Discontinues the requirement that certificates of incorporation be approved by the commissioner of mental retardation and developmental disabilities; repealer

Sections 2 and 3 of the bill would amend NFPCL §§ 404(q) and 804(a)(i), respectively, to remove the requirement that the Commissioner of OMRDD must approve certificates of incorporation or amendments to such certificates for such entities prior to filing with the Secretary of State and issuance of an operating certificate.

Section 4 of the bill would provide for an immediate effective date.

Existing law

MHL § 16.03 requires certain providers of services to possess an operating certificate.

MHL § 16.05 sets forth the procedure and criteria for the issuance of operating certificates.

MHL § 16.07 requires the Commissioner of OMRDD to approve certificates of incorporation for entities that intend to establish or operate facilities that would also require an operating certificate issued by OMRDD, such as community residences, or entities that wish to perform fund raising activities for the facility.

NFPCL § 404(q) requires that every certificate of incorporation of a facility that would require an operating certificate issued by OMRDD or that would allow for fundraising for such a facility must have the approval of OMRDD prior to filing with the Secretary of State.

NFPCL § 804 requires that amendments to any such certificate of incorporation be approved by OMRDD prior to filing with the Secretary of State.

Prior legislative history

This is a new proposal.

Statement in support

Currently, the MHL requires OMRDD to perform a two-step review before authorizing a provider agency to operate a new facility. The first step is a review of the legal sufficiency of the certificate of incorporation or amendment pursuant to MHL § 16.07.. After this first step has been performed, the provider agency files the certificate of incorporation or amendment with the Secretary of State, which also reviews the certificate or amendment for legal sufficiency.

After the Secretary of State accepts the certificate of incorporation or amendment, OMRDD again reviews the certificate of incorporation or amendment pursuant to MHL §§ 16.03 and 16.05. As part of this process, OMRDD must review and approve a provider's certificate of need application and related construction plans; the character, competency and standing in the community of the proposed provider, the public need for the facility and its sources of future revenues and the adequacy of the premises, equipment and program.

Because the Secretary of State reviews each certificate and OMRDD also reviews each certificate in the context of the certificate of need process after the certificate of incorporation has been accepted by the Secretary of State, the initial OMRDD review is redundant and imposes an unnecessary and costly administrative burden on the agency. Moreover, the requirement that OMRDD perform the initial review is often premature because not every provider agency proposes the establishment or operation of a facility at the time they seek to incorporate. In practice, providers sometimes file certificates of incorporation and then never propose a facility. By delaying this review until the corporation is actually ready to proceed with a new or expanded facility, the number of reviews of the corporation which OMRDD will need to conduct will be reduced.

The requirement that OMRDD be involved in the initial review of a provider's certificate of incorporation is an historic relic from the time when the Department of Mental Hygiene did not have a significant oversight role over provider agencies. Today, the not-for-profit agencies that provide services to persons with developmental disabilities are among the most heavily regulated entities in the State. The great majority of existing OMRDD services are Medicaid-funded and OMRDD providers must undergo the Medicaid Provider Agreement review and approval process overseen by the Department of Health (DOH). This process includes review of any provide~ to make sure they have not been excluded as a Medicaid provider by the federal government or DOH for improper practices. Additionally, any providers that provide contract-based services are also subject to the procurement requirements of the State Finance Law with respect to those services, including, where applicable, approval by the Office of the State Comptroller.

All OMRDD providers are also subject to both federal and state criminal background checks pursuant to MHL § 16.33 and the State Central Register for Child Abuse (for employees who will serve children). They are also subject to annual quality assurance surveys, audits and claims review by OMRDD, DOH and the Office of the Medicaid Inspector General, which review a variety of programmatic and fiscal issues, such as whether appropriate and up-to-date Individual Service Plans (ISPs) are done, whether a provider's ongoing fiscal practices are sound and whether submitted Medicaid claims are accurate.

In light of the multiple layers of initial and ongoing review, the initial review requirement is an unnecessary and duplicative step that often delays a provider's ability to begin or expand their operations and may result in increased costs. While this bill seeks to streamline OMRDD's approval process, the proposal will not reduce the meaningful programmatic and fiscal reviews that service providers must still undergo.

Budget implications

This bill would have no fiscal impact.

Effective date

This bill would take effect immediately.