56 N.J.R. 884(a)

VOLUME 56, ISSUE 10, MAY 20, 2024
RULE PROPOSALS

Reporter
56 N.J.R. 884(a)
NJ - New Jersey Register  >  2024  >  MAY  >  MAY 20, 2024  >  RULE PROPOSALS  >  LAW AND PUBLIC SAFETY -- DIVISION OF CONSUMER AFFAIRS

Interested Persons Statement 

INTERESTED PERSONS 
Interested persons may submit comments, information or arguments concerning any of the rule proposals in this issue until the date indicated in the proposal. Submissions and any inquiries about submissions should be addressed to the agency officer specified for a particular proposal. 
The required minimum period for comment concerning a proposal is 30 days. A proposing agency may extend the 30-day comment period to accommodate public hearings or to elicit greater public response to a proposed new rule or amendment. Most notices of proposal include a 60-day comment period, in order to qualify the notice for an exception to the rulemaking calendar requirements of  N.J.S.A. 52:14B-3. An extended comment deadline will be noted in the heading of a proposal or appear in a subsequent notice in the Register. 
At the close of the period for comments, the proposing agency may thereafter adopt a proposal, without change, or with changes not in violation of the rulemaking procedures at      N.J.A.C. 1:30-6.3. The adoption becomes effective upon publication in the Register of a notice of adoption, unless otherwise indicated in the adoption notice. Promulgation in the New Jersey Register establishes a new or amended rule as an official part of the New Jersey Administrative Code. 
Agency


LAW AND PUBLIC SAFETY > DIVISION OF CONSUMER AFFAIRS > OFFICE OF THE DIRECTOR

Administrative Code Citation


Proposed Amendment: N.J.A.C. 13:45B-13.5A      

Text

 Health Care Service Firms Financial Statements, Audits, and Reports
Authorized By: Cari Fais, Acting Director, Division of Consumer Affairs.
Authority: N.J.S.A. 34:8-54; and P.L. 2020, c. 132.
Calendar Reference: See Summary below for explanation of exception to calendar requirement.
Proposal Number: PRN 2024-061.
Submit comments by July 19, 2024, to:
Cari Fais, Acting Director
State of New Jersey
Division of Consumer Affairs
Office of the Director
PO Box 45027
Newark, New Jersey 07101
or electronically at:
http://www.njconsumeraffairs.gov/Proposals/Pages/default.aspx.
The agency proposal follows:
[page=885]
Summary
P.L. 2020, c. 132 (Act), revised the financial reporting requirements for health care service firms registered with the Division of Consumer Affairs (Division). Prior to the enactment of the Act, all health care service firms were required to submit audits to the Division every three years that included both a financial component and a compliance component. The financial component included an audit of the financial statements and accompanying notes, as specified in the Statements on Auditing Standards issued by the American Institute of Certified Public Accountants, and the compliance component evaluated the health care service firm's compliance with relevant laws and regulations governing health care service firms.
Pursuant to the Act, audits are now required only from health care service firms that satisfy the statutory criteria. In particular, firms that receive more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services are required to submit an audit the third calendar year after the date of registration or on December 30, 2022, whichever date is later, and every third year thereafter. In addition, firms that generate $ 10 million or more in gross income in a year are required to submit an audit for that year. However, the Act requires all health care service firms, including firms that must submit an audit, to submit financial statements on an annual basis. The Act also requires health care service firms that generate one million or more in gross income in a year, but do not meet the audit thresholds described above, to submit reports as a condition of registration. The Division proposes to amend N.J.A.C. 13:45B-13.5A, the provision of the Division's health care service firm rules governing audits, to effectuate the Act. The proposed amendments also amend the section heading to better describe the requirements of the Act and make changes for style and grammar throughout the section.
Pursuant to the proposed amendments at N.J.A.C. 13:45B-13.5A, the financial statements, audits, and reports required by the Act would be due no earlier than July 1, 2025, even if the Act would otherwise require submission by an earlier date. The reasons for this extension of the applicable statutory deadlines are two-fold. First, a deadline earlier than July 1, 2025, would not give health care service firms sufficient time to prepare their financial submissions in accordance with the rules. Second, a deadline of July 1, 2025, would minimize the administrative burden both for health care service firms and for the Division because it would align the deadline for financial submissions with the deadline for registration renewal.
The proposed amendments at N.J.A.C. 13:45B-13.5A require a health care service firm to submit a financial statement on an annual basis as part of registration renewal. The financial statement must include the firm's assets, liabilities, gross income, operating expenses, and the amount of money received for the provision of New Jersey Medicaid Personal Care Assistance services.
In addition to the financial statement described above, a health care service firm that received its initial registration on or before July 1, 2021, shall submit an audit to the Division by July 1, 2025, if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in calendar year 2024. The audit must cover calendar year 2024. The firm must also submit an audit by July 1 of every third year following July 1, 2025, if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in the immediately preceding calendar year.
In addition to the financial statement described above, a health care service firm that received its initial registration on or after July 2, 2021, must submit an audit to the Division by the third anniversary date of its initial registration if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in the immediately preceding calendar year. The audit must cover the immediately preceding calendar year. In addition, the firm must submit an audit to the Division by July 1 of every third year following the third anniversary date of its initial registration if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in the immediately preceding calendar year.
A health care service firm that generates $ 10 million or more in gross income in a year would be required to submit an audit covering that year, in addition to its annual financial statement.
Pursuant to the Act, a health care service firm that receives less than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services and generates one million or more, but less than $ 10 million, in gross income in a year must submit a report for that year to the Division, in addition to its annual financial statement. The report must be prepared by an "independent third-party practitioner," consistent with standards and procedures developed by the Director of the Division.
The proposed amendments at N.J.A.C. 13:45B-13.5A set forth the information that the report must contain, and it specifies the portions of the report that must be prepared by a certified public accountant who will function as the "independent third-party practitioner" required by the Act. If the information contained in the report suggests that there is reason to doubt the firm's financial viability, the Director of the Division may make an adverse finding and order the firm to take such corrective action as the Director deems appropriate. If ordered to take such corrective action, the firm would be required to submit a separate review of its data for the year in question. This review must be conducted by a certified public accountant licensed in New Jersey who did not prepare the original report. The firm would also be required to submit an audit for the year following that for which the Director made an adverse finding and ordered corrective action.
N.J.A.C. 13:45B-13.5A currently requires audits to be conducted by a certified public accountant licensed in New Jersey. Audits must consist of a compliance component evaluating a firm's compliance with laws and rules governing health care service firms, and a financial component that includes an audit of the financial statements and accompanying notes, as specified in the Statements on Auditing Standards issued by the American Institute of Certified Public Accountants. The Division proposes to amend these requirements to allow the compliance component of an audit to be prepared by either a certified public accountant or a homemaker agency accrediting body recognized by the Department of Human Services. The financial component must still be prepared by a certified public accountant. This proposed amendment recognizes that while a certified public accountant may have special expertise in preparing financial records and assessing the financial well-being of a firm, such expertise does not necessarily extend to a firm's compliance with applicable statutes and rules.
The proposed amendments allow health care service firms that are wholly or majority-owned by an organization that owns two or more firms to submit the financial statement, audit, report, or review prepared by that organization. The Division believes that the information provided by a parent organization or an organization with a majority stake in a firm would sufficiently cover the information relevant to the regulation of health care service firms owned by that organization. It would be duplicative and overly burdensome for wholly or majority-owned health care service firms to submit separate financial statements, audits, reports, or reviews.
As the Division has provided a 60-day comment period on this notice of proposal, this notice is excepted from the rulemaking calendar requirement pursuant to N.J.A.C. 1:30-3.3(a)5.
Social Impact
The proposed amendments will have a positive social impact by providing the Division with the information it needs to assess the financial viability of health care service firms, while at the same time ensuring that health care service firms are not unduly burdened by financial reporting requirements.
Economic Impact
The Division anticipates that the proposed amendments will have a beneficial economic impact because health care service firms that do not meet the audit thresholds in the Act will no longer have to submit audits. Preparing such audits can be expensive, and while health care service firms that do not meet the audit thresholds will still incur costs in preparing the required financial statements and reports, these costs should be lower than those associated with preparing an audit.
Federal Standards Statement
A Federal standards analysis is not required because there are no Federal laws or standards applicable to the proposed amendments.
[page=886] 
Jobs Impact
The Division does not believe that the proposed amendments will either increase or decrease the number of jobs in New Jersey.
Agriculture Industry Impact
The Division does not expect the proposed amendments to have any impact on the agriculture industry in the State.
Regulatory Flexibility Analysis
Any health care service firm that qualifies as a "business which is resident in this State, independently owned and operated and not dominant in its field, and which employers fewer than 100 full-time employees," would constitute a "small business" within the meaning of the Regulatory Flexibility Act (RFA), N.J.S.A. 52:14B-16 et seq. To the extent a health care service firm qualifies as a "small business" pursuant to the RFA, the following analysis applies, pursuant to N.J.S.A. 52:14B-19.
The costs that the proposed amendments impose on small businesses, as outlined in the Economic Impact above, are the same as those imposed on all businesses. Health care service firms will be required to employ the professional services of a licensed public accountant to comply with reporting and auditing requirements. The proposed amendments impose no recordkeeping or reporting requirements. However, they do impose the compliance requirements discussed in the Summary above.
As the proposed amendments help to ensure that the Division has the information it needs to assess the financial viability of health care service firms, the Division believes that the proposed amendments must be uniformly applied to all health care service firms. Accordingly, no exemptions are provided based on the size of a business.
Housing Affordability Impact Analysis
The proposed amendments will have an insignificant impact on the affordability of housing in New Jersey, and there is an extreme unlikelihood that the proposed amendments would evoke a change in the average costs associated with housing because the proposed amendments concern financial reporting requirements for health care service firms.
Smart Growth Development Impact Analysis
The proposed amendments will have an insignificant impact on smart growth, and there is an extreme unlikelihood that the proposed amendments would evoke a change in housing production in Planning Areas 1 or 2, or within designated centers, pursuant to the State Development and Redevelopment Plan in New Jersey because the proposed amendments concern financial reporting requirements for health care service firms.
Racial and Ethnic Community Criminal Justice and Public Safety Impact
The Division has evaluated this rulemaking and determined that it will not have an impact on pretrial detention, sentencing, probation, or parole policies concerning adults and juveniles in the State. Accordingly, no further analysis is required.
Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):
13:45B-13.5A [Audits] Financial statements, audits, and reports
[(a) Commencing May 21, 2021, and every third year from that date, a health care service firm shall submit an audit to the Division that complies with the requirements of (b) below as part of the renewal of registration required under N.J.A.C. 13:45B-13.5.]
(a) By July 1, 2025, and by July 1 of each calendar year thereafter, a health care service firm shall submit a financial statement that covers the preceding calendar year. The financial statement shall be consistent with the firm's State tax filing for the year covered by the financial statement. The financial statement shall be submitted with the firm's registration renewal pursuant to N.J.A.C. 13:45B-13.5, and shallinclude the firm's:
1. Assets;
2. Liabilities;
3. Gross income;
4. Operating expenses; and
5. Amount of money received for the provision of New Jersey Medicaid Personal Care Assistance services.
(b) In addition to the financial statement required pursuant to (a) above, a health care service firm that received its initial registration on or before July 1, 2021, shall submit an audit to the Division by July 1, 2025, if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in calendar year 2024. The audit shall cover calendar year 2024. In addition, the firm shall submit an audit by July 1 of every third year following July 1, 2025 (for example, by July 1, 2028, July 1, 2031, etc.) if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in the immediately preceding calendar year (for example, in calendar year 2027, 2030, etc.). The audit shall cover the immediately preceding calendar year (for example, 2027, 2030, etc.) An audit required pursuant to this subsection shall comply with (j) below, and shall be submitted with the firm's registration renewal, pursuant to N.J.A.C. 13:45B-13.5.
(c) In addition to the financial statement required pursuant to (a) above, a health care service firm that received its initial registration on or after July 2, 2021, shall submit an audit to the Division by the third anniversary date of its initial registration if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in the immediately preceding calendar year. The audit shall cover the immediately preceding calendar year. In addition, the firm shall submit an audit to the Division by July 1 of every third year following the third anniversary date of its initial registration if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in the immediately preceding calendar year. The audit shall be submitted with the firm's registration renewal pursuant to N.J.A.C. 13:45B-13.5. For example, a firm that received its initial registration on August 1, 2022, must submit an audit by August 1, 2025, if it received more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in calendar year 2024, then, the audit must cover calendar year 2024. The firm must then submit an audit by July 1, 2028, as part of its registration renewal pursuant to N.J.A.C. 13:45B-13.5, if it receives more than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services in calendar year 2027, then, the audit must cover calendar year 2027. An audit required pursuant to this subsection shall comply with (j) below.
(d) In addition to the financial statement required pursuant to (a) above, a health care service firm that generates $ 10 million or more in gross income in a year shall submit an audit for that year to the Division. The audit shall comply with (j) below and shall be submitted with the firm's registration renewal pursuant to N.J.A.C. 13:45B-13.5.
(e) In addition to the financial statement required pursuant to (a) above, a health care service firm that receives less than $ 250,000 for the provision of New Jersey Medicaid Personal Care Assistance services, and that generates one million or more, but less than $ 10 million, in gross income in a year, shall submit a report for that year to the Division.
(f) The report required at (e) above shall be submitted with the health care service firm's registration renewal pursuant to N.J.A.C. 13:45B-13.5.
1. The report shall contain the following information prepared by the firm:
i. Verification of the accreditation and licensing status of the firm;
ii. Review of the firm's ownership structure;
iii. Review of the adequacy of the firm's insurance coverage;
iv. Review of any litigation involving the firm, regulatory actions taken against the firm, or past audits of the firm; and
v. Proof of the qualifications of the independent third-party practitioner who prepared the information required pursuant to (f)2 below; and
2. The report shall also contain the following information prepared by an independent third-party practitioner who is a certified public accountant licensed in New Jersey:
i. Review of contracts and funding sources, as well as payments, cash transactions, and reconciliation of account balances;
[page=887] ii. Review of billing practices and invoices to ensure the adequacy of supporting documentation and the inclusion of appropriate authorizations;
iii. Review of the use of independent contractors; and
iv. Review of large transactions and liabilities that exceed 50 percent of the firm's total billings or liabilities, as appropriate.
(g) If the independent third-party practitioner referenced at (f) above concludes that, based on generally accepted accounting principles, there is reason to doubt the health care service firm's financial viability, the Director may make an adverse finding and order the health care service firm to take corrective action.
(h) Upon compliance with or completion of the corrective action required at (g) above, the firm shall obtain a separate review of the firm's data for the year at issue. The review shall be conducted by a certified public accountant licensed in New Jersey other than the individual who prepared the information in the original report required pursuant to (f)2 above. The review shall address the information required at (f)2 above.
(i) A health care service firm that has been ordered to take corrective action pursuant to (g) above shall submit an audit to the Division for the year following the year in which corrective action was ordered, regardless of the firm's gross income for the year in which corrective action was ordered. The audit shall be submitted by December 30 of the year following the year in which corrective action was ordered, and shall comply with (j) below.
[(b)] (j) The audit required by [(a)] (b), (c), (d), and (i) above shall:
[1. Be conducted by a certified public accountant licensed in New Jersey and shall encompass an examination of the health care service firm's financial records, financial statements, the general management of its operations, and its internal control systems;]
[2.] 1. (No change in text.)
[3.] 2. Be divided into the following two components [of which]:
i. [One is a] A compliance component that evaluates the health care service firm's compliance with laws and rules governing health care service firms. This component must be prepared by a certified public accountant licensed in New Jersey or by an accrediting body recognized by the Department of Human Services as an accrediting body for homemaker agencies participating in the Medicaid program, as set forth at N.J.A.C. 10:60-1.2; and
ii. [One is a] A financial component that includes an audit of the financial statements and accompanying notes, as specified in the Statements on Auditing Standards issued by the American Institute of Certified Public Accountants. This component must be prepared by a certified public accountant licensed in New Jersey.
(k) If an organization wholly owns, or is the majority owner of, two or more health care service firms, and that organization has submitted a financial statement, audit, report, or review that satisfies the requirements of this section, a health care service firm wholly or majority-owned by that organization may submit the financial statement, audit, report, or review prepared by the organization in lieu of submitting its own separate financial statement, audit, report, or review.