PDD-41-10-00024-P Reimbursement of Equipment and Property Insurance

10/13/10 N.Y. St. Reg. PDD-41-10-00024-P

NEW YORK STATE REGISTER

VOLUME XXXII, ISSUE 41

October 13, 2010

RULE MAKING ACTIVITIES

OFFICE FOR PEOPLE WITH DEVELOPMENTAL DISABILITIES

PROPOSED RULE MAKING

HEARING(S) SCHEDULED

 

I.D No. PDD-41-10-00024-P

Reimbursement of Equipment and Property Insurance

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

Proposed Action:

Amendment of Parts 635 and 671 of Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 13.07, 13.09(b) and 43.02

Subject:

Reimbursement of equipment and property insurance.

Purpose:

To revise and streamline the methodology for reimbursement of equipment and property insurance.

Public hearing(s) will be held at:

10:30 a.m., Nov. 30, 2010 and Dec. 1, 2010 at OPWDD, 44 Holland Ave., Counsel's Office Conference Rm., Albany, NY.

Interpreter Service:

Interpreter services will be made available to hearing impaired persons, at no charge, upon written request submitted within reasonable time prior to the scheduled public hearing. The written request must be addressed to the agency representative designated in the paragraph below.

Accessibility:

All public hearings have been scheduled at places reasonably accessible to persons with a mobility impairment.

Text of proposed rule:

Paragraph 635-6.1(b)(2) is amended to read as follows:

(2) the allowability of costs of capital moveable and personal property obtained from related and unrelated parties, other than capital moveable equipment and personal property of an IRA or group day habilitation program; and

Subparagraph 635-10.5(b)(8)(iv) is amended and new subparagraph (v) is added to read as follows:

(iv) Newly certified sites. A newly certified site is an IRA whose reimbursable costs are not already included in the monthly price and at which a provider is initially approved to deliver services pursuant to an operating certificate issued by [OMRDD] OPWDD. A newly certified site's annual total reimbursable residential habilitation costs and certified capacity shall be included in the monthly price as calculated in accordance with subparagraph (ii) of this paragraph except for capital moveable equipment and property insurance components after December 31, 2010. If two countable…

Note: rest of subparagraph remains unchanged.

(v) Effective January 1, 2011, capital moveable equipment and property insurance shall become fixed values contained in the cost category Other Than Personal Services.

(a) The fixed value amounts for each--capital moveable equipment and property insurance--shall be determined by OPWDD after reviewing the amounts, if any and as available, reported in a provider's annual cost reports for its supervised IRA sites for three successive years. For Region I reporting providers, the three fiscal years ending 6/30/2007, 6/30/2008 and 6/30/2009 shall be reviewed. For Region II and Region III reporting providers, the three calendar years 2007, 2008, and 2009 shall be reviewed. The values for capital moveable equipment and the values for property insurance shall be analyzed in terms of bed capacity and detrended to base year values. The bed capacities shall be those reflected in the prices on the last day of the respective reporting years. The highest value for per bed detrended capital moveable equipment and the highest value for per bed detrended property insurance shall be selected. OPWDD will not select any value that exceeds either of the other two values by more than 20% if that value is determined not to be representative of the provider's costs. The selected values shall then be adjusted on a pro rata basis to correspond to the bed capacities reflected in the January 1, 2011, price. For providers which have not operated any supervised IRAs or supervised CRs, the annual budgeted capital moveable equipment and property insurance amounts approved by OPWDD will be divided by the units of service OPWDD authorized for the current price period.

(b) For providers which operate both supervised IRAs and supervised Community Residences, the capital moveable equipment values will be the combined amounts, if any and as available, reported in the annual cost reports for the supervised IRAs and the supervised CRs for each of the years. The property insurance values will be the combined amounts, if any and as available, reported in the annual cost reports for the supervised IRAs and the supervised CRs for each of the years. Associated bed capacities for the selected values shall be the combined bed capacities as reflected in the prices of the supervised IRAs and in the fees of the supervised CRs.

(c) As of January 1, 2011, for Region II and Region III reporting providers, or July 1, 2011, for Region I reporting providers, the fixed values for capital moveable equipment and property insurance shall be subject to trend factor increases applied to the operating components of the price.

(d) The residential habilitation efficiency adjustment which was effective October 1, 2010, and any efficiency adjustments effective after December 31, 2010, shall not be applied to the capital moveable equipment and property insurance components of the supervised IRA price.

(e) OPWDD may opt to re-examine the capital moveable equipment and property insurance components of the supervised IRA price for purposes of recalculation after December 31, 2015, for Region II and Region III reporting providers, or after June 30, 2016, for Region I reporting providers.

Subparagraph 635-10.5(b)(9)(iv) is amended and new subparagraph (v) is added to read as follows:

(iv) Newly certified sites. A newly certified site is an IRA whose reimbursable costs are not already included in the monthly price and at which a provider is initially approved to deliver services pursuant to an operating certificate issued by [OMRDD] OPWDD. A newly certified site's annual total reimbursable residential habilitation costs and certified capacity shall be included in the monthly price as calculated in accordance with subparagraph (ii) of this paragraph except for capital moveable equipment and property insurance components after December 31, 2010. If two countable…

Note: rest of subparagraph remains unchanged.

(v) Effective January 1, 2011, capital moveable equipment and property insurance shall become fixed values contained in the cost category Other Than Personal Services.

(a) The fixed value amounts for each--capital moveable equipment and property insurance--shall be determined by OPWDD after reviewing the amounts, if any and as available, reported in a provider's annual cost reports for its supportive IRA sites for three successive years. For Region I reporting providers, the three fiscal years ending 6/30/2007, 6/30/2008 and 6/30/2009 shall be reviewed. For Region II and Region III reporting providers, the three calendar years 2007, 2008, and 2009 shall be reviewed. The values for capital moveable equipment and the values for property insurance shall be analyzed in terms of bed capacity as reflected in the price and detrended to base year values. The bed capacities shall be those reflected in the prices on the last day of the respective reporting years. The highest value for per bed detrended capital moveable equipment and the highest value for per bed detrended property insurance shall be selected. OPWDD will not select any value that exceeds either of the other two values by more than 20% if that value is determined not to be representative of the provider's costs. The selected values shall then be adjusted on a pro rata basis to correspond to the bed capacities reflected in the January 1, 2011, price. For providers which have not operated any supportive IRAs or supportive CRs, the annual budgeted capital moveable equipment and property insurance amounts approved by OPWDD will be divided by the units of service OPWDD authorized for the current price period.

(b) For providers which operate both supportive IRAs and supportive CRs, the capital moveable equipment values will be the combined amounts, if any and as available, reported in the annual cost reports for the supportive IRAs and the supportive CRs for each of the years. The property insurance values will be the combined amounts, if any and as available, reported in the annual cost reports for the supportive IRAs and the supportive CRs for each of the years. Associated bed capacities for the selected values shall be the combined bed capacities as reflected in the prices of the supportive IRAs and in the fees of the supportive CRs on the last day of the respective reporting year.

(c) As of January 1, 2011, for Region II and Region III reporting providers, or July 1, 2011, for Region I reporting providers, the fixed values for capital moveable equipment and property insurance shall be subject to trend factor increases applied to the operating components of the price.

(d) Efficiency adjustments effective after December 31, 2010, shall not be applied to the capital moveable equipment and property insurance components of the supportive IRA price.

(e) OPWDD may opt to re-examine the capital moveable equipment and property insurance components of the supportive IRA price for purposes of recalculation after December 31, 2015, for Region II and Region III reporting providers, and after June 30, 2016, for Region I reporting providers.

Clause 635-10.5(c)(4)(vi)(b) is replaced as follows:

(b) Effective January 1, 2011, capital moveable equipment and property insurance shall become fixed values contained in the cost category Other Than Personal Services.

(1) The fixed value amounts for each--capital moveable equipment and property insurance--shall be determined by OPWDD after reviewing the amounts, if any and as available, reported in a provider's annual cost reports for its group day habilitation sites for three successive years. For Region I reporting providers, the three fiscal years ending 6/30/2007, 6/30/2008 and 6/30/2009 shall be reviewed. For Region II and Region III reporting providers, the three calendar years 2007, 2008, and 2009 shall be reviewed. The values for capital moveable equipment and the values for property insurance shall be analyzed in terms of the greater of annual cost report reported units of services or units billed for the respective period and detrended to base year values. The highest value for per unit detrended capital moveable equipment and the highest value for per unit detrended property insurance shall be selected. OPWDD will not select any value that exceeds either of the other two values by more than 20% if that value is determined not to be representative of the provider's costs. The selected values shall then be adjusted on a pro rata basis to correspond to the units of service as reflected in the January 1, 2011, price. For providers which have not operated any group day habilitation services, the annual budgeted capital moveable equipment and property insurance amounts approved by OPWDD will be divided by the units of service OPWDD authorized for the current price period.

(2) As of January 1, 2011, for Region II and Region III reporting providers or July 1, 2011, for Region I reporting providers, the fixed value for capital moveable equipment and property insurance shall be subject to trend factor increases applied to the operating components of the price.

(3) Efficiency adjustments effective after December 31, 2010, shall not be applied to the capital moveable equipment and property insurance components of the group day habilitation price.

(4) OPWDD may opt to re-examine the capital moveable equipment and property insurance components of the group day habilitation price for purposes of recalculation after December 31, 2015, for Region II and Region III reporting providers, and after June 30, 2016, for Region I reporting providers.

Note: rest of subparagraph remains unchanged.

Paragraph 671.7(a)(7) is amended as follows:

(7) The capital component of the community residence price shall be equal to the amount of total allowable annual property, fixed equipment, and start-up costs pursuant to section 686.13(b)(3) and Subpart 635-6 of this Title divided by 12 and then divided by the total certified capacities of these sites less any certified temporary use bed(s). At the onset of each price period, [OMRDD] OPWDD shall review the capital component for allowable material changes and if said changes conform to the requirements of section 686.13(b)(3) and Subpart 635-6 of this Title, the capital component shall be revised to reflect said changes.

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

Barbara Brundage, Director, Regulatory Affairs Unit, Office For People With Developmental Disabilities, 44 Holland Avenue, Albany, New York 12229, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

Five days after the last scheduled public hearing.

Additional matter required by statute:

Pursuant to the requirements of the State Environmental Quality Review Act, OPWDD, as lead agency, has determined that the action described herein will have no effect on the environment, and an E.I.S. is not needed.

Regulatory Impact Statement

1. Statutory authority:

a. Section 13.07 of the Mental Hygiene Law sets forth the responsibility of the New York State Office For People With Developmental Disabilities (OPWDD) to assure and encourage the development of programs and services in the area of care, treatment, rehabilitation, education and training of persons with mental retardation and developmental disabilities, as stated in the New York State Mental Hygiene Law Section 13.07.

b. Section 13.09(b) of the Mental Hygiene Law establishes OPWDD's authority to adopt rules and regulations necessary and proper to implement any matter under its jurisdiction.

c. Section 43.02 of the Mental Hygiene Law establishes OPWDD's responsibility for setting Medicaid rates and fees for services in facilities licensed or operated by OPWDD.

2. Legislative objectives: The proposed amendments further the legislative objectives embodied in sections 13.07, 13.09, and 43.02 of the Mental Hygiene Law by streamlining the reimbursement of capital equipment and property insurance costs. Considered as "other than personal service" expenses (OTPS), they will then be eligible for trend factor adjustments normally applied to operating costs in order to reflect annual increases.

3. Needs and benefits: Historically, capital equipment and property insurance have been grouped with capital expenditures and have been subject to an annual review. Price sheets have been updated annually to reflect the actual costs incurred by providers or depreciation expense recognized. The document utilized for the review was the Consolidated Fiscal Report (CFR) for the prior two year period. Accordingly, reimbursement incorporates a two year lag. This process will change with these regulations. Provider capital equipment and property insurance will be regarded as fixed costs and categorized as "other than personal service" expenses (OTPS). When trend factors are approved for operating costs, these components will be trended by virtue of the OTPS classification.

This measure is one of many streamlining efforts being undertaken by OPWDD. After the initial conversion, the annual updating process for reimbursing these components will be eliminated; however, there will be an OPWDD review of funding levels for the 2016 and 2016/17 price periods. This streamlining initiative has the effect of providing predictability to providers in the reimbursement of provider equipment and property insurance costs.

4. Costs:

a. Costs to the Agency and to the State and its local governments: OPWDD expects that the amendments will not materially change either the costs or the amounts in reimbursement of these equipment expenses or property insurance.

There will be no additional costs or savings to local governments as a result of these particular amendments because Chapter 58 of the Laws of 2005 places a cap on the local share of Medicaid costs.

b. Costs to private regulated parties: As stated, amounts reimbursed to providers for these equipment expenses and property insurance once re-characterized as fixed costs are expected to remain generally constant. In addition, because the amount included in the price will be based on the highest representative costs from a three year period, providers should not be adversely affected by this change.

c. Costs to individuals and families: There are no new costs to the individuals and families. The proposed regulations only affect provider reimbursement.

5. Local government mandates: There are no new requirements imposed by the rule on any county, city, town, village; or school, fire, or other special district.

6. Paperwork: There is no new paperwork required.

7. Duplication: The proposed amendments do not duplicate any existing State or Federal requirements that are applicable to the above cited services for persons with developmental disabilities.

8. Alternatives: Currently provider-paid capital equipment and property insurance have been grouped with capital expenditures and have been subject to an annual review. Price sheets have been updated annually to reflect the actual costs incurred by providers or depreciation expense recognized. There is no alternative that would streamline this process without the changes implemented by the proposal and adoption of this rulemaking.

9. Federal standards: The proposed regulations do not exceed any applicable federal standards.

10. Compliance schedule: The regulation is expected to become effective January 1, 2011.

Regulatory Flexibility Analysis

1. Effect on small businesses and local governments: These proposed regulatory amendments will apply to agencies which operate Individualized Residential Alternatives (IRAs), Community Residences (CRs) or Day Habilitation services for persons with developmental disabilities. While most services are provided by voluntary agencies which employ more than 100 people overall, many of the facilities and services operated by these agencies at discrete sites employ fewer than 100 employees at each site, and each site (if viewed independently) would therefore be classified as a small business. Some smaller agencies which employ fewer than 100 employees overall would themselves be classified as small businesses. As of September 2010, OPWDD estimates that approximately 543 provider agencies operate these types of facilities or services.

The proposed amendments have been reviewed by OPWDD in light of their impact on these small businesses and on local governments. OPWDD has determined that these amendments will not have any negative effects on these small business providers of IRAs, CRs or Day Habilitation services, and that they will continue to provide appropriate funding for the delivery of such services.

Historically, capital equipment and property insurance for these services have been grouped with capital expenditures and have been subject to an annual review. Price sheets have been updated annually to reflect the actual costs incurred by providers or depreciation expense recognized. The document utilized for the review was the Consolidated Fiscal Report (CFR) for the prior two year period. Accordingly, reimbursement incorporates a two year lag. This process will change with these regulations. Provider capital equipment and property insurance will be regarded as fixed costs and categorized as "other than personal service" expenses (OTPS). When trend factors are approved for operating costs, these components will be trended by virtue of the OTPS classification.

This measure is one of many streamlining efforts being undertaken by OPWDD. After the initial conversion, the annual updating process for reimbursing these components will be eliminated; however, there will be an OPWDD review of funding levels for the 2016 and 2016/17 price periods. This streamlining initiative has the effect of providing predictability to providers in the reimbursement of provider equipment and property insurance costs. In addition, because the amount included in the price will be based on the highest representative costs from a three year period, providers should not be adversely affected by this change.

2. Compliance requirements: There will be no compliance requirements as a result of these proposed amendments.

3. Professional services: In accordance with existing practice, providers are required to submit annual cost reports by certified accountants. The proposed amendments do not alter this requirement. Therefore, no additional professional services are required as a result of these amendments. The amendments will not add to the professional service needs of local governments.

4. Compliance costs: As discussed in the Regulatory Impact Statement, there are no additional compliance costs to small business regulated parties or local governments associated with the implementation of, and continued compliance with, these proposed amendments.

5. Economic and technological feasibility: The proposed amendments are concerned with fiscal and administrative issues, and do not impose on regulated parties the use of any new technological processes.

6. Minimizing adverse economic impact: OPWDD expects that the amendments will not result in any adverse economic impacts. As stated in the Regulatory Impact Statement, amounts reimbursed to providers for these equipment expenses and property insurance once re-characterized as fixed costs are expected to remain generally constant. The amendments will have no impact on local governments. In addition, because the amount included in the price will be based on the highest representative costs from a three year period, providers should not be adversely affected by this change.

7. Small business and local government participation: The changes implemented by these proposed regulations have been discussed with providers of the affected services. Presentations were made to providers and their representatives at meetings of the Provider Associations (most recently on September 20, 2010) and in various meetings of providers. In particular, providers have had input on the method used to translate current expenses for capital equipment and insurance into fixed costs for each provider. Small business providers have therefore been consulted, and have had opportunity for input in the development of the proposed rule making.

Rural Area Flexibility Analysis

A rural area flexibility analysis for these amendments is not being submitted because the proposed amendments will not impose any adverse economic impact on rural areas. The proposed amendments will revise the reimbursement methodologies for the referenced facilities in order to streamline the way capital equipment and property costs are reimbursed. They are not expected to result in any economic impacts, either for the state or for providers of the affected services, including providers with operations in rural areas.

Further, the amendments will have no adverse impact on providers as a result of the location of their operations (rural/urban) because the amount included in each provider's price will be based on that particular provider's costs.

OPWDD's reimbursement methodologies are primarily based upon costs or budgeted costs of services. Thus, OPWDD’s reimbursement methodologies have been developed to reflect variations in cost and reimbursement which could be attributable to urban/rural and other geographic and demographic factors.

Job Impact Statement

A Job Impact Statement for these amendments is not being submitted because it is apparent from the nature and purposes of the amendments that they will not have an adverse impact on jobs and employment opportunities. The proposed amendments will revise the reimbursement methodologies for the referenced facilities and services in order to streamline the way capital equipment and property costs are reimbursed. The changes are not expected to have any economic impacts and should therefore not result in any changes to current staffing levels nor have any effect on the numbers of jobs and employment opportunities in New York State.