MRD-07-10-00007-P Fee Setting for HCBS Waiver Day Habilitation Services

2/17/10 N.Y. St. Reg. MRD-07-10-00007-P

NEW YORK STATE REGISTER

VOLUME XXXII, ISSUE 7

February 17, 2010

RULE MAKING ACTIVITIES

OFFICE OF MENTAL RETARDATION AND DEVELOPMENTAL DISABILITIES

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. MRD-07-10-00007-P

Fee Setting for HCBS Waiver Day Habilitation 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 of Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 13.09(b) and 43.02

Subject:

Fee setting for HCBS waiver day habilitation services.

Purpose:

To implement an efficiency adjustment.

Text of proposed rule:

Add new paragraph 635-10.5(c)(15) to read as follows:

(15) Effective May 1, 2010, for all regions there shall be an efficiency adjustment to group day habilitation and supplemental group day habilitation prices. The efficiency adjustment shall take the form of a two-tiered reduction in reimbursable operating costs as follows:

(i) All providers shall be subject to the first tier of the efficiency adjustment which shall reduce total reimbursable operating costs inclusive of transportation and Health Care Adjustments (HCA) in the price in effect on May 1, 2010. The reduction shall be 2.5 percent.

(ii) The second tier adjustment shall be applied to all non-personal services (NPS) reimbursable operating costs reflected in the reimbursement prices for providers at or above the benchmark described in clause (b) of this subparagraph.

(a) For purposes of this paragraph, non-personal services (NPS) include Other Than Personal Services (OTPS), transportation, program administration OTPS and agency administration OTPS. NPS does not include Personal Services, contracted personal services, Fringe Benefits, and HCA.

(b) The benchmark is predicated on the value of all NPS reflected in a provider's group day habilitation price in effect on June 30, 2008 for Region I reporting providers and on December 31, 2007 for Region II and Region III reporting providers. This value is expressed as a percentage of the total reimbursable operating costs including transportation and HCA in a provider's group day habilitation price on the respective date. The percentages for each provider of group day habilitation services are ranked ordinally. OMRDD has established the benchmark to coincide with the 40th percentile. All providers below the 40th percentile are exempt from the second tier reduction.

(c) For all providers ranked at or above the benchmark, the second tier reduction shall be applied to gross NPS reimbursable operating costs in the price in effect on May 1, 2010 without consideration of the effect of the first tier reduction described in subparagraph (i) of this paragraph.

(d) The second tier percentage reduction shall be 4.29 percent.

(e) The Commissioner may waive all or a portion of this reduction for a provider upon a showing that the imposition of the full NPS reduction would jeopardize the continued operation of the group day habilitation and/or supplemental group day habilitation program.

(iii)For purposes of price adjustments, the effects of this efficiency adjustment shall be not be construed as a basis for loss. OMRDD shall offset any price adjustment it would otherwise make by the efficiency adjustment described in this paragraph.

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

Barbara Brundage, Director, OMRDD, Regulatory Affairs Unit, Office of Counsel, 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 the State Environmental Quality Review Act, OMRDD, 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. 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).

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

2. Legislative objectives: These proposed amendments further the legislative objectives embodied in sections 13.09(b) and 43.02 of the Mental Hygiene Law. The proposed amendments are necessary to make adjustments to the reimbursement methodology applicable to Home and Community Based (HCBS) waiver day habilitation services.

3. Needs and benefits: OMRDD is instituting an efficiency adjustment for group day habilitation programs including supplemental group day habilitation programs. This measure is designed to encourage providers to seek efficiencies in their operations. Consolidated Fiscal Reporting for group day habilitation programs in recent years suggests that reimbursement has been adequate to sustain optimal program requirements and economies are eminently possible.

The two-tiered approach first imposes a modest across the board adjustment for all providers of 2.5 percent in operating reimbursement reducing all cost categories proportionately and secondly, an adjustment of 4.29 percent reducing reimbursement for Non-Personal Services (NSP) for those providers with NPS in their reimbursement that exceeded specified parameters. OMRDD ranked providers according to their reimbursable NPS operating costs as a percentage of total operating costs contained in the reimbursement price. All providers are subject to the first reduction and approximately 60 percent of all providers-those at or above the 40th percentile in the ranking-- will be subject to the second phase of the efficiency adjustment. The second tier reduction is applied to gross NPS reimbursable operating costs in the price in effect on May 1, 2010 without consideration of the effect of the first tier reduction.

4. Costs:

a. Costs to the Agency and to the State and its local governments. The efficiency adjustment is expected to result in a savings of approximately $14 million in the State share of funding for the affected group day habilitation services. The amendments will have no impact on local governments.

b. Costs to private regulated parties: There are no initial capital investment costs nor initial non-capital expenses. There are no additional costs associated with implementation and continued compliance with the rule. The proposed amendments are expected to result in a decrease of approximately $28 million in funding to providers of the affected HCBS waiver group day habilitation services.

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: No additional paperwork will be required by the proposed amendments.

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

8. Alternatives: The current course of action as embodied in these proposed amendments reflects what OMRDD believes to be a fiscally prudent, cost-effective reimbursement of HCBS waiver group day habilitation services. OMRDD had previously, in collaboration with representatives of provider associations, discussed alternatives to achieve the desired efficiencies in the provision of the affected services. Other alternatives were thoroughly explored but this was determined to be the optimal methodology.

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

10. Compliance schedule: OMRDD expects to finalize the proposed amendments with an effective date of May 1, 2010. The amendments do not impose any new requirements with which regulated parties are expected to comply.

Regulatory Flexibility Analysis

1. Effect on small business: These proposed regulatory amendments will apply to voluntary not-for-profit corporations that provide HCBS waiver group day habilitation services to persons with developmental disabilities in New York State. As of January 2010, there were 258 providers with sites certified by OMRDD providing group day habilitation services to approximately 40,000 individuals in New York State.

The OMRDD has determined, through a review of the certified cost reports, that while most services are provided by non-profit agencies which employ more than 100 people overall, many of the 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.

The proposed amendments have been reviewed by OMRDD in light of their impact on these small businesses. The proposed amendments are expected to result in a decrease of approximately $28 million in funding to providers of the affected HCBS waiver group day habilitation services. OMRDD has determined that these amendments will not cause undue hardship to providers due to increased costs for additional services or increased compliance requirements.

2. Compliance requirements: There are no additional compliance requirements resulting from the implementation of these proposed amendments. The proposed amendments revise the reimbursement methodology for HCBS waiver group day habilitation services to adjust payments made to providers, consistent with goals for increased operational efficiency. While operators of the referenced facilities will need to address adjustments in funding through increased operational efficiencies, the amendments do not specifically impose any new requirements with which regulated parties are expected to comply.

3. Professional services: In accordance with existing practice, providers are required to submit annual cost reports certified by licensed or public accountants. The proposed amendments do not alter this requirement. Therefore, no additional professional services are required as a result of these amendments.

4. Compliance costs: There are no additional compliance costs to regulated parties associated with the implementation of, and continued compliance with, these amendments.

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

6. Minimizing adverse economic impact: The purpose of these proposed amendments is to revise the reimbursement methodologies of the referenced programs and services to adjust payments made to providers, consistent with goals for increased operational efficiency. OMRDD determined that it could adjust prices for HCBS waiver group day habilitation services to encourage efficiencies in operation and still adequately reimburse providers of such services. The proposed amendments which adjust the group day habilitation reimbursement methodology represent OMRDD's best effort at adjusting reimbursement in a way which will accommodate the realization of efficiencies where they can best be achieved and afforded, and in the most equitable distribution possible.

OMRDD has also reviewed and considered the approaches for minimizing adverse economic impact as suggested in section 202-b(1) of the State Administrative Procedure Act. However, since these amendments require no specific compliance response of regulated parties, the approaches outlined cannot be effectively applied.

7. Small business participation: In an effort to include small businesses as much as possible in the decision-making process, OMRDD has continued to meet regularly with associations of providers of services to discuss issues of interest. Options for implementing a day habilitation efficiency adjustment were discussed with representatives of the provider associations on a number of occasions beginning in the summer of 2009. In particular, the efficiency adjustment contained in the proposed regulations, and the available options for achieving efficiencies, were the main topic of discussion at a meeting with provider associations held on January 5, 2010.

Rural Area Flexibility Analysis

A rural area flexibility analysis for these proposed amendments is not being submitted because the amendments will not impose any adverse impact or reporting, record keeping or other compliance requirements on public or private entities in rural areas. There will be no professional services, capital, or other compliance costs imposed on public or private entities in rural areas as a result of the proposed amendments. While the efficiency adjustment contained in the proposed amendments may have some adverse fiscal impact on providers of HCBS waiver group day habilitation services, the geographic location of any given program (urban or rural) will not be a contributing factor to any such impact.

This is because the reimbursement methodology OMRDD uses to reimburse HCBS waiver group day habilitation services is primarily based upon provider specific cost projections. Thus, both this reimbursement methodology and the efficiency adjustment, which is applied proportionately to reimbursement, 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 proposed amendments is not being submitted because OMRDD does not anticipate a substantial adverse impact on jobs and employment opportunities. The proposed rule making revises the reimbursement methodology for HCBS waiver group day habilitation services by implementing an efficiency adjustment. In establishing a lower percentage reduction for the first tier which is imposed on all reimbursed costs including salaries and fringe benefits, OMRDD intended to preserve funding for personal services to as great an extent as possible. The second tier reduction is a larger percentage, but, because it targets non-personal services, it is unlikely to affect salaries and fringe benefits. Moreover, before the effective date of this regulation, OMRDD will have put in place other initiatives intended to bolster salaries and fringe benefits. Consequently, OMRDD does not anticipate an adverse impact on jobs and employment opportunities.