Chapter 257 of the Acts of 2008 Clubhouse Provider Information & Dialogue Session August 18, 2010 www.mass.gov/hhs/chapter257

Agenda Chapter 257 Implementation Infrastructure Service Classification System Setting Rational Rates Contract Reform Overview of Clubhouse Service Class Overview of Clubhouse Service Model under New Procurement Timeline for Procurement and Rate Setting Implementation Preliminary Analysis of Current Program Costs Discussion: Understanding Cost Drivers and Variations Among DMH Clubhouse Programs

Chapter 257 of the Acts of 2008 Regulates Pricing for the POS System Chapter 257 places authority for determination of Purchase of Service reimbursement rates with the Division of Health Care Finance and Policy. Chapter 257 requires that DHCFP consider the following criteria when setting and reviewing human service reimbursement rates: Reasonable costs incurred by efficiently and economically operated providers Reasonable costs to providers of any existing or new governmental mandate Changes in costs associated with the delivery of services (e.g. inflation) Substantial geographical differences in the costs of service delivery Some rates within the POS system do not reflect consideration of these factors. Additional funding was not appropriated to finance any potential cost increases associated with the law. The statute specifies a four year implementation timeframe. FY10 FY11 FY12 FY13 Statutory Requirement: Percent of POS System with Regulated Rates 10% 30% Spending Base Associated with Statutory Percentage (based on current projection of $2.1B POS Baseline to be implemented) ~ $215M ~ $645M

Chapter 257 Requires Successful Achievement of Three Strategies 1. Create Service Classes 2. Develop Reimbursement Methodology & Rates 3. Reform Contracting Develop Service Class structure to group similar services & programs Build out process & technology to manage codes & classes Align activity codes to Service Classes FY09 Develop Implementation Plan Develop Service Classes Establish new cross-Secretariat organizational and governance structure Maximize Cumulative Statutory Requirement Use of Master Agreements Contracts w/ performance features Contracts shared across departments Service Value FY10 10% of System $215M Enabling FY11 40% of System $860M Rate analysis and establishment Contract consolidation across agencies Improved reporting FY12 70% of System $1.50B Minimize FY13 100% of System $2.15B Number of different POS contracts Cost reimbursement contracts

The HCFP-led Cost Analysis and Rate Setting Effort has Several Objectives and Challenges Objectives and Benefits Development of uniform analysis for standard pricing of common services Rate setting under Chapter 257 will enable: Predictable, reimbursement models that reduce unexplainable variation in rates among comparable, economically operated providers Incorporation of inflation adjusted prospective pricing methodologies Standard and regulated approach to assessing the impact of new service requirements into reimbursement rates Transition from “cost reimbursement” to “unit rate” Challenges (Extremely) fast paced timeline Constrained resources for implementation Cross system collaboration and communication Data availability and integrity (complete/correct) Coordination of procurement with rate development activities Pricing Analysis, Rate Development, Approval, and Hearing Process Data Sources Identified or Developed Provider Consultation Cost Analysis & Rate Option Development Provider Consultation Review/ Approval: Departments, Secretariat, and Admin & Finance Public Comment and Hearing Possible Revision / Promulgation

In Many Cases, Contract Reform is Necessary to Implement Chapter 257 Today Vision for FY13 Purchasing Department Providers Providers Secretariat or Department Master Agreements By Service Class DHCFP rate schedules Panel of qualified providers Departments purchase via rate agreements Dept Dept Dept Dept Dept Dept Dept Thousands of individually negotiated contracts Multiple contracts within and across departments with the same providers. Services with core similarities purchased individually by agencies and regions Low capacity for cross-agency coordination, performance assessment Reduced contract complexity and redundancy Greater amendment flexibility Improved capacity for rate management Streamlined, centrally-managed procurement cycles

Benefits to EOHHS Departments Master Agreements Simplify Management of the POS System for Providers and Departments Benefits to Providers Single bidding cycle for similar services Bid once – engage many times under a single bid Standard reporting formats Rate transparency Potential to engage with new purchasing Departments Benefits to EOHHS Departments Reduced procurement burden Potential to expand pool of providers Enable statewide coordination Eliminate multiple procurements for the same service

Agenda Chapter 257 Implementation Infrastructure Service Classification System Setting Rational Rates Contract Reform Overview of Clubhouse Service Class Overview of Clubhouse Service Model under New Procurement Timeline for Procurement and Rate Setting Implementation Preliminary Analysis of Current Program Costs Discussion: Understanding Cost Drivers and Variations Among DMH Clubhouse Programs

Clubhouse Services Service Class Definition: Programs that provide individuals with mental or behavioral health issues support services which include: employment, educational services and social services to help individuals live a productive and stable life in the community. DMH Activity Code Program Name Projected FY11 Spending 3034 Clubhouse Services $ 18,835,106 DMH anticipates that total spending on Clubhouses will remain the same under the new procurement.

Overview of Clubhouse Service Model Under New Procurement HCFP will develop a rationale rate methodology that will be applied to all Clubhouse programs. Individual Clubhouse providers may receive reimbursement at levels above or below their current annual maximum obligation amounts. Future Key Programmatic Elements: Open enrollment Unlimited time membership Services are defined and member level utilization is tracked ICCD certification not required but won’t preclude contractors from attaining certification status Clubhouses become a bridging service Full array of employment services offered but greater emphasis on independent employment Service specific Individualized Action Plans (IAPs) developed and implemented according to DMH regulations Emphasis on building natural community supports to achieve goal attainment Services meet the needs of a diverse membership  Effectiveness of service measured at an individual and systems level Decisions Under Consideration: Number of Clubhouses to be purchased going forward Potential utilization of a Master Agreement structure

Planned Procurement Approach and Timeline for Implementation DMH will be re-procuring all contracts under their 3034 Clubhouse Services in mid-November for contracts effective on July 1, 2011 DHCFP regulated rates will be adopted in late winter 2011, but will not be effective until contracts are executed in July 2011

Analysis of Current Program Cost Drivers to Date The calculated costs for Clubhouse programs range from ~$1,000 to over $7,000 per member per year, using current dynamic capacity estimates (number of unduplicated members a Clubhouse anticipated serving annually). FY2010 Contract Budget data was used in the analysis, as well as the static and dynamic capacity information provided by DMH. DHCFP has issued a survey to current Clubhouse organizations to obtain a better understanding of client utilization.

Most of the spending (36%) in each program is on non-specialized direct care staffing

Agenda Chapter 257 Implementation Infrastructure Service Classification System Setting Rational Rates Contract Reform Overview of Clubhouse Service Class Overview of Clubhouse Service Model under New Procurement Timeline for Procurement and Rate Setting Implementation Preliminary Analysis of Current Program Costs Discussion: Understanding Cost Drivers and Variations Among DMH Clubhouse Programs

Understanding DMH Clubhouse Services The following questions are intended to guide a discussion on the way these services are delivered: What kind of unit rate would work best for Clubhouses (client day, enrollment day)? What are the major costs associated with the different components of Clubhouse programs? Do some Clubhouses emphasize certain components over others? How does member participation in Clubhouses vary in terms of frequency and duration? Are there any differences between members who are DMH-referred and those who are not? Do you keep track of member participation? What staff positions, professional qualifications, and level of staff intensity are necessary to achieve the intended outcomes in each program? How do Clubhouses determine an appropriate number of staff for the program? Does geographical region or setting affect program costs (transportation, occupancy, etc)?