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Elder care about to get a lot more expensive

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Non-medical home care service agencies operating in New Jersey have been governed by statute and regulation since 2004.

However, a 2014 law, N.J.S.A. 34:8-45.1, expanded the scope of their requirements governing these businesses, adding an “accreditation” element and requiring audits by CPAs.  These administrative requirements threaten to drive the cost of senior citizen home care way up.

In late August, the NJ Division of Consumer Affairs (“DCA”) proposed new regulations to implement this law; and, if adopted,  they will have an undue economic impact on the operations of these non-medical firms.  The home care providers will necessarily have to pass on these new costs onto their clients.  Ignoring the harsh economic reality, none of these legislative and regulatory provisions offer any additional assistance to or protection for this sensitive population.   And beyond the vague generalities offered by DCA, to wit “ensur[ing] that health care service firms are adequately prepared to offer services in a safe and effective manner”, the State as failed to demonstrate how this goal will be accomplished.

The non-medical home care world is a quintessential small business environment.  These providers, and others New Jersey small businesses, are guaranteed statutory protection from strangulation by red tape.  The Administrative Procedures Act (“APA”) requires any agency proposing a new rule for adoption “shall utilize approaches that will accomplish the objectives of applicable statutes while minimizing any adverse consequences to small businesses of different types and of differing sizes.” N.J.S.A. 52:14B-18.

In this instance, Rule Proposal PRN: 2017-201, proposing to amend the New Jersey Administrative Code to add the new accreditation and audit requirements, fails this test.

All rule proposals must include and publish an economic impact analysis.   Here, the Economic Impact analysis proffered by the State is inadequate and simply wrong.  Its  conclusion that the impact of (1) accreditation is a mere $2,500 per year; and that (2) “costs [will be] incur[red] in preparing an audit for the Division every three years”, is wholly devoid of the required statutory and fiscal analysis.  The closing statement of the paragraph:  “[t]his will have a significant impact on agencies that only provide companion services as they are now required to registered with the Division as a health care service firms and be regulated by the State.” is flat out wrong.  Indeed, it misses the point, non-medical home care has been regulated by the Division of Consumer Affairs (“DCA”) since 2004.  Now  “companion” care firms also will be regulated. 

In 2004, when home care agencies were folded into the health care service firm licensure, the State published an  Economic Impact statement that stated “The proposed amendments will have an economic impact on firms that offer personal care services in that these firms will need to obtain registration.”[1]  The State recognized there would be a cost, but underestimated it: finding the 2004 regulations were merely a ‘consolidation of regulated categories” and opining the cost of implementing N.J.A.C. 13:45B-13.1 (b) would be minimal.  Since 2004, the necessary paperwork to be compliant doubled and the cost of supervision increased the cost of providing non-medical home care.  Non-medical home care is not reimbursable by Medicare or Medicaid.  These increased costs in many instances were passed onto consumers - the elderly, the frail and the disabled. 

New laws never seem to decrease the cost of doing business. As was the case in 2004, the 2014 law created new obligations; and with them, significant new costs. The 2014 law added the requirement that homecare agencies obtain and maintain an “accreditation” from a third-party (think JD Power for home care agencies) and demanded CPAs conduct financial audits every three years.   Neither of these new statutory requirements will have any impact on consumer safety, despite the stated intention of achieving an “assurance that homecare agencies are prepared to offer services in a safe and effective manner”[2]. The scope of the “audits” is unprecedented and is unheard of for businesses that do not receive government subsidy from Medicaid or Medicare.

Because they have to – the providers in this field have run the numbers even if the State has not.  The increased cost to the consumer will be range between $1.75 and $3.00 per hour depending on size and structure of the home care agency, and could exceed $2,500 per year of additional cost to the consumer.  The majority of clients receiving non-medical home care services are elderly (as opposed to disabled or otherwise infirm) and are living on fixed incomes. 

The overhead costs to the providers are likely to explode.  The total cost increase for the non-medical home care agency is estimated to be in excess of $175,000 per year, per location.  This is seventy time what the State estimated in its August 21, 2017 Economic Impact analysis.

An analysis of these costs follows:

Cost to the Consumer receiving Non-medical Home Care:

Assumed hourly rate increase

$1.75/hr

 

Average services per week provided to a client

30 hours/wk

$52.50/wk/client

Increased costs per year per client

52 weeks/yr    

$2,730/year

Cost of Accreditation:

CHAP[3]

Joint Commission[4] Estimates

See CHAP and Joint Commission Costs

           

$9,800

$8,040

Over 3 years; additional cost for each location

Over 3 years; additional cost for each location

Compliance RN[5]                    

$70,000/yr

$35/hr x 2,000 hrs per year; See Best Practices.[6]

Compliance Clerk              

$30,000/yr

$15/hr x 2,000 hrs per year; See Best Practices.

Mileage                      

$3,600/yr        

$300/month for increased cost of client assessments.[7]

           

Overhead                   

$15,000/yr

Add’l HR, insurance; payroll deductions; operational expenses; 15% of RN and Compliance salaries

CPA Audit[8]                           

$10,000/year

unsure of the scope of audit

Mandatory In-Service Training                                  

$40,400/year

Best Practices requires 13 courses to be offered quarterly;

Wages paid to CHHA to attend in-service training:  $19,200 =16 hrs @ $12/hr x 100 CHHAs

Facility for in-service training:

$8,000 = $1,000/day x 2 days per quarter x 4times/yr 

Compensation paid to RN Instructor for in service training:

$11,200=$35/hr x 80 hrs/quarter x 4/yr

New Training materials: $2,000 = $500/quarter x 4/yr

Total Additional Annual Costs to the Provider:

 

$172,000

New Administrative Costs:

Perhaps the providers could live with this spectacular disruption to their business model if the proposed regulation served a legitimate purpose.  But there is none. 

The result of these additional, administrative burdens placed on the providers is that disabled and elderly consumers will spend down assets at a quicker rate.  Many will be forced onto Medicaid, creating a substantial and additional financial obligation to the State.  The Economic Impact analysis published by the State completely ignores this potential result.  To preserve assets, many elderly consumers will be forced into the unregulated private duty market, finding unlicensed home care providers on websites such as Craigslist.  Home care workers are similarly at risk; they will be forced into the unregulated private duty market with no oversight or protection.

No other business in New Jersey, except those receiving a government subsidy in some form, is subjected to the rigors now proposed for the non-medical home care providers by the State.[9]  The target population:  the elderly and disabled consumer, will gain little from the newly proposed amendment. 

Given the harsh economic realities at play here, the State must be held to its burden of demonstrating a cost-benefit analysis.  At the very least, the State should be conducting an open public hearing to vet the merits of this regulations versus the costs that will result.  The elderly and disabled population demand it; and the business community that serves them deserves it.


[1] The similarity of the statement in the 2004 publication in the NJ Register to the wording in the August 2017 publication are eerily similar and equally and inappropriately conclusory.

[2] See Regulatory Flexibility Analysis, par. 2 at 49 N.J.R. 2759(a).

[3] CHAP is the Community Health Accreditation Partner, an accreditation entity.

[4] Joint Commission is an accreditation entity.

[5] The RN hourly rate will vary geographically and $35.00/hr is used as an average.

[6] DCA  has been flirting with the adoption of “Best Practices” for several years.  If codified into regulations, this will add an additional annual requirement for health care service firms.

[7] Including home visits, clinical observations, supervisory visits, and CHHA competency testing.

[8] A CPA has no relevant compliance or regulatory experience in this field.  The proposed audit would be limiting to reviewing balance sheets, rendering it almost irrelevant. 

[9] What about daycare centers? – Certainly they service a sensitive population, yet they are not subjected to audits by certified public accountants.  There is simply substantive rationale for this requirement.

By Lori Grifa, partner at Archer & Greiner’s Hackensack office.

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Comments

Steve October 18, 2017 9:32 am

What is wrong with our lawmakers? When will we stop wasting money on foolish regulations and costing the consumer more hard-earned and needed income? Do they not see that social media will damage a business to the point of closing if that business is not up to standards? Let's start looking at the consequences of regulations for the public as a whole it would benefit our entire economy.

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