OMH-22-12-00019-P Limits on Administrative Expenses and Executive Compensation

5/30/12 N.Y. St. Reg. OMH-22-12-00019-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 22

May 30, 2012

RULE MAKING ACTIVITIES

OFFICE OF MENTAL HEALTH

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. OMH-22-12-00019-P

Limits on Administrative Expenses and Executive Compensation

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

Proposed Action:

Addition of Part 513 to Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 7.09, 7.15(a), (b), 31.04, 31.05(a), 41.03, 41.15, 41.18, 41.44, 43.02; and Executive Order No. 38

Subject:

Limits on Administrative Expenses and Executive Compensation.

Purpose:

To implement Executive Order No. 38 to limit administrative expenses and executive compensation of providers of services.

Substance of proposed rule (Full text is posted at the following State website:www.omh.ny.gov):

The State of New York directly or indirectly funds with taxpayer dollars a large number of tax exempt organizations and for-profit entities that provide critical services to New Yorkers in need. The goal of this proposed rule is to ensure that taxpayers' dollars are used properly, efficiently, and effectively to improve the lives of New Yorkers. It is imperative that New York State and the New York State Office of Mental Health ensure that State funds and State-authorized funds are optimized for the purpose of providing services to those individuals who are in need of them. Utilizing State funds and State-authorized funds primarily for the provision of direct care and services helps to guarantee that such funds are providing the greatest benefit to persons in New York State who are in need of mental health services. These regulations, which are required by Executive Order No. 38, will ensure that State funds or State-authorized payments paid to providers of services by the New York State Office of Mental Health are used predominantly to provide direct care and services to persons in need of mental health services. In order to achieve these goals, the New York State Office of Mental Health is proposing a new 14 NYCRR Part 513 as follows:

Section 513.1 sets forth the background and intent of the proposed rule.

Section 513.2 establishes the legal base for the proposed rule.

Section 513.3 clarifies the entities that are covered by the proposed rule.

Section 513.4 sets forth the definitions that are applicable to the proposed rule.

Section 513.5 outlines the limits on administrative expenses. Specifically, this section details the percentage of State funds and State-authorized funds that must be used to fund program services as opposed to administrative expenses. This section also provides that the limit on administrative expenses applies to covered providers as well as to (i) subcontractors and agents of covered providers that are related entities that receive State funds or State-authorized payments from the covered provider, and (ii) covered providers whose contract or agreement is with, or which receives State funds or State-authorized payments directly from, a county or local unit of government rather than directly from a state agency. Further, section 513.5 states that the New York State Office of Mental Health or its designee, rather than the county or local governmental unit, is responsible for obtaining the necessary reporting from and compliance by covered providers with the proposed regulations.

Section 513.6 details the limits on executive compensation. Subdivisions (a) and (b) of section 513.6 outline how executive compensation will be limited and what methods will be used to determine that compensation limit. Subdivisions 513.6(c), (d), (e) and (f) further detail the factors that will be considered when determining the limits on executive compensation.

Section 513.7 sets forth the factors and procedures under which waiver of the executive compensation limits and waiver of the reimbursement for administrative expenses will be considered. Subdivision (c) of section 513.7 details the procedure to be followed in the event a request for a waiver of the executive compensation limits and/or reimbursement of administrative expenses is denied.

Section 513.8 specifies the reporting procedures that must be followed by the covered entities. This section also outlines the potential penalties for the failure to report.

Section 513.9 provides the procedure for penalizing and the potential penalties for non-compliant covered entities. This section details the steps that will be taken if non-compliance is suspected. These steps include a preliminary determination of non-compliance, a corrective action period, the filing, review and acceptance of a corrective action plan, the ramifications of a failure to cure the non-compliance issues and the appeal procedure.

The complete proposed regulatory text is found at: http://www.omh.ny.gov/omhweb/policy_and_regulations/

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

Sue Watson, NYS Office of Mental Health, 44 Holland Avenue, 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.

Regulatory Impact Statement

1. Statutory Authority: Sections 7.09 and 31.04 of the Mental Hygiene Law grant the Commissioner of the Office of Mental Health the power and responsibility to adopt regulations that are necessary and proper to implement matters under his or her jurisdiction, and to set standards of quality and adequacy of facilities, equipment, personnel, services, records and programs for the rendition of services for adults diagnosed with mental illness or children diagnosed with emotional disturbance, pursuant to an operating certificate.

Section 7.15(a) of the Mental Hygiene Law charges the Commissioner with the responsibility for promoting, establishing, developing, coordinating and conducting programs and services for the benefit of persons with mental illness within the funding available for such purposes.

Section 7.15(b) of the Mental Hygiene Law provides the Commissioner with the authority to cooperate and enter into agreements with other state, local and federal departments or agencies in fulfilling his or her responsibilities.

Section 31.05(a) of the Mental Hygiene Law establishes the criteria for the issuance of an operating certificate, including that the premises, equipment, personnel, records, and program are adequate and appropriate to provide services for persons with mental illness.

Section 41.03 of the Mental Hygiene Law provides that the meaning of operating costs shall be in accordance with and subject to the regulations of the Commissioner of Mental Health.

Sections 41.15 and 41.18 of the Mental Hygiene Law provide that the Commissioner of Mental Health has the authority to approve the net operating costs of programs incurred pursuant to an approved local services plan that are eligible for state aid.

Section 41.44 provides that the Commissioner may provide state aid to local governments and to voluntary agencies within amounts available therefor and subject to regulations established by him or her.

Section 43.02 of the Mental Hygiene Law provides that the Commissioner has the power to establish standards and methods for determining rates of payment made by government agencies pursuant to Title 11 of Article 5 of the Social Services Law for services, other than inpatient services, provided by facilities, including hospitals, licensed by the Office of Mental Health.

Section 43.02(b) of the Mental Hygiene Law requires operators of facilities licensed by the Office of Mental Health to furnish such financial, statistical and program information as the Commissioner may determine to be necessary.

Executive Order No. 38 directs the Commissioner of each Executive State Agency that provides State financial assistance or State-authorized payments to providers of services, including the Office of Mental Health, to promulgate regulations and take any other actions within the agency's authority, including amending agreements with such providers, to address the extent and nature of a provider's administrative costs and executive compensation that shall be eligible to be reimbursed with State financial assistance or State-authorized payments for operating expenses. Executive Order No. 43 extends the time for agencies to comply with Executive Order No. 38.

2. Legislative Objectives: Article 7 of the Mental Hygiene Law provides that the Office of Mental Health and its Commissioner shall plan and work with local governments, voluntary agencies and all providers and consumers of mental health services in order to develop an effective, integrated, comprehensive system for the delivery of all services to persons with mental illness and to create financing procedures and mechanisms to support such a system of services to ensure that persons with mental illness in need of services received appropriate care and treatment.

This regulation serves to comply with Executive Order No. 38 and furthers the legislative policy of providing high quality mental health services to individuals with mental illness in a cost-effective manner.

3. Needs and Benefits: The Office of Mental Health is proposing to adopt the following regulation because the State of New York directly or indirectly funds with taxpayer dollars a large number of tax exempt organizations and for-profit entities that provide critical services to New Yorkers in need. The goal of this regulation is to ensure that taxpayers' dollars are used properly, efficiently, and effectively to improve the lives of New Yorkers. In certain instances, providers of services that receive State funds or State-authorized payments have used such funds to pay for excessive administrative costs or inflated compensation for their senior executives, rather than devoting a greater proportion of such funds to providing direct care or services to their clients. Such abuses involving public funds harm both the people of New York who are paying for such services, and those persons who must depend upon such services to be available and well-funded. These regulations, which are required by Executive Order No. 38, will ensure that State funds or State-authorized payments paid by this agency to providers are not used to support excessive compensation or unnecessary administrative costs.

4. Costs:

(a) cost to State government: The costs to State government are expected to be very limited, and efforts to ensure efficient centralization of certain aspects of such implementation are underway.

(b) cost to local government: There are no costs anticipated to local government.

(c) cost to regulated parties: The costs to regulated parties are anticipated to be minimal as most, if not all, of the information that must be reported by such providers is already gathered or reported for other purposes.

5. Local Government Mandates: These regulatory amendments will not result in any additional imposition of duties or responsibilities upon county, city, town, village, school or fire districts.

6. Paperwork: The proposed regulatory amendments will require limited additional information to be reported to the agency by providers receiving State funds or State-authorized payments. To the extent feasible, such reporting shall be made electronically to avoid unnecessary paperwork costs.

7. Duplication: The proposed rule does not duplicate, overlap or conflict with any State or Federal statute or rule. However, the proposed rule seeks to minimize the reporting requirements faced by providers by building upon those requirements in the Federal Internal Revenue Code that require certain tax-exempt organizations to report information concerning their executive compensation and administrative costs.

8. Alternatives: No alternatives were considered. Executive Order No. 38 requires the adoption of this proposed regulation.

9. Federal Standards: The regulatory amendments do not conflict with Federal standards.

10. Compliance Schedule: This rule takes effect January 1, 2013.

Regulatory Flexibility Analysis

A Regulatory Flexibility Analysis for Small Businesses and Local Governments is not being submitted with this notice because the proposed rule will not impose any adverse economic impact on small businesses, nor will it impose new reporting, recordkeeping or other compliance requirements on small businesses or local governments.

Rural Area Flexibility Analysis

A Rural Area Flexibility Analysis is not being submitted with this notice because the proposed rule will not impose any adverse economic impact on rural areas.

Job Impact Statement

A Job Impact Statement is not being submitted with this notice because it is evident from the subject matter of the regulation that it will have no impact on jobs and employment opportunities.