MRD-10-10-00009-A Revision of the Reimbursement Methodology Related to Allowable Costs of Ownership of Real Property

5/26/10 N.Y. St. Reg. MRD-10-10-00009-A

NEW YORK STATE REGISTER

VOLUME XXXII, ISSUE 21

May 26, 2010

RULE MAKING ACTIVITIES

OFFICE OF MENTAL RETARDATION AND DEVELOPMENTAL DISABILITIES

NOTICE OF ADOPTION

 

I.D No. MRD-10-10-00009-A

Filing No. 516

Filing Date. May. 11, 2010

Effective Date. Jun. 01, 2010

Revision of the Reimbursement Methodology Related to Allowable Costs of Ownership of Real Property

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

Action taken:

Amendment of sections 635-6.4, 635-99.1, 680.12 and 686.13 of Title 14 NYCRR.

Statutory authority:

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

Subject:

Revision of the reimbursement methodology related to allowable costs of ownership of real property.

Purpose:

To simplify payment of property costs and synchronize reimbursement with providers' payment obligations based on debt service.

Text of final rule:

Section 635-6.4 is amended as follows:

Section 635-6.4 - Costs of ownership of real property.

(a) Unless specifically otherwise provided for in this Title, costs of ownership of real property shall be allowable in the amount of depreciation, interest, costs of alteration, construction, rehabilitation and/ or renovation to real property, and costs attributable to the negotiation or settlement of sale or purchase of real property[, or in the amount of] in cases where:

(1) OMRDD and the Division of the Budget first approved the property costs before June 1, 2010; or

(2) OMRDD and the Division of the Budget first approved the property costs on or after June 1, 2010, but the costs were previously funded, in whole or in part, by New York State, any other state or the federal government.

(b) Unless specifically otherwise provided for in this Title and except as provided in paragraph (2) of subdivision (a) of this section, costs of ownership of real property shall be allowable in the amount of interest and principal or provider equity (see Subpart 635-99 of this Part), in cases where OMRDD and the Division of the Budget first approved the property costs on or after June 1, 2010.

(c) Notwithstanding the provisions of subdivisions (a) or (b) of this section, costs of ownership of real property shall be allowable in the amount of costs related to loans from the Dormitory Authority of the State of New York (see [glossary,] Subpart 635-99 of this Part).

(d) Reimbursement for principal and interest or provider equity and interest is an allowance in lieu of reimbursement of interest and depreciation associated with the property, and in lieu of reimbursement of the underlying allowable costs, which may include allowable start-up costs, for which the mortgage, loan, or other financing is received.

[(b)] (e) Depreciation is based upon the historical cost and useful life of buildings, fixed equipment and/or capital improvements, alterations, rehabilitation and/or renovations.

(f) Principal shall be the amount which the provider borrows for the purchase, alteration, construction, rehabilitation and/or renovation of real property, for costs attributable to the negotiation or settlement of sale or purchase of the real property and for other reasonable and necessary costs related to such purchase, alteration, construction, rehabilitation and/or renovation, including, but not limited to, design fees and short term interest. Principal shall be allowable in the amount approved by OMRDD and the Division of the Budget, but shall not be greater than the lesser of:

(1) the historical cost; or

(2) the amount the provider actually borrowed.

(g) The commissioner may allow provider equity in an amount not to exceed fair market value if the provider demonstrates that allowing such provider equity:

(1) is necessary in order for the facility or program in question to continue to operate, or is necessary in order for the facility or program to open;

(2) would be an economic and efficient use of resources; and

(3) would be in the best interests of the persons who are receiving or will receive services at the facility or program in question.

Note: Current subdivisions 635-6.4(c)-(h) are renumbered as (h)-(m).

Note: Renumbered paragraphs 635-6.4(h)(1)-(8) are unchanged, except that subparagraph (8)(iii) is amended as follows:

(iii) The commissioner may allow an alternative historical cost only for transfers, purchases, alteration, construction, renovation or rehabilitation, the terms of which were agreed to after [the effective date of this regulation] July 12, 2000.

Note: Renumbered subdivision 635-6.4(i) is amended as follows:

(i) Useful life and amortization period.

(1) The useful life of depreciable assets shall be the higher of the reported useful life or the useful life from the Estimated Useful Lives of Depreciable Hospital Assets (current edition), published by the American Hospital Association. This document is available from:

(i) the American Hospital Association, 840 Lake Shore Drive, Chicago, Illinois 60611;

(ii) it may also be reviewed in person during regular business hours at the:

(a) N.Y.S. Department of State, [41 State Street] 99 Washington Avenue, Albany, New York 12231; or

(b) by appointment at the N.Y.S. Office of Mental Retardation and Developmental Disabilities, 44 Holland Avenue, Albany, New York 12229.

(2) The amortization period for principal repayment and provider equity shall be the lesser of:

(i) the term of the indebtedness, as approved by OMRDD and Division of the Budget, related to the real property in question; or

(ii) the remaining useful life on the asset.

[(2)] (3) A provider or [consumer] an individual receiving services may use a different useful life or amortization period if such different useful life or amortization period is approved by OMRDD. OMRDD shall base such approval upon historical experience, documentary evidence, loan agreements (if any) and need for the services for which the depreciable or financed assets are used.

Note: Rest of section 635-6.4 remains unchanged except for renumbering.

Add new subdivision 635-99.1(ai) as follows and renumber rest of section 635.99.1 accordingly:

(ai) Equity, provider. The amount the provider paid, excluding the amount paid from borrowed funds, for the purchase, alteration, construction, rehabilitation and/or renovation of real property, for costs attributable to the negotiation or settlement of sale or purchase of such real property and for other reasonable and necessary costs related to such purchase, alteration, construction, rehabilitation and/or renovation, including, but not limited to, design fees and short term interest.

Paragraph 680.12(a)(9) is amended as follows:

(9) Capital costs shall mean property costs subject to the limitations contained in this section, Subpart 635-6 of this Title, and Medicare principles of reimbursement, except that costs of ownership of real property shall not include principal or provider equity.

Paragraph 680.12(d)(8)is amended by the addition of a new subparagraph (xiii) as follows:

(xiii) Costs of ownership of real property shall not include principal or provider equity.

Paragraph 686.13(b)(3) is amended by the addition of a new subparagraph (i) as follows:

(i) The provisions of this paragraph (3) shall only apply where costs of ownership of real property under Section 635-6.4 are limited to depreciation, interest, costs of alteration, construction, rehabilitation and/ or renovation to real property, and costs attributable to the negotiation or settlement of sale or purchase of real property.

Note: Subparagraphs 686.13(b)(3)(i) and (ii) are renumbered as (ii) and (iii).

Final rule as compared with last published rule:

Nonsubstantial changes were made in sections 635-6.4(i)(1) and 680.12(a)(9).

Text of 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]

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.

Revised Regulatory Impact Statement, Revised Regulatory Flexibility Analysis, Revised Rural Area Flexibility Analysis and Revised Job Impact Statement

Minor nonsubstantive changes were made to the proposed amendments in clause 635-6.4(i)(1)(ii)(a) and in paragraph 680.12(a)(9). The first change corrects the street address of the Department of State. The second change corrects a typographical error in underlining existing regulation text.

These minor technical corrections do not necessitate revision of the previously published Regulatory Impact Statement, Regulatory Flexibility Analysis for Small Businesses and Local Governments, Rural Area Flexibility Analysis, or Job Impact Statement.

Assessment of Public Comment

The agency received no public comment.