In the past several years, proposed regulatory changes and many of those adopted have unfairly and unnecessarily created onerous burdens on small independent providers of residential services (earlier comment postings); forcing several to discontinue services. This proposed draft continues the deliberate targeting or callous indifference to small providers of residential services, guaranteeing further grossly unjust destruction of small business providers and the elimination of service provider choices for individuals served.
The rationale for proposing changes at this time (the 4 year review required by the Administrative Process Act), should not be construed as a rationale for the specific regulatory changes in the proposed document. Rather, the Administrative Process Act establishes by law requirements for each of the individual changes proposed -2 are particularly applicable here:
There are 4 provisions in the proposed regulations that have no/very limited fact basis indicating necessity and would force our small business (and many others) to close upon their adoption and a 5th that guarantees small businesses would be unable to survive the death of their owner and consumed by ever larger and more bureaucratic providers.
12 VAC 35 – 106 – 180 – Governance – this proposed regulation may be appropriate for large bureaucratic organizations ( some may disagree); however, it is completely inappropriate for small providers. 1st There is no fact basis to demonstrate poor organizational governance by small businesses under the existing regulations and no data nor examples exist that establishes poor governance impacts – if they’re going out of business it’s much more likely due to the regulatory and reimbursement burdens unique to small businesses. 2nd the adverse impact on small businesses would be devastating: Section A – creates substantial unfunded mandates: liability insurance would be required for the board (otherwise the individual from the population served the proposed regulations required to be on the board would be exposed to financial liability and finding board members would be even more costly); the qualifications and duties required of the board would make volunteers extremely unlikely for small businesses, requiring payment for board members to meet the regulatory requirement (or in the alternative recording names of uninvolved/indifferent board members who rubberstamp making the regulation ineffective) and the cost of setting up the board, adapting provider policies/procedures and maintaining its implementation ongoing. Section B – is even more troubling for small business: B1 requires board members “delegate” to a Director, could the director both be on the board and then delegate away the responsibilities to themselves, B2 would require the owner to sign a contract with themselves in order to be the director – enforceable on whom?; B9 and B10 pile on additional unfunded mandates that would be costly in time and services and finally worst of all from a small business owner perspective B6 would term limit the owner out of the governing body of their own small business through no fault of their own – very unjust. The effort to increase input from the population served, overlaps and duplicates other requirements to seek input from that population, could be counterproductive in large bureaucratic organizations (directing individual complaints to their representative on the board who may or may not pursue them) and is wholly unnecessary for many small businesses; as in our case, where we employ a “committee of the whole” approach and all of the individuals we serve have an opportunity to have a voice in and request significant changes not only at the household but also at the organizational level.
12 VAC 35 – 106 – 390 – C – a more complete commentary for this section will be provided in a later posting that will provide clear and convincing evidence this proposed regulation fails both of the requirements for adoption of a specific regulation, which is applicable here. However, even without those considerations, the direct impact on small businesses would be devastating as it would ban a very successful and economically viable option for small residential providers, the shared residence group home where the provider and the Individual served share the provider’s personal residence. Were this regulation adopted our organization would be forced to discontinue group home services, surrender our license and go out of business and I suspect many others would be in similar circumstance. Even if the small business was able to struggle through this onerous burden, direct and indirect cost of operation would be greatly increased and the provision becomes another very significant unfunded mandate.
5) Slow motion extinction of small independent providers – taken together the proposed regulations for initial licensing applications and change of ownership rules would prohibit many independent small business provider organizations from surviving the death of the owner or being transferred as a whole. 12 VAC 35 – 106 – 50 – C, 106 – 80 – C and D3 all clearly limit any attempt to transfer the business to a different person to a conditional license, apparently at both the organizational and service-level. Section 106 – 40 – B limits a conditional license to only one service and 106 – 50 – A1g further limits residential services with a conditional license to “a single location serving no more than 4 individuals during the conditional period”. Thus, a small business offering multiple services, a 5 or more person group home or having more than one group home would be prohibited from transferring the business in its entirety to anyone else; unless the acquirer had a full organizational license already, assuring that any attempt to transfer the business in its entirety will automatically involve the inexorable gobbling up of small independent business assets into ever larger bureaucratic organizations, until none of the small remain. For example, even our very small business 1-4 person group home and 1 sponsored placement home would have our continuity of service plan (all accounts have access by the house manager who has over 20 years of experience, 17 managing and operating our business and would receive all business assets in the will upon the owner’s death allowing them to meet the requirements to apply for a new license) is prohibited by these provisions. A husband-and-wife team who hold the license together and have operated their business with multiple services and homes successfully for many years would be required under these regulations to apply for a conditional license if the ownership changed to only one of them upon the death of the other and the business would have to be dismantled to meet the proposed regulatory requirement, destroying the business model, eliminating the economies of scale and unnecessarily disrupting the continuity of services for almost everyone they serve. Additionally, if the individual is not currently licensed section 106 – 40 – A – would require a much more stringent and restrictive 90 day funding requirements, which not only reduces small business formation, but would also create a barrier to relicensing an organization that has operated successfully for decades under the existing 90 day requirement with no difficulties whatsoever, further increasing the likelihood of the death of the organization along with the original owner. Even if the original owner wanted to add the individual they have identified in their continuity of services plan upon their death to the license, under these regulations that owner/individual would have to apply for a new conditional license under the change of ownership rules, dismantle their existing small business to meet the requirements of the conditional license and comply with the more stringent/restrictive 90 day funding requirements; despite decades of successfully running their small business and providing exemplary services. Clearly, under these requirements small business formation would be deterred and existing small independent providers would not be able to survive the death of the original owner – assuring the eventual extinction of the small organization and services they have poured their lifetime into developing.
In addition to these 5 small business killers that would immediately force closure or eventual death of many small businesses, there are a host of unfunded mandates that fail the 1st test of demonstrated necessity based in fact (future posting) and create a substantial economic burden on small businesses 12 VAC – 106: 180; 210; 240; 480; 560; 600; and 810 among others. While these provisions individually may not force the closer of a small business, these unfunded mandates piled on top of the ones from previous regulatory changes add significantly to the burden; at some point one of them will become the straw that broke the camel’s back, forcing small business closures.
The negative impact of these changes, which have little or no necessity basis in fact will be negative for both small providers and individuals receiving services in Virginia.
Individuals served currently by small independent providers will also be harmed in 2 ways. First, provider choice (a CMS and DBHDS right) will be eliminated by eliminating the option they currently choose and their future provider options will be severely curtailed as fewer and fewer different providers are available to choose among. Second, individuals served will be forced into ever larger and more bureaucratic organizations. There is an axiom in political science that the closer the government is to the individuals it impacts the more effective and responsive that government is to those they serve. This axiom also applies to services, large bureaucratic organizations adopt rules and practices that have to be applicable across all of their service environments leading to the increased institutionalization of the home and the dilution of individualized adaptations based on persons and contexts – which small independent providers are able to avoid because rules and practices are more effectively adapted to the specific and limited context in which they operate. This will also decrease the voice of the individual served in requesting and seeking change, because rather than going directly to the decision-maker they will be forced through a bureaucratic maze of varying degrees of indifference in any attempt to have their voice heard and achieve the desired individualized change.
This may be just the tip of the iceberg, I have been told (but not independently researched) that with the move to MCO’s other states have altered their regulations in similar manner, resulting in the elimination of small independent providers and the reduction to only a few large bureaucratic residential service providers in those states.
Recommendations: DBHDS should follow the law as currently written. The Administrative Process Act section 2.2 – 4007.1 requires regulatory flexibility and the utilization of alternative regulatory methods for small businesses and list 5 specific recommendations for protecting small businesses, none of which have been utilized in the proposed regulations. The one most applicable here, as none of these provisions have a basis in fact for promoting health, safety, environmental or economic welfare is number 5: “ the exemption of small businesses from all or any part of the requirements contained in the proposed regulation”.