MRD-28-10-00018-A Efficiency Adjustment for Residential Habilitation Services in Supervised IRAs and Supervised CRs

9/29/10 N.Y. St. Reg. MRD-28-10-00018-A

NEW YORK STATE REGISTER

VOLUME XXXII, ISSUE 39

September 29, 2010

RULE MAKING ACTIVITIES

OFFICE FOR PEOPLE WITH DEVELOPMENTAL DISABILITIES

NOTICE OF ADOPTION

 

I.D No. MRD-28-10-00018-A

Filing No. 947

Filing Date. Sept. 14, 2010

Effective Date. Oct. 01, 2010

Efficiency Adjustment for Residential Habilitation Services in Supervised IRAs and Supervised CRs

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

Action taken:

Amendment of sections 635-10.5(b), 671.7(a) and 686.13(k) of Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 13.09(b) and 43.02

Subject:

Efficiency adjustment for residential habilitation services in supervised IRAs and supervised CRs.

Purpose:

To implement an efficiency adjustment by modifying the IRA price.

Text of final rule:

Paragraph 635-10.5(b)(18) is amended as follows:

(18) Determination of the efficiency adjustment for individualized residential alternatives (IRAs): [effective January 1, 2003.]

(i) Effective January 1, 2003, there shall be an efficiency adjustment for IRAs as follows:

[(i)] (a) The efficiency adjustment shall be a percentage reduction applied to the allowed administration operating reimbursements for residential habilitation services and room, board and protective oversight (see section 686.13[k][1] of this Title) in the IRA price in effect on December 31, 2002.

[(ii)] (b) The efficiency adjustment described herein will not apply to:

Clauses (a)-(c) of the current subparagraph 635-10.5(b)(18)(ii) are renumbered to be subclauses (1)-(3)

Subparagraphs (iii)-(viii) of the current paragraph 635-10.5(b)(18) are renumbered to be clauses (c)-(h) and the new clauses (c) and (d) are amended as follows:

(c) Reimbursement for administration operating costs for IRAs newly certified on or after January 1, 2003, except those described in [clauses (ii)(a) and (b)] subclauses (b)(1) and (2) of this [paragraph] subparagraph, will reflect the percentage reductions determined in [subparagraph (vii)] clause (g) of this [paragraph] subparagraph.

(d) All information used to determine the efficiency adjustment percentage described in [subparagraph (vii)] clause (g) of this [paragraph] subparagraph is based on allowed IRA administration operating reimbursements for the calendar 2001 or the 2001-2002 price period.

Paragraph 635-10.5(b)(18) is amended by the addition of a new subparagraph (ii) as follows:

(ii) Effective October 1, 2010, for providers in all regions there shall be an efficiency adjustment applied to the IRA price for the residential habilitation services provided in supervised IRAs and supervised Community Residences.

(a) There shall be three components of the efficiency adjustment as follows:

(1) Non-Personal Services (NPS). Providers which demonstrate a level of NPS at or above the benchmark described in item (ii) of this subclause shall be subject to a reduction in the supervised IRA price.

(i) For the purposes of this efficiency adjustment, NPS includes site Other Than Personal Services (OTPS), transportation, and expensed equipment as contained in the supervised IRA price. NPS does not include Personal Services, contracted personal services, Fringe benefits, total program administration, total agency administration, Health Care Adjustments (HCA), capital costs and State paid items.

(ii) The benchmark is predicated on the value of all NPS contained in a provider's supervised IRA 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 operating costs including transportation and HCA but exclusive of capitalized property contained in a provider's supervised IRA price on the respective date. The percentages for each provider offering residential habilitation services are ranked ordinally. OPWDD has established the benchmark at the 15th percentile. All providers below the 15th percentile in the ordinal ranking are exempt from the NPS reduction.

(iii) For all providers ranked at or above the benchmark, the reduction shall be applied to NPS operating costs contained in the supervised IRA price in effect on October 1, 2010.

(iv) The percentage reduction shall be 18 percent.

(2) Administration. Providers which demonstrate a level of Administration contained in the supervised IRA price at or above the benchmark described in item (ii) of this subclause shall be subject to a reduction in the supervised IRA price.

(i) For the purposes of this efficiency adjustment Administration includes Total Program Administration and Total Agency Administration contained in the supervised IRA price. Both Total Program Administration and Total Agency Administration include components representing personal services, administrative contracted services, administrative OTPS and administrative fringe benefits.

(ii) The benchmark is predicated on the combined value of Total Program Administration and Total Agency Administration contained in a provider's supervised IRA 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 operating costs including transportation and the HCA but exclusive of capitalized property contained in a provider's supervised IRA price on the respective date. The percentages for each provider offering residential habilitation services are ranked ordinally. OPWDD has established the benchmark at the 15th percentile. All providers below the 15th percentile in the ordinal ranking are exempt from the Administration reduction.

(iii) For all providers ranked at or above the benchmark, the reduction shall be applied to Total Program Administration and Total Agency Administration operating costs contained in the supervised IRA price in effect on October 1, 2010.

(iv) The percentage reduction shall be 5 percent.

(3) Residual Adjustment. For providers subject to either one or both of the reductions described in subclauses (1) and (2) of this clause, a residual adjustment shall be implemented as described in items (i) and (ii) of this subclause. The residual adjustment shall confine the aggregate effect of this efficiency adjustment and an offset factor of $44 per unit of service to a range between a minimum of 1.5 percent and a maximum of 3.5 percent of the total supervised IRA price on October 1, 2010.

(i) For providers which would realize a reduction in the total supervised IRA price less than 1.5 percent after combining the effects subclauses (1) and (2) of this clause and $44 per unit of service, the total efficiency adjustment shall be increased to 1.5 percent of the total supervised IRA price in effect on October 1, 2010.

(ii) For providers which would realize a reduction in the total supervised IRA price greater than 3.5 percent after combining the effects of subclauses (1) and (2) of this clause and $44 per unit of service, the total efficiency adjustment shall be held to 3.5 percent of the total supervised IRA price in effect on October 1, 2010.

(b) New sites: To the extent that a provider is subject to this efficiency adjustment, a corresponding correction to approved budgeted costs for new sites shall be made so that the percentage offsets in effect before inclusion of the new site—18% NPS, 5% Administration and any residual adjustment thereto—shall be preserved when the new site's budgeted costs are included in the calculation of the supervised IRA price.

(c) For purposes of requesting a price adjustment, the effects of this efficiency adjustment resulting from the NPS and Administrative reductions as described in subclauses (a)(1) and (2) of this subparagraph as well as any subsequent residual adjustment thereto per subclause (a)(3) of this subparagraph shall not be construed as a basis for loss. In processing a price adjustment, any revised price will be offset by the monetary effects of the NPS and Administrative reductions including the residual adjustment thereto, if any.

Paragraph 671.7(a)(10) is amended as follows:

(10) The price as computed in accordance with this subdivision for a community residence of 16 or fewer beds shall be offset as follows:

(i) [For s]Supervised community residences:

(a) Effective January 1, 2010, the offset shall be $1,404 (or a prorated portion thereof for facilities which opened after April, 2009) and beginning January 1, 2010, $156 per month.

(b) Effective October 1, 2010, the offset shall be $200 per month.

(ii) For supportive community residences the offset shall be $1,134 (or a prorated portion thereof for facilities which opened after April, 2009) and beginning January 1, 2010, $126 per month.

Subdivision 671.7(a) is amended by the addition of a new paragraph (11) as follows and the existing paragraphs (11) and (12) are renumbered to be (12) and (13):

(11) Effective October 1, 2010, for providers in all regions there shall be an efficiency adjustment applied to the IRA price for residential habilitation services provided in supervised IRAs and supervised Community Residences.

(i) There shall be three components of the efficiency adjustment as follows:

(a) Non-Personal Services (NPS). Providers which demonstrate a level of NPS at or above the benchmark described in subclause (2) of this clause shall be subject to a reduction in the supervised IRA price.

(1) For the purposes of this efficiency adjustment, NPS includes site Other Than Personal Services (OTPS), transportation, and expensed equipment contained in the supervised IRA price. NPS does not include Personal Services, contracted personal services, Fringe benefits, total program administration, total agency administration, Health Care Adjustments (HCA), capital costs and State paid items.

(2) The benchmark is predicated on the value of all NPS contained in a Community Residence provider's supervised IRA 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 operating costs including transportation and HCA but exclusive of capitalized property contained in a provider's supervised IRA price on the respective date. Alternatively, for Community Residence providers which did not operate supervised IRAs at these times, the NPS costs and the total operating costs shall be extracted from the CFR filed for the period ending either on December 31, 2007 or June 30, 2008 as appropriate in order to calculate a comparable value. The percentages for each provider offering residential habilitation services are ranked ordinally. OPWDD has established the benchmark at the 15th percentile. All providers below the 15th percentile in the ordinal ranking are exempt from the NPS reduction.

(3) For all providers ranked at or above the benchmark, the reduction shall be applied to NPS operating costs contained in the supervised IRA price in effect on October 1, 2010.

(4) The percentage reduction shall be 18 percent.

(b) Administration. Providers which demonstrate a level of Administration contained in the supervised IRA price at or above the benchmark described in subclause (2) of this clause shall be subject to a reduction in the supervised IRA price.

(1) For the purposes of this efficiency adjustment Administration includes Total Program Administration and Total Agency Administration contained in a provider's supervised IRA price. Both Total Program Administration and Total Agency Administration include components representing personal services, administrative contracted services, administrative OTPS and administrative fringe benefits.

(2) The benchmark is predicated on the combined value of Total Program Administration and Total Agency Administration contained in a Community Residence provider's supervised IRA 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 operating costs including transportation and HCA but exclusive of capitalized property contained in a provider's supervised IRA price on the respective date. Alternatively, for Community Residence providers which did not operate supervised IRAs at these times, the Administrative costs and the total operating costs shall be extracted from the CFR filed for the period ending either on December 31, 2007 or June 30, 2008 as appropriate in order to calculate a comparable value. The percentages for each provider offering residential habilitation services are ranked ordinally. OPWDD has established the benchmark at the 15th percentile. All providers below the 15th percentile in the ordinal ranking are exempt from the Administration reduction.

(3) For all providers ranked at or above the benchmark, the reduction shall be applied to Total Program Administration and Total Agency Administration operating costs contained in the supervised IRA price in effect on October 1, 2010.

(4) The percentage reduction shall be 5 percent.

(c) Residual Adjustment. For providers subject to either one or both of the reductions described in clauses (a) and (b) of this subparagraph, a residual adjustment shall be implemented as described in subclauses (1) and (2) of this clause. The residual adjustment shall confine the aggregate effect of this efficiency adjustment and an offset factor of $44 per unit of service to a range between a minimum of 1.5 percent and a maximum of 3.5 percent of the total supervised IRA price on October 1, 2010.

(1) For providers which would realize a reduction in the total supervised IRA price less than 1.5 percent after combining the effects of clauses (a) and (b) of this subparagraph and $44 per unit of service, the total efficiency adjustment shall be increased to 1.5 percent of the total supervised IRA price in effect on October 1, 2010.

(2) For providers which would realize a reduction in the total supervised IRA price greater than 3.5 percent after combining the effects clause (a) and (b) of this subparagraph and $44 per unit of service, the total efficiency adjustment shall be held to 3.5 percent of the total supervised IRA price in effect on October 1, 2010.

(ii) New sites: To the extent that a provider is subject to this efficiency adjustment, a corresponding correction to approved budgeted costs for new sites shall be made so that the percentage offsets in effect before inclusion of the new site—18% NPS, 5% Administration and any residual adjustment thereto—shall be preserved when the new site's budgeted costs are included in the calculation of the supervised IRA price.

(iii) For purposes of requesting a price adjustment, the effects of this efficiency adjustment resulting from the NPS and Administrative reductions as described in clauses (i)(a) and (b) of this paragraph as well as any subsequent residual adjustment thereto per clause (i)(c) of this paragraph shall not be construed as a basis for loss. In processing a price adjustment, any revised price will be offset by the monetary effects of the NPS and Administrative reductions including the residual adjustment thereto, if any.

Paragraph 686.13(k)(1) is amended by the addition of a new subparagraph (ix) as follows and the existing subparagraphs (ix) and (x) are renumbered to be (x) and (xi):

(ix) The total reimbursable operating costs derived through the application of the above methodology shall be subject to efficiency adjustments in paragraph 635-10.5(b)(18) of this Title.

Final rule as compared with last published rule:

Nonsubstantive changes were made in sections 635-10.5(b) and 671.7(a).

Text of 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], [e-mail]

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

Chapter 168 of the Laws of 2010 changed the name of the submitting agency from the Office of Mental Retardation and Developmental Disabilities (OMRDD) to the Office for People with Developmental Disabilities (OPWDD). The text of the regulations was amended to reflect the agency's name change. This minor change does not necessitate revision to the previously published Regulatory Impact Statement, Regulatory Flexibility Analysis for Small Business and Local Governments, Rural Area Flexibility Analysis or Job Impact Statement.

Assessment of Public Comment

Public Comments:

OPWDD received three comments in opposition to the proposed regulation.

A Provider Association's executive director, on behalf of the Provider Association, asserts that OPWDD's contention that the Medicaid trend factor will mitigate the reduction is "misleading and inaccurate" because the trend factor is used for recruitment and retention and to benefit direct support professionals. She disputes that efficiencies are possible because rates established at a point in time do not accommodate a population as it ages and consequently as its needs increase. She states that the proposed regulation not only penalizes agencies that operate efficiently, "it gives the impression that providers seek to undercut staff, when in fact… providers seek to bolster and serve as the champion of the direct support professional." She further asserts that "the overly prescriptive nature of the proposed regulations" will force reductions in critical areas such as food, fuel, and utilities. She urges OPWDD to reverse the efficiency adjustment.

A voluntary provider agency's executive director expressed concern that the quality and efficacy of services will be jeopardized by this efficiency adjustment. He explained that the agency's historically low residential rates and its aging population with its growing medical needs have already caused its program to operate at a deficit. Further, he faults the rate appeal process as not adequately addressing the sustained losses.

A second voluntary provider agency identified that it works with hard to place individuals and states that it has a highly efficient administrative structure. If it experiences administrative cuts, it fears that programs will be jeopardized. This provider agency was represented by two individuals who presented testimony at a public hearing on the proposed regulations.

All three comments alluded to reductions in other programs that compound the fiscal stress.

OPWDD's Response:

OPWDD recognizes that these are difficult times for its providers of service and it asks that they strive in concert with OPWDD to deal with the fiscal challenges.

A trend factor when issued is allocated across the board to all operating expenses-- personal services as well as non-personal services so that it is not necessarily used, or intended to be used, exclusively for recruitment and retention of direct support professionals. OPWDD does encourage providers to utilize trend factor monies to increase the salaries and/or benefits of direct support professionals. Additionally, OPWDD has consistently implemented initiatives to provide compensation opportunities for direct support professionals.

By the end of the 2010 or the 2010/2011 reporting year, providers will have realized an 8.2% increase (3.06% for 2009 or 2009/2010, 3.06% for 2010 or 2010/2011 and 2.08% for 2010 or 2010/2011) in revenue attributable to the trend factors in every operating cost category over the prior year. The residual adjustment aspect of the efficiency adjustment limits the impact of the reduction to an annual maximum of 3.5% of the total supervised IRA price. The Health Care Adjustment VI initiative further augments provider revenues. This initiative-the sixth in a series--assists providers with the enhancement of health care benefits offered to employees by enriching operating revenues by another 1% beginning in April, 2010.

Upon further review, OPWDD is amending the efficiency adjustment regulation to allow partial exemption for a provider that can demonstrate that the adjustment would jeopardize its ability to continue providing services. OPWDD expects to adopt this as an emergency regulation to go into effect concurrently with the efficiency adjustment. It will be available to all providers.

The provider which felt its administrative structure was vulnerable was not subject to a reduction in administration by virtue of this efficiency adjustment.

The rate appeal process is designed to address all critical care concerns and to limit awards in certain areas in which providers exceed prescribed parameters such as in administrative costs.