MRD-43-08-00010-P Reimbursement of Property and Capital Equipment Costs in Day Habilitation and Prevocational Services

10/22/08 N.Y. St. Reg. MRD-43-08-00010-P

NEW YORK STATE REGISTER

VOLUME XXX, ISSUE 43

October 22, 2008

RULE MAKING ACTIVITIES

OFFICE OF MENTAL RETARDATION AND DEVELOPMENTAL DISABILITIES

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. MRD-43-08-00010-P

Reimbursement of Property and Capital Equipment Costs in Day Habilitation and Prevocational Services

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

Proposed Action:

Amendment of section 635-10.5(c)(4) and (e)(5) of Title 14 NYCRR.

Statutory authority:

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

Subject:

Reimbursement of property and capital equipment costs in day habilitation and prevocational services.

Purpose:

To establish a methodology for reimbursement of property/capital equipment costs in day habilitation/prevocational services.

Text of proposed rule:

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

[(vi) The capital cost portion of the unit price for all four types of non-state-operated day habilitation shall be determined by dividing the approved annual budgeted capital costs by 12 and shall be paid monthly.]

(vi) Allowable capital costs for group day habilitation services shall be reimbursed. Effective January 1, 2009, the capital cost portion for group day habilitation shall be included in the group day habilitation price as follows:

(a) OMRDD shall determine the property component add-on by dividing the annual amount specified in the provider’s day habilitation sites’ total allowable costs of real property by the total number of units of service OMRDD authorized for the period.

(b) OMRDD shall determine the capital equipment component add-on by dividing the annual day habilitation allowable capital equipment expense reported by the provider in its cost report by the units of service OMRDD authorized for the current price period. The capital equipment expense will be extracted from the cost report for a reporting period that precedes the price period by two years, provided that the cost report conforms to the requirements in Subpart 635-4 of this Title. Otherwise, OMRDD will use the capital equipment component add-on in the previous price. For providers which have not operated any group day habilitation services during the cost reporting period (two years prior to the beginning of the price period), the annual budgeted capital equipment amount approved by OMRDD will be divided by the units of service OMRDD authorized for the current price period. For providers with an existing group day habilitation site(s) in operation during the cost reporting period two years prior to the price period, and- which open a new group day habilitation site during the price period, the approved annual budgeted capital equipment costs for the new site will be combined with the capital equipment expenses reported on the cost report described above and divided by the new total OMRDD authorized units of service.

Subparagraph 635-10.5(e)(5)(vi) is replaced as follows:

[(vi) The capital portion of the unit price for non-state-operated prevocational services shall be determined by dividing the approved annual budgeted capital costs by 12 and shall be paid monthly.]

(vi) Effective January 1, 2009, the capital cost portion for prevocational services shall be reimbursed as follows:

(a) OMRDD shall determine the property component add-on by dividing the annual amount specified in the provider’s prevocational sites’ total allowable costs of real property by the total number of units of service OMRDD authorized for the period.

(b) OMRDD shall determine the capital equipment component add-on by dividing the annual prevocational allowable capital equipment expense reported by the provider in its cost report by the units of service OMRDD authorized for the current price period. The capital equipment expense will be extracted from the cost report for a reporting period that precedes the price period by two years, provided that the cost report conforms to the requirements in Subpart 635-4 of this Title. Otherwise, OMRDD will use the capital equipment component add-on in the previous price. For providers which have not operated any prevocational services during the cost reporting period (two years prior to the beginning of the price period), the annual budgeted capital equipment amount approved by OMRDD will be divided by the units of service OMRDD authorized for the current price period. For providers with an existing prevocational site(s) in operation during the cost reporting period two years prior to the price period, and which open a new prevocational site during the price period, the approved annual budgeted capital equipment costs for the new site will be combined with the capital equipment expenses reported on the cost report described above and divided by the new total OMRDD authorized units of service.

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

Barbara Brundage, Director, Regulatory Affairs Unit, OMRDD, 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:

45 days after publication of this notice.

Additional matter required by statute:

Pursuant to the requirements of SEQRA and 14 NYCRR Part 602, OMRDD has on file a Negative Declaration with respect to this Action. OMRDD 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. The New York State Office of Mental Retardation and Developmental Disabilities' (OMRDD) statutory responsibility 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. OMRDD's authority to adopt rules and regulations necessary and proper to implement any matter under its jurisdiction as stated in the New York State Mental Hygiene Law Section 13.09(b).

c. OMRDD's responsibility, as stated in section 43.02 of the Mental Hygiene Law, for setting Medicaid rates and fees for services in facilities licensed or operated by OMRDD.

2. Legislative Objectives: These proposed amendments further the legislative objectives embodied in sections 13.07, 13.09, and 43.02 of the Mental Hygiene Law by making revisions to the regulations governing day habilitation and prevocational services. The proposed amendments will establish a new methodology for pricesetting for property and capital equipment costs in these services.

3. Needs and Benefits: The proposed method of reimbursing capital costs for providers of group day habilitation and prevocational services ties reimbursement to the units of service. By converting the process for reimbursing capital costs to be consistent with the process for reimbursing operational costs, OMRDD is essentially simplifying the mechanics of reimbursement. What was a two step process because it utilized different methods for reimbursing capital vs. operations becomes a one step process and, by using a common denominator, reimbursement for both components can occur simultaneously. The entire group day habilitation or prevocational services payment will now be paid through eMedNY. This allows for better auditing and monitoring, and increases transparency and accountability in the Medicaid program.

4. Costs:

a. Costs to the Agency and to the State and its local governments: There will be no new costs to OMRDD or the State. There will also be no new costs to local governments as a result of the proposed amendments.

b. Costs to private regulated parties: There are no initial capital investment costs nor initial non-capital expenses. For providers that are at 100% capacity, there will be no reduction in the reimbursement received by utilizing a price-based methodology. For providers which are not at 100% capacity, there will be a minor reduction in the amounts received. Because of the unpredictable nature of vacancies, OMRDD is unable to reliably quantify this reduction in aggregate or on a provider-specific basis. It may approximate $300,000 in total.

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 are no new paperwork requirements resulting from this proposed regulation. The calculation of the new price component will be based on information which is already submitted to OMRDD.

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: OMRDD considered the feasibility of retaining the current two step process instead of the one-step process for reimbursement of costs that is established by the proposed regulation. However, OMRDD determined that because of the heightened importance of increasing accountability, ease and functionality of billing, enhanced clarity, and administrative efficiency, that the proposed methodology was preferable to the current process.

9. Federal Standards: The proposed regulations do not exceed any minimum standards of the federal government.

10. Compliance Schedule: OMRDD expects to adopt the proposed amendments as soon as possible within the time frames mandated by the State Administrative Procedure Act. OMRDD will provide all necessary information and guidance to providers regarding the revised prices before they become effective.

Regulatory Flexibility Analysis

1. Effect on small businesses and local governments: These proposed regulatory amendments will apply to agencies which provide day habilitation and prevocational services to persons with developmental disabilities. While most services are provided by voluntary agencies which employ more than 100 people overall, many of the facilities operated by these agencies at discrete sites (e.g. small day habilitation programs) 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 2008, OMRDD estimates that there were approximately 693 day habilitation programs and 124 prevocational programs that would be affected by the proposed amendments.

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

The amendments only change the methodology for the reimbursement of property and capital equipment costs in facilities providing day habilitation and prevocational services.

Billing procedures will be simplified by moving from a two-step process with operating costs and capital costs reimbursed through separate mechanisms, to a single-step process with both types of costs reimbursed through one price.

The amendments will have no effect on local governments.

2. Compliance requirements: Providers will not need to submit any additional information to OMRDD for the calculation of the new property component add-on and capital equipment component add-on. OMRDD already has the necessary information for existing programs because of the providers' annual submission of cost reports pursuant to longstanding regulatory requirements. As mentioned previously, billing procedures will be simplified as a result of the proposed regulations.

3. Professional services: 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: 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 do not impose on regulated parties the use of any new technological processes.

6. Minimizing adverse impact: There is no adverse economic impact for providers which are at 100% capacity. The amendments may result in a minor reduction in reimbursements for providers whose programs are not at 100% capacity. Because of the unpredictable nature of vacancies, OMRDD is unable to reliably quantify this reduction in aggregate or on a provider-specific basis. It may approximate $300,000 in total. All providers may realize some modest savings due to billing simplification.

7. Small business and local government participation: The proposal was distributed to provider associations and discussed at provider association meetings on September 11 and 22, 2008.

Rural Area Flexibility Analysis

A Rural Area Flexibility Analysis for these amendments is not submitted because the amendments will not impose any adverse impact or significant reporting, record keeping or other compliance requirements on public or private entities in rural areas. This is based on the fact that the amendments are concerned with revising the reimbursement methodologies for property and capital equipment costs for day habilitation and prevocational services. OMRDD expects that adoption of the amendments will have a minor, if any, adverse economic impact on regulated parties. Further, the amendments will have no adverse fiscal impact on providers as a result of the location of their operations (rural/urban), because the reimbursement methodologies are primarily based upon allowed property and capital equipment costs of individual facilities. Thus, the 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 a substantial impact on jobs and/or employment opportunities. This finding is based on the fact that the amendments are concerned with revising the reimbursement methodologies for property and capital equipment costs for day habilitation and prevocational services. The subject of the amendments does not concern matters related to employment, and the amendments will result in minor economic impact, if any, to providers. Therefore, the amendments will not have any adverse impacts on jobs or employment opportunities in New York State.