PDD-16-11-00015-P Personal Services Surpluses Adjustment for Prevocational Services

4/20/11 N.Y. St. Reg. PDD-16-11-00015-P

NEW YORK STATE REGISTER

VOLUME XXXIII, ISSUE 16

April 20, 2011

RULE MAKING ACTIVITIES

OFFICE FOR PEOPLE WITH DEVELOPMENTAL DISABILITIES

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. PDD-16-11-00015-P

Personal Services Surpluses Adjustment for 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(e) of Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 13.09(b) and 43.02

Subject:

Personal Services Surpluses Adjustment for Prevocational Services.

Purpose:

To modify reimbursement methodology for Prevocational Services effective July 1, 2011.

Text of proposed rule:

Subdivision 635-10.5(e) is amended by the addition of a new paragraph (6) as follows and existing paragraphs (6)-(10) are renumbered to be (7)-(11):

(6) Effective July 1, 2011, prevocational services prices shall be reduced according to the measures outlined in this paragraph. This personal services action addresses provider surpluses in funding for direct care, clinical and support staff and the associated fringe benefits.

(i) Applicability. The price reduction shall apply to all providers except for those which meet the criteria for exemption.

The first criterion, in order for any provider to be exempt from the impact of the reduction on any basis, is a cost report requirement. Region I providers must have filed a 2008-2009 cost report and Regions II and III providers must have filed a 2008 cost report on or before December 23, 2010, except that a provider may submit the cost report after December 23, 2010, if the cost report represents an original submission or a resubmission specifically requested by OPWDD due to identified inaccuracies or insufficiencies. Cost reports submitted after December 23, 2010, must be submitted by May 1, 2011, unless the Commissioner exercises or has exercised his or her discretion to extend the May 1, 2011, deadline. Providers with cost reports submitted in accordance with the deadlines in this subparagraph (i) may qualify for exemption pursuant to subparagraph (ii) of this paragraph. Providers which did not submit cost reports in accordance with the deadlines in this subparagraph (i) shall be subject to price reductions pursuant to subparagraph (vii) of this paragraph. OPWDD shall employ data extracted from the most recent 2008/2008-2009 cost report submitted by a provider on or before December 23, 2010, except that data from a 2008/2008-2009 cost report submitted after December 23, 2010, representing an original submission or a resubmission specifically requested by OPWDD due to identified inaccuracies or insufficiencies and submitted by May 1, 2011, or a later deadline extended by the Commissioner shall also be utilized.

(ii) Exemptions.

(a) FTE personal services loss. OPWDD compared each provider's actual FTEs for direct care, clinical care and support as reported in its 2008/2008-2009 cost report to the maximum reimbursable FTEs designated for direct care, clinical care and support as reflected in the corresponding price. This analysis included the FTE equivalents for contracted services. OPWDD identified a subset of providers which demonstrated an excess of actual FTEs over reimbursable FTEs. They are exempt.

(b) Providers with a loss in personal services and associated fringe benefits combined are exempt. OPWDD examined 2008/2008-2009 cost reports for those providers not exempted by virtue of clause (a) of this subparagraph. OPWDD compared each provider's actual expenses for direct care, clinical care and support and the associated fringe benefits to the total reimbursable costs reflected in the corresponding price and designated for direct care, clinical care and support and the associated fringe benefits cost categories. This analysis included contracted services. OPWDD identified a subset of providers which demonstrated an excess of actual expenses for direct care, clinical care and support and the associated fringe benefits over reimbursable costs reflected in the corresponding price and designated for direct care, clinical care and support and the associated fringe benefits. They are exempt.

(iii) Providers subject to prevocational services price reduction are those providers which are not specifically exempted pursuant to subparagraph (ii) of this paragraph.

(iv) Untrended gross surplus. A provider is identified as having an untrended gross surplus when the analysis as conducted and described in clause (b) of subparagraph (ii) demonstrated an excess of reimbursable costs as reflected in the price for the respective reporting period and designated for direct care, clinical care and support and the associated fringe benefits over actual expenses for direct care, clinical care and support and the associated fringe benefits as reported in the provider's 2008/2008-2009 cost report. The amount of this excess is the untrended gross surplus.

(v) Untrended tentative gross reduction. The untrended gross surplus multiplied by 40 percent is referred to as the untrended tentative gross reduction.

(vi) Tentative gross reduction. The tentative gross reduction equals the untrended tentative gross reduction pursuant to subparagraph (v) of this paragraph trended to June 30, 2011, dollars.

(vii) Total impact limitation. Before OPWDD revises a provider's prevocational services price, it shall assess the total impact on a provider of all the tentative gross reductions and tentative aggregate gross reductions pursuant to this paragraph 635-10.5(e)(6) and sections 635-10.5(b)(18)(iv), 635-10.5(c)(16), and 671.7(a)(13) of this Title, combined with the final price and fee reductions pursuant to sections 635-10.5(b)(18)(iii), 635-10.5(d)(6), 635-10.5(h)(3)(iii)(d), 635-10.5(ab)(12)(iii)(b) and 671.7(a)(12) of this Title. The total impact to an individual provider shall be limited to an amount not to exceed 6.5 percent of the aggregated total gross reimbursable operating costs as reflected in a provider's June 30, 2011, prices and the aggregated total gross allowable reimbursement reflected in a provider's June 30, 2011, fees for the provider's programs and/or services subject to the price and fee revisions. The lesser of the amount of the total impact or the amount of the total impact as limited by the 6.5 percent provision represents the final impact. For providers for which no 2008/2008-2009 cost reports were available because the conditions established in subparagraph (i) of this paragraph were not met, the total impact is calculated as follows: The aggregated total gross reimbursable operating costs as reflected in a provider's June 30, 2011, prices and the aggregated total gross allowable reimbursement as reflected in a provider's June 30, 2011, fees for the provider's programs and/or services subject to the price and fee revisions are summed. The total is multiplied by 6.5 percent. The product is the final impact for these providers.

(viii) Allocation of final impact. Before allocation, the final impact on a provider shall be reduced by the final price and fee reductions pursuant to sections 635-10.5(b)(18)(iii), 635-10.5(d)(6), 635-10.5(h)(3)(iii)(d), 635-10.5(ab)(12)(iii)(b) and 671.7(a)(12) of this Title because those reductions are not subject to any further revisions. The remainder of the final impact on a provider shall be distributed equitably across the reimbursable operating costs in that provider's prevocational, supervised residential habilitation, group day habilitation, and supplemental group day habilitation services in proportion to the amount of reduction each of these programs would have incurred had the reductions been calculated separately.

(ix) Final prevocational services price reduction percentage. The allocation of the final impact to a provider's prevocational services shall be expressed as a percentage of the total gross reimbursable operating costs reflected in the price in effect on June 30, 2011.

(x) The final prevocational services price shall be the prevocational services price in effect on June 30, 2011, reduced by the final prevocational services price reduction percentage pursuant to subparagraph (ix) of this paragraph applied to that price.

(xi) For the purposes of requesting a price adjustment, the effects of this price reduction shall not be construed as a basis for loss. In processing a price adjustment, any revised price will be offset by the monetary impact, prorated as appropriate, of the adjustment as calculated pursuant to this paragraph.

(xii) The commissioner, at his or her discretion, may waive all or a portion of this adjustment for a provider upon the provider demonstrating that the imposition of the reduction would jeopardize the continued operation of the prevocational services.

Subdivision 635-10.5(e) is amended by the addition of new paragraphs (12) and (13) as follows and existing paragraph (12) is renumbered to be (14).

(12) Revenues realized by providers from reimbursement attributable to components of the price other than the administrative component shall not be used to fund administrative expenses.

(13) The price determined through the application of this subdivision may be appealed. Such appeal shall be pursuant to section 686.13(i) of this Title, except that the determination following such first level appeal process shall be the commissioner's final decision. At the conclusion of the first level appeal process, OPWDD shall notify the provider of any revised price or denial of the request. Once OPWDD has informed the provider of the appeal outcome, a provider which submits a revised cost report for the period reviewed shall not be entitled to an increase in the award determination based on that resubmission.

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

Barbara Brundage, Director, Regulatory Affairs Unit, OPWDD, 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, 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 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 concern changes in the price methodology for Prevocational services.

3. Needs and benefits: New York State is seeking to achieve efficiencies in its Medicaid program including Medicaid funded services overseen by OPWDD. One such efficiency will be changes in the price methodology for Prevocational services. The new methodology is intended to better align a provider's reimbursement for direct care, support, clinical and related fringe benefit costs with actual costs, by eliminating 40% of the operating surplus for these combined categories. In most cases, the new prices will be predicated on cost information from provider's respective reporting periods that ended either on December 31, 2008, or June 30, 2009, with those costs adjusted for inflationary factors. Additionally, providers will be constrained from utilizing revenues realized from reimbursement attributable to components of the price other than the administrative component to fund administrative expenses. The new methodology strives to more closely match reimbursements to costs and to institute efficiency standards. OPWDD proposes to revise the current prices on July 1, 2011.

These changes will assist in achieving Medicaid efficiency for New York State. Since the majority of the methodology change is structured to eliminate only 40 percent of the operating surpluses allowing providers to retain 60 percent of operating surpluses, OPWDD believes that providers will be able to absorb this reduction while not reducing supports or services or service quality. Additionally, there is a limitation on OPWDD's concurrent reimbursement actions such that a provider's revenue reduction shall be held to an amount not to exceed 6.5 percent of that provider's June 30, 2011, aggregate operating revenue for services subject to price reductions which may include its supervised IRAs and CRs, Group and Supplemental Group Day Habilitation, Prevocational services, supportive IRAs and CRs, Community Habilitation, Waiver Supported Employment and Waiver Respite. This limitation acts as a safety measure so that reductions will not jeopardize the quality of supports and services provided.

4. Costs:

a. Costs to the Agency and to the State and its local governments: There is an approximate $3.4 million savings in Medicaid that will be evenly shared by the State (approximately $1.7 million) and the Federal (approximately $1.7 million) governments. There will be no savings to local governments as a result of these specific amendments. There will be no savings to local governments as a result of these specific amendments concerning some individuals receiving supported employment services 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. Concerning the remainder of individuals, for the current State fiscal year, there are no savings to local governments as a result of these specific 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: There are neither 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 $3.4 million in aggregate funding to providers of Prevocational 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: The proposed amendments do not require any additional paperwork to be completed by providers.

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

8. Alternatives: In developing this regulatory proposal, OPWDD consulted with representatives of provider associations and considered alternatives to achieve the desired efficiencies in the Medicaid funded services overseen by OPWDD. OPWDD determined that the changes in price methodology proposed in this amendment, in concert with other proposals, is the most optimal approach in achieving efficiencies without diminishing the quality of services provided to individuals and while minimizing any adverse impact on providers.

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: OPWDD expects to finalize the proposed amendments effective July 1, 2011. There are no additional compliance activities associated with these amendments.

Regulatory Flexibility Analysis

1. Effect on small business: OPWDD has determined, through a review of the certified cost reports, that most prevocational services are provided by non-profit agencies which employ more than 100 people overall. However, some smaller agencies which employ fewer than 100 employees overall would be classified as small businesses. Currently, there are 100 providers of Prevocational services. OPWDD is unable to estimate the portion of these providers that may be considered to be small businesses.

The proposed amendments have been reviewed by OPWDD in light of their impact on small businesses. The proposed amendments are expected to result in a decrease of approximately $3.4 million in funding to providers of Prevocational services. OPWDD has determined that these amendments will not result in increased costs for additional services or increased compliance requirements.

2. Compliance requirements: The proposed amendments do not impose any additional compliance requirements on providers.

The amendments will have no effect on local governments.

3. Professional services: There are no additional professional services required as a result of these amendments and the amendments will not add to the professional service needs of local governments.

4. Compliance costs: There are no compliance costs since the proposed amendments will not impose any additional compliance requirements on providers.

5. Economic and technological feasibility: The proposed amendments 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 make changes in the price methodology for Prevocational services in order to achieve efficiencies in the Medicaid funded services overseen by OPWDD. OPWDD determined that it could adjust prices for Prevocational services to encourage efficiencies in operation and still adequately reimburse providers of such services. The proposed amendments represent OPWDD'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 with the most equitable distribution possible.

OPWDD 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. While the amendments do not exempt all small business providers from the rule, they do allow OPWDD to waive all or part of the funding reduction for a provider, including a small business provider, if the reduction would jeopardize the continued operation of the prevocational services. Since these amendments require no specific compliance response of regulated parties, the other approaches outlined cannot be effectively applied.

OPWDD determined that the changes in price methodology proposed in this amendment, in concert with other proposals, is the most optimal approach in achieving efficiencies without diminishing the quality of services provided to individuals and while minimizing any adverse impact on providers.

7. Small business participation: The proposed regulations were discussed with representatives of providers, including the New York State Association of Community and Residential Agencies (NYSACRA), on March 8, March 16, March 21, March 22, and March 28, 2011. In addition, the proposed regulations were discussed at a meeting of the Fiscal Sustainability Team, also on March 8. NYSACRA was part of the Fiscal Sustainability Team. Some of the members of NYSACRA have fewer than 100 employees. Finally, OWPDD will be mailing these proposed amendments to all providers, including providers that are small businesses.

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. 44 counties have a population 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, Saratoga, Schenectady, Schoharie, Schuyler, Seneca, Steuben, Sullivan, Tioga, Tompkins, Ulster, Warren, Washington, Wayne, Wyoming and Yates. 9 counties with certain townships have a population density of 150 persons or less per square mile: Albany, Broome, Dutchess, Erie, Monroe, Niagara, Oneida, Onondaga and Orange.

The proposed amendments have been reviewed by OPWDD in light of their impact on entities in rural areas. The proposed amendments are expected to result in a decrease of approximately $3.4 million in funding to providers of Prevocational services for all of New York State. While the reduction in funding will have an adverse fiscal impact on providers of Prevocational services, the geographic location of any given program (urban or rural) will not be a contributing factor to any such impact.

2. Compliance requirements: The proposed amendments do not impose any additional reporting, recordkeeping or other compliance requirements on providers.

The amendments will have no effect on local governments.

3. Professional services: There are no additional professional services required as a result of these amendments and the amendments will not add to the professional service needs of local governments.

4. Compliance costs: There are no compliance costs since the proposed amendments will not impose any additional compliance requirements on providers or local governments.

5. Minimizing adverse economic impact: The purpose of these proposed amendments is to make changes in the price methodology for Prevocational services in order to achieve efficiencies in the Medicaid funded services overseen by OPWDD. OPWDD determined that it could adjust prices for Prevocational services to encourage efficiencies in operation and still adequately reimburse providers of such services. The proposed amendments represent OPWDD'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 with the most equitable distribution possible.

OPWDD has also reviewed and considered the approaches for minimizing adverse economic impact as suggested in section 202-bb(2)(b) of the State Administrative Procedure Act. While the amendments do not exempt all providers in rural areas from the rule, they do allow OPWDD to waive all or part of the funding reduction for a provider, including a provider in a rural area, if the reduction would jeopardize the continued operation of the prevocational services. Since these amendments impose no compliance requirements on regulated parties or local governments, the other approaches outlined in section 202-bb(2)(b) cannot be effectively applied.

6. Participation of public and private interests in rural areas: The proposed regulations were discussed at meetings with representatives of providers on March 8, March 16, March 21, March 22 and March 28, 2011. In addition, the proposed regulations were discussed at a meeting of the Fiscal Sustainability Team, also on March 8. The Fiscal Sustainability Team includes self-advocates, family members, and representatives of providers. Provider associations which were present, such as NYSARC, the NYS Association of Community and Residential Agencies, NYS Catholic Conference, and CP Association of NYS, represent providers throughout NYS, including those in rural areas.

Job Impact Statement

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

The proposed rule will change the methodology for setting Medicaid rates for prevocational services authorized by OWPDD to make use of more current cost information. The methodology was specifically structured to eliminate 40 percent of the surpluses in the categories of direct care, support and clinical. That direction was taken to achieve a minimal impact on jobs and supports and services and service quality. The changes will not result in a decrease of more than 100 full time annual jobs or employment opportunities. Prices will be based on providers' actual spending as reported on cost reports, including actual spending on salaries and benefits. Providers received recent trend factor increases (3.06 percent for 2009 and 2.08% for 2010). Additionally, as a safety measure, no provider's total Waiver funding reduction will be allowed to exceed 6.5% of their total waiver operating reimbursement for the services affected by reductions. For all these reasons, providers will be able to absorb this reduction while not reducing staff.