1. (1) Allowable costs shall mean those costs incurred by an eligible inpatient provider which are eligible for payment by government agencies in accordance with title 11 of article 5 of the Social Services Law. To be allowable, costs must be reasonable and necessary for efficient provision of chemical dependence services, related to patient care, and approved by the commissioner.
2. (2) Patient day shall mean the unit of measure denoting lodging provided and services rendered to one patient between the census taking hours on two successive days. In computing patient days, the day of admission shall be counted but not the day of discharge. When a patient is admitted and discharged on the same day, this period shall be counted as one patient day.
3. (3) Billable days shall mean those patient days during which services have been provided which conform to the requirements of Part 818 of this Title for a chemical dependence inpatient rehabilitation provider; or a residential services provider pursuant to Part 820 of this Title.
4. (4) Allowable days shall mean the total of patient days provided by an eligible inpatient provider; and calculated pursuant to subdivision (c) of this section.
5. (5) Fiscal year shall mean the 12-month period beginning January 1st and ending December 31st, except for chemical dependence inpatient services operated by the office in which case the fiscal year shall mean the 12-month period beginning April 1st and ending March 31st.
6. (6) Rate year shall be the calendar year.
7. (7) Base year shall mean the cost reporting period for which fiscal and patient data are utilized to calculate rates of payment.

8. (8) Eligible inpatient provider shall mean a chemical dependence inpatient provider who meets the requirements in this Part and is:

   1. (i) a chemical dependence inpatient rehabilitation service provider; or
   2. (ii) an inpatient medically supervised withdrawal service which has formerly been certified by the office to provide medical detoxification in alcoholism treatment centers; or
   3. (iii) a residential services provider under 16 beds.

9. (9) New eligible inpatient provider shall mean an eligible inpatient provider as defined in paragraph (8) of this subdivision for which relevant historical chemical dependence service costs are not available.

   (b) Financial and statistical reporting for new eligible inpatient providers.

10. (1) Each new eligible inpatient provider shall prepare and submit to the commissioner a budgeted cost report in accordance with the requirements of section 841.5(b)(1), (c)(1), (2) and (e)-(f) of this Part. Such report shall:

    1. (i) include a detailed projection of revenues and a line item expense budget with regard to staffing and non-personal service costs, including capital costs;
    2. (ii) include a detailed staffing plan;
    3. (iii) include a projected month by month bed utilization by program;
    4. (iv) cover a 12-month period; and

    5. (v) be completed and submitted at least 180 days prior to the beginning of the rate year for which a rate is being requested.

       (c) Calculation of allowable patient days.

       For the purposes of determining rates of payment, allowable patient days for eligible inpatient providers shall be computed using the higher of allowable days in the base year or 90 percent of possible days based upon annualized certified bed capacity. For an eligible inpatient medically supervised service which has formerly been certified by the office to provide medical detoxification in alcoholism treatment centers allowable patient days shall be computed using the higher of allowable days in the base year or 85 percent of the possible days based upon annualized certified capacity.

       (d) Calculation of allowable costs.

11. (1) General. To be considered as allowable in determining the rate of payment, costs must be properly chargeable to necessary patient care rendered in accordance with the operating requirements of the office pursuant to this Title, as such may be amended from time to time. The allowability of costs shall be determined in accordance with the following:

    1. (i) Except where specific rules concerning allowability of costs are stated herein, the office shall use as its major determining factor in deciding on the allowability of costs, the most recent edition of the Medicare Provider Reimbursement Manual, commonly referred to as HIM15, published by the U.S. Department of Health and Human Services' Centers for Medicaid and Medicare Services.
    2. (ii) Where specific rules stated herein or in HIM15 are silent concerning the allowability of costs, the commissioner shall determine allowability of costs based on reasonableness and relationship to patient care and generally accepted accounting principles.
12. (2) Services. Allowable operating costs shall include the costs of all services necessary to meet the operating requirements of the office pursuant to this Title and the special needs of the patient population to be served by an eligible inpatient provider.
13. (3) Religious orders. Allowable costs shall include a monetary value assigned to services provided by religious orders.
14. (4) Dues. Allowable costs shall include only that portion of the dues paid to any professional association which has been demonstrated, to the satisfaction of the commissioner, to be other than for public relations, advertising, political contributions and lobbying.
15. (5) Capital expenditures. No capital expenditures for which approval by the office is required in accordance with section 841.15 of this Part shall be included in allowable capital costs for purposes of computation of the rate of payment unless such approval shall have been secured. Reimbursement for capital and start-up costs will be limited to those costs determined by the office to be both reasonable and necessary.
16. (6) Owner compensation. Reasonable compensation to owners of eligible inpatient provider or parties related to such owners, where services have been actually performed and required to be performed shall be considered as an allowable cost. The amount to be allowed shall be equal to the amount normally required to be paid for the same service provided by a non-related employee, as determined by the commissioner under section 841.15 of this Part. Compensation shall not be included in the rate of payment computation for any services which the owner of the eligible inpatient provider or relative of the owner of the eligible inpatient provider of services is not authorized to perform.

17. (7) Limits on Compensation. The maximum reimbursable costs for salaries for positions/titles shall be consistent with the requirements of Part 812 of this Title.

    (e) Non-allowable costs.

18. (1) Costs. Allowable costs shall not include expenses or portions of expenses reported by an eligible inpatient provider which are determined by the commissioner not to be reasonably related to and commonly associated with the efficient and effective provision of chemical dependence services because of either the nature or amount of the particular item.
19. (2) Entertainment. Allowable costs shall not include costs which principally afford entertainment or amusement to owners, operators or employees of eligible inpatient providers or the referral sources.
20. (3) Penalties. Allowable costs shall not include any interest charged or penalty imposed by governmental agencies or courts, nor the costs of insurance policies obtained solely to insure against the imposition of such a penalty.
21. (4) Advertising, public relations or promotions. Allowable costs shall not include the direct or indirect costs of advertising, public relations and promotion except in those instances where the costs are specifically related to the operation of the eligible inpatient provider, i.e., advertising for staff recruitment, and not for the purpose of attracting residents.
22. (5) Political contributions. Allowable costs shall not include costs of contributions or other payments to political parties, candidates or organizations.
23. (6) Transfer costs. Allowable costs shall not include any costs which the commissioner determines result solely from the transfer of ownership of an eligible inpatient provider.
24. (7) Prosthetic or orthotic costs. Allowable operating costs shall not include the costs of prosthetic or orthotic appliances and devices, including hearing aids which are supplied by vendors who are eligible for payment for such appliances or devices in accordance with the established requirements of the Medicaid Program.
25. (8) Educational costs. Allowable costs shall not include costs for academic, remedial, physical and vocational education provided directly to residents of eligible inpatient providers, by the eligible inpatient provider or by arrangement with local school districts.
26. (9) Dues. Allowable costs shall not include dues paid to any professional association or group for the purposes of public relations, advertising, political contributions, or lobbying.

27. (10) Fundraising. Allowable costs shall not include direct and indirect costs of fundraising.

    (f) Costs of related parties.

28. (1) Costs applicable to services, facilities and supplies furnished to the eligible inpatient provider by related parties as defined in section 841.16 of this Part are includable in the allowable cost of the eligible inpatient provider at the lower of the cost to the related party or the fair market value of the services, facilities or supplies.

    (g) Rates of payment.

29. (1) Payment rates shall be established on a prospective basis.
30. (2) Separate payment rates shall be established by the office for different types of services in accordance with the provisions of this Title.
31. (3) Payment rates shall be all-inclusive per diem rates taking into account all allowable days pursuant to subdivision (c) of this section and all allowable costs pursuant to subdivision (d) of this section. Such principles shall be applied to new eligible inpatient providers.
32. (4) Payment rates established under this section shall be effective for a 12-month period beginning January 1st and ending December 31st.
33. (5) Transfer costs. Allowable costs shall not include any costs which the commissioner determines result solely from the transfer of ownership of an eligible inpatient provider.
34. (6) Payment rates established under this section shall be provisional pending the completion of an audit in accordance with section 841.13 of this Part.
35. (7) For any rate year, an operating cost per diem and capital cost per diem shall be determined from the allowable costs in the base year. The base year is the year ending at least one year prior to the first day of the rate year. The operating cost per diem and capital cost per diem shall be calculated by dividing the allowable cost by the allowable days pursuant to subdivision (c) of this section. For new eligible inpatient providers with at least six months but less than two years of cost experience, the most recent fiscal year will be used.
36. (8) In determining the allowable operating cost per diem for any base year, there shall be applied a growth factor limitation on the previous base year operating per diem. The growth factor limitation is determined by adding two percent to the final trend factor applicable to the base year. The trend factor shall be based on the Congressional Budget Office's Consumer Price Index for all urban consumers. The allowable operating cost per diem for the rate year shall be the lower of allowable operating cost per diem from the base year or the allowable operating cost per diem from the previous base year increased by growth factor limitation. In determining the allowable operating cost per diem for any rate year, there shall be applied a trend factor for allowable operating cost increases during the rate year.
37. (9) To the allowable operating cost per diem computed in accordance with the provisions of this subdivision there shall be added an allowable capital cost per diem. Allowable capital costs shall be determined by the application of the principles developed for determining payments as set forth pursuant to subparagraphs (d)(1)(i) and (ii) of this section.

38. (10) Payment rates for each new eligible inpatient provider with less than six months of cost experience shall be determined as follows:

    1. (i) Payment rates shall be only for the time period as approved in the budgeted cost report submitted by the new eligible inpatient provider.
    2. (ii) The allowable capital per diem during the period covered by the budgeted cost report will be computed based upon the approved budgeted capital costs divided by allowable patient days.
    3. (iii) The allowable operating per diem during the period covered by the budgeted cost report will be the lower of the approved budgeted operating costs divided by allowable patient days or 110 percent of the statewide average operating per diem for programs similar in size and geographic location. Where there are no similar programs for comparison, 115 percent of the statewide average operating per diem will be used.
    4. (iv) The payment rate shall be determined by adding the allowable operating per diem and the allowable capital per diem.
39. (11) Upon submission of the financial reports pursuant to this subdivision, the commissioner may adjust retroactively the eligible inpatient provider's current budget based rate of payment to more accurately reflect the cost of operating the eligible inpatient provider pursuant to this section.

40. (12) Notwithstanding the provisions of this section, if the office determines that an eligible inpatient provider has violated regulations of the office by exceeding certified capacity, the commissioner may, at his or her discretion, adjust retroactively, any rates certified under this section to reflect the allowable costs and patient days incurred by the eligible inpatient provider for rendering such services consistent with its certified capacity. Such revised rates may be applied retroactively, shall be calculated according to the methodology set forth in this section, and shall become effective upon approval by the State Division of the Budget.

    (h) Approval of rates.

    Payment rates established in accordance with the provisions of this Part shall be calculated by the commissioner and shall be approved by the State Division of the Budget. An eligible inpatient provider shall receive written notice of a payment rate after such certification and approval.

    (i) Utilization review.

    Utilization review for chemical dependence inpatient rehabilitation providers and Part 820 residential services providers shall provide that:

41. (1) a physician must certify for each Medicaid recipient that services of the type provided are or were needed in accordance with Part 818 of this Title for a chemical dependence inpatient rehabilitation provider or a Part 820 of this Title residential services provider;
42. (2) the certification must be made within 72 hours prior or subsequent to admission, or, if an individual applies for Medicaid while in the facility, within 72 hours of application;

43. (3) the utilization review plan of an eligible inpatient provider shall include the following:

    1. (i) provisions for review of each Medicaid recipient's need for the services furnished in accordance with the criteria of Part 818 of this Title for a chemical dependence inpatient rehabilitation provider or a Part 820 of this Title residential services provider;
    2. (ii) provisions to ensure that utilization review of a Medicaid recipient's services shall be performed by a group of professionals that includes a physician, and at least one individual who is not directly responsible for the care of the recipient nor who has a financial interest in the eligible inpatient provider's service who shall solely be responsible for approval of the utilization plan;
    3. (iii) procedures to be used by the committee to ensure that staff of the eligible inpatient provider take needed corrective action;
    4. (iv) provisions to ensure that the patient's record includes all information required by Part 818 of this Title for a chemical dependence inpatient rehabilitation provider or a Part 820 of this Title residential services provider, as well as the name of the patient's physician, the dates of Medicaid application and authorization if made after admission, initial and subsequent continued stay review dates, the reasons and plan for continued stay if continued stay is necessary, and other supporting material found necessary and appropriate by the utilization review group;
    5. (v) specification of records and reports to be made by the utilization review group;
    6. (vi) provisions for maintaining the confidentiality of the identities of patients in the records and reports of the utilization review group; and
    7. (vii) written criteria to assess the need for continued stay which conform to the requirements of Part 818 of this Title for a chemical dependence inpatient rehabilitation provider or a Part 820 of this Title residential services provider;
44. (4) the group performing utilization review shall ensure that the initial review for a continued stay of a recipient in an eligible program shall be no later than the 31st day after admission. The date assigned shall be noted in the patient's record;
45. (5) the group performing utilization review shall ensure that subsequent reviews for continued stay of a recipient in an eligible inpatient provider service are conducted no later than each 14 days following the initial continued stay review until 60 days after admission. After 60 days, continued stay reviews shall be conducted each seven days until discharge. The date assigned for each subsequent continued stay review shall be noted in the patient's record;

46. (6) continued stay reviews shall be performed in accordance with the following:

    1. (i) review for continued stay shall be conducted by the utilization review group or a designee of the group;
    2. (ii) the review shall be conducted on or before the review date assigned;
    3. (iii) the group or designee shall review and evaluate the documentation referred to in subparagraph (3)(iv) of this subdivision in relation to the criteria established in response to subparagraph (3)(vii) of this subdivision;
    4. (iv) if the group or designee finds that a recipient's continued stay is needed, the group shall assign a new continued stay review date in accordance with paragraph (5) of this subdivision;
    5. (v) a physician or physician assistant or nurse practitioner must certify that the services continue to be needed by each recipient;
    6. (vi) if the group finds that a continued stay is not needed, it shall notify the recipient's attending physician and primary counselor within one working day and provide them two working days to present their views before a final decision;
    7. (vii) if the attending physician and the primary counselor do not present additional information or agree that continued stay is unnecessary, the utilization review group decision shall be final;
    8. (viii) if the attending physician and primary counselor present additional information or clarification, the need for continued stay shall be reviewed by the entire utilization review group and its decision shall be final;

    9. (ix) any decision of the utilization review group that continued stay is unnecessary shall be provided in writing within two days to the director, the attending physician, the primary counselor and the patient; and Medicaid billing shall cease as of the day of notification. However, any decision to discharge or retain the patient shall be made on clinical grounds independent of the utilization review group's determination.

       (j) Application procedures.

       To qualify for medical assistance payments, an eligible inpatient provider, with a current operating certificate issued by the office, shall apply for enrollment as a Medicaid provider on application forms supplied by the office.

(a) Definitions.

For purposes of this section: