N.Y. Comp. Codes R. & Regs. tit. 10, § 86-2.34 – Affiliation changes.

(a) A hospital-based residential health care facility as defined in section 86-2.10(a)(13) of this Subpart whose affiliated hospital closes its acute care beds shall notify the department within 30 days of actual complete closure of such beds. Such residential health care facility shall have its affiliation status changed to free-standing effective as of the date of actual complete closure.
(b) For purposes of establishing the allowable indirect component of the rate pursuant to section 86-2.10(d) of this Subpart, a hospital-based residential health care facility whose affiliation changes to free-standing under circumstances described in subdivision (a) of this section may apply to the department at the same time notice of closure is given pursuant to subdivision (a) of this section for a three-year phase in of its free-standing affiliation for reimbursement purposes effective the beginning of the next calendar year following actual complete closure of its acute care beds.
1. (1) For the rate effective January 1st of the calendar year following actual complete closure of the affiliated hospital's acute care beds, the mean indirect price per day determined pursuant to section 86-2.10(d)(4)(i) of this Subpart shall be determined by summing the product of multiplying the mean indirect price per day of the appropriate hospital-based peer group by.75 and the product of multiplying the mean indirect price per day of the appropriate free-standing peer group by.25.
2. (2) For the rate effective January 1st of the second calendar year following actual complete closure of the affiliated hospital's acute care beds, the mean indirect price per day determined pursuant to section 86-2.10(d)(4)(i) of this Subpart shall be determined by summing the product of multiplying the mean indirect price per day of the appropriate hospital-based peer group by.50 and the product of multiplying the mean indirect price per day of the appropriate free-standing peer group by.50.
3. (3) For the rate effective January 1st of the third calendar year following actual complete closure of the affiliated hospital's acute care beds, the mean indirect price per day determined pursuant to section 86-2.10(d)(4)(i) of this Subpart shall be determined by summing the product of multiplying the mean indirect price per day of the appropriate hospital-based peer group by.25 and the product of multiplying the mean indirect price per day of the appropriate free-standing peer group by.75.
(c) For purposes of establishing the factor determined pursuant to section 86-2.12(a) of this Subpart, a hospital-based residential health care facility whose affiliation changes to free-standing under circumstances described in subdivision (a) of this section and has applied for a three-year phase in of the free-standing indirect component pursuant to subdivision (b) of this section shall continue to be classified as hospital-based for a period of three calendar years following the actual complete closure of the affiliated hospital's acute care beds.
(d) A hospital-based residential health care facility whose affiliation changed to free-standing under the circumstances described in subdivision (a) of this section that fails to notify the department within 30 days from the date of actual complete closure of the acute care beds shall not be eligible for the provisions of subdivisions (b) and (c) of this section. Such facilities shall be designated free-standing, for rate calculation purposes, pursuant to this Subpart retroactive to the date of actual complete closure of the acute care beds of the affiliated hospital.