BILL ANALYSIS Ó
AB 1400
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Date of Hearing: April 28, 2015
ASSEMBLY COMMITTEE ON HUMAN SERVICES
Kansen Chu, Chair
AB 1400
(Santiago) - As Amended April 21, 2015
SUBJECT: Developmental services: regional center contracts
SUMMARY: Establishes an administrative cost cap for specified
in-home respite service providers that receive regional center
funds.
Specifically, this bill:
1)Defines administrative costs as all costs other than direct
service expenditures, as specified, including, but not limited
to the following:
a) Compensation and benefits, including federal, state, and
local payroll taxes, workers' compensation and unemployment
insurance premiums, and recruiting, training, orientation,
and background checks for managerial personnel whose
primary purpose is the administrative management of the
entity, including, but not limited to, directors and chief
executive officers, as well as for employees who perform
administrative functions, including, but not limited to,
payroll management, personnel functions, accounting,
budgeting, and facility management;
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b) Facility and occupancy costs directly associated with
administrative functions;
c) Maintenance and repair;
d) Data processing and computer support services;
e) Contract and procurement activities, except those
provided by a direct service employee;
f) Training directly associated with administrative
functions;
g) Travel directly associated with administrative
functions;
h) Licenses directly associated with administrative
functions;
i) Taxes;
j) Interest;
aa) Property insurance;
bb) Personal liability insurance directly associated with
administrative functions;
cc) Depreciation;
dd) General expenses, including, but not limited to,
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communication costs and supplies directly associated with
administrative functions;
ee) Consultants and professional services, including, but
not limited to, accounting and legal services;
ff) Distributions to shareholders;
gg) Advertising costs;
hh) Conference, convention, and meeting costs;
ii) Facility and office equipment costs, including, but not
limited to, rent, lease, and mortgage payments, directly
associated with administrative functions;
jj) Transfers to a corporate parent or franchisor,
including, but not limited to, franchise fees, fees for
copyright or trademark usage, fees for advertising
materials, royalty fees, or conference fees; and
aaa) Other general operating and overhead costs.
2)Defines direct service expenditures as all amounts actually
paid and all accounts payable, as specified, as wages and
benefits, including state, federal, and local payroll taxes,
workers' compensation and unemployment insurance premiums, and
recruiting, training, orientation, and background checks for
respite care aides, and other substantially similar benefits
that are directly related to the provision of in-home respite
services.
3)Requires that entities that contract with regional centers to
provide in-home respite services, and have annual revenue
attributable to regional center consumers of at least $7
million dollars, spend at least 85% of the regional center
funds on direct service expenditures, as specified.
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4)Prohibits funds used for direct service expenditures from
including administrative costs.
5)Requires in-home respite service providers and contractors
subject to the provisions of this bill to, upon request,
provide regional centers with access to books, documents,
papers, computerized data, source documents, consumer records,
or other records pertaining to the service providers' and
contractors' negotiated rates.
EXISTING LAW:
1)Establishes an entitlement to services for individuals with
developmental disabilities under the Lanterman Developmental
Disabilities Services Act (Lanterman Act). (WIC 4500 et seq.)
2)Grants all individuals with developmental disabilities, among
all other rights and responsibilities established for any
individual by the United States Constitution and laws and the
California Constitution and laws, the right to treatment and
habilitation services and supports in the least restrictive
environment. (WIC 4502)
3)Establishes a system of 21 nonprofit regional centers
throughout the state to identify needs and coordinate services
for eligible individuals with developmental disabilities and
requires the Department of Developmental Services (DDS) to
contract with regional centers to provide case management
services and arrange for or purchase services that meet the
needs of individuals with developmental disabilities, as
defined. (WIC 4620 et seq.)
4)Requires the development of an individual program plan (IPP)
for each regional center consumer, which specifies services to
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be provided to the consumer, based on his or her
individualized needs determination and preferences, and
defines that planning process as the vehicle to ensure that
services and supports are customized to meet the needs of
consumers who are served by regional centers. (WIC 4512)
5)Establishes that an infant or toddler under age 3 who is
eligible for regional center services shall have an
individualized family service plan (IFSP) to direct services,
as specified, and defines the types of services, supports and
staffing that should be considered when creating the plan.
(GOV 95020)
6)Requires all regional center contracts or agreements with
service providers in which rates are determined through
negotiations between the regional center and the service
provider to expressly require a 15% administrative cost cap
for regional center funds spent by the providers. Stipulates
that direct service expenditures are those costs immediately
associated with the services to consumers being offered by the
provider, and requires that funds spent on direct services do
not include any administrative costs, as defined. (WIC 4629.7
(a))
7)Requires that all contracts between DDS and regional centers
require a 15% administrative cost cap for all funds
appropriated through a regional center's operations budget.
Requires that funds spent on direct services, as defined, do
not include any administrative costs, as specified. (WIC
4629.7 (b))
8)Requires the DDS Director to develop program standards and
establish, maintain, and revise, as necessary, an equitable
process for setting state payment rates for in-home respite
services purchased by regional centers from vendored
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providers. Defines in-home respite services as intermittent
or regularly scheduled temporary nonmedical care and
supervision, provided in the client's own home, for a regional
center client who resides with a family member. (WIC 4690.2
(a))
9)Provides that, commencing July 1, 2014, in-home respite
services agency providers with temporary payment rates set by
DDS can seek unanticipated rate adjustments from DDS due to
the impacts of the increased minimum wage, as specified.
Requires that rate adjustment to be specific to increases in
payroll costs only to the extent necessary to bring employee
pay into compliance with the increased state minimum wage, and
prohibits such a rate adjustment from being sought to provide
a general wage enhancement to any employees paid above the
increased minimum wage. (WIC 4691.6(g))
FISCAL EFFECT: Unknown
COMMENTS:
Developmental services: The Lanterman Act (WIC § 4500 et seq.)
guides the provision of services and supports for Californians
with developmental disabilities. Each individual under the Act,
typically referred to as a "consumer," is legally entitled to
treatment and habilitation services and supports in the least
restrictive environment. Lanterman Act services are designed to
enable all individuals served to live more independent and
productive lives in the community.
The term "developmental disability" means a disability that
originates before an individual attains 18 years of age, is
expected to continue indefinitely, and constitutes a substantial
disability for that individual. It includes intellectual
disabilities, cerebral palsy, epilepsy, and autism spectrum
disorders (ASD). Other developmental disabilities are those
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disabling conditions similar to an intellectual disability that
require treatment (i.e., care and management) similar to that
required by individuals with an intellectual disability.
Direct responsibility for implementation of the Lanterman Act
service system is shared by DDS and 21 regional centers, which
are private nonprofit entities, established pursuant to the
Lanterman Act, that contract with DDS to carry out many of the
state's responsibilities under the Act. The 21 regional centers
serve 280,000 consumers, providing services such as residential
placements, supported living services, respite care,
transportation, day treatment programs, work support programs,
and various social and therapeutic activities. Approximately
1,100 consumers reside at one of California's three
Developmental Centers-and one state-operated, specialized
community facility-which provide 24-hour habilitation and
medical and social treatment services.
Services provided to people with developmental disabilities are
outlined in an IPP, which is developed by the IPP
team-including, among others, the consumer, his or her legally
authorized representative, and one or more regional center
representatives-and is based on the consumer's needs and
choices. The Lanterman Act requires that the IPP promote
community integration and maximize opportunities for each
consumer to develop relationships, be part of community life,
increase control over his or her life, and acquire increasingly
positive roles in the community. The IPP must give the highest
preference to those services and supports that allow minors to
live with their families and adults to live as independently as
possible in the community.
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Regional center vendors: Prior to being approved to receive
funding from a regional center for providing services to a
consumer, a service provider must become vendored by the
regional center that oversees the catchment area in which the
provider is located. This "vendorization" process includes
verifying that the provider is qualified to provide the planned
services and meets all other regulatory standards and
requirements. It is important to note that vendorization makes
a provider eligible to provide services paid for by the regional
center, but does not guarantee the regional center will refer
consumers. Furthermore, there is nothing precluding a vendor
from being vendorized by more than one regional center. There
are over 45,000 vendors that provide services paid for by
regional centers in California.
Regional center rates: Current statute and regulations set
forth rate requirements for regional center rates paid to
vendored providers to facilitate service delivery to regional
center consumers. There are different rates for different types
of services, including the following:
a)Rates set by DDS, which are included in statute or regulation,
or can be set through cost estimates or rate schedules;
b)Rates established by Medi-Cal for the same service, which
require a regional center to pay no more than the Medi-Cal
rate;
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c)Usual and customary rates, which align with the rates a
particular business charges individuals who do not have
developmental disabilities and are not served by regional
centers;
d)Rates established by the Department of Social Services (DSS),
which apply to out-of-home respite services provided in
facilities with rates established by DSS;
e)Rates set for transportation services to regional center
clients; and
f)Rates set through negotiation between the regional center and
the provider (also known as "negotiated rates"), which are
applied to services that do not fit within any of the other
established rate structures and in which case the maximum rate
is capped at the regional center median rate for that service
or the statewide median rate for that service, whichever is
lower.
In-home respite: In-home respite services are intended to
provide temporary, nonmedical care and supervision to a regional
center client, in his or her own home, for the purpose of
assisting family members in maintaining the client at home,
ensuring the client's safety in the absence of family members,
relieving family members, and providing other socialization and
assistance with activities of daily living that would otherwise
be provided by family members. In California, there are a
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number of large agencies that hire or subcontract with in-home
respite providers to provide direct care, or that serve as the
employer of record for in-home respite providers (primarily to
help comply with employment law and payroll tax requirements)
for situations in which a consumer selects and supervises his or
her own caregiver. Rates for in-home respite services are set
by DDS either through state regulations or cost statements and
vary based on the employment model.
Need for this bill: Because in-home respite services are not
included among services with negotiated rate contracts, there is
currently no statutory requirement for in-home respite provider
contracts with regional centers to include an administrative
expenditure cost cap. According to the author, "Respite care is
a vital family support service that keeps individuals with
developmental disabilities living at home. By investing in
direct care and direct caregivers, this bill attempts to improve
the consistency and continuity of respite services to family
caregivers."
Staff comments: While this bill mirrors what is in current law
for negotiated rate contracts and regional center operations, it
also requires a number of additional expenditure categories to
be included within an administrative costs definition that are
not included in the current statutory definitions for
administrative costs for providers with negotiated rates or for
regional center operations. By establishing a cap on
administrative costs, then mandating the categories of
expenditures to be included in that capped amount, this bill
could limit an in-home respite provider's flexibility and
overall fiscal sustainability.
Conversely, this bill could result in higher wages for in-home
respite service workers providing direct care to regional center
consumers. By designating a certain percentage of funds for all
in-home respite contracts for direct services, in-home respite
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service workers may have a better chance of making more than the
minimum wage.
Aside from potential financial impacts, it should be noted that
this bill was introduced after conversations around how regional
center rates might be restructured to improve the overall system
and service delivery had already begun. The Developmental
Services Task Force, which was established by the Secretary of
the Health and Human Services Agency in collaboration with DDS,
is comprised of a number of regional center representatives,
consumers, consumer advocates, providers, and legislative staff.
The Task Force continues to meet and discuss whether particular
aspects of regional center rates, including the rate
methodologies and the actual amounts paid, should be revised;
discussions that encompass the in-home respite services being
discussed in this bill. The author may wish to address how this
bill fits within the larger context of the work of the
Developmental Services Task Force.
Additionally, this bill is specific to in-home respite service
providers even though there are a number of other services paid
for by regional centers that have rates set by DDS and are not
required to adhere to an administrative cost cap. The author
may wish to explain why this bill is specific to in-home respite
services.
Technical amendments necessary: As currently written, this bill
does not fully achieve the author's intent to apply this bill
specifically to entities with a certain level of revenue
attributable to in-home respite services provided to regional
center clients, nor does it make clear that direct service
expenditures are prohibited from including administrative costs.
Additionally, this bill includes a subdivision that does not
apply to the contracts outlined in this bill, as the services
addressed in this bill are not paid for through negotiated
rates.
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Committee staff recommends that this bill be amended per the
following beginning on page 3, line 30:
30 (b) (1) Notwithstanding Section 4629.7 or any other
law, all all regional center contracts or agreements with
31 regional center contracts or agreements with service
providers
32 contracting entities that provide in-home respite services
and that
33 have an annual revenue attributable to in-home respite
services provided
34 to regional center consumers of at least seven million
dollars
35 ($7,000,000) shall expressly require that at least 85
percent of
36 regional center funds be spent on direct service
expenditures. Funds
37 spent on direct Direct service expenditures shall not
include administrative
38 costs.
(Page 4)
1 (2) A contracting entity may meet the annual revenue
2 attributable to in-home respite services specified in
paragraph (1) in either
3 of the following ways:
4 (A) The annual revenue of the contracting entity that is
5 attributable to in-home respite services provided to
regional center
6 consumers meets or exceeds seven million dollars
($7,000,000).
7 (B) The annual revenue of the contracting entity's
parent
8 organization that is attributable to in-home respite
services provided to
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9 regional center consumers in this state, whether earned
directly
10 by the parent organization or by subcontractors and
subsidiaries
11 of the parent organization, meets or exceeds seven million
dollars
12 ($7,000,000).
13 (c) Consistent with subdivision (b), service providers
and
14 contractors, upon request, shall provide regional centers
with access
15 to books, documents, papers, computerized data, source
documents,
16 consumer records, or other records pertaining to the service
17 providers' and contractors' negotiated rates.
REGISTERED SUPPORT / OPPOSITION:
Support
SEIU California, co-sponsor
Opposition
The Alliance
California Association for Health services at Home (CAHSAH)
Maxim Healthcare Services
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Analysis Prepared by:Myesha Jackson / HUM. S. / (916) 319-2089