By Jeff Paterson
Picture this. You go into your favorite store and buy a $100 outfit. Six months later, you learn that it cost only $25 to make the outfit. You return to the store and demand a $75 refund. Chances are, you are laughed out of the store.
Now put yourself in my position. I’m responsible for a not-for-profit organization that provides services to people with intellectual and developmental disabilities. New York State pays for these programs, with a big assist from the federal Medicaid system. Twice a year, the state is supposed to tell us how much we will be paid for the services we provide. The rates are based on our past expenses.
Here is the problem. The New York State Department of Health, which calculates the rates, is not very good with deadlines. Last year, my agency should have been informed of its new rates by July 1. Unfortunately, the Department of Health blew past the deadline, and we didn’t learn our rates until October. Then we were told that the rates were wrong and needed to be recalculated. We finally received our July 2017 rates in the middle of January 2018. Sadly, this situation was not at all unusual. These delays happen almost every time.
It is common for the new rates to be lower than the old ones. The state calls it “rate rationalization.” Needless to say, we disagree that the process is rational at all, because our costs always go up, not down. But we have to take whatever the state gives us.
Now it gets interesting. Let’s say the state cuts our July 1 rates, but doesn’t tell us until the following January. Because we were never told how much we could spend during that six-month period, we have kept spending at the same level. Then, when the rate is reduced, we have to repay the difference between the old rate and the new rate, going all the way back to July 1.
In other words, we have to pay back tens or hundreds of thousands of dollars that have already been spent. It isn’t because we did anything wrong, but because state officials failed to do their work on time. That is exactly what just happened to my organization. Our 2017 bottom line was decimated by a six-month retroactive rate cut, and countless other not-for-profit agencies across the state are facing the same reality.
New York State may not be able to guarantee funding levels, but the state’s not-for-profit partners should be able to count on timely and transparent funding decisions. We can’t prepare budgets if we don’t know our revenue. Until the state repairs its rate-setting process, charitable organizations will be left sitting on the brink of financial ruin. Services for people with disabilities hang in the balance.
Jeff Paterson is chief executive officer of Empower, a Niagara County-based not-for-profit organization.