We agree with the vaACCSES and the VNPP comments that the proposed guidance document contradicts the language in the current regulation for which the guidance seeks to interpret.

Current regulation 12VAC35-105-210 states “The provider shall document financial arrangements or a line of credit that are adequate to ensure maintenance of ongoing operations for at least 90 days on an ongoing basis. This amount needed shall be based on a working budget showing projected revenue and expenses.”

The proposed DBHDS guidance Office of Licensing stated below exceeds the intent and spirit of the current regulation and creates a new onerous regulatory requirement.

“Therefore, both applicants for licensure and licensed providers must be able to provide proof, at any time when requested by a representative from the department, that they have sufficient funds for 90 days of operating expenses, whether in cash or a line of credit.”

This proposed regulatory requirement is a substantive policy change and therefore requires the proposed guidance interpretation go through the traditional regulatory process.

We understand and support the importance of all licensed providers to maintain their legal and financial obligations. However, applying an overly strict interpretation of the current regulation will impose an unfunded mandate and will create an undue hardship on both large and small providers.

We oppose the proposed guidance document language for the following reasons:

·       The term “projected revenue” is missing from the new language. This is a significant omission and must be included as a key factor when considering 90 days of operating budget. The exclusion of this option is also a substantive policy change. Any substantive policy change requires that it proceed through the traditional regulatory process and not through an interpretive guidance document.

·       The requirement of maintaining 90 days of sequestered cash is onerous and unreasonable. The proposed interpretation: 

o   Removes millions of dollars statewide from the DD service system by requiring licensed providers to place a significant amount of resources in an untouchable “escrow” account.

o   Prevents providers from using essential amounts of money needed to maintain operational capacity (i.e. recruit and retain staff and expand program services) in a fiscal climate already negatively impacted by years of low Medicaid reimbursement rates. 

o   Increases fiscal hardships such that some providers may have no option but to cease operations entirely.

We propose the following recommendations:

·       “Projected revenue” must continue to be included as an option for providers to meet their financial obligations for a 90-day operating budget. An organization’s financial obligations are usually based on a combination of cash on hand, including lines of credit, accounts receivable on hand, and future revenues generated in conjunction with the delivery of future services. Ignoring both future revenues and an organization’s accounts receivable imposes an unnecessary and unwarranted burden on providers.

·       Licensing staff do not have the necessary expertise in interpreting financial documents nor should we expect them to have this expertise. There are reliable alternatives to ensuring and determining an organization’s fiscal stability other than the sequestration of 90 days of operating expenses in cash or a line of credit equivalent.

o   Require a financial review or audit by an external certified accounting firm and/or an accompanying auditor’s letter stating that the auditor found the organization’s accounting standards to be compliant with U.S. generally acceptable accounting practices with no significant audit findings, that the organization has positive cash flow to sustain ongoing operations, and that the financial viability of the organization is supported with reliable and sound fiscal management.

o   Waive the requirement of a 90-day operating budget if an organization is CARF accredited or a United Way member. CARF accreditation requires strict fiscal policy and operation standards. United Way members already complete an annual audit review that includes submission of annual audits and 990’s that are reviewed by United Way for administrative costs and expense-to-income standards.

o   For not-for-profits, DBHDS can also use GuideStar to assess and research the annual audits and/or 990’s of licensed not-for-profits. GuideStar gathers, organizes and distributes information about U.S. not-for-profits in their data base.

DD Waiver licensed providers have a proven history as valued partners with DBHDS in the delivery of valued quality services to Virginians with disabilities. Extreme caution must be considered before moving forward with any dramatic changes in additional financial requirements of licensed providers. The proposed omission of “projected revenue” in the Guidance document alone could have dire unanticipated outcomes that could permanently damage the IDD service system as a whole.

Providers are willing to actively work with the DBHDS Office of Licensing to develop a satisfactory remedy to whatever problem you seek to solve regarding the fiscal responsibilities of providers.