HLT-28-14-00016-E Rate Rationalization for Community Residences/Individualized Residential Alternatives Habilitation and Day Habilitation

10/15/14 N.Y. St. Reg. HLT-28-14-00016-E

NEW YORK STATE REGISTER

VOLUME XXXVI, ISSUE 41

October 15, 2014

RULE MAKING ACTIVITIES

DEPARTMENT OF HEALTH

EMERGENCY RULE MAKING

 

I.D No. HLT-28-14-00016-E

Filing No. 845

Filing Date. Sept. 29, 2014

Effective Date. Sept. 29, 2014

Rate Rationalization for Community Residences/Individualized Residential Alternatives Habilitation and Day Habilitation

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

Action taken:

Amendment of Subpart 86-10 of Title 10 NYCRR.

Statutory authority:

Public Health Law, section 201

Finding of necessity for emergency rule:

Preservation of public health, public safety and general welfare.

Specific reasons underlying the finding of necessity:

The emergency adoption of these amendments is necessary to protect the health, safety, and welfare of individuals receiving services in the OPWDD system.

The amendments are necessary to properly implement a new rate methodology for residential habilitation provided in Individualized Residential Alternatives (IRAs) and Community Residences (CRs) and day habilitation services. OPWDD and DOH made commitments to the Centers for Medicare and Medicaid Services (CMS) in order to qualify for substantial federal funding, including its commitment to implement the new rate methodology in July, 2014. To fulfill its commitment, OPWDD and DOH adopted proposed regulations to implement the new methodology effective July, 2014 through the regular rulemaking process. However, OPWDD and DOH became aware that substantive changes were necessary to properly implement the methodology subsequent to the proposal of the regulations, which was too late to incorporate the amendments through the regular rulemaking process. The State Administrative Procedure Act (SAPA) sets forth timeframes for the promulgation of regulations (including a mandatory public comment period) and prohibits the adoption of rules containing substantive changes in the terms of proposed regulations. SAPA requires additional rulemaking activities to make substantive changes through the regular rulemaking process which delays the effective date. The only way that the substantive amendments necessary to properly implement the new methodology could be promulgated at the same time that the original regulation is adopted is through the emergency rulemaking process.

If DOH did not promulgate these regulations on an emergency basis, DOH would fail to meet its commitment to CMS and would risk loss of the substantial federal funding that is contingent on this commitment. The loss of this federal funding could jeopardize the health, safety, and welfare of individuals receiving services in the OPWDD system, as without it, individuals would be at risk of receiving services that are inadequate or insufficient in meeting their needs.

Subject:

Rate Rationalization for Community Residences/Individualized Residential Alternatives Habilitation and Day Habilitation.

Purpose:

To amend the new rate methodology effective July 1, 2014.

Substance of emergency rule:

The emergency/proposed regulations amend the newly-adopted 10 NYCRR Subpart 86-10, concerning the rate methodology for Residential Habilitation delivered in IRAs and Community Residences and Day Habilitation. (Note that the text of the newly adopted regulation is the same as the text of the proposed regulation published in the spring of 2014.) The changes include the following:

1) A clarification that the “initial period” of the methodology is July 1, 2014 through June 30, 2015.

2) A definition was added for “total reimbursement”. The definition total reimbursement is the provider’s final reimbursement as calculated on its rate sheets inclusive of SSI/SNAP adjustments and any State supplement add-on.

3) A clarification in the definitions of the “regional average general and administrative component” and the “provider average general and administrative component” to specify that the administrative allocation for the base year is agency administration, that depreciation is equipment depreciation and that program administration property is not part of the formula.

4) A clarification in the definition of “provider direct care hours”, “provider salary clinical hours” and the “provider contracted clinical hours” to indicate that the formulas are based on rate sheet capacities rather than billed units and that the formula quotient is multiplied by rate sheet capacities rather than units.

5) A change in the “provider facility reimbursement” definition to indicate that depreciation is equipment depreciation and that the formula utilizes provider rate sheet capacities rather than billed units or units.

6) A clarification to the “alternative cost component” and to the “alternative facility cost component” (specific to IRAs and Community Residences) to indicate that this section applies to providers that did not submit a cost report or submitted a cost report that was incomplete. The previous language applied these components in a more narrow set of circumstances, i.e., only when providers did not provide services during the base year.

7) The “budget neutrality” formula was changed for Supervised and Supportive IRAs and Community Residences. Budget neutrality was eliminated on the “facility cost component” and a “statewide budget neutrality for State supplement factor” was added to the methodology.

8) A note was added to the “capital component” section to indicate that the capital component language was not applicable to capital approved by OPWDD prior to July 1, 2014.

9) The “capital component” section for both Supervised and Supportive IRAs and Community Residences was changed to clarify that start-up costs may be amortized over a one-year period beginning with certification.

10) Numerous changes were made to the capital threshold schedules to add clarity including the elimination of references to incorrect programs; the elimination of the non-relevant “architect/engineer design fee schedule for ground-up construction” and to standardize definitions, including that of soft costs.

11) The “adjustments” section (specific to Supervised and Supportive IRAs and Community Residences) was revised to clarify that the supplemental security income offset is an annualized figure.

12) A “rate correction” section was added to specify the policies and procedures for the correction of arithmetic or calculation errors.

13) Within the “transition periods and reimbursement” section, it was clarified that retainer days, specific to Supervised IRAs and Community Residences, will be reconciled at the mid-point and the end-point of the rate period ending June 30, 2015. It was further clarified that Supervised IRA and Community Residence providers shall not be paid for more than 14 retainer days per annual period for any one individual.

14) Also, within the “transition periods and reimbursement” section, specific to Supervised IRAs and Community Residences, it was clarified that therapeutic leave days include vacation absences and that therapeutic leave days will be reimbursed at the provider’s Supervised IRA or Community Residence rate.

15) Additionally, within the “transition periods and reimbursement” section, specific to Supervised IRAs and Community Residences, it was further clarified that the payment for vacant bed days, through the period ending June 30, 2015, would be 75 percent of the provider’s Supervised IRA or Community Residence rate up to a maximum of 90 such vacant bed days.

16) A new section is added governing funding for those individuals identified as qualifying for template or auspice funding. The funding for IRA/CR residential habilitation and day habilitation provided to these individuals will be determined in accordance with that section instead of the methodology that is generally applicable.

17) Various non-substantive technical corrections were added to correct inconsistencies, grammatical errors, etc.

This notice is intended

to serve only as a notice of emergency adoption. This agency intends to adopt the provisions of this emergency rule as a permanent rule, having previously submitted to the Department of State a notice of proposed rule making, I.D. No. HLT-28-14-00016-P, Issue of July 16, 2014. The emergency rule will expire November 27, 2014.

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

Katherine Ceroalo, DOH, Bureau of House Counsel, Reg. Affairs Unit, Room 2438, ESP Tower Building, Albany, NY 12237, [phone], email: [e-mail]

Regulatory Impact Statement

Statutory Authority:

Social Services Law (SSL) section 363-a and Public Health Law (PHL) section 201(1)(v) provide that the Department is the single state agency responsible for supervising the administration of the State’s medical assistance (“Medicaid”) program and for adopting such regulations, not inconsistent with law, as may be necessary to implement the State’s Medicaid program.

Legislative Objective:

These proposed regulations further the legislative objectives embodied in section 363-a of the Social Services Law and section 201(1)(v) of the Public Health Law. The emergency/proposed regulations amend the newly adopted methodology for reimbursement of residential habilitation delivered in Individualized Residential Alternatives (IRAs) and Community Residences (CRs) and day habilitation services.

Needs and Benefits:

OPWDD and the Department of Health (DOH) recently finalized a new reimbursement methodology for residential habilitation in IRAs/CRs and day habilitation, which complements existing OPWDD requirements concerning these programs, to satisfy commitments included in OPWDD's transformation agreement with the federal Centers for Medicare and Medicaid Services (CMS).

Prior to final adoption of the rule, OPWDD and DOH became aware of amendments that were needed to properly implement the new methodology. Many of the corrections and clarifications contained in these amendments are in response to concerns noted in public comments about the proposed regulations and questions submitted to OPWDD and DOH about the new methodology. The changes in these amendments clarify the new methodology and contain corrections that are necessary for its proper implementation.

Costs:

Costs to the Agency and to the State and its Local Governments:

The emergency/proposed regulations are necessary to enable the State to properly implement the new methodology. In general, there are no material fiscal changes that result from the amendments compared to the intent of the original methodology. The amendments, building on the original methodology, will be cost neutral to the state as the overall monies expended overall for such services will remain constant.

The new methodology and the accompanying amendments do not apply to the state as a provider of services.

There will be no savings or costs to local governments as a result of these regulations because pursuant to Social Services Law sections 365 and 368-a, either local governments incur no costs for these services or the State reimburses local governments for their share of the cost of Medicaid funded programs and services. In addition, even if the amendments lead to an increase in Medicaid expenditures in a particular county, these amendments will not have any fiscal impact on local governments, as the contribution of local governments to Medicaid has been capped. Chapter 58 of the Laws of 2005 places a cap on the local share of Medicaid costs and local governments are already paying for Medicaid at the capped level.

Costs to Private Regulated Parties:

The emergency/proposed regulations will amend the new reimbursement methodology for residential habilitation in IRAs/CRs and day habilitation and facilitate its proper implementation. Application of the new methodology (as amended) is expected to result in increased rates for some non-state operated providers and decreased rates for others. However, overall reimbursement to providers will not be changed. The amendments themselves may result in a minor increase or decrease in rates for some providers, but will have no overall impact on provider rates because budget neutrality is built into the new methodology.

Local Government Mandates:

There are no new requirements imposed by the rule on any county, city, town, village, school, fire or other special district.

Paperwork:

The emergency/proposed regulations are not expected to increase paperwork to be completed by providers.

Duplication:

The emergency/proposed regulations do not duplicate any existing State or federal requirements that are applicable to services for persons with developmental disabilities.

Alternatives:

The amendments include a statement to clarify that the provisions of the capital component do not apply to capital approved by OPWDD prior to July 1, 2014. This statement reflects the intent of the original regulations although this was not explicit in the original language. The statement is included in the amendments in response to concerns raised that the regulations could be construed to permit the prior approval of capital to be subject to inappropriate review. OPWDD and DOH considered the inclusion of the statement to be unnecessary but after consideration decided to include it to make its intent explicit and the regulations clear.

Federal Standards:

The emergency/proposed amendments do not exceed any minimum standards of the federal government for the same or similar subject areas.

Compliance Schedule:

DOH is adopting the amendments on an emergency basis effective July 1, 2014 to coincide with the final adoption of the proposed regulations which it is amending. During the spring of 2014, DOH and OPWDD trained providers on the new methodology as amended and issued rate sheets, guidance documents and training materials which reflected the anticipated amendments. DOH expects to finalize the amendments as soon as possible within the timeframes established by the State Administrative Procedure Act.

Regulatory Flexibility Analysis

Effect of Rule:

The changes in these amendments clarify the new methodology and contain corrections that are necessary for its proper implementation.

Many of the amendments correct technical errors in the original text or add clarifying material. In general, these provisions do not change the impact of the original regulations on providers, including providers that are small businesses, or have positive impacts. However, several technical amendments make changes to the original text that may translate into a minor increase or decrease in the rates and may have a modest negative impact on some small business providers of residential habilitation in IRA/CRs and/or day habilitation. For example, the change from “billed units” to “rate sheet capacities” in the methodology may result in immaterial positive or negative differences in the final rates. These immaterial differences will not impose an adverse economic impact on small business providers and in any case, the overall funding to providers will remain the same because of budget neutrality. Changes made to the budget neutrality component of the methodology may have a slight impact on all providers of residential habilitation in IRA/CRs. The amendments do not change any requirements for recordkeeping or other compliance requirements that are contained in the original regulations.

Finally, these amendments do not impose any requirements on local governments, and (as noted in the Regulatory Impact Statement) have no fiscal impact on local governments.

Compliance Requirements:

There are no new compliance activities imposed by these amendments.

Professional Services:

No new professional services will be required as a result of these regulations and the regulations will not add to the professional service needs of local governments.

Compliance Costs:

There are no compliance costs since there are no new compliance activities imposed by these amendments.

Economic and Technological Feasibility:

The proposed amendments do not impose on regulated parties the use of any technological processes.

Minimizing Adverse Impact:

As noted above, some of the technical changes may affect the rates either positively or negatively. DOH does not expect that these immaterial differences would impose an adverse economic impact on small business providers. In any case, the overall funding to providers as a result of these technical amendments will remain the same because of budget neutrality.

DOH has reviewed and considered the approaches for minimizing adverse economic impact as suggested in section 202-b(1) of the State Administrative Procedure Act. The proposed regulations minimize adverse economic impact in several ways. First, the anticipated fiscal impact of the amendments is expected to be slight because only minor changes in the rates result from the technical amendments. In addition, DOH notes that the rate sheets distributed to providers in June anticipated the promulgation of these amendments by incorporating the technical changes into the methodology underlying the rate calculation (except for the change in budget neutrality), and providers have therefore already been developing plans to implement the new rate methodology based on the incorporation of these amendments. Therefore, providers will only need to make minimal adjustments in fiscal plans as a result of the minor change in budget neutrality. DOH considered the impact of the change in budget neutrality on providers but determined that the changes incorporated in these amendments were necessary to properly implement the methodology. The potential loss of federal funds that could result from non-compliance would have had far more serious consequences to providers than the minor decrease in rates that result from these changes.

The amendments also contain several changes that will be positive for providers. The amendments include changes which explicitly state that the new provisions related to the calculation of the capital component do not apply to capital approved prior to July 1, 2014. While this reflects the original intention and is not a change per se, the inclusion of this specific language helps providers to keep faith with financial institutions who can rest assured that anticipated capital reimbursement will continue to be received for projects. In addition, new language was added to explicitly address the correction of arithmetic or calculation errors. In the event that such errors occur, providers now have a referenced mechanism to request corrections of these errors. Related to the calculation of the capital component, new items were added to the chart of thresholds for “soft costs,” such as security and clerk of the works, which will permit the reimbursement of these items up to the threshold amount. This corrects the inadvertent exclusion of these items in the original proposed regulations.

There are several additional positive changes for providers which are specific to the provision of residential habilitation services in supervised IRAs/CRs. Changes were made in the definition of “therapeutic leave days” to include days when the individual receiving services is on vacation. This corrected an inadvertent omission in the original regulations (which only permitted therapeutic leave days for the purpose of visiting with family and friends). Because of this change, providers may receive reimbursement for days when the individual is on vacation but the vacation is not for the purpose of visiting with family and friends. Finally, changes were made related to the reconciliation of therapeutic leave days and retainer days, which positively affect the cash flow to providers. The amendments eliminate the reconciliation requirement for therapeutic leave days and state that the determination of reimbursement for retainer days will happen at the mid-point of the stated period as well as the conclusion of the period.

Small Business and Local Government Participation:

OPWDD and DOH met with representatives of providers to discuss the new methodology (including provider concerns) at numerous meetings beginning in August 2013, including the New York State Association of Community and Residential Agencies (NYSACRA) (which represents some providers that have fewer than 100 employees). OPWDD and DOH posted material about the original proposed regulations on the respective agencies’ websites, and OPWDD notified all providers affected by proposed regulation of the materials posted. In addition, OPWDD and DOH conducted six training sessions for providers by videoconference throughout NYS during April-May 2014. As noted above, DOH sent each provider affected by the new methodology the rate sheet and documents that described the impact of the new regulations (including the emergency/proposed amendments) on the specific provider. OPWDD and DOH received public comments on the original regulations and answered numerous questions. Many of the changes contained in these emergency/proposed amendments were made as a result of the concerns raised by the regulated parties through one or more of these vehicles. OPWDD is also posting materials about these emergency/proposed amendments on its website and is notifying all affected providers about the availability of these materials.

Rural Area Flexibility Analysis

Effect on Rural Areas:

Description of the types and estimation of the number of rural areas in which the rule will apply: OPWDD services are provided in every county in New York State. Forty three counties have a population of less that 200,000: Allegany, Cattaraugus, Cayuga, Chautauqua, Chemung, Chenango, Clinton, Columbia, Cortland, Delaware, Essex, Franklin, Fulton, Genesee, Greene, Hamilton, Herkimer, Jefferson, Lewis, Livingston, Madison, Montgomery, Ontario, Orleans, Oswego, Otsego, Putnam, Rensselaer, St. Lawrence, Schenectady, Schoharie, Schuyler, Seneca, Steuben, Sullivan, Tioga, Tompkins, Ulster, Warren, Washington, Wayne, Wyoming and Yates. Additionally, 10 counties with certain townships have a population density of 150 persons or less per square mile: Albany, Broome, Dutchess, Erie, Monroe, Niagara, Oneida, Onondaga, Orange and Saratoga.

The changes in these amendments clarify the new methodology and contain corrections that are necessary for its proper implementation.

Many of the amendments correct technical errors in the original text or add clarifying material. In general, these provisions do not change the impact of the original regulations on providers, including providers in rural areas, or have positive impacts. However, several technical amendments make changes to the original text that may translate into a minor increase or decrease in the rates and may have a modest negative impact on some providers of residential habilitation in IRA/CRs and/or day habilitation in rural areas. For example, the change from “billed units” to “rate sheet capacities” in the methodology may result in immaterial positive or negative differences in the final rates. These immaterial differences will not impose an adverse economic impact on providers in rural areas and in any case, the overall funding to providers will remain the same because of budget neutrality. Changes made to the budget neutrality component of the methodology may have a slight impact on all providers of residential habilitation in IRA/CRs. The amendments do not change any requirements for recordkeeping or other compliance requirements that are contained in the original regulations.

Finally, these amendments do not impose any requirements on local governments, and (as noted in the Regulatory Impact Statement) have no fiscal impact on local governments, including local governments in rural areas.

Reporting, Recordkeeping and Other Compliance Requirements and Professional Services:

There are no additional reporting, recordkeeping, other compliance requirements or professional services imposed by these amendments. The Department does not anticipate that regulated entities will require new professional services as a result of this new rule.

The amendments will have no effect on local governments.

Costs:

There are no compliance costs since there are no new compliance activities imposed by these amendments.

Minimizing Adverse Impact:

As noted above, some of the technical changes may affect the rates either positively or negatively. DOH does not expect that these immaterial differences would impose an adverse economic impact on providers in rural areas. In any case, the overall funding to providers as a result of these technical amendments will remain the same because of budget neutrality.

DOH has reviewed and considered the approaches for minimizing adverse impact on providers in rural areas as suggested in section 202-bb(2)(b) of the State Administrative Procedure Act. The emergency/proposed regulations minimize adverse impact in several ways. First, the anticipated fiscal impact of the amendments is expected to be slight because only minor changes in the rates result from the technical amendments. In addition, DOH notes that the rate sheets distributed to providers in June anticipated the promulgation of these amendments by incorporating the technical changes into the methodology underlying the rate calculation (except for the change in budget neutrality), and providers have therefore already been developing plans to implement the new rate methodology based on the incorporation of these amendments. Therefore, providers will only need to make minimal adjustments in fiscal plans as a result of the minor change in budget neutrality. DOH considered the impact of the change in budget neutrality on providers but determined that the changes incorporated in these amendments were necessary to properly implement the methodology. The potential loss of federal funds to OPWDD that could result from non-compliance would have had far more serious consequences to providers than the minor decrease in rates that result from these changes.

The amendments also contain several changes that will be positive for providers. The amendments include changes which explicitly state that the new provisions related to the calculation of the capital component do not apply to capital approved prior to July 1, 2014. While this reflects the original intention and is not a change per se, the inclusion of this specific language helps providers to keep faith with financial institutions who can rest assured that anticipated capital reimbursement will continue to be received for projects. In addition, new language was added to explicitly address the correction of arithmetic or calculation errors. In the event that such errors occur, providers now have a referenced mechanism to request corrections of these errors. Related to the calculation of the capital component, new items were added to the chart of thresholds for “soft costs,” such as security and clerk of the works, which will permit the reimbursement of these items up to the threshold amount. This corrects the inadvertent exclusion of these items in the original proposed regulations.

There are several additional positive changes for providers which are specific to the provision of residential habilitation services in supervised IRAs/CRs. Changes were made in the definition of “therapeutic leave days” to include days when the individual receiving services is on vacation. This corrected an inadvertent omission in the original regulations (which only permitted therapeutic leave days for the purpose of visiting with family and friends). Because of this change, providers may receive reimbursement for days when the individual is on vacation but the vacation is not for the purpose of visiting with family and friends. Finally, changes were made related to the reconciliation of therapeutic leave days and retainer days, which positively affect the cash flow to providers. The amendments eliminate the reconciliation requirement for therapeutic leave days and state that the determination of reimbursement for retainer days will happen at the mid-point of the stated period as well as the conclusion of the period.

Rural Area Participation:

Participation of public and private interests in rural areas: OPWDD and DOH met with representatives of providers to discuss the new methodology (including provider concerns) at numerous meetings beginning in August 2013, including providers in rural areas, such as NYSARC, the NYS Association of Community and Residential Agencies, NYS Catholic Conference, and CP Association of NYS. OPWDD and DOH posted material about the original proposed regulations on the respective agencies’ websites, and OWPDD notified all providers affected by the proposed regulation of the materials posted. In addition, OPWDD and DOH conducted six training sessions for providers by videoconference throughout NYS during April-May 2014. As noted above, DOH sent each provider affected by the new methodology the rate sheet and documents that described the impact of the new regulations (including the emergency/proposed amendments) on the specific provider. OPWDD and DOH received public comments on the original regulations and answered numerous questions. Many of the changes contained in these emergency/proposed amendments were made as a result of the concerns raised by the regulated parties through one or more of these vehicles. OPWDD is also posting materials about these emergency/proposed amendments on its website and is notifying all affected providers about the availability of these materials.

Job Impact Statement

A job impact statement is not being submitted for this emergency/proposed rulemaking because this rulemaking will not have a substantial adverse impact on jobs or employment opportunities.

The emergency/proposed amendments make changes to the newly-adopted regulations that revise the rate methodology for residential habilitation in IRA/CRs and day habilitation. The changes in these amendments clarify the new methodology and contain corrections that are necessary for its proper implementation.

As noted in the Regulatory Flexibility Analysis, the emergency/proposed amendments have a minor potential adverse economic impact on some providers, but otherwise have no overall impact or a positive impact. The amendments do not impose any changes to recordkeeping or other compliance activities. While some providers may experience a minor adverse economic impact as a result of these amendments (while experiencing positive effects from other amendments), the effect on jobs as a result is expected to be negligible. Other providers are expected to experience a commensurate slight increase in funding. The amendments are therefore expected to have no significant adverse impact on jobs and employment opportunities with providers.

As noted in the emergency justification, if these regulations were not promulgated, a substantial amount of federal funding would be lost. This loss of substantial funds could adversely impact jobs and employment opportunities in New York State. This potential adverse effect on jobs and employment opportunities is avoided by the promulgation of these amendments.