BILL NUMBER:  S7668

 TITLE OF BILL :  An act directing the department of health to study
and develop suitable measures to prevent financial hardship and/or
failure of providers serving individuals with developmental
disabilities funded by Medicaid to support the uninterrupted
continuation of necessary services

 PURPOSE OR GENERAL IDEA OF BILL :

This legislation requires the Department of Health in consultation
with the Office of People with Developmental Disabilities to prepare a
report including recommendations as they relate to rate
rationalization.

 SUMMARY OF SPECIFIC PROVISIONS :

Section 1 requires the commissioner of Health in consultation with the
Commissioner of OPWDD to prepare a report that includes
recommendations for holding harmless from future rate reductions
providers that operate beneath a regional average ration, a
methodology for adjusting rates so that total reimbursement is equal
to the total costs of that program, establishment of a rate appeal
process designed to increase rates during a non-rebasing year,
consider lengthening the period between base year updates, and
identify parts of the plan to be approved by CMS.
              

Section 2 requires DOH to submit a report detailing the
recommendations set forth by this act by February 1, 2017 as well as
regulations effectuating the report's recommendations by July 1, 2017.

Section 3 is the effective date.

 JUSTIFICATION :

Services for individuals with developmental disabilities funded by
Medicaid are subject to extraordinary financial stress under rate
setting policies and methodologies known as "rate rationalization."
Rate rationalization poses a systemic threat to the entire system of
OPWDD funded services. Specifically, it penalizes agencies efficient
enough to realize savings by taking those savings away when program
rates are rebased every other year.  This ignores the fact that the
system of OPWDD funded services is based in large measure on an
agency's ability to operate efficiently enough to realize savings in
various cost categories or programs in order to subsidize cost
categories or programs which are chronically underfunded. Without this
flexibility providers have been placed in a position of closing or
curtailing services or allowing services to weaken because of
insufficient funds to improve wages for underpaid employees, provide
intensified services to meet challenging needs of people served, meet
increases in health insurance costs and other costs necessary to
successfully provide services for people with developmental
disabilities.

Rate rationalization makes it unlikely the financially struggling
providers can recover since reducing costs in order to operate more
efficiently results in reimbursement rate cuts by the Department of
Health which simply exacerbate the provider's weak financial
condition. In one of many instances a financially struggling agency
cut costs to produce savings. However it soon found those savings lost
to rate cuts thus punishing it for being efficient further weakening
it almost to the point of bankruptcy.

Additionally, programs which must increase their costs in order to
manage a more difficult population with severe needs must wait for two
and a half to nearly three and a half years before rates are increased
by DOH. If the agency is financially marginal the potential exists to
fatally weaken the agency. In one of many examples a provider in a
struggling agency accepted four behaviorally challenging individuals
for placement from State facilities. The extraordinary costs
associated with these placements created a financial hole in excess of
almost $1 million and nearly bankrupted the entire agency placing the
services for hundreds of individuals and families at risk.

Rate rationalization also means that the cost to the State for funding
the entire services system must be budget neutral. However that
doesn't recognize essential costs increases due, for example, to an
aging population or meeting new mandates. Budget neutrality therefore
contributes to fiscal instability and jeopardizes sustainability.

 PRIOR LEGISLATIVE HISTORY :

New Bill.

 FISCAL IMPLICATIONS :

To be determined.

 EFFECTIVE DATE :
This act shall take effect immediately.