N.Y. Comp. Codes R. & Regs. tit. 10, § 86-5.12 – Cost guidelines for reimbursement purposes.

(a) For the purpose of promulgating cost-based rates or rates based on budget, the department shall establish regional guidelines to be applied to the rate for each service to be provided. The cost guidelines shall be computed on a regional basis and based on the most recent annual cost data available to the department. For this purpose, LTHHCPs shall be grouped on the following basis:
1. (1) Downstate: Putnam, Rockland, Westchester, Nassau, Suffolk, Kings, New York, Richmond, Queens and Bronx Counties.
2. (2) Upstate: All other New York State counties.
(b) The cost guidelines shall be established by:
1. (1) calculating a group average cost;
2. (2) centering the cost of any provider whose costs are not between 75 percent and 125 percent of the group average by raising or lowering the provider's cost, as appropriate, to the 75-percent and 125-percent limits;
3. (3) recalculating the group average; and
4. (4) multiplying the recalculated group average by 110 percent.
  (c)
5. (1) For the purpose of review of initial rates based on budget, the cost guidelines shall be 115 percent of the recalculated group average cost.
6. (2) If the rate based on cost or budget is at or below the cost guideline, such a rate shall be promulgated.
7. (3) If the initial rate based on budget is in excess of the cost guideline, the department shall contact the LTHHCP prior to promulgation of the initial rate and determine if the rate is justified based on a written submission by the LTHHCP. If the department determines that the initial rate based on budget in excess of the guideline is justified, the department shall promulgate such a rate for the applicable rate period. If the department determines that the initial rate based on budget in excess of the cost guideline is not justified, a rate set at the guideline amount shall be promulgated for the applicable rate period.
  (d)
8. (1) If the rate based on cost is in excess of the cost guideline, a rate set at the actual cost shall be promulgated. For each rate year, within 90 days of notification of the rate, the LTHHCP may submit written documentation justifying a rate in excess of the cost guideline. If a program whose cost-based rates exceed the cost guideline fails to submit written documentation justifying the rate within 90 days of notification of the rate, that program's rates which exceed the guideline shall revert to the guideline level on a retrospective basis.
  1. (i) The written documentation submitted by a LTHHCP may indicate what conditions have resulted in a rate in excess of the cost guideline or describe what steps the LTHHCP shall take in pursuing a less expensive alternative way of delivering the service, or both.
9. (2) If the department determines that the written documentation justifies a rate based on cost in excess of the guideline, such a rate shall remain at the actual cost amount for the applicable rate year only.
10. (3) If the department determines that the written documentation does not justify a rate based on cost in excess of the guideline amount, the promulgated rate shall revert to the guideline amount on a retrospective basis.
  1. (i) If the written documentation outlines steps to be taken by the LTHHCP in pursuing a less expensive alternative way of delivering a service, the LTHHCP shall be required to submit an application for prospective revision of a rate. The promulgated rate shall remain as it is promulgated pursuant to this subdivision until the rate is revised pursuant to the department's written approval of the LTHHCP's application for revision of the rate.
  2. (ii) A justification which outlines a plan of action to be taken by the LTHHCP must contain a time frame within which that plan of action shall be implemented. The LTHHCP can use such a justification only once and cannot use such a justification to justify rates in excess of the cost guideline in rate years which do not fall within the specified time frame for implementation of the plan of action.
  (4)
11. (5) In making determinations pursuant to this subdivision, the commissioner shall consider generally applicable factors, including but not limited to:
  1. (i) allowable costs;
  2. (ii) geographical differences in elements of cost;
  3. (iii) geographical differences in availability and cost of personal services;
  4. (iv) economic factors in the area in which the LTHHCP is located;
  5. (v) factors associated with program capacity, patient census, and service to special populations; and
  6. (vi) the need for incentives to improve services and institute economies.
(e) The department shall establish a cap on reimbursable base year administrative and general costs equal to 30% of total reimbursable base year operational costs of a provider of services, excluding a provider of services reimbursed on an initial budget basis, and a new provider, excluding changes in ownership or changes in name, who begins operation in the year prior to the year which is used as a base year in determining rates of payment. The cap on administrative and general costs shall be applied after the application of the cost guidelines described in this section.