PDD-16-11-00019-P Reimbursement of Specialty Hospitals

4/20/11 N.Y. St. Reg. PDD-16-11-00019-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-16-11-00019-P

Reimbursement of Specialty Hospitals

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

Proposed Action:

Amendment of section 680.12 of Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 13.09(b) and 43.02

Subject:

Reimbursement of Specialty Hospitals.

Purpose:

To modify the reimbursement methodology for Specialty Hospitals and make associated changes.

Text of proposed rule:

Clause 680.12(b)(3)(ii)(b) is amended as follows:

(b) NYS Office [of Mental Retardation and] for People With Developmental Disabilities, [Division of Revenue Management, 30 Russell Road] Office of Counsel, 44 Holland Avenue, Albany, NY [12206-1377] 12229.

Subparagraph 680.12(b)(5)(iii) is amended as follows:

(iii) In the event the provider discovers that the financial reports it has submitted are incomplete, inaccurate or incorrect prior to receiving its new rate, the provider must notify [OMRDD] OPWDD that such error exists. The provider will have 30 days from the date such notification is received by [OMRDD] OPWDD to submit revised reports or additional data. Such data or report shall meet the certification requirements of the report being corrected. If the corrected data or report are received within a reasonable time before the issuance of the rate, [OMRDD] OPWDD shall incorporate the corrected data or report into its computation of the rate without the provider having to file an appeal application. However, OPWDD will not accept the resubmission of a January 1 - December 31, 2008, cost report, subsequent to January 1, 2011, for the purposes of the calculation of the rate effective July 1, 2011 as described in clause (5)(ii)(f) of subdivision (d) of this section.

Clause 680.12(d)(5)(ii)(e) is amended as follows:

(e) For the period January 1, 1992, through December 31, 1992, and for each subsequent rate period through June 30, 2011, the rate shall be equal to the reimbursable operating costs and appropriate appeal adjustments contained in the Year 4 rate calculated pursuant to clause (i)(d) of this paragraph, as trended, with the addition of appropriately approved property.

Subparagraph 680.12(d)(5)(ii) is amended by the addition of a new clause (f) as follows:

(f) For the period July 1, 2011, through December 31, 2011, and for each subsequent rate period, rates for other than newly-certified facilities for non-ACD clients and for ACD clients when the commissioner has determined that the occupancy of certified beds for the facility and the region is 80 percent or more shall be as follows. The operating component of the rate shall be equal to the allowable operating costs as reported by the provider in its 2008 annual cost report trended to the current rate period. For the period July 1, 2011, through December 31, 2011, and for each subsequent rate period, the capital component of the rate shall be equal to the allowable capital costs as reported in the provider's 2008 annual cost report. However, OPWDD shall update the capital component of the July 1, 2011 - December 31, 2011, rate based upon capital cost information reported in cost reports for years subsequent to the 2008 reporting year subject to a desk audit review by OPWDD.

Subdivision 680.12(e) is amended as follows:

(e) [First level rate] Rate appeals and corrections.

(1) Rate appeals for rate periods prior to July 1, 2011.

(i) First level rate appeals.

(a) The commissioner shall consider first level rate appeals applications for revisions to the rate, if brought within 120 days of the provider's receipt of the initial rate computation sheet. However, if the appeal is to the ACD rate calculated in accordance with section 680.12(d)(4)(ii) of this Part, the appeal must be from the ACD rate for a group of individuals residing in a physically distinct wing, unit or part of the facility, receiving similar services, having similar characteristics, and for whom the provider can identify discrete costs.

[(2)] (b) For any first level appeal, the provider must demonstrate that the rate requested in the appeal is necessary to ensure efficient and economic operation of the facility. If an appeal pursuant to this section is the ACD rate, the provider must also show that the individuals to whom the appeal pertains require care for which the necessary cost of providing [client] care to admitted individuals exceeds the ACD rate.

[(3)] (c) First level rate revision appeal applications shall be made in writing to the commissioner.

[(i)] (1) The application shall set forth the basis for the first level appeal and the issues of fact. Appropriate documentation shall accompany the application and [OMRDD] OPWDD may request such additional documentation as it deems necessary.

[(ii)] (2) Actions on first level rate appeal applications will be processed without unjustifiable delay.

[(4)] (d) A rate revised pursuant to an appeal shall not be considered final unless and until approved by the State Division of the Budget. At the conclusion of the first level appeal process [OMRDD] OPWDD shall notify the specialty hospital of any proposed revised rate or denial of same. [OMRDD] OPWDD shall inform the facility that the facility may either accept the proposed revised rate or request a second level appeal in accordance with section 602.9 of this Title in the event that the proposed revised rate fails to grant some or all of the relief requested.

[(5)] (e) At no point in the first level appeal process shall the provider have a right to any form of interim report or determination made by [OMRDD] OPWDD or the State Division of the Budget.

[(6)] (f) If [OMRDD] OPWDD approves the revision to the rate and the State Division of the Budget denies the revision, the provider shall have no further right to administrative review pursuant to this section.

[(7)] (g) Any rate revised in accordance with subdivision (d) of this section shall be effective according to the dates indicated in the approval of rate appeal notification. Such notification shall be sent to the provider by certified mail, return receipt requested.

[(8)] (h) Any additional reimbursement received by the facility, pursuant to a rate revised in accordance with this subdivision or section 602.9 of this Title, shall be restricted to the specific purpose set forth in the appeal decision.

[(9)] (ii) Second level rate appeals.

[(i)] (a) [OMRDD's] OPWDD's denial of the first level appeal of any or all of the relief requested in the appeals provided for in [paragraph (1) of this subdivision] subparagraph (i) of this paragraph shall be final, unless the facility requests a second level appeal to the commissioner in writing within 30 days of notification of denial or proposed revised rate.

[(ii)] (b) Second level appeals shall be brought and determined in accordance with the applicable provision of Part 602 of this Title.

(2) Rate corrections for rate periods beginning on or after July 1, 2011.

(i) The commissioner will correct rates in instances where there are material errors in the information submitted by the provider which OPWDD used to establish the rate or where there are material errors in the rate computation and only in instances which would result in an annual increase of $5,000 or more in a specialty hospital's allowable costs.

(ii) In order to request a rate correction in accordance with subparagraph (i) of this paragraph, the provider must send to OPWDD its request by certified mail, return receipt requested, within 90 days of the provider receiving the rate computation or within 90 days of the first day of the rate period in question, whichever is later.

(3) Rate appeals for rate periods beginning on or after July 1, 2011.

(i) Threshold. The threshold is $5,000.

(ii) The only appeals that shall be considered are vacancy appeals.

(iii) First level rate appeals.

(a) Notification of first level appeal. In order to appeal a rate, the provider must send to OPWDD within one year of the close of the rate period in question, a first level appeal application by certified mail, return receipt requested.

(b) First level rate appeal applications shall be made in writing to the commissioner.

(c) The application shall set forth the issues of fact. Appropriate documentation shall accompany the application and OPWDD may request such additional documentation as it deems necessary.

(d) Actions on first level rate appeal applications will be processed without unjustifiable delay.

(e) The burden of proof on first level appeals shall be on the provider to demonstrate that the rate requested in the first level appeal is necessary to ensure efficient and economical operation of the specialty hospital.

(f) A rate revised by OPWDD pursuant to an appeal shall not be considered final unless and until approved by the State Division of the Budget.

(g) At no point in the first level appeal process shall the provider have a right to an interim report of any determinations made by any of the parties to the appeal. At the conclusion of the first level appeal process OPWDD shall notify the provider of any proposed revised rate or denial of same. OPWDD shall inform the provider that it may either accept the proposed revised rate or request a second level appeal in accordance with the provisions of section 602.9 of this Title, in the event that the proposed revised rate fails to grant some or all of the relief requested.

(h) At the conclusion of the first level appeal process, OPWDD shall notify the provider of any revised rate or denial of the request. Once OPWDD has informed the provider of the appeal outcome, if the provider submits a revised cost report for the period reviewed, it shall not be entitled to an increase in the award determination based on that resubmission.

(i) If OPWDD approves the revision to the rate and the State Division of the Budget denies the revision, the provider shall have no further right to administrative review pursuant to this section.

(j) Any rate revised in accordance with this paragraph shall be effective according to the dates indicated in the approval of the rate appeal notification.

(k) Any additional reimbursement received by the provider pursuant to a rate revised in accordance with this paragraph shall be restricted to the specific purpose set forth in the first or second level appeal decision. If the provider does not spend such reimbursement on such specific purpose, OPWDD shall be entitled to recover such reimbursement.

(ii) Second level rate appeals.

(a) OPWDD's denial of the first level appeal of any or all of the relief requested shall be final, unless the provider requests a second level appeal to the commissioner in writing within 30 days of service of notification of denial or proposed revised rate.

(b) Second level appeals shall be brought and determined in accordance with the applicable provisions of Part 602 of this Title.

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 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 reimbursement of Specialty Hospitals.

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 a change in the rate methodology for the Specialty Hospital. The Specialty Hospital rate will be changed to make use of current cost information. The operating components of the Specialty Hospital rate are based, in part, on 1987 budget costs. The new methodology for the Specialty Hospital will base rates on actual 2008 costs. This will correct any misalignments between costs and reimbursements.

The Specialty Hospital rate methodology will be changed to make use of more current cost information, to establish an appeal threshold of $5,000, and to limit grounds for appeals to vacancies. In addition, if the provider resubmits its cost report for a rate appeal period after OPWDD notified the provider of an appeal outcome, the provider will not be entitled to an increase in the appeal award based on the resubmitted cost data. Specialty Hospital rates are calculated using a prospective methodology. The benefit of this change is to more closely align the appeals process with the prospective rate methodology.

These changes will assist in achieving Medicaid efficiency for New York State. Since the methodology change is structured to eliminate operating surpluses, OPWDD believes that the provider will be able to absorb this reduction while not reducing supports or services or service quality.

4. Costs:

a. Costs to the Agency and to the State and its local governments: There is an approximate $1.1 million savings in Medicaid that will be evenly shared by the State (approximately $550,000) and the Federal (approximately $550,000) governments. There will be no savings to local governments as a result of these specific amendments 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.

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 $1.1 million in funding to the Specialty Hospital provider.

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 the provider.

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 considered alternatives to achieve the desired efficiencies in the Medicaid funded services overseen by OPWDD. OPWDD determined that the methodology change for the Specialty Hospital 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.

OPWDD considered alternative efficiency methodologies for the Specialty Hospital but determined that the updating of cost information was most appropriate as it eliminated surpluses.

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

OPWDD is not submitting a Regulatory Flexibility Analysis for Small Business and Local Governments. The only provider impacted by this proposed regulation employs over 100 individuals and is therefore not classified as a small business. It is apparent from the nature and purposes of the amendments that no reporting, recordkeeping or other compliance requirements are imposed on local governments. In addition, as noted in the Regulatory Impact Statement, there is no fiscal impact on local governments.

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. The only provider impacted by this proposed regulation is located in an urban area. It is apparent from the nature and purposes of the amendments that no reporting, recordkeeping or other compliance requirements are imposed on local governments. In addition, as noted in the Regulatory Impact Statement, there is no fiscal impact on local governments.

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 specialty hospitals licensed by OWPDD to make use of more current cost information, to establish appeal thresholds, and to limit grounds for appeals to vacancies. The operating components of the Specialty Hospital rate are based, in part, on 1987 budget costs. The new methodology will base rates on actual 2008 costs. Appeals will be limited to vacancy appeals and there will be a loss threshold of $5,000. In addition, if the specialty hospital resubmits its cost report for a rate appeal period after OPWDD notified the hospital of an appeal outcome, the hospital will not be entitled to an increase in the appeal award based on the resubmitted cost data.

Using actual costs from 2008 to establish rates will not result in a loss of jobs or employment opportunities because the change will essentially only eliminate reimbursement the specialty hospital was receiving in excess of its actual costs. Since the specialty hospital will receive funding based on its actual spending, including actual spending on salaries and benefits, the new rates will reimburse the hospital for its staff costs.

The changes regarding appeals should not result in a decrease of more than 100 full time annual jobs or employment opportunities. Because the specialty hospital will no longer be able to submit appeals for unlimited reasons, and will no longer be able to revise cost reports to increase revenue, it will no longer be able to simply spend more than its revenues and look to OPWDD for compensation. However, as with the use of 2008 cost data, this will not affect existing jobs, because it will not affect existing revenue. It may limit new employment opportunities because the specialty hospital cannot expect that OPWDD will reimburse it for any and all additional spending on staff. However, the specialty hospital has not submitted rate appeals for many years, and OPWDD estimates that it would not have hired more than 100 full time annual employees if this unlimited right to appeal remained in place.

The change establishing a threshold for appeals will not result in a loss of over 100 full time jobs, because the change will only eliminate appeals for under $5,000, and no full time annual job costs under $5,000.