1. Managed Care: Financial Reporting
Richard Stebbins, Director
Financial Reporting
Medicaid CHIP Division
April 29, 2016

2. Managed Care Business Model
Full risk capitation
Actuarially sound capitation rates
Defined accounting principles
HHSC-designed reporting
Quarterly reporting
Data validation and reconciliation
Compare to encounters
Compare to subcontracts

3. Managed Care Business Model
Audited financials
Annual Agreed-Upon-Procedures (“AUPs”)
Risk Assessments
Performance Audits
HHSC-OIG oversight
CMS oversight
HHS-OIG oversight
Excess profit recovery
Experience Rebate
Admin Cap

4. Managed Care Business Model
HHSC Resources applied to Financial Oversight
Director and 9 financial professionals
Reconciliation team lead and 4 analysts (5)
Audit lead (1)
Encounter and special projects team (2)
Finance manager – contract development (1)

5. Managed Care Business Model
Other Resources applied to Financial Oversight
HHSC Actuarial Analysis group
Chief Actuary and 5 professionals
External Independent Actuaries – Rudd and Wisdom
External Quality Review Organization (EQRO)
Institute for Child Health Policy
Data Certification

6. Managed Care Business Model
Public resources
HHSC web site
Part 1 of all Financial Statistical Reports (FSRs)
Liquidated Damages
Contracts
Uniform Managed Care Contract
Uniform Managed Care Manual
Cost Principles
Financial reporting templates
Actuarial Reports (rate-setting documentation)
Open Records process – complete FSRs

7. Managed Care Business Model
Financial Summary Reports (FSRs)
Income Statement
Multi-tab Excel template
Submitted quarterly
Annual submission on Dec 31st for State Fiscal Year ending 9/30 (90 day FSR).
Additional submission on August 31 (334 day FSR) – accounts for claims run out

8. Managed Care Business Model
Experience Rebate
Recovers portion of profits greater than 3% of revenue based on a tiered structure:
Admin Cap
Profits
MCO Share
HHSC Share
≤ 3%
100% 0%
> 3% and ≤ 5%
80%
20%
> 5% and ≤ 7%
60%
40%
> 7% and ≤ 9%
> 9% and ≤ 12%
> 12%

9. Managed Care Business Model
Current state of Managed Care
Model is maturing since most regions, benefits and populations have been or will be carved-in
Allowable administrative expenses are capped
Quality Improvement costs (new CMS rule) will be allowable as Medical expense (remove from admin)

10. Managed Care Business Model
Challenges
Affiliate agreements
Vertical integration
MCO consolidation
Cigna merger, Amerigroup merger…more?
Evolution of new payment models
Value-based purchasing
Pay for Quality
ACO model
Innovative payment model – shared savings

11. Managed Care Business Model
Sample FSR – part Sample FSR – part 5
Incurred Months:
HHSC Managed Care contract costs 1
Member Months 2
Average Monthly Member Months
Revenues: 3
Medical Premiums 4
Delivery Supplemental Payments 5
Pharmacy Premiums 6
Investment Income 7
Health Insurance Providers Fee Reimbursement 8
Other Revenue 9
Total Gross Revenues 10
Health Insurance Providers Fee & Related Costs 11
Health Insurance Providers Fee (NAIP) 12
Premium Taxes 13
Maintenance Taxes 14
Net Revenues
Medical Expenses: 15
Fee-For-Service 16
Capitated Services 17
Patient Centered Medical Home Services 18
Net Reinsurance cost 19
IBNR Accrual - Medical 20
Total Medical Expenses 21
Prescription Expenses (excluding PBM Admin) 22
Total Medical and Prescription Expenses 23
Administrative Expenses 24
Total Expenses 25
Net Income Before Taxes
HHSC Managed Care contract costs 1
Physician Services: Primary Care 2
Physician Services: Specialist 3
Physician Services: Deliveries - Prof. Component 4
Non-Physician Professional Services 5
Emergency Room Services 6
Outpatient Facility Services 7
Inpatient Facility Svcs: Medical/Surgical 8
Inpatient Facility Svcs: Deliveries - Facility Component 9
Behavioral Health Services 10
Vision Services 11
Miscellaneous Other 12
Patient Centered Medical Home Services 13
Reinsurance Premiums 14
Reinsurance Recoveries 15
Incurred But Not Reported (IBNR) 16
Incentives or Network Risk Retention 17
Total Medical Expenses

12. Managed Care Business Model
Sample FSR – Administrative Expenses
HHSC Managed Care contract costs 1
Salaries, wages, and benefits (excl. bonuses) 2
Bonuses 3
Rent, Lease, or Mortgage Payment for Office Space 4
Utilities (if not incl. in rent), excl. Phone/Telecom 5
Phone / Telecom / Cell phones / T1 / Broadband 6
Equipment Lease or Rent, excl. Phone/Telecom 7
Computer hardware/Software purch., uncapitalized 8
Furniture, Fixtures, and other Equipment Purchased, uncapitalized 9
Maintenance, Repairs, Custodial, and Security 10
Supplies, Postage, Freight, Printing 11
Legal & Prof. Services, incl. External Audit, Tax, Consulting 12
Travel Expenses 13
Marketing, PR, and Outreach (excl. Salaries) 14
Taxes (excl. income taxes & premium taxes) & Licensing 15
Insurance 16
Depreciation & Amortization 17
Other Adminstrative Expenses 18
Subtotal (specified in-house services) 19
Outsourced services (Non-Capitated Arrangements) 20
Outsourced services (Capitated Arrangements) 21
PBM Admin Fees - Fees based on $PMPM 22
PBM Admin Fees - Fees based on transaction volume 23
PBM Fees - Other 24
Corporate Allocations 25
Total Administrative Expenses

13. Managed Care Business Model
Important Links
Uniform Managed Care Manual
Medicaid Home Page
Medicaid/CHIP Contracts Page
Rate Setting Page

14. Managed Care Business Model
Questions?

15. Managed Care Business Model
Thanks for your attention Rich Stebbins, Director – Financial Reporting HHSC –Medicaid/CHIP Division