Comments - Proposed 90-Day Reserve Requirements
I am submitting the following comments on behalf of the vaACCSES Board of Directors and our member organizations. The DBHDS Office of Licensing proposed guidance document dated July 12, 2019 directly 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 guidance below by the DBHDS Office of Licensing exceeds the intent and spirit of the current regulation and creates a new onerous regulatory requirement. Any substantive policy change requires that it proceed through the traditional regulatory process.
“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.”
Although we understand and support the importance of all licensed providers to maintain their legal and financial obligations, the overly strict interpretation of the current regulation will impose an unfunded mandate and will most certainly cause 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.
- Removes millions of dollars statewide from the DD service system and prevents an organization from investing resources in quality staff and/or expansion of services when a significant amount of resources is sitting in an untouchable “escrow” account.
- Providers are currently struggling to maintain operations and recruit and retain staff with the current low Medicaid reimbursement rates.
- May lead some providers 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.
- Because licensing staff do not have the necessary expertise in interpreting financial documents nor should we expect them to have this expertise – there may be other alternatives that an organization can provide to prove sound fiscal practices and financial viability other than the sequestration of 90 days of operating expenses in cash or a line of credit equivalent.
- Requirement of 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.
- 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 must submit, as part of the annual application process, copies of annual audits and 990’s that are reviewed for administrative costs and expense-to- income standards. United Way members already complete an annual audit review.
- 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 been and continue to be 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 DD service system as a whole.
We would welcome the opportunity 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.