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:

1. A fact basis must be established that makes the proposed changes necessary. Section 2.2 – 4017 establishes that in the 4 year review changes must be “necessary” and that the agency must provide “reasons for its findings”. Section 2.2 – 4007.05 is even more specific and requires a “rationale or justification of the new provisions” and clearly separates a statement of “purpose” (why someone thinks they may be good/necessary) and a statement of “substance and issues” (actual risk, occurrences of concerns, data and facts).
2. Minimization of adverse impact on small businesses. Section 2.2 – 4007.1 clearly states in D that this is a required consideration in the 4 year review process and provides clear requirements “to minimize the economic impact on small businesses”, “consider utilizing alternative regulatory methods” for small businesses (listing 5), avoid regulations that “overlaps, duplicates… federal or state law or regulation” and “minimizing the adverse impact on small businesses”.

       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 5^th 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. 1^st 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. 2^nd 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.
3. 12 VAC 35 – 106 – 300 – Employee Training –  I concur with B4 and contend that it makes unnecessary some of the most onerous burdens found in B1 – 3, which establish unrealistic time frames and unnecessary requirements for small providers. 1^st the fact-based necessity of the time deadlines for completing trainings (7 to 14 business days) is not clear and would appear to be mitigated by strict adherence to B4. Also, lapses are typically tied to inattention/carelessness not a lack of training and no fact base exist to demonstrate a training concern. 2^nd the adverse impact on small businesses would be devastating: while we maintain qualified trainers in the house for most of the requirements, but cannot afford in-house training for medication management or CPR/1^st aid and have to rely on qualified agencies to provide and establish DSP competency in these areas; as a result we have little control over their scheduling and some are only available to us quarterly at best (and even then occasionally postponed due to weak overall demand), making it impossible to consistently meet the regulatory time lines even if we wanted to, forcing closure. The inclusion of medication management as a required training rather than an option, creates a significant unfunded mandate (course cost plus 40 to 108 paid staff hours) that would be unnecessary in some cases where an employee does not handle any medications during service provision and is prepared for effective monitoring of any serious side effects through the CPR/1^st aid requirement. Section C – requires annual retraining’s in all areas creating additional unfunded mandates that are often unnecessary and burdensome: retraining is appropriate for skills that are rarely used and may atrophy over time as a result (CPR – 1^st aid, emergency procedures, serious incident reporting); however, even when the need is clear our current training agency recertifies every 2 years which is effective, so this provision would double those cost. Other areas where the retraining is required annually, should also be reconsidered, particularly for daily task where frequent repetition, supervision, the corporate culture and periodic retraining of individuals to address lapses all assure that the individual skill set in these areas is demonstrated, reinforced and developed in real time throughout the year and taking a true false test annually becomes superfluous. These annual requirements are a significant cost to the provider and particularly burdensome for small business owners who have a very small staff with few part-timers, typically requiring overtime pay to provide the training to the full-time staff which make up the bulk of our employees. Simply put why would you need to provide an orientation to a 10 year veteran employee of the organization, if they don’t know by now they never will.
4. 12 VAC 35 – 106 – 390 – B – records shall not be stored within a provider’s personal residence – 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, this proposed regulation creates an onerous and unique burden on small businesses that would prevent their continued operation. The home office has been a necessary staple of small businesses since their inception and as such are even favored in the tax code to promote small business formation and operation. Elimination of the home office option by DBHDS would require a small business dependent upon the reduced overhead of a home office to rent a storefront at some strip mall or other office space and just sit there and wait for the occasional unannounced licensing visit, divorced from any opportunity to provide direction, supervision or services where the services are actually being provided. Thus, constituting an unfunded mandate that would be impossible for many small businesses forcing their closure and a significant detriment to the quality and quantity of services received by individual served at any small business that manages to struggle through the financial burden.

5. 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 1^st 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.

    

1. A gross injustice to good small independent providers who are operating currently. Small business providers who have operated their services successfully for decades would be forced out of service provision through no fault of their own and their years of hard work and successful operation will be for naught. The unfunded mandates are uniquely harmful to small businesses because they lack the economies of scale that are afforded to large bureaucratic organizations. Specifically, in a conference call on the Burns and Associates rate setting formulation they were asked what provisions were made for profits in their calculations and they simply laughed and indicated with economies of scale “you could probably find some”, which highlights an additional failure to consider the needs of small businesses in that process and that the analysis resulted in rates which were the bare minimum for continued operations in small organizations leaving no room for additional unfunded mandates. It is also important to note that this analysis was based on outdated data when it was performed, has not been refreshed and makes no provisions for general inflation nor the wage inflation concerns that have inexorably marched forward since the analysis was conducted – leaving no room for additional unfunded mandates at small businesses.

2. 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”.