Commonwealth of Massachusetts Executive Office of Health and Human Services Chapter 257 of the Acts of 2008 Provider Information and Dialogue Session: Adult Long Term Care February 29,

2 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Procurement Approach Review of Pricing Analysis and Methodologies Data and Initial Review Trends and Cost Drivers Pricing Structure Timeline and Key Milestones

3 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 Secretary Of Health and Human Services under MGL 118G. The Division of Health Care Finance and Policy provides staffing and support for the development of Chapter 257 pricing. Chapter 257 requires that the following criteria be considered 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 Many current rates within the POS system may not reflect consideration of these factors. Chapter 9 of the Acts of 2011 establishes new deadlines for implementing POS rate regulation as well as requires that related procurements not go forward until after the rate setting process is completed. Jan 2012Jan 2013Jan 2014 Statutory Requirement: Percent of POS System with Regulated Rates 40%30% Spending Base Associated with Statutory Percentage (based on current projection of $2.278B POS Baseline to be implemented) ~ $880M~ $660M

4 In implementing Chapter 257, EOHHS will leverage three POS Reform Strategies to improve services and client outcomes POS Reform Strategy –# POS contracts for similar services –Use of cost reimbursement contracts 3. Reform Contracting +# of contracts shared across departments +# contracts w/ performance features +Use of Master Agreements +Overall POS governance structure 2. Develop Rational Rates 1. Create Service Classes Minimize Maximize Increased Administrative Efficiency Simplification and improved coordination of administrative processes for agencies and providers More resources directed toward client activities Immediate Term Near Term Long Term Improved Client Outcomes Improved quality management +Develop service class structure defined by outcomes +Enhance POS taxonomy database +Align activity codes to service classes Enabling Integrated data management systems Improved reporting More clients served w/ higher quality services Improved client outcomes Contract consolidation across agencies Rational resource base and stronger provider system POS Reform 1/1/12 1/1/13 1/1/14 Statutory Requirement Service Value 40% of system 30% of system ~$880M ~$660M Rates to be reviewed every two years

5 The 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: A.Predictable, reimbursement models that reduce unexplainable variation in rates among comparable, economically operated providers B.Incorporation of inflation adjusted prospective pricing methodologies C.Standard and regulated approach to assessing the impact of new service requirements into reimbursement rates Transition from “cost reimbursement” to “unit rate” Challenges Ambitious implementation timeline Data availability and integrity (complete/correct) Unexplained historical variation in reimbursement rates resulting from long-term contracts and individual negotiations between purchasers and providers Constrained financial resources for implementation, especially where pricing analysis warrants overall increases in reimbursement rates Cross system collaboration and communication 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 Methods Development Provider Consultation Review/ Approval: Departments, Secretariat, and Admin & Finance Public Comment and Hearing Possible Revision / Promulgation

6 Reduced contract complexity and redundancy Greater amendment flexibility for providers and agencies Greater opportunity for provider engagement Streamlined, centrally-managed procurement cycles managed 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 rate management, cross-agency coordination, performance assessment In Many Cases, Contract Reform is Necessary to Implement Chapter 257 Today Vision for FY15 Purchasing Department Providers Dept Providers Secretariat or Department Master Agreements By Service Class DHCFP rate schedules Panel of qualified providers Departments purchase via rate agreements

7 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Procurement Approach Review of Pricing Analysis and Methodologies Data and Initial Review Trends and Cost Drivers Pricing Structure Timeline and Key Milestones

8 Adult Long Term Care Service Class Service Class Definition: Programs that provide individuals a place of overnight housing for a long- term period of time in a specialized residential facility with necessary daily living, physical, social, clinical and/or medical support. Transition to a less restrictive setting, while ideal, is not a common goal for individuals receiving services in these settings.

9 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

10 Adult Long Term Care Procurement Plan DDS will issue an RFR on behalf of itself, MRC, and MCB and will result in a multi-department Master Agreement. This decision was based in part on the following issues: DDS currently contracts with 145 provider organizations and is due to re-procure the system. 73% of MCB providers and 91% of its spending overlap with MRC and DDS. 61% of MRC providers and 78% of its spending overlap with MCB and DDS. DDS will issue this RFR in early 2013 once Chapter 257 rates are adopted with a target effective date of July 1, 2013 for contracts.

11 Agenda Chapter 257 of the Acts 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Procurement Approach Review of Pricing Analysis and Methodologies Data and Initial Review Trends and Cost Drivers Pricing Structure Timeline and Key Milestones

12 Adult Long Term Care Services: Data Sources DDS Contract Data from Fiscal Year 2011 and EIM claims units provided. The data represents a wide mix of program models and levels of participant need. Salary data from Bureau of Labor Statistics, Salary.com, and other applicable sources. MRC gathered data on current programs. Facility/Occupancy Cost Survey –issued February 28, UFR, if needed to enrich data analysis of specific cost elements.

13 Provider Occupancy Survey The Purchasing Departments, EOHHS, and DHCFP designed an online survey to gain a better understanding of the features of facilities and their cost that could affect the development of standard pricing of physical space for human service providers that provide long-term residential care. To complete this survey, please collaborate with staff familiar with both fiscal and programmatic aspects of your organization in order to provide the most accurate answers. If your organization provides services to multiple residential sites: –Please answer all questions for each of your site locations Please complete this survey by Friday, March 23, 2012

14 Adult Long Term Care Services: Observations from Initial Review of Data MRC programs trend along a higher unit cost curve than DDS programs DDS data reflects contract cost prior to application of offsets MRC data is inclusive of off-sets, therefore differential is likely to be more marked

15 Unit Cost Data Distribution: DDS vs. MRC MRC average unit cost greater that DDS MRC has a wider range of unit cost; DDS more concentrated DDS# of Data % of total Data Point $0~$ % $101~$ % $201~$ % $301~$ % $401~$ % Above $ % Total233100% AVG:$ MRC# of Data % of total Data Point $0~$ % $101~$ % $201~$ % $301~$ % $401~$ % Above $ % Total151100% AVG:$ DDS Unit Cost Data DistributionMRC Unit Cost Data Distribution

16 Cost Summary Analysis: DDS Data Staffing costs, along with related tax & fringe expenses, average over 60% of total per-site spending Non-specialized direct care (DC1, DC2 & DC3) account for the majority of staffing costs. Supervisory/management, clinical/medical and support staffing account for a smaller portion of staffing costs Combined, expenses related to occupancy, administrative costs and other program costs account for less than 30% of total per-site spending

17 Major Cost Driver - Staffing There is a high level of correlation between the staff-per-unit and the daily rate R 2 value is.8324 Tightly packed cluster between $125 and $175 Tax and Fringe was not as strong an influence – more unaccounted variability Unit cost reflects the cost of a bed day within a unique site.

18 Non-Specialized Direct Care Staffing Non-specialized direct care unit costs are related to the daily rate, though not as significantly as overall staffing costs Non-specialized direct care refers to a weighted blend of Case Worker/Manager, DC Program Staff Supervisor, DC1, DC2 and DC3 staff. R 2 is.4889

19 Transportation Cost Transportation costs do not explain much variation in rates R 2 is.1086 Transportation costs include Staff Mileage/Travel, Client Transportation, Vehicle Expenses, and Vehicle Depreciation.

20 Occupancy Cost Variation in Occupancy costs explain some of the variation in unit cost but the relationship is modest. R 2 is.4073

21 Regional Variation Statistical tests* have been conducted to examine the effect of regional location on the following cost elements: -Total reported per bed-day unit cost -Occupancy unit cost -Direct Care unit cost -Transportation unit cost No significant differences were observed. * (Analysis of Variance- ANOVA)

22 Draft Pricing Structure Rates per bed day, as under current system Rates for an array of program models that flow along a continuum of level reflected in varying staffing patterns Program size Number of Individuals Intervention Model Basic$X.00$Y.00$Z.00 Behavioral or Clinical $X.00 + $Y.00 + $Z.00 + Medical$X.00 + $Y.00 + $Z.00 + Behavioral and Medical $X $Y $Z.00 ++

23 Draft Pricing Structure: Specialty and Add-on Services Acknowledge the opportunity for extraordinary individual needs, such as the rare instance when a program serves a single individual Add-ons allow for variations in models not reflected in the standard rates Can be temporary, as needed Types of add-ons: Nursing Additional Direct Care Staff Clinical Specialized vehicles Day services Others?

24 Draft Pricing Structure (cont’d) Model Budget - Basic Services (Capacity Level 2-3) Beds:3Bed Days:1,095 FTEExpense Management0.2 House Manager1.00 Direct Care I1.00 Direct Care II1.00 ReliefXX%X.XX Total Program Staff7.15 Tax and FringeXX.xx% Total Compensation $ ExpensesUnit Cost Occupancy $ XX.00 $ XX,XXX Other Expenses $ XX.00$ XX,XXX Food $ XX.00$ XX,XXX Transportation $ XX.00$ XX,XXX Direct Admin Expenses $ XX.00$ XX,XXX $ XXX,XXX Total Reimb excl M&G $ XXX,XXX.XX Admin. AllocationXX.xx% $ XX,XXX TOTAL $ XXX,XXX CAF:X.xx% $ XXX,XXX Rate with CAF RATE: $ XXX.XX $ XXX.xx Utilization Rate:XX%$ XXX.XX Model Budget Uses articulated assumptions for staff FTEs based on purchaser recommendation Employs standard benchmarks for price elements, e.g., salaries, T&F %, occupancy, food, transportation Includes a relief factor applied to DC staff FTEs Cost Adjustment Factor (CAF) applied Utilization factor <100% typically applied

25 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Procurement Approach Review of Pricing Analysis and Methodologies Data and Initial Review Trends and Cost Drivers Pricing Structure Timeline and Key Milestones

26 Department Service Design Finalized: All service components, staffing ratios, staff qualifications, other program inputs have been decided by the purchasing department. Provider Sessions: For each rate setting project, EOHHS conducts an average of 3 provider input sessions prior to Executive Sign-Off and the Public Hearing Process to allow for greater depth in understanding core program components, cost drivers, and procurement considerations. Executive Sign-Off: Commissioner and C257 Executive Committee sign-off on draft rates and implementation plan. EO485 Submitted to ANF: Draft rate regulation to ANF; Will better align the rate regulation proposal with budget planning. Public Hearing: DHCFP and purchasing departments consider testimony in advance of rate adoption. Procurement Process: The procurement will be issued after the rates have been adopted. Rates Effective: Where possible, reimbursement under regulated rates will align with beginning of SFY to minimize mid-year contract amendments for both purchasing Departments and providers. Updated Implementation Timeline and Key Milestones for Adult Long Term Care July 1

27 Questions/Feedback Or Visit the Chapter 257 Website: