Rule-Making Notices (Hearing Notices)

The primary document that was used to determine the effect of the proposed rules on small business was 2003 Wisconsin Act 99. This Act requires the Department to promulgate rules for certifying businesses as eligible to claim tax credits for fuel and electricity used in manufacturing, under sections 71.07 (3t), 71.28 (3t), and 71.47 (3t) of the Statutes.

Effect on small business

The proposed rules are not expected to impose significant costs or other impacts on small businesses because the rules address submittal of documentation only by businesses that choose to pursue these tax credits.

Agency Contact Person

Amy Cumblad, Wisconsin Department of Commerce, Bureau of Business Development, P.O. Box 7970, Madison, WI, 53707-7970; telephone [phone]; e-mail [e-mail].

Copy of Rules

The proposed rules and an analysis of the rules are available on the Internet, by entering “Comm 130" in the search engine at the following website: http://adminrules. wisconsin.gov. Paper copies may be obtained without cost from Amy Cumblad at the Department of Commerce, Bureau of Business Development, P.O. Box 7970, Madison, WI, 53707-7970; or at telephone [phone] or [phone] (TTY); or at [e-mail]. Copies will also be available at the public hearing.

Environmental Analysis

NOTICE IS HEREBY GIVEN that the Department has considered the environmental impact of the proposed rules. In accordance with chapter Comm 1, the proposed rules are a Type III action. A Type III action normally does not have the potential to cause significant environmental effects and normally does not involve unresolved conflicts in the use of available resources. The Department has reviewed these rules and finds no reason to believe that any unusual conditions exist. At this time, the Department has issued this notice to serve as a finding of no significant impact.

Initial Regulatory Flexibility Analysis

Types of small businesses that will be affected by the rules

Any business which chooses to apply for the tax credits under sections 71.07 (3t), 71.28 (3t), and 71.47 (3t) of the Statutes – and which meets at least one of the following conditions:

(1) The business has retained 100 percent of its full-time jobs in Wisconsin from December 23, 2003, through either December 31, 2006, or December 31, 2007.

(2) The business's average annual investment in Wisconsin from January 1, 2003, through either December 31, 2006, or December 31, 2007, is equal to no less than 2 percent of the total book value of the business's depreciable assets in facilities that are based in Wisconsin.

(3) The business's average annual investment in Wisconsin from January 1, 2003, through either December 31, 2006, or December 31, 2007, is no less than $5,000,000.

Reporting, bookkeeping and other procedures required for compliance with the rules

Applicants for becoming certified as being eligible for the tax credits must submit an application that demonstrates compliance with at least one of the above conditions.

Types of professional skills necessary for compliance with the rules

No new professional skills would be needed for compliance with these rules.

Will the rules have a significant economic impact on small businesses?

No.

Small business regulatory coordinator

The small business regulatory coordinator for the Department of Commerce is Carol Dunn, who may be contacted at telephone [phone], or by e-mail at [e-mail].

Fiscal Estimate

Although the proposed rules would newly result in review and approval of documentation relating to certifying businesses as eligible to claim tax credits for fuel and electricity used in manufacturing, the number of these reviews and approvals is expected to be too small to result in significant changes in the Department's costs for administering its business development programs. Therefore, the proposed rules are not expected to have any significant fiscal effect on the Department.

The proposed rules are not expected to impose any significant costs on the private sector, because the rules address only voluntary submittal of documentation relating to tax credits for fuel and electricity used in manufacturing.

Notice of Hearings

Health and Family Services

(Community Services, Chs. HFS 30—)

[CR 07-095]

NOTICE IS HEREBY GIVEN that pursuant to ss. 50.02 (1) and (2) (a), 50.025, and 227.11 (2) (a), Stats., and interpreting ss. 50.03, 50.035, and 50.037, Stats., the Wisconsin Department of Health and Family Services proposes to repeal and recreate ch. HFS 83, relating to community-based residential facilities, and affecting small businesses.

Hearing Information

Date and Time	Location
December 7, 2007 8:30 AM - 12:30 PM	Northeastern Regional Office 200 North Jefferson Street Room 152A Green Bay, Wisconsin
December 12, 2007 11:30 AM - 3:30 PM	State Revenue Building 2135 Rimrock Road First Floor Events Room Madison, Wisconsin
December 17, 2007 8:30 AM – 12:30 PM	Northern Regional Office 2187 North Stevens Street Suite C Rhinelander, Wisconsin
December 18, 2007 12:00 PM – 4:00 PM	Western Regional Office 610 Gibson Street Room 123 Eau Claire, Wisconsin
December 19, 2007 9:00 AM – 1:00 PM	Southeastern Regional Office 819 North 6th Street Room 40 Milwaukee, Wisconsin

The hearing site is fully accessible to people with disabilities. If you are hearing impaired, do not speak English or have circumstances that might make communication at a hearing difficult; you require an interpreter or a non-English large print or taped version of the proposed rules, contact the person at the address or telephone number given below at least 10 days before the hearing. With less than 10 days notice, an interpreter may not be available.

Submission of Comments

Written comments may be submitted at the public hearing or submitted to the contact person listed below. Comments may also be made using the Wisconsin Administrative Rule Website at http://adminrules.wisconsin.gov. The deadline for submitting comments to the Department is 4:30 p.m. on December 26, 2007.

Analysis Prepared by the Department of Health and Family Services

This proposed order repeals and re-creates ch. HFS 83 relating to CBRFs. CBRFs are facilities for 5 or more adults who require supervision and care and services above room and board. Nursing care is not the primary function of the facility. In Wisconsin, CBRFs are one of 4 categories of regulated entities referred to as assisted living facilities.

The purpose of the proposed rule is to accomplish the following:

•   Focus on resident outcomes and quality of life and quality of care.

•   Support reasonable and flexible regulatory processes.

•   Improve readability and organization, and eliminate excess and prescriptive verbiage.

•   Incorporate information from Division of Quality Assurance memos.

•   Update HFS 83 with related regulations, including requirements regarding Family Care, Wisconsin Commercial Building Code, chs. HFS 12 and 13, and ch. 50, Stats.

•   Address increasing acuity care levels of consumers residing in CBRFs.

•   Revise staff training standards, establishing a more cost effective system for providers and the Department.

•   Clarify medication administration requirements.

•   Incorporate requirements for facilities with more than 20 residents into the main body of the rule.

•   Promote utilization of nationally recognized standards of practice.

The proposed order recognizes national and state trends in the assisted living industry, and incorporates recommendations from the 2003 Assisted Living Workgroup Report to the U.S. Senate Special Committee on Aging. The Department's goal is to integrate these concepts into HFS 83 for the benefit of the consumers of Wisconsin. For example:

•   Staff training in the provision of personal care will enhance the ability of staff to meet the increasing care needs of consumers in assisted living facilities.

•   Additional requirements for assessment and care planning in the areas of mental health, wandering, falls, pain management, and choking will augment existing care planning requirements.

•   Clarification of nurse delegation responsibilities to a non-licensed caregiver will address acuity and will allow facilities to provide appropriate care in a cost effective manner in times of limited nurse availability.

•   A new requirement that a temporary service plan be developed and implemented on admission will help ensure that facilities will be prepared to meet the immediate needs of the consumers.

•   Increased administrator qualifications and annual staff training standards are reflective of national trends.

•   Increased requirements for disclosure to consumers and families regarding services, including nurse availability to help consumers choose a CBRF that best meets their needs.

•   Development of a Department approved training curriculum in medication administration enhances the consumer choice to live in a community residential setting while decreasing risks associated with the administration of medication.

•   Additional Department approved training curriculum incorporates current standards in fire safety, first aid/choking, and standard precautions to protect the health, safety and welfare of consumers in CBRFs.

•   The new requirement for a sprinkler system in small facilities serving persons who are not physically or mentally capable of responding to an electronic fire alarm and exiting the facility without help, or physical or verbal prompting, will ensure the safety of vulnerable adults living in CBRFs.

Chapter HFS 83 was last substantially revised July 1, 1996.

Initial Regulatory Flexibility Analysis

The proposed rule will affect CBRFs that are licensed to care for 5 or more unrelated adults. Based on data from the APIS database, as of January 2006, there were 1373 licensed CBRFs in Wisconsin. The majority of these entities are “small businesses" as the term is defined under s. 227.114 (1) (a), Stats.

The North American Industry Classification System (NAICS) includes CBRFs in the Health Care and Social Assistance sector, (sector 62) and further defined in sub-sector 623 Nursing and Residential Care Facilities. CBRFs represent approximately 60% of the NAICS establishments, 30% of the $2.7 billion in annual receipts, and 33% of the 72,000 employees in the sub-sector. Industries in sub-sector 623 provide residential care combined with either nursing, supervisory, or other types of care as required by residents. The facilities are a significant part of the production process; and care provided is a mix of health and social services with the health services being largely some level of nursing service.

Data obtained from the APIS database on January 18, 2006 records 1,373 CBRFs as licensed to operate in Wisconsin; CBRFs have averaged 1,356 facilities since 2001. Approximately one dozen facilities open, close, or, change ownership each month. CBRF entities include non-profits including churches, corporations for profits, partnerships, limited liability corporations, sole proprietorships, and governmental entities.

CBRFs are categorized based on residents' ability to respond to an emergency. Class `A' CBRFs may serve residents who are ambulatory, semi-ambulatory, or non-ambulatory if the residents are mentally and physically capable of responding to an electronic fire alarm and exiting the facility without any help or verbal or physical prompting. Currently 1/3 of all CBRFs hold Class `A' licenses.

Class `C' CBRFs may serve residents who are ambulatory, semi-ambulatory, or non-ambulatory but one or more of whom are not mentally or physically capable of responding to an electronic fire alarm and exiting the facility without help or verbal or physical prompting.

CBRFs are also categorized by size. CBRFs that have bed capacity for 5 to 8 residents are licensed as small CBRFs. CBRFs that have bed capacity for 9 to 20 residents are licensed as medium CBRFs. CBRFs that have bed capacity for 21 or more residents are licensed as large CBRFs. Class `C' CBRFs currently make up 85% of the licensed bed capacity, up from 15% in 1983.

	Class `A'			Total Class `A'	Class `C'			Total Class `C'	Total CBRFs
Types of CBRF Entities	Small	Medium	Large		Small	Medium	Large
Non-Profit	76	65	12	153	66	38	34	138	291
Corporation for Profit	162	44	6	212	162	165	73	400	612
Partnership/LLC	34	12	1	47	105	163	66	334	381
Sole Proprietorship	23	12	0	35	17	12	1	30	65
Governmental	7	3	1	11	9	2	2	13	24
Total	302	136	20	458	359	380	176	915	1373

The 1,373 CBRFs are licensed for a total of 22,035 beds, an average of 16 beds per facility.

Most of the revenue CBRFs receive is for resident care. The low and high rate charged per resident is gathered on the license application and subsequent renewals and is maintained in the APIS database. Residents are charged different rates based on the levels of care provided. The January 18, 2006 data for all CBRFs was averaged by class and size to estimate revenue for a `typical' CBRF. Average revenue decreases as facility sizes increase.

	Class `A'				Class `C'
Average Annual Revenue per Licensed Bed, APIS Data	Small	Medium	Large	All Sizes	Small	Medium	Large	All Sizes
Average Low Rate Revenue	37,788	32,313	32,139	35,908	42,361	30,110	29,436	34,787
Average Median Rate Revenue	40,070	36,533	35,483	38,763	46,104	30,070	29,425	40,206
Average High Rate Revenue	42,185	40,753	38,827	41,612	49,846	42,885	42,935	45,626

Expenditure data for Wisconsin CBRFs is not readily available; to determine average operating expenses per licensed bed, data from The State of Seniors Housing 2005 report is compiled below. This study defines assisted living beds as “properties designed for frail seniors who need assistance with activities of daily living, but do not require skilled nursing care." Beds identified for persons with Alzheimer's are defined as “designated for those residents with significant cognitive impairment as a result of having Alzheimer's or a related dementia." These categories most closely match the Wisconsin definition of a CBRF. The national sample contained 117 assisted living residences, including Alzheimer's units. The sample represents 10,078 assisted living beds, resulting in an average of 86 beds per facility. The sample covers all 50 states and consists of 87% for-profit businesses. The data presented below is an average annual per bed cost from all 117 entities included in the sample. The data is presented in income statement format for ease of presentation and does not reflect any actual operating results for any given entity. The averaging process generally inflates the individual line item expense. The larger 86 bed average facility will include higher administrative costs than the typical 16 bed CBRF in Wisconsin.

Assisted living facilities are more profitable than the demonstration income statement below implies. The State of Seniors Housing 2005 report includes operating margins ranging from 19.3% - 33.8%; these ratios reflect results of Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent (EBITDAR). The revenues in the table below, $35,712 and $40,348 are within the revenue ranges in the APIS dataset, providing validation to Wisconsin CBRFs. All expenses are also displayed as a percentage of revenue.

National Median Annual Operating Revenue and Expenses per Occupied Assisted Living Bed	Senior Assisted Living Facilities		Senior Assisted Living Facilities including Alzheimer's residents
Revenue	35,712	100.00%	40,348	100.00%
Direct Labor
Administrative	1,601	4.48%	1,576	3.91%
Dietary	1,593	4.46%	1,550	3.84%
Housekeeping Maintenance	501	1.40%	597	1.48%
Maintenance	397	1.11%	371	0.92%
Assisted living	6,285	17.60%	6,039	14.97%
Nursing	1,207	3.38%	2,548	6.32%
Marketing	577	1.62%	768	1.90%
Other Labor	676	1.89%	420	1.04%
Payroll Taxes	1,158	3.24%	1,281	3.17%
Employee Benefits	931	2.61%	1,684	4.17%
Total Labor	14,926	41.80%	16,834	41.72%
Non-Labor Expenses
Property Taxes	1,067	2.99%	966	2.39%
Liability Insurance	901	2.52%	753	1.87%
Raw Food	1,541	4.32%	1,744	4.32%
Utilities	1,308	3.66%	1,319	3.27%
Marketing/Advertising	763	2.14%	500	1.24%
Repairs & Maintenance	620	1.74%	795	1.97%
Housekeeping	174	0.49%	227	0.56%
Management Fees	1,661	4.65%	2,262	5.61%
Debt Service/Lease Payments	7,446	20.85%	9,364	23.21%
Misc. Operating Expenses	2,022	5.66%	2,267	5.62%
Corporate/Administrative Expenses	2,914	8.16%	327	0.81%
Total Non-Labor Expenses	20,417	57.17%	20,524	50.87%
Total Expenses	35,343	98.97%	37,358	92.59%
Net Operating Income	369	1.03%	2,990	7.41%

Labor costs are 42% of revenue for both sample income statements, with higher receipts covering the higher cost of care at the Alzheimer's facilities. Non-labor or fixed cost expenses are slightly higher for facilities offering lower care levels, due mostly to lower receipts. The data in the table above was used to determine whether any increased costs associated with the proposed rules have a significant impact on small business in Wisconsin.

Pursuant to the Department's criteria, a proposed rule will have a significant economic impact on a substantial number of small businesses if at least 10% of the businesses affected by the proposed rules are small businesses and if operating expenditures, including annualized capital expenditures, increase by more than the prior year's consumer price index or reduces revenues by more than the prior year's consumer price index. For the purposes of this rulemaking, 2005 is the index year. The CPI rate for 2005 is 3.4%.

It is anticipated that all CBRFs will experience modest increased costs from one or more of the additional requirements defined above. A number of CBRFs already meet or exceed the requirements set forth in the proposed rule and will not be affected by the rule changes. It is estimated that many of the cost increases would be less than 1% of revenue on a single bed; distributing the cost across all licensed beds further reduces the impact of increased costs to the CBRF

Approximately 117 of the small Class `C' CBRFs may be required to install a sprinkler system. The cost to install a sprinkler system at these facilities will likely exceed 3.4% or operating expenses. Should these facilities need to make changes to meet other regulated areas such emergency lighting, increased cost for training, solid doors, higher costs for an administrator, etc., this will most likely exceed the established Department cost criteria of 3.4%. Only 8.5% of all CBRFs appear to be affected by the need for sprinkler systems, the single most costly item in the proposed rule. The affected facilities have other options available to them to address the cost of sprinklers; including downsizing to a 4 bed adult family home, or requesting a waiver from the Department.

The proposed rule may increase costs for CBRFs modestly in several areas, however, changes in administrative reporting requirements may reduce this administrative burden. Based on available data, the increased costs for most CBRFs will be less than the 2005 CPI of 3.4%. The effect on small business CBRFs cannot be clearly defined as there are too many variables. Small CBRFs will experience a larger fiscal impact then larger facilities as the per bed impact for any single item is greater.

Based on the January 2006 data, it is estimated that 892 CBRFs (65% of all CBRFs) are small business with annual revenue less then $5 million or 25 or fewer employees. To determine small business status, the Department used CBRF published low monthly rates and a conservative FTE calculation. The logic used may have overstated the estimate of small business CBRFs.

Revenue for each CBRF was estimated using data from the APIS database. Each CBRF monthly low rate was multiplied by licensed beds, then by twelve months, and then 85%; the industry occupancy rate. Five CBRFs exceed annual receipts of $5 million using this formula. Using the CBRF monthly high rate resulted in eight entities exceeding $5 million in annual receipts. Several corporations operate multiple CBRFs; revenue estimates for these corporations were tallied together.

NAICS employee data in sub-sector 623 Nursing and Residential Care Facilities (71,877 employees) was distributed by licensed beds for all BQA licensed entities in this sub-sector, including CBRFs. This calculation results in an average of 0.878 staff per licensed bed. Staff levels were projected using the average staff calculation and multiplying by licensed capacity. The results showed 130 CBRFs with 26 or more employees. Once again, corporate owned CBRFs were tallied together.

Capital Expenditures

Sprinkler system for small class `C' facilities.

Small class `C' CBRFs serve 5 to 8 persons with physical or cognitive impairments which prevent them from responding to an alarm and escaping a fire without assistance. Many of these facilities are older, private homes with aging mechanical and electrical systems that have been converted to CBRFs, increasing the need for fire protection. An analysis of federal data and public news accounts shows at least 2 fires a day in the nation's assisted living facilities. These fires result in generally one fatal fire a month, twice the rate of nursing homes. Wisconsin CBRFs are required to report all fires that occur on the premises. In 2005, 10 fires were reported. While there were no deaths, one resident was injured.

In August, 2005, the South Milwaukee Common Council passed the Fire Prevention, Protection and Control Code. This Code was drafted by the South Milwaukee Fire Department and 6 surrounding communities because of the potential increase in loss of life from fire that could occur in residences converted to house a group of elderly or disabled persons. The Code requires the retrofit of fire sprinkler protection in all adult family homes and CBRFs regardless of class or occupancy load. Facilities must begin installation within one year from the date of notification. Other local governments may follow South Milwaukee's lead in this requirement.

Alabama is one of the few states that require all assisted living facilities to be sprinklered, and has not had a fatal fire in an assisted living facility in a decade. The National Fire Protection Association (NFPA) has documented and analyzed 28 fatal board and care facility fires during the past 20 years. This report, published in the NFPA Journal January/February 1993, stated that an approved automatic sprinkler system would have controlled or extinguished the fire and may have altered the outcome at a board and care home in Detroit in which 10 residents died. The Journal also reported that the average property loss per fire in a sprinklered building is $2,130 versus $5,845 in a non-sprinklered building.

See related articles regarding fire safety in the nation's assisted living facilities.

http://www.usatoday.com/news/nation/2005-12-15-
fire-safety_x.htm

http://www.iafc.org/associations/4685/files/healthcare.pdf

http://archive.ggao.gov/d15t6/138117.pdf

http://www.gao.gov/new.items/d04660.pdf

Installing a sprinkler system may be a financial hardship for some small class `C' CBRFs but there are alternatives available. Facilities may choose to change the classification of their licensure to serve persons who are physically and mentally capable of taking life-sustaining action. A CBRF could reduce capacity and become a four-bed adult family home, not subject to ch. HFS 83. However, both options would most likely result in some decreased revenue, either from fewer residents or providing services to residents with fewer health needs at a lower rate. A CBRF can request a waiver from the Department. The Department may grant a waiver of the requirement if the facility submits alternate provisions to meet the rule that would not jeopardize the health, safety, and welfare of its residents. CBRFs have 5 years to comply with the sprinkler requirement allowing substantial time to budget for the associated costs.