formally adopted through the SAPA rule promulgation process.

Subject:

Rates of Reimbursement - Hospitals Licensed by the Office of Mental Health.

Purpose:

Remove the 2014 trend factor for article 31 private psychiatric hospitals effective January 1, 2014.

Text of emergency/proposed rule:

1. Paragraph (1) of subdivision (e) of Section 577.7 is amended to read as follows:

(1) Allowable operating costs in the rate year are calculated by choosing the lower of the base year cost computed on a per diem basis or the limitation cost computed on a per diem basis, and trending this amount forward two years by the inflation factor, except for the rate period effective January 1, 2010, to December 31, 2010, when the inflation factor used to trend costs will be limited to the inflation factor for the first year of the two-year period, and the rate period effective January 1, 2014, to December 31, 2014, when there will be no inflation factor used to trend costs. Administration costs, as contained in and part of operating costs, shall be subject to an administrative cost screen. Two separate administrative cost screens shall be calculated, one for hospitals with greater than 100 beds (group one), and one for hospitals with 100 or less beds (group two). The administrative cost screen is derived from the costs in the fiscal year one year prior to the base year (i.e., the same cost year from which the limitation is derived), and shall be the group average per diem cost plus 10 percent.

2. Paragraph (4) of subdivision (h) of Section 577.7 is amended to read as follows:

(4) The operating cost component of the rate will be updated annually, except for the period January 1, 2010, to December 31, 2010, and the period January 1, 2014, to December 31, 2014, with the Medicare inflation factor for hospitals and units excluded from the prospective payment system, until the hospital has operated for six months at a minimum occupancy level of at least 75 percent and files its first cost report for that same period in accordance with section 577.5 of this Part.

This notice is intended:

to serve as both a notice of emergency adoption and a notice of proposed rule making. The emergency rule will expire March 19, 2014.

Text of rule and any required statements and analyses may be obtained from:

Sue Watson, NYS Office of Mental Health, 44 Holland Avenue, Albany, NY 12229, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory authority: Section 7.09 of the Mental Hygiene Law grants the Commissioner of the Office of Mental Health the authority and responsibility to adopt regulations that are necessary and proper to implement matters under his/her jurisdiction.

Section 43.02 of the Mental Hygiene Law provides that the Commissioner has the power to establish standards and methods for determining rates of payment made by government agencies pursuant to Title 11 of Article 5 of the Social Services Law for services provided by facilities, including hospitals, licensed by the Office of Mental Health.

2. Legislative objectives: Article 7 of the Mental Hygiene Law reflects the Commissioner’s authority to establish regulations regarding mental health programs. The amendments to Part 577 are needed to reduce the growth rate of Medicaid reimbursement for private psychiatric hospitals licensed pursuant to Article 31 of the Mental Hygiene Law. (Note: These amendments are not applicable to psychiatric hospitals which are jointly licensed pursuant to Article 31 of the Mental Hygiene Law, as well as Article 28 of the Public Health Law.) These amendments are the result of an administrative action consistent with Chapter 56 of the Laws of 2013 (the 2013-2014 enacted State Budget).

3. Needs and benefits: Effective January 1, 2014, the amendments remove the 2014 trend factor of 5.216 percent in developing the 2014 per diem Medicaid rates for Article 31 private psychiatric hospitals. Normally, under the Commissioner’s authority, OMH trends base year costs forward two years to the rate year by using two annual trend factors (representing a trend factor for the year preceding the rate year and another trend factor for the rate year). But for the 2014 rate year, OMH will not use a trend factor. This action is consistent with the elimination of the inflationary adjustments and trends applied to rates for community mental health programs in 2013-2014. As a result, the rate of growth in Medicaid expenditures for the private psychiatric hospitals will be slowed, but the expectation is that the level of services provided by such hospitals will be maintained. OMH will be recognizing a more current cost report period in the calculation of the 2014 rates, after having frozen rates in prior periods, which will allow for more current actual expenditures to be recognized in the rate calculation.

4. Costs:

(a) cost to State government: These regulatory amendments will not result in any additional costs to State government. These amendments are expected to result in a savings to State government of $1.12 million.

(b) cost to local government: These regulatory amendments will not result in any additional costs to local government.

(c) cost to regulated parties: This regulatory amendment will not result in any additional cost to regulated parties, but will reduce the rate of growth in Medicaid payments that the Article 31 private psychiatric hospitals would have received, projected to be 5.216 percent. Currently there are six such providers. It is estimated that this action will result in an annual reduction in Medicaid growth of approximately $1.12 million State share of Medicaid ($2.23 million gross Medicaid).

5. Local government mandates: These regulatory amendments will not result in any additional imposition of duties or responsibilities upon county, city, town, village, school or fire districts.

6. Paperwork: This rule should not substantially increase the paperwork requirements of affected providers.

7. Duplication: These regulatory amendments do not duplicate existing State or federal requirements.

8. Alternatives: As noted above, this amendment is consistent with the 2013-2014 enacted State Budget and the budgetary constraints included therein. The elimination of the 2014 trend factor of 5.216 percent is consistent with the elimination of the inflationary adjustments and trends applied to rates for community mental health programs in 2013-2014, and reflects the serious fiscal condition of the State. The only alternative to this rule making would have been to make budgetary cuts to another program which may have already sustained previous cuts and could have the potential for putting those providers at financial risk. Therefore, that alternative was not considered. It should be noted that OMH has not applied a trend factor to other cost-based reimbursement programs in the 2013-14 fiscal year, nor have cost of living adjustments been made to other payments in this year.

9. Federal standards: The regulatory amendments do not exceed any minimum standards of the federal government for the same or similar subject areas.

10. Compliance schedule: The regulatory amendments would become effective immediately upon adoption.

Regulatory Flexibility Analysis

The rule making will reduce the rate of growth in Medicaid reimbursement associated with private psychiatric hospitals licensed pursuant to Article 31 of the Mental Hygiene Law. The proposed change is consistent with the 2013-2014 enacted State Budget. This change removes the 2014 trend factor in the development of the 2014 per diem Medicaid rates for Article 31 private psychiatric hospitals, and, as a result, slows the rate of growth in Medicaid expenditures. There will be no adverse economic impact on small businesses or local governments; therefore, a regulatory flexibility analysis is not submitted with this notice.

Rural Area Flexibility Analysis

A Rural Area Flexibility Analysis is not submitted with this notice because the rule making, which serves to reduce the growth rate of Medicaid reimbursement associated with private psychiatric hospitals licensed pursuant to Article 31 of the Mental Hygiene Law, will not impose any adverse economic impact on rural areas. The proposed change is consistent with the 2013-2014 enacted State Budget. This change removes the 2014 trend factor in the development of the 2014 per diem Medicaid rates for Article 31 private psychiatric hospitals, and, as a result, slows the rate of growth in Medicaid expenditures.

Job Impact Statement

A Job Impact Statement is not submitted with this notice because the regulation eliminates the 2014 trend factor in the development of the 2014 per diem Medicaid rates for Article 31 private psychiatric hospitals, and, as a result, slows the rate of growth in Medicaid expenditures. The proposed change is consistent with the 2013-2014 enacted State Budget. No adverse impact on jobs and employment opportunities is expected as a result of this rule making.