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Office of Mental Health

Elimination of Medication Neutrality

As part of a multi-year effort in collaboration with the Department of Health to restructure outpatient mental health services, OMH is reforming provider financing and licensure. OMH has revised Part 551 of Title 14 NYCRR to promote development of licensed outpatient programs that are accessible within the local community and can provide an alternative to inpatient care. Effective April 30, 2008, paragraph (3) of subdivision (b) of Section 551.13 commonly referred to as the “Medicaid neutrality regulations' of Part 551 has been repealed.

Part 551 governs the Prior Approval Review (PAR) process for programs that require an OMH operating certificate, either for development of a new program or substantial change in an existing program. Section 551.13(b)(3) specifically applied to outpatient programs and required verification of the source and availability of the state share of Medicaid and/or local assistance, if the PAR project budget indicated this funding as a revenue source. As a practical matter, because the state share was often quite limited, we believe it deterred applicants from submitting PAR projects for needed outpatient programs.

In addition, it is no longer necessary to complete the following sections of the current PAR application form (Comprehensive Application for Prior Approval Review, Form OMH 165 3/99) when submitting a PAR application:
Part I, Section G Financial, item # 8;
Part I, Section K Attachments for Program Expansion, item # 4, 2nd sentence;
Part I, Section L Attachments for Other Projects, item # 6 Change in Population, subsection (e), information within parentheses;
Part I, Section L Attachments, item # 8 Other Projects, subsection (d), information within parentheses.

Although section 551.13(b)(3) has been repealed, the rest of Part 551 remains in effect. A PAR application is still required for new or expanded outpatient programs licensed by OMH. Section 551.7 outlines the standards for review of projects and section 551.5 highlights the need for consultation with county Directors of Community Services and OMH Field Offices prior to submission.

While “Medicaid neutrality' is no longer evaluated as an indicator of financial viability of an outpatient PAR project, please recognize that certain outpatient projects directly impact the OMH budget and, as such, require longer-range planning consistent with the annual State budget cycle when incremental Medicaid and/or local assistance funding is included in the proposed program budget. These projects include: assertive community treatment (ACT) programs; comprehensive psychiatric emergency programs (CPEP); and projects for which local assistance funding is indicated. If your PAR project relates to one of these programs, please begin discussions with the Field Office and the county Director of Community Services well in advance of your PAR submission to ensure timely consideration of financial viability during the PAR review process.

OMH’s streamlining of the PAR regulations and review process is continuing. We will propose revisions to Part 551 which will be available for public review and comment prior to implementation. By July 2008, we expect to publish further guidance for Article 28 providers and applicants regarding the licensing criteria specified in the “Certificate of Need (CON) Reform for Ambulatory Services' as recently posted on the websites of OMH and DOH.