A994

An Act concerning developmental disability service providers, supplementing Title 30 of the Revised Statutes, and making an appropriation.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in this act:

“Covered provider agency” means a provider agency that is authorized by the division to provide $250,000 or more in billable services during the prior State fiscal year.

“Covered service” means day habilitation service, individual support service, or any long-term care service provided to an individual at a site owned or leased by a provider agency.

“Division” means the Division of Developmental Disabilities in the Department of Human Services.

“Direct support professional” means an employee who directly assists individuals with developmental disabilities with activities of daily living and related supports, including medical and behavioral health needs and workplace and social skills development.

“Independent” means an individual or entity that has no personal or professional relationship with a provider agency or provider agency’s management that would interfere with the exercise of independent judgement in carrying out the responsibilities of a director.

“Participant” means an individual that is both eligible for division services and enrolled in one of the home and community-based services waiver programs administered by the division.

“Provider agency” means an entity that is approved both by the Division of Developmental Disabilities and the Division of Medical Assistance and Health Services in the Department of Human Services to provide, and submit fee-for-service claims for, covered services. “Provider agency” shall not include sole proprietors or participants that hire self-directed employees.

“Provider-managed services” means: a community residence for people with developmental disabilities licensed pursuant to P.L.1977, c.448 (C.30:11B-1 et seq.); a private residential facility for persons with developmental disabilities licensed pursuant to P.L.1971, c.136 (C.26:2H-1 et seq.) and R.S.30:1-15; a day habilitation site certified by the division; or a covered service.

“Recipient” means an individual that is both eligible for division services and authorized to receive a covered service from a provider agency.

“Site” means the physical location at which provider-managed services are provided to recipients.

2. a. A covered provider agency shall establish a board of directors of at least five individuals, the majority of which must be independent.

b. At a minimum, the board of directors shall meet at least once every three months.

c. Upon request, the board of directors membership, contact information, meeting schedules, and meeting minutes shall be made available electronically to the division, recipients, and family members or guardians of recipients.

d. A covered provider agency shall appoint one self-advocate or family member or guardian of a recipient as a board observer. This individual shall be permitted to participate in all board and executive meetings as a non-voting observer and may also designate another individual or professional to assist in the performance of observer duties and understanding of the provider agency’s operations and management. Observer obligations shall be limited to advocacy on behalf of recipients and shall not include any obligations or liabilities related to the management of the provider agency.

e. A covered provider agency with revenues over $2 million in the prior State fiscal year shall establish an audit committee of at least three individuals, all of whom must be independent, and one shall have a master’s level degree in finance or accounting, or a nationally-recognized credential in finance or accounting that requires annual continuing education compliance. The audit committee’s duties shall include, but shall not be limited to:

(1) making recommendations to the board of directors on the hiring and termination of the provider agency’s independent auditor;

(2) reviewing and determining whether to accept the annual audit;

(3) approving all non-audit services provided by the audit firm to ensure that independence is maintained; and

(4) monitoring and annually reviewing the provider agency’s internal controls, which may be done as part of the audit.

f. A covered provider agency shall publicly post the three most recent annual audited financial statements on the provider agency’s Internet website.

3. Each board of directors established pursuant to subsection a. of section 2 of this act shall ensure that the revenues received by the covered provider agency are primarily spent in ways that benefit recipients. At a minimum, the combined costs of annual executive compensation, general and administrative expenses, management fees, interest and lease payments, and similar expenses, plus profit or retained earnings, shall not exceed 15 percent of program revenues. Payments in excess of this percentage shall: be deemed a violation of the standards for the health and safety of recipient care; be recovered by the State as an adjustment of amount paid; and constitute as a condition that supports the appointment of a receiver.

4. a. A covered provider agency shall not pay all of an employee’s salary, including bonuses, from revenue received solely from division sources in a given State fiscal year, in excess of the schedule as set forth below:

(1) if the provider agency receives over $20 million of revenue from the division, the limitation shall be $250,000 for any individual salary;

(2) if the provider agency receives over $10 million of revenue from the division, but less than or equal to $20 million, the limitation shall be $225,000 for any individual salary;

(3) if the provider agency receives over $5 million of revenue from the division, but less than or equal to $10 million, the limitation shall be $212,500 for any individual salary; and

(4) if the provider agency receives less than $5 million of revenue from the division, the limitation shall be $187,500 for any individual salary.

b. The amounts specified in the schedule set forth in this section shall be increased annually by the same percentage as any increase in the State’s minimum wage within the previous year.

c. The provisions of this section shall not apply to any salaried staff members providing medical or behavioral services to individuals.

5. A covered provider agency shall not make loans to staff members, executive officers, or members of the board of directors.

6. a. Each covered provider agency shall report, within 10 days, to the division, recipients, and family members or guardians of recipients the occurrence of any of the following significant events:

(1) the provider agency takes any action which adds or eliminates significant personnel or program functions;

(2) the sale or disposition of five percent or more of the provider agency’s assets during any 12-month period;

(3) changes in the compensation and bonuses or benefit packages greater than three percent of the provider agency’s personnel, including the provider agency’s principal decision makers and highest managerial personnel; and

(4) any administrative or financial service, program, event, or circumstance, which can reasonably be expected to adversely impact the provider agency’s operation or service delivery. Such events may include, but are not limited to: suspension or revocation of license; loss of lease; union strike or action; investigation of the abuse, neglect or exploitation of a recipient; investigation of a manager, executive member, or board member by any federal, State or local government agency; changes in corporate by-laws; loss of insurance; loss of five percent or more of total funding; significant facility damage; and client lawsuits or other lawsuits.

b. The department or the division shall not be obligated to assume the cost of a provider agency’s significant event.

c. Following the occurrence of a significant event, regardless of the reason, the department reserves the right to take reasonable action to assess the matter and, after review of the information submitted, the department may: continue the current arrangement for the provider agency to provide services to individuals with developmental disabilities; continue the current arrangement on a conditional basis as stipulated by the division; terminate the arrangement and coordinate the transition of services to other provider agencies through the appointment of a receiver; or another process determined at the department’s sole discretion.

d. A covered provider agency shall assume all responsibility for, and shall defend and indemnify the State of New Jersey and its employees against, all claims that directly or indirectly arise from the provider agency’s performance, deficient performance, or failure to perform any of the provider agency’s obligations.

e. The department may, at its own discretion or in response to a concern or pattern of concerns raised by employees, volunteers, recipients, or family members or guardians of recipients, appoint an independent monitor at the provider agency’s expense to provide oversight of, and reporting on, any individual, entity, or provider agency providing services that are paid for or reimbursed by the division.

7. a. Each covered provider agency shall establish written policies on the prevention, reporting, and disposition of nepotism, conflicts of interest, non-discrimination and retaliation. Such policies shall include, but not be limited to:

(1) a policy on retaliation that shall specifically address retaliation against, and the protection of, employees, volunteers, recipients, and family members or guardians of recipients, particularly in response to advocacy or reports of a violation of the standards for health, safety or recipient care; and

(2) policies and procedures on conflict of interest to prevent the personal interest of staff members, executive officers, or members of the board of directors from interfering with the performance of their responsibilities to the provider agency and its recipients, or resulting in personal financial, or professional and political gain on the part of such persons at the expense of the provider agency's and clients' interest. Such policies and procedures shall include, at a minimum:

(a) provisions for the disclosure of situations when a:

(i) member of the governing board of the provider agency is related to another member of the governing board;

(ii) member of the governing board is related to a staff member;

(iii) member of the governing board is also a staff member;

(iv) staff member in a supervisory capacity is related to another staff member under the staff member’s supervision;

(v) member of the governing board or a staff member receives payment from the provider agency for any sub-contracts, goods or services, such as consulting, laundry, maintenance, construction or remodeling; or

(vi) member of the governing board or a staff member is a member of the governing body of a contributor to the provider agency; and

(b) policies that specify the procedures that shall be followed in the event that any of the situations specified in subparagraph (a) of this paragraph occur.

b. Upon request, these written policies shall be made available electronically to the division, recipients, and family members or guardians of recipients.

8. A covered provider agency shall employ a full-time salaried manager at each site in which the provider agency delivers provider-managed services to more than three clients.

9. a. (1) A covered provider agency shall be required to obtain general liability insurance written on a commercial liability occurrence form against any liability of the provider agency. The minimum limits of liability of the general liability insurance shall be established annually by the department for each occurrence and in the aggregate, which may be established as a combined single limit. The general liability insurance policy obtained pursuant to this subsection shall:

(a) not be circumscribed by an endorsement limiting the breadth of coverage;

(b) name the State of New Jersey and the Department of Human Services as additional insured; and

(c) include broad form comprehensive general liability, products-completed operations coverage, and premises-operations coverage.

(2) An umbrella liability insurance policy may be used to supplement the base policy obtained pursuant to paragraph (1) of this subsection to meet the minimum standards for insurance. The State of New Jersey and Department of Human Services shall be named as additional insured for any such umbrella liability insurance policy.

b. A covered provider agency shall be required to obtain commercial automobile liability insurance written to cover cars, vans, or trucks used by the provider agency. Limits of liability for bodily injury and property damage shall be established annually by the department for each occurrence. The State of New Jersey and the Department of Human Services shall be named as additional insured on the commercial automobile liability insurance policy.

c. A covered provider agency shall be required to obtain workers’ compensation insurance without regard to liability required by State law in case of illness, injury, disability, or death as a result of a job-related accident. Such insurance shall include employer’s liability insurance, with limits that shall be established annually by the department, for bodily injury for each occurrence; disease for each employee; and the total aggregate limit for disease claims.

d. A provider agency shall be required to maintain an employee fidelity bond issued for a stated amount on all regular employees of the provider agency, insuring against loss from any dishonest act by an employee. The bond shall be for at least 15 percent of the full dollar amount of all State authorized billable services for the current year.

10. There is appropriated from the General Fund to the Department of Human Services the sum of $300,000 for the purposes of hiring additional staff members to monitor and enforce the provisions of this act.

11. This act shall take effect on the first day of the sixth month next following enactment.

STATEMENT

This bill provides protections for individuals with developmental disabilities through the establishment of provider governance and service standards. These standards apply to provider agencies that are authorized to bill greater than $250,000 of services in a State Fiscal Year and to deliver services in provider-managed environments, which the bill defines as a “covered provider agency.” In these environments, provider agencies substantially control all aspects of the programming and often the physical setting in which programming occurs. This arrangement creates additional vulnerabilities, particularly for individuals that rely on service providers for all of their long-term care needs.

This bill sets standards for provider agency governance to ensure that funds paid by the Division of Developmental Disabilities (division) in the Department of Human Services are properly managed and expended on direct client services. Provider agencies within the scope of the bill are required to have a minimum of five board members, the majority of which are required to be independent, as well as to provide transparency on board composition and meetings. The bill requires the appointment a self-advocate or family member or guardian of a service recipient to each board of directors as a board observer to represent the interests of recipients and their families. Covered provider agencies with greater than $2 million of revenue are required to establish an independent audit committee with a minimum of three members.

The bill requires each covered provider agency to post the three most recent annual audited financial statements on the provider agency’s Internet website.

The bill includes several provisions to ensure that funds paid by the division are primarily expended on direct client services. This includes a cap of 15 percent on program revenue expenditures for executive compensation, general and administrative costs, and similar expenses, plus profit and retained earnings. Existing caps on compensation have been incorporated, updated, and indexed to future increases in the State’s minimum wage. Similarly, existing prohibitions on loans to staff members are included.

The bill provides that no covered provider agency may pay the costs of any individual salary, except under certain circumstances, in excess of the schedule set forth under the bill.

This bill protects service recipients from actions taken by covered provider agencies and their owners that create significant financial or programmatic risk. The bill requires that provider agencies inform the division when a variety of events occur that can reasonably be expected to adversely impact the provider agency’s operation or service delivery. These provisions also give the division authority to take action to address the situation and prevent future reoccurrence, including the appointment of an independent monitor.

This bill requires that covered provider agencies establish policies on the prevention, reporting and disposition of nepotism, conflicts of interest, non-discrimination and retaliation. Policies against retaliation are of particular concern in order to establish a climate where employees, recipients and families are comfortable raising service quality concerns with the provider agency’s management and the division.

The bill requires each covered provider agency to employ a full-time salaried manager at each site where the provider agency delivers provider-managed services to more than three clients.

This bill incorporates existing insurance and indemnification standards, including the division’s authority to annually adjust insurance minimums to ensure that coverage remains consistent with the level of protection needed for staff and service recipients.

The bill appropriates from the General Fund to the Department of Human Services the sum of $300,000 for the purposes of hiring additional staff members to monitor and enforce the provisions of the bill.