STATEMENT OF ESTIMATED REGULATORY COSTS FEBRUARY 2014 PROPOSED CHANGES TO CHAPTER 58A-5, FLORIDA ADMINISTRATIVE CODE

STATEMENT OF ESTIMATED REGULATORY COSTS FEBRUARY 2014 PROPOSED CHANGES TO CHAPTER 58A-5, FLORIDA ADMINISTRATIVE CODE Executive Summary The Department of Elder Affairs, (Department) in consultation with the Agency for Health Care Administration (AHCA), the Department of Children and Families (DCF), and the Department of Health (DOH), initiated a negotiated rulemaking process beginning in June 2012 to develop rule amendments to Chapter 58A-5, Florida Administrative Code (F.A.C.), regulating assisted living facilities. The impetus for this rulemaking occurred in 2011 when the Miami Herald published a three-part series titled Neglected to Death, which identified several areas of assisted living facility regulation in need of reform. In response, Governor Rick Scott assembled an Assisted Living Facility Workgroup of stakeholders who proposed amendments to assisted living facility regulations. The Department s negotiated rulemaking was created to address proposals identified in Phase I of Governor Scott s Workgroup and elements from legislation that was proposed but did not pass in the 2012 legislative session. The negotiated rulemaking sessions later incorporated recommendations from the Senate Committee on Health Regulations Interim Report 2012-128. The negotiated rulemaking committee was comprised of 15 individuals representing stakeholders affected by the rule: assisted living facility industry representatives, consumer advocates, health education trainers, and state agencies. The proposed negotiated rule amendments were published in November 2012 with the goal of resolving the quality and safety issues in assisted living facilities in a manner that would ensure the well-being of facility residents without creating unnecessary regulatory cost increases. In January 2013, the Department published a Statement of Estimated Regulatory Costs ( SERC ) to accompany its proposed rule amendments. On May 16, 2013, the Department received correspondence from the House Rulemaking Oversight and Repeal Committee stating that the Department s SERC was inadequate because it did not account for the lost opportunity costs incurred by the staff training requirements, nor did it account for inflation or population indexing over the first five years of implementation. The Department withdrew its proposed amendments on June 18, 2013, and reopened the rulemaking in September 2013. This SERC reflects the costs associated with the proposed rule amendments that were developed from the accumulation of the aforementioned input and recommendations over the past two years. This SERC also corrects the deficiencies identified by the House Rulemaking Oversight and Repeal Subcommittee. I. Introduction Assisted Living Facilities are residential establishments that provide residents with housing, meals, assistance with activities of daily living, and assistance with self-administration of medication. Chapter 429, Florida Statutes (F.S.), tasks the Department, in conjunction with the Agency for Health Care Administration, the Department of Health, and the Department of Children and Families, with protecting the health, safety, and welfare of assisted living facility residents through regulation. The proposed amendments address the following regulatory goals: increase the quality and professionalism of assisted living facility administrators, managers, and staff; implement certain aging-in-place initiatives as requested by consumers and facilities; and clarify and modernize the language of the rules so that they are consistent with the current statutes and prevalent business practices. 1

II. Summary of Rule Amendments and Effect of Proposed Rule Changes In order to better prepare persons to provide quality care to assisted living facility residents, Phase I of the Governor s Assisted Living Facility Workgroup recommended that the Department increase the initial core training requirement for administrators and managers from 26 to 40 hours. The negotiated rulemaking committee recommended an increase in training from 26 to 56 hours, as well as the addition of new training curriculum topics, including aggression control and de-escalation techniques, proper use of the Baker Act process, infection control, and business management practices. The final version of the rule increases the training from 26 to 40 hours, expands the core training curriculum topics, and increases the continuing education requirement from 12 to 18 hours biennially. The proposed amendments to Chapter 58A-5, F.A.C., are intended to balance the need for effective care with the residential model of the facility without creating undue regulatory cost increases. The recommended clean-up and modernization of the rule has streamlined compliance for facilities by deleting burdensome and duplicative reporting requirements and allowing for electronic recordkeeping. According to Chapter 429, F.S., assisted living facilities must allow residents to age in place when resources are available to meet their needs and accommodate their preferences. The proposed rule incorporates several aging-in-place initiatives, including an expansion of the types of routine medical services to be provided in a standard licensed assisted living facility and clarification of the role of facility staff when a resident is enrolled in hospice. These proposed amendments, recommended by the Legislature, industry stakeholders, and members of the public, enhance the safety and quality of assisted living facilities by ensuring staff competency, providing flexibility of care through the aging process, and streamlining administrative requirements. III. Ratification The increases in the continuing education core training requirements are contained within proposed Rules 58A-5.019 relating to staffing standards and 58A-5.0191 relating to administrator, manager, and staff training requirements. The Department has determined that these two rules are likely to increase regulatory costs in excess of $1 million in the aggregate within five years after the implementation of the rule. Pursuant to Section 120.541(3), F.S., the Department shall submit proposed Rules 58A-5.019 and 58A-5.0191 for ratification by the Legislature during the next legislative session. IV. Required Components Section 120.541, F.S., sets forth the requirements that agencies must follow in preparing Statements of Estimated Regulatory Costs (SERC). Specifically, Section 120.541(2)(a) through (f), F.S., provides that certain information must be addressed in any SERC. (a) An economic analysis showing whether the rule directly or indirectly: (1) Is likely to have an adverse impact on economic growth, private sector job creation or employment, or private sector investment in excess of $1 million in the aggregate within 5 years after the implementation of the rule; (2) Is likely to have an adverse impact on business competitiveness, including the ability of persons doing 2

business in the state to compete with persons doing business in other states or domestic markets, productivity, or innovation in excess of $1 million in the aggregate within 5 years after the implementation of the rule; or (3) Is likely to increase regulatory costs, including any transactional costs, in excess of $1 million in the aggregate within 5 years after the implementation of the rule. After careful analysis of all available economic data, the Department has determined it is likely that the proposed rule changes will increase regulatory costs, including transactional costs that are directly and indirectly related. A full discussion of the estimated direct and indirect regulatory impact of the proposed rule changes follows. (b) Provide a good faith estimate of the number of individuals and entities likely to be required to comply with this rule, together with a general description of the types of individuals likely to be affected by the rule. Based on current data from the Agency for Health Care Administration (AHCA), the proposed increase for continuing education requirements is expected to impact 3,048 administrators and 456 managers,. These counts are included in the first year of the analysis and are subsequently increased by 10% (average increase from 2009-2013) for each of the following four years. Further, based on data from the University of South Florida, roughly 1,580 applicants will be impacted in year one by the proposed increased core training curriculum requirements contained in Chapter 58A-5, F.A.C. (c) Provide a good faith estimate of the cost to the agency, and to any other state and local government entities, of implementing and enforcing the proposed rule, and any anticipated effect on state or local revenues. The changes proposed to Chapter 58A-5, F.A.C., do not impose costs related to implementation or enforcement of the rule on either the Department or any other state agency and do not affect state or local revenues. Further, the proposed rule will not negatively impact the delivery of services by state agencies and will not otherwise divert state resources. (d) Provide a good faith estimate of the transactional costs likely to be incurred by individuals and entities, including local government entities, required to comply with the requirements of the rule. As used in this section, transactional costs are direct costs that are readily ascertainable based upon standard business practices, and include filing fees, the cost of obtaining a license, the cost of equipment required to be installed or used or procedures required to be employed in complying with the rule, additional operating costs incurred, the cost of monitoring and reporting, and any other costs necessary to comply with the rule. The Department has determined that the main economic impact of changes proposed to Chapter 58A-5, F.A.C., is generated through increased staff training and educational requirements. Specifically, there are two staff training and educational increases proposed in Rule 58A-5.0191, F.A.C.: (1) a proposed increase to the biennial continuing education requirement for administrators and managers of assisted living facilities from 12 to 18 hours; and (2) a proposed increase in the requisite core training curriculum hours from 26 to 40 hours. 3

V. Cost Estimates A. Proposed Increase to Administrators and Managers Continuing Education Requirement The Department has determined that, for the 3,048 licensed assisted living facilities in the state, there are presently 3,048 administrators and, at most, 456 managers. Providing a precise tally for the number of managers who have been appointed by administrators to supervise facilities pursuant to current Rule 58A-5.019(b), F.A.C., is impossible because presently there is no statutory or rule prohibition preventing administrators from serving as managers of separate facilities. Proposed Rule 58A-5.0191(5)(d), F.A.C., provides a list of continuing education providers who may offer continuing education training in satisfaction of the above requirement. Several providers on the list likely offer, or will offer, continuing education courses to administrators and managers at a cost that is significantly less than the costs charged by core trainers registered with the Department. However, the Department recognizes that pricing data obtained from core trainers presently offering continuing education courses is likely the best available data from which to analyze and estimate anticipated regulatory impacts created by the proposed rule changes. The available core trainers are offering these classes at an average class cost of $7.73 per hour. Since the increase from 12 to 18 continuing education hours represents 6 additional hours biennially (or 3 additional hours annually), it is anticipated that the likely cost increase per administrator or manager would be $46 biennially (or $23 annually). Based on the five most recent national annual inflation rates, the Department will assume an average inflation increase of 2.1% per year for the four following years. The Department has also considered the potential impact of costs related to travel. In calculating this cost we assume two things: (1) employers will reimburse employees for mileage to attend these courses; and (2) such travel will result in a reasonably estimated 30 mile roundtrip (based on the geographic location of the majority of facilities and trainers). Past experience informs us that continuing education attendees will likely leverage their travel by attending more than one additional one-hour course at a time. At the federal mileage rate of $0.565, the estimated mileage reimbursement will be just under $17 per employee for each trip. This represents a total amount of just over $50 every two years or $25 per year when the six hours of additional training requirement over two years is met by combining at least two hours of training into one trip for a total of three trips. However, it is important to note that multiple options exist for administrators and managers to avoid travel costs while fulfilling the continuing education requirement through courses offered online and through other avenues. The online option provides an opportunity to meet the continuing education requirement without incurring any travel costs. Other readily available and commonly utilized options that avoid the need for travel cost reimbursement include, but are not limited to, onsite training offered by registered nurse practitioners and pharmacists, in addition to courses offered at multiple annual industry conferences throughout the state. In short, employers have ample opportunity to avoid travel costs by having their employees take advantage of the many opportunities available to meet the continuing education requirements without incurring any travel costs whatsoever. We are confident employers will make the wisest economic choice available to them. Therefore, we firmly believe the costs we have calculated for travel represent an unlikely high end cost of the additional hours of continuing education. 4

In summary, given that: (1) there are 3,048 administrators and 456 managers presently supervising assisted living facilities in the state; (2) there will be a $23 annual increase as a result of the increased continuing education training requirement; and (3) employers will reimburse employees for $25 in mileage costs (without incorporating any of the various cost avoidance opportunities available), the Department believes that the increase from 12 to 18 continuing education hours will increase private sector costs by $168,192 in the first year. This calculation makes no assumptions for possible future efficiencies or cost reduction measures which might foreseeably be employed or realized by continuing education providers. This calculation does not take into account the vast amount of opportunities available for all administrators and managers to fulfill the additional continuing education requirements through courses offered online or through the other commonly used and readily available options mentioned previously that avoid the need for travel cost reimbursement altogether. B. Proposed Increase to Core Training Curriculum Proposed Rule 58A-5.0191(1)(a), F.A.C., provides that administrators and managers must complete an approved assisted living facility core training curriculum consisting of a minimum of 40 hours of training prior to registering for the core competency test. Under the current Rule 58A-5.0191(1)(a), F.A.C., such core training curriculum must consist of a minimum of 26 hours. This proposed increase of 14 hours is less pronounced than the increase recommended by the Negotiated Rulemaking Committee, which approved through consensus an increase from 26 to 56 hours. The Department has proposed an effective date of December 1, 2014, for the above increase in training hours in proposed Rule 58A- 5.0191(1)(b)3, F.A.C. The Department does not collect or maintain data regarding the number of individuals who annually enroll in approved core training curriculum classes. However, based on data made available by the University of South Florida, the Department has determined that, on average over the last five years, 1,580 applicants registered for the core competency exam each year. While not precise, the same data suggests, on average, a participation rate increase of roughly 10% every year is a fairly reasonable assumption and is therefore the number we have chosen to use for this exercise. Further, based on a review and indexing of available pricing figures, the Department has determined that the current 26-hour core training curriculum is currently offered at prices ranging from $215 (an online training course) to $450 (traditional classroom) and that the average price is $350. Since the increase from 26 to 40 core training curriculum hours represents an approximate 50% increase, based on the above pricing figures it is anticipated that the approximate one-time cost increase per successful applicant will be $175. This calculation makes no assumptions for possible efficiencies or cost reduction measures which might foreseeably be employed or realized by core trainers in the future. For example, currently six trainers offer online courses at a rate lower than the $350 average and considerably lower than the higher end courses of $450. Not surprisingly, the number of trainers offering online courses has increased in recent years, and it is safe to assume that more trainers will offer online services in the future. The Department has also considered the potential impacts of costs related to travel. The additional 14 hours will likely result in two additional days of training. Hotel costs for one overnight stay are estimated at $75 (based on a simple online search and comparison), fuel cost for two days is estimated at $10 (based on the geographic location of the majority of trainers and trainees), and two days of meals are estimated at $80 (just above the per diem rate for State of Florida employees). 5

Because the training locations are widely spread throughout the state and ample training options exist in and around the metropolitan areas that house the majority of the state s assisted living facilities, the majority of the trainers, and the majority of the applicants, a reasonable estimate based on available residency data for the trainee population is that about 10% of the applicants may incur hotel and travel costs. Therefore, we estimate that 90% of the applicants will incur fuel and meal costs only, while 10% will incur lodging, fuel, and meal expenses. We account for one meal (lunch) only for the 90% population because commuters have the ability to eat breakfast and dinner at home. That total cost for fuel and lunch for the 90% comes to $36 per person, which equates to $10 for fuel and $26 for two lunches. Total travel costs for the 10% is estimated to be $165 per person (for the first year and subsequently increased by 2.1% each year thereafter accounting for inflation). To reiterate, these are individuals who decide against pursuing the many online course options and whose geographic circumstances warrant lodging, travel, and meal expenses. When analyzing the areas covered by in-person trainers across the state, the case is made that very few applicants will need to incur overnight lodging expenses. It is important to note, again, that six trainers currently offer core training classes online that can be accessed statewide. Online classes provide an opportunity for applicants to fulfill the training requirement without incurring any travel, lodging, or meal expenses. In addition to travel expenses, the Department has also calculated opportunity costs related to wages potentially lost by employed applicants during the additional two days of training. Specifically, we are speaking to lost wages associated with the applicant s choice to attend the core training curriculum in person, as opposed to taking the opportunity to take courses online, on their own time, thereby avoiding any lost time and lost wages with their current employer. Because neither salary nor employment data for each applicant exists, we do not have the personal employment data necessary to calculate lost wages precisely. Therefore, we must endeavor to provide a broad, good faith estimate on what those opportunity costs could be. The Department bases this opportunity cost analysis on the current salaries in the industry. The Department assumes that an applicant will not choose to enter this field if the individual currently earns a salary greater than the current salaries offered in the industry. The highest current annual administrator salary is $75,000 (or $36 per hour). This represents the high end of the salary spectrum for larger assisted living facilities classified as those facilities that house 51 or more beds. For facilities housing between 17 and 50 beds, the rate for administrators is $18 per hour, while the hourly rate for administrators of smaller facilities with less than 17 beds is $10. The hourly rate for facility managers is unknown. In an effort to calculate an average hourly rate for managers, a weighted average based on the current administrator s rate relative to the size of facilities was derived to yield an hourly rate of $16.65 for managers. When each of these hourly rates is averaged with the minimum wage of $7.94, an estimated average salary that represents lost wages is $17.70 or approximately $18. To reiterate, crucial employment data for the applicants is not available, therefore we cannot calculate the precise cost in terms of lost wages for the additional training hours. We simply do not know what professions these applicants are attempting to transition from or at what rate they have current employment from which to transition. Due to that lack of data, in an effort to provide a broad and good faith estimate, it is necessary to account for the unemployed applicants seeking training as a means to improve their employment status and rejoin the workforce. Based on data attained from the U.S. Department of Labor s Bureau of Labor Statistics, the five year unemployment rate average for the State of Florida is 9.46%. 6

In summary, given that: (1) 1,580 applicants will take the exam in year one; (2) there will be a $175 annual increase as a result of increased core training curriculum hours; (3) no further efficiencies or cost reduction measures will be realized by training providers; (4) there will be $165 in travel costs for 10% of the population and $36 in travel costs for 90% of the population; and (5) there will be $18 per hour in opportunity costs per person for those currently employed, the Department estimates that the increase from 26 to 40 curriculum hours will increase private sector costs by $714,256 in the first year. The Department s full five-year projection of anticipated regulatory costs caused by the above increases in administrator and manager training and education requirements is included as Appendix 1. (e) Provide an analysis of the impact on small businesses as defined by section 288.703, Florida Statutes, and an analysis of the impact on small counties and small cities as defined in section 120.52, Florida Statutes. The impact analysis for small businesses must include the basis for the agency s decision not to implement alternatives that would reduce adverse impacts on small businesses. Section 288.703(6), Florida Statutes, defines small business as an independently owned and operated business concern that employs 200 or fewer permanent full-time employees and that, together with its affiliates, has a net worth of not more than $5 million or any firm based in this state which has a Small Business Administration 8(a) certification. As applicable to sole proprietorships, the $5 million net worth requirement shall include both personal and business investments. Data made available to the Department indicates that the vast majority of state assisted living facilities qualify as small businesses pursuant to Part IV, Chapter 288, F.S, which means that the cost associated with the proposed increased biennial continuing education requirements for existing administrators and managers of assisted living facilities would primarily be borne by small businesses. The Department believes that the costs associated with the proposed increased core training requirements for all prospective administrators and managers will primarily fall upon individuals. After holding several negotiated rulemaking sessions and rule workshops, the Department has concluded that there are no alternative approaches to the proposed rulemaking that would reduce the adverse impact on small businesses. There will be no impact on small counties or small cities as defined in Section 120.52, F.S. (f) Provide any additional information that the agency determines may be useful. As a general consideration, although the Department regulates core training providers and curricula pursuant to Chapter 58T-1, F.A.C., it does not have the authority to regulate the fees charged by approved core trainers for providing either core training or continuing education for administrators and managers of assisted living facilities. Therefore, the Department admits that it is impossible to precisely forecast the future training costs of increased training and educational requirements proposed by the rule. Therefore, for this exercise the Department solely relies on available pricing data for our calculations of the increased training hours. However, the Department contends that it is reasonable to assume that, in coming years, there will be a continued natural migration of training providers towards increased utilization of online training techniques. It appears reasonable to assume there will be cost efficiencies realized and 7

those efficiencies will result in lower training costs to the consumer. For instance, although the average fee charged for the 26-hour core training curriculum presently required by Rule 58A-5.0191, F.A.C., is $350, as indicated above, the Department has identified online core training options as low as $215. In an effort to further increase competition in the core training market and to assist in the migration towards the utilization of online training, the Department intends to explore the possibility of expanding its listing of approved core training providers and courses to include available pricing information and an indication of whether providers offer online training options. The Department believes that such market competition will result in cost savings to trainees. (g) Provide a description of any regulatory alternatives submitted under paragraph 120.541(1)(a), Florida Statutes, and a statement adopting the alternative or a statement of the reasons for rejecting the alternative in favor of the proposed rule. No lower cost regulatory alternative to the proposed rule has been submitted to the Department. 8

APPENDIX 1 Florida Department of Elder Affairs Statement of Estimated Regulatory Costs Assisted Living Facility Rulemaking February 2014 Online & Summary Online Classroom Biennially Continuing Education Increase for ALF Administrators & Managers (12 to 18 hours) $515,194 $1,050,044 Core Training Curriculum Training Increase (26 to 40 hours) $1,767,401 $4,546,211 Five-Year Regulatory Cost Projection (July 1, 2014 through June 30, 2019) $2,282,595 $5,596,255 Year 1 Year 2 Year 3 Year 4 Year 5 Total Continuing Education - Annual Increase of 3 Additional Hours Number of Staff Affected: Administrators 3,048 3,353 3,688 4,057 4,463 Managers 456 502 552 607 668 Total Staff 3,504 3,855 4,240 4,664 5,131 Staff 3,504 3,855 4,240 4,664 5,131 CE Training Cost $23 $23 $24 $24 $25 Total Training Costs $80,592 $90,527 $101,659 $114,173 $128,243 $515,194 Staff $3,504 $3,855 $4,240 $4,664 $5,131 Travel Cost $25 $25 $25 $25 $25 Total Travel Costs $87,600 $96,375 $106,000 $116,600 $128,275 $534,850 Total for Continuing Education $168,192 $186,902 $207,659 $230,773 $256,518 $1,050,044 Assumptions: Inflation increases by 2.1% (average over last 5 years). Increase in staff by 10% each year (average in last 3 years). Travel costs include reimbursement mileage at the federal standard rate of $0.565. 9

Year 1 Year 2 Year 3 Year 4 Year 5 Total Core Training Curriculum - Increase of 14 Additional Hours Total Applicants 1,580 1,738 1,912 2,103 2,313 Training Cost $175 $179 $182 $186 $190 Total Training Costs $276,500 $310,537 $348,801 $391,701 $439,862 $1,767,401 Travel Cost 10% of Applicants 158 161 165 168 172 Hotel, Fuel, and Meals $165 $168 $172 $176 $179 Travel Cost for 10% of Applicants $26,070 $27,176 $28,330 $29,532 $30,786 90% of Applicants 1,422 1,577 1,747 1,935 2,141 Fuel & Meals $36 $37 $38 $38 $39 Travel Cost for 90% of Applicants $51,192 $57,953 $65,572 $74,135 $83,769 Total Travel Costs $77,262 $85,129 $93,902 $103,667 $114,555 $474,515 Opportunity Costs (lost wages) Total Applicants 1,580 1,738 1,912 2,103 2,313 Hourly Rate $18 $18 $19 $19 $20 14 Additional Hours of Core Training 14 14 14 14 14 Lost Wages $398,160 $447,173 $502,273 $564,049 $633,402 Unemployed -$37,666 -$42,303 -$47,515 -$53,359 -$59,920 Total Opportunity Costs $360,494 $404,871 $454,758 $510,690 $573,482 $2,304,295 Total for Core Training Curriculum $714,256 $800,537 $897,461 $1,006,058 $1,127,899 $4,546,211 Assumptions: Inflation increases by 2.1% (average over last five years). Increase in staff by 10% each year (average in last three years). Travel costs include one hotel night, car fuel for two days, and six meal reimbursements since training is for an additional 14 hours. Opportunity costs calculate the lost wages associated with taking these additional 14 hours. Hourly rate is based on current hourly rates from the current ALF administrators and managers. Unemployed deduction represents the unemployed rate at 9.46%. 10