PDD-46-14-00004-EP Amendment to Rate Setting for Non-State Providers: Intermediate Care Facilities for Persons with Developmental Disabilites

11/19/14 N.Y. St. Reg. PDD-46-14-00004-EP

NEW YORK STATE REGISTER

VOLUME XXXVI, ISSUE 46

November 19, 2014

RULE MAKING ACTIVITIES

OFFICE FOR PEOPLE WITH DEVELOPMENTAL DISABILITIES

EMERGENCY/PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. PDD-46-14-00004-EP

Filing No. 926

Filing Date. Oct. 31, 2014

Effective Date. Nov. 01, 2014

Amendment to Rate Setting for Non-State Providers: Intermediate Care Facilities for Persons with Developmental Disabilites

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

Proposed Action:

Amendment of Subpart 641-2 of Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 13.09(b) 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 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 the rate methodology for intermediate care facilities for persons with developmental disabilities (ICF/DDs).

On July 1, 2014, OPWDD and the Department of Health (DOH) implemented a new reimbursement methodology for ICF/DDs, 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).

After July 1, CMS informed OPWDD and DOH that CMS would require changes in reimbursement for ICF/DD capital assets. These changes are that capital costs for property acquisitions must be depreciated over 25 years and that providers must submit information for each capital asset that is verified by an independent auditor and identifies the differences, by asset, between the amounts reported on the cost report and amounts that were approved by OPWDD.

The emergency/proposed regulations are in response to these CMS requirements. The regulations change the depreciation period and reporting for capital costs.

OPWDD was not able to use the regular rulemaking process established by the State Administrative Procedure Act because there was not sufficient time to develop and promulgate regulations within the necessary timeframes. 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 to adopt the substantive amendments necessary to implement the rate-setting methodology in accordance with CMS mandates is through the emergency rulemaking process.

If OPWDD did not promulgate these regulations on an emergency basis, OPWDD 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:

Amendment to Rate Setting for Non-State Providers: Intermediate Care Facilities for Persons with Developmental Disabilites.

Purpose:

To amend the new rate setting methodology effective July 2014.

Text of emergency/proposed rule:

• Section 641-2.3 is amended by the addition of new subdivisions (e) and (g) to read as follows:

(e) Capital costs. Costs that are related to the acquisition, lease, construction and/or long-term use of land, building and fixed equipment, leasehold improvements and vehicles.

(g) Depreciation. The allowable cost based on historical costs and useful life of buildings, fixed equipment, capital improvements and /or acquisition of real property. The useful life shall be based on “The Estimated Useful Life of Depreciable Hospital Assets (2008 edition). This document is available from the American Hospital Association, 840 Lake Shore Drive, Chicago, IL 60611; or is available during business hours and by appointment at the following locations:

(1) Department of State, Division of Administrative Rules, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231-0001

(2) OPWDD, Attention Public Access Officer, 44 Holland Avenue, Albany, NY 12229.

Note: existing subdivision (e) is re-lettered subdivision (f), and existing subdivisions (f) through (n) are re-lettered subdivisions (h) through (p).

• Section 641-2.3 is amended by the addition of new subdivision (q) to read as follows:

(q) Start-up Costs. Those costs associated with the opening of a new facility or program. Start-up costs include pre-operational rent, utilities, staffing, staff training, advertizing for staff, travel, security services, furniture, equipment and supplies.

Note: existing subdivision (o) is re-lettered subdivision (r).

• Current paragraph 641-2.3(c)(4) is deleted and a new paragraph 641-2.3(c)(4) is added to read as follows:

(4) Capital component.

(i) For Capital Assets Approved on or after July 1, 2014. OPWDD regulations at Subpart 635-6 of this Title establish standards and criteria for calculating provider reimbursement for the acquisition and lease of real property assets which require approval by OPWDD. The regulations also address associated depreciation and related financing expenses. The rate will include costs for actual straight line depreciation, interest expense, financing expenses, and lease cost.

In no case will the total capital reimbursement associated with the capital asset exceed the total acquisition, renovation and financing cost associated with a capital asset. The asset life for building acquisitions shall be 25 years.

(ii) For Capital Assets Approved Prior to July 1, 2014. The State will identify each asset by provider, and provide a schedule of these assets identifying: total actual cost, reimbursable cost determined by the prior approval, total financing cost, allowable depreciation and allowable interest for the remaining useful life as determined by the prior approval, and the allowable reimbursement for each year of the remaining useful lives.

In no case will the total reimbursable depreciation or principal amortization and total interest associated with the capital asset exceed the total acquisition, renovation and financing cost associated with a capital asset.

(iii) Notification to Providers. Subpart 635-6 of this Title contains the criteria and standards associated with capital costs and reimbursement. Each provider will receive a schedule of prior approved assets that is being used to establish the real property capital component of the provider’s reimbursement rate.

(iv) Initial rate for capital assets approved on or after July 1, 2014. The rate shall include the approved appraised costs of an acquisition or fair market value of a lease, and estimated costs for renovations, interest, soft costs and start-up expenses. Such costs shall be included in the rate as of the date of certification of the site, continuing until such time as actual costs are submitted to the State. Estimated costs shall be submitted in lieu of actual costs for a period no greater than two years. If actual costs are not submitted to the State within two years from the date of site certification, the amount of capital costs included in the rate shall be zero for each period in which actual costs are not submitted. DOH may retroactively adjust the capital component.

(v) Cost verified rates for capital assets approved on or after July 1, 2014. The provider shall submit to the State supporting documentation of actual costs. Actual costs shall be verified by the State reviewing the supporting documentation of such costs. A provider submitting such actual costs shall certify that the reimbursement requested reflects allowable capital costs, and that such costs were actually expended by such provider. Under no circumstances shall the amount included in the rate under this subparagraph exceed the amount authorized in the approval process. Capital costs shall be depreciated over a 25 year period for acquisition of properties or amortized over the life of the lease for leased sites. Capital improvements shall be depreciated over the life of the asset. The amortization of interest shall not exceed the life of the loan taken. Amortization or depreciation shall begin upon certification by the provider of such costs. Start-up costs may be amortized over a one year period beginning with site certification. If actual costs are not submitted to the State within two years from the date of site certification, the amount of capital costs included in the rate shall be zero for each period in which actual costs are not submitted.

(vi) Capital reimbursement reconciliation schedule. Beginning with the cost reporting period ending December 31, 2014, each provider shall submit to OPWDD, as part of the annual cost report, a capital reimbursement reconciliation schedule.

This schedule will specifically identify the differences, by capital reimbursement item, between the amounts reported on the certified cost report, and the reimbursable items, including depreciation, interest and lease cost from the schedule of approved reimbursable capital costs.

The provider’s independent auditor will apply procedures to verify the accuracy and completeness of the capital reimbursement reconciliation schedule.

DOH will retroactively adjust capital reimbursement based on the actual cost verification process as described in subparagraph (iv) of this paragraph.

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 January 28, 2015.

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

Regulatory Affairs Unit, Office for Persons with Developmental Disabilities (OPWDD), 44 Holland Avenue, 3rd floor, 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.

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. OPWDD has the statutory 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).

b. OPWDD has the statutory responsibility for setting Medicaid rates and fees for other services in facilities licensed or operated by OPWDD, as stated in section 43.02 of the Mental Hygiene Law.

2. Legislative Objective: These emergency/proposed amendments further the legislative objectives embodied in sections 13.09(b) and 43.02 of the Mental Hygiene Law. The amendments change the newly adopted methodology for reimbursement of intermediate care facilities for persons with developmental disabilities (ICF/DDs).

3. Needs and Benefits: On July 1, 2014, OPWDD and the Department of Health (DOH) implemented a new reimbursement methodology for ICF/DDs to satisfy commitments included in OPWDD's transformation agreement with the federal Centers for Medicare and Medicaid Services (CMS).

After July 1, CMS informed OPWDD and DOH that CMS would require changes in reimbursement for ICF/DD capital assets. These changes are that capital costs for property acquisitions must be depreciated over 25 years; that the provider must submit a schedule that that identifies the differences, by capital asset, between the amounts reported on the cost report and the amounts that were approved by OPWDD, and that an independent auditor apply procedures to verify the accuracy and completeness of the schedule. The amendments are in response to these CMS requirements.

These changes will bring the methodology into compliance with current CMS policies regarding amortization of capital assets and provide information on capital costs required by CMS.

4. Costs:

a. Costs to the Agency and to the State and its local governments: The amendments require OPWDD or DOH to give each provider a schedule identifying (for each capital asset for which OPWDD approved the costs prior to July 1, 2014) total actual costs, reimbursable costs, total financing cost, allowable depreciation and interest for the remaining useful life, and allowable reimbursement for each year of the remaining useful life.

The new methodology and these 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.

b. Costs to private regulated parties: The emergency/proposed regulations will change the new reimbursement methodology for ICF/DDs. Application of the changes in the methodology will result in lower capital cost reimbursement per year, but full approved capital costs will be reimbursed over the 25 year depreciation period. In addition, providers will incur costs preparing capital assets schedules and having independent auditors apply procedures to verify the accuracy and completeness of the capital assets schedules.

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: The amendments increase paperwork to be completed by providers. The amendments require providers to submit a capital assets schedule to OPWDD as part of the annual cost report, to identify the differences, by asset, between the amount on the cost report and the amount prior approved by OPWDD, and to have an independent auditor apply procedures to verify the accuracy and completeness of the capital assets schedule.

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

8. Alternatives: Since the methodology changes in these amendments are required by CMS, OPWDD and DOH did not consider any alternatives, because any alternatives would not be in compliance with recently articulated CMS policy and requirements.

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

10. Compliance Schedule: OPWDD is adopting the amendments on an emergency basis effective November 1, 2014. OPWDD expects to finalize the amendments as soon as possible within the timeframes established by the State Administrative Procedure Act.

Regulatory Flexibility Analysis

1. Effect on small business: OPWDD has determined, through a review of the certified cost reports, that most services delivered in intermediate care facilities for persons with developmental disabilities (ICF/DDs) are provided by agencies that employ more than 100 people overall. However, some smaller agencies that employ fewer than 100 employees overall would be classified as small businesses. Currently, there are 108 ICF/DD providers. OPWDD is unable to estimate the portion of these providers that may be considered to be small businesses.

The emergency/proposed regulations, effective November 1, 2014, amend the rate-setting methodology that was adopted in July 2014 in conformance with changes mandated by CMS after July 1, 2014.

After July 1, 2014, CMS informed OPWDD and DOH that CMS would require changes in reimbursement for ICF/DD capital assets. These changes are that capital costs for property acquisitions must be depreciated over 25 years; that the provider must submit a schedule that that identifies the differences, by capital asset, between the amounts reported on the cost report and the amounts that were approved by OPWDD, and that an independent auditor apply procedures to verify the accuracy and completeness of the schedule. The amendments change the depreciation period and reporting for capital costs. Application of the changes in the methodology for capital costs will result in lower reimbursement per year, but full approved capital costs will be reimbursed over the 25 year depreciation period.

2. Compliance requirements: The amendments require ICF/DD providers to submit a capital assets schedule to OPWDD as part of the annual cost report, to identify the differences, by asset, between the amount on the cost report and the amount approved by OPWDD, and to have an independent auditor apply procedures to verify the accuracy and completeness of the capital assets schedule.

3. Professional services: Additional professional services will be required as a result of these regulations. The amendments require independent auditors to apply procedures to verify the accuracy and completeness of the capital assets schedule. However, the regulations will not add to the professional service needs of local governments.

4. Compliance costs: The amendments require ICF/DD providers to submit a capital assets schedule to OPWDD as part of the annual cost report, to identify the differences, by asset, between the amount on the cost report and the amount approved by OPWDD, and to have an independent auditor apply procedures to verify the accuracy and completeness of the capital assets schedule.

5. Economic and technological feasibility: The amendments do not impose on regulated parties the use of any new technological processes.

6. Minimizing adverse impact: Since the methodology changes in these amendments are required by CMS, OPWDD and DOH did not consider any alternatives, because any alternatives would not be in compliance with recently articulated CMS policy and requirements.

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 yearly reimbursement for capital costs that result from these changes.

7. Small business participation: OPWDD and DOH met with representatives of providers to discuss the changes in the new methodology on October 6, 2014. The New York State Association of Community and Residential Agencies (NYSACRA) (which represents some providers that have fewer than 100 employees) was included in these meetings.

Rural Area Flexibility Analysis

1. 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. 43 counties have a population of less than 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, certain townships in 10 other counties have a population density of 150 persons or less per square mile: Albany, Broome, Dutchess, Erie, Monroe, Niagara, Oneida, Onondaga, Orange, and Saratoga.

The emergency/proposed amendments, effective November 1, 2014, amend the rate-setting methodology that was adopted in July 2014 in conformance with changes mandated by CMS after July 1, 2014.

After July 1, 2014, CMS informed OPWDD and DOH that CMS would require changes in reimbursement for ICF/DD capital assets. These changes are that capital costs for property acquisitions must be depreciated over 25 years; that the provider must submit a schedule that that identifies the differences, by capital asset, between the amounts reported on the cost report and the amounts that were approved by OPWDD, and that an independent auditor apply procedures to verify the accuracy and completeness of the schedule. The amendments change the depreciation period and reporting for capital costs. Application of the changes in the methodology will result in lower reimbursement per year, but full approved capital costs will be reimbursed over the 25 year depreciation period.

2. Compliance requirements: The amendments require ICF/DD providers to submit a capital assets schedule to OPWDD as part of the annual cost report, to identify the differences, by asset, between the amount on the cost report and the amount approved by OPWDD, and to have an independent auditor apply procedures to verify the accuracy and completeness of the capital assets schedule.

3. Professional services: Additional professional services will be required as a result of these regulations. The amendments require independent auditors to apply procedures to verify the accuracy and completeness of the capital assets schedule. However, the regulations will not add to the professional service needs of local governments.

4. Compliance costs: The amendments require ICF/DD providers to submit a capital assets schedule to OPWDD as part of the annual cost report, to identify the differences, by asset, between the amount on the cost report and the amount prior approved by OPWDD, and to have an independent auditor apply procedures to verify the accuracy and completeness of the capital assets schedule.

5. Minimizing adverse impact: Since the methodology changes in these amendments are required by CMS, OPWDD and DOH did not consider any alternatives, because any alternatives would not be in compliance with recently articulated CMS policy and requirements.

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 yearly reimbursement for capital costs that result from these changes.

6. Participation of public and private interests in rural areas: OPWDD and DOH met with representatives of providers to discuss the capital changes in the new methodology on October 6, 2014. The New York State Association of Community and Residential Agencies (NYSACRA) (which represents some providers in rural areas) was included in these meetings.

Job Impact Statement

OPWDD is not submitting a Job Impact Statement for this emergency/proposed rulemaking because this rulemaking will not have a substantial adverse impact on jobs or employment opportunities.

The emergency/proposed regulations, effective November 1, 2014, amend the rate-setting methodology that was adopted in July 2014 in conformance with changes mandated by CMS after July 1, 2014.

Application of the changes in the methodology will result in lower capital cost reimbursement per year, but full approved capital costs will be reimbursed over the 25 year depreciation period. The impact of additional recordkeeping associated with verification of those capital costs will be negligible.

The amendments are therefore expected to have no significant adverse impact on jobs and employment opportunities with providers.