1. Commonwealth of Massachusetts Executive Office of Health and Human Services Chapter 257 of the Acts of 2008 DYS Provider Information & Dialogue Session April 26, 2010 www.mass.gov/hhs/chapter257

2. 2 Agenda Introductions and Overview Purchase of Service Context Chapter 257 Implementation Infrastructure Service Classification System Setting Rational Rates Contract Reform

3. 3 The Purchase of Service System Accounts for Nearly 10% of the Commonwealth Budget FY10 Budget: $27.4 B Other Accounts EOHHS $13.9B EOHHS FY10 Estimated Budget: $13.9B Represents just over 50% of state budget Medicaid accounts for just over 66% of EOHHS’ budget The remaining 34% of EOHHS’ budget is roughly split between: Purchase of Service (POS) - direct care services purchased from approximately 1,200 community partners Agency Operations – services provided directly by state governmental entities. MassHealth [Medicaid] $9.2B Purchase of Service $2.4B Agency Operations $2.3B

4. 4 POS Spending Varies Across EOHHS Departments * Includes Object Codes M03, M04, and MM3 (excludes most payments made to individuals and providers with spending less than $5,000) ‡ ”Other” includes Chelsea Soldier’s Home, MCB, MCD, MRC, ORI, VET Source: MMARS Encumbrance Management and Vendor Payments, 04/10 FY09 Approximate Provider Count FY10 Estimated POS Budget by Department DDS – $879.8M DMH – $375.4M ELD – $331.4M DCF – $335.9M DPH – $283.0M DYS – $86.8M Other ‡ – $82.6M FY10 Estimated POS Budget $2.4B* DTA – $21.0M 263 65 339 165 346 161 28 346

5. 5 Agenda Introductions and Overview Purchase of Service Context Chapter 257 Implementation Infrastructure Service Classification System Setting Rational Rates Contract Reform

6. 6 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. FY10FY11FY12FY13 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) ~ $215M~ $645M

7. 7 Chapter 257 Requires Successful Achievement of Three Strategies Number of different POS contracts Cost reimbursement contracts 3. Reform Contracting Use of Master Agreements Contracts w/ performance features Contracts shared across departments 1. Create Service Classes Establish new cross- Secretariat organizational and governance structure Develop Service Class structure to group similar services & programs Build out process & technology to manage codes & classes Align activity codes to Service Classes Enabling Rate analysis and establishment Contract consolidation across agencies Improved reporting 2. Develop Reimbursement Methodology & Rates Maximize FY09 Develop Implementation Plan Develop Service Classes Cumulative Statutory Requirement Service Value FY10 10% of System $215M FY11 40% of System $860M FY12 70% of System $1.50B FY13 100% of System $2.15B Minimize

8. 8 The Chapter 257 Implementation Plan is Organized by Newly Defined POS Service Classes Why were Service Classes Created? DHCFP cannot meet the mandated schedule by setting specific rates for all of the individually procured services purchased throughout the POS system Rate setting and procurement reform require an overall organizing structure for the classification of POS services There were no Secretariat standards for categorizing or describing similar services within or across Departments. The use and functionality of MMARS codes vary widely from Department to Department– as a result, it is very difficult to report on the performance, costs, and volume of services delivered across EOHHS. How were Service Classes Created? Departments formed POS Service Classification Working Groups Working groups met with the EOHHS POS Policy Office over the course of three months Current POS Services Reviewed, Described, and Catalogued EOHHS Suggested Service Groupings Departments Verified / Modified and Developed Definitions Current MMARS Codes were “Mapped” to New Service Classes

9. 9 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: 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 (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

10. 10 Reduced contract complexity and redundancy Greater amendment flexibility Improved capacity for rate management Streamlined, centrally-managed procurement cycles 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 In Many Cases, Contract Reform is Necessary to Implement Chapter 257 TodayVision for FY13 Purchasing Department Providers Dept Providers Secretariat Master Agreements By Service Class DHCFP rate schedules Secretariat Master Agreements Panel of qualified providers Departments purchase via rate agreements

11. 11 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

12. 12 Discussion Questions?

13. 13 Appendix: DYS Services Under Chapter 257 Implementation Service Class Activity Code Activity Total Activity Spending % Mapped to Service Class Spending Mapped to Service Class Year 2 Youth Intermediate-Term Stabilization 2500SECURE TREATMENT $11,775,661100% $11,775,661 2503GROUP CARE $18,687,243100% $18,687,243 2505REVOCATION $3,170,238100% $3,170,238 2512LONG TERM GROUP CARE $5,037,680100% $5,037,680 2516TRANS. INDEP. LIVING PROGRAM $1,010,316100% $1,010,316 Year 3 Education, Vocational, and Skills Training 2508EDUCATIONAL SERVICES $11,863,46092% $10,914,383 Educational Services 2508EDUCATIONAL SERVICES $11,863,4608% $949,077 Youth Short-Term Stabilization and Emergency Placement 2501SECURE DETENTION $9,793,958100% $9,793,958 2502ASSESSMENT $11,154,547100% $11,154,547 Year 4 Capacity Building2517SUPPORT SERVICES $8,210,436100% $8,210,436 Clinical and Medical Counseling, Therapy and Treatment 2513MEDICAL SVS $4,248,49434% $1,444,488 Clinical and Medical Diagnostics2513MEDICAL SVS $4,248,49433% $1,402,003 Direct Prevention, Outreach, and Stabilization Services 2514DAY REPORTING CENTER $5,887,906100% $5,887,906 Individual Primary Care and Wellness 2513MEDICAL SVS $4,248,49433% $1,402,003

14. Commonwealth of Massachusetts Executive Office of Health and Human Services Chapter 257 of the Acts of 2008 Provider Information & Dialogue Session: DYS Youth Intermediate-Term Stabilization Service Class April 26, 2010 www.mass.gov/hhs/chapter257

15. 15 Agenda Overview of Youth Intermediate-Term Stabilization Service Class Definition and Overview of Programs DYS Procurement Approach Timeline for Implementation Review of Cost Analysis to Date Discussion: Understanding Cost Drivers and Variations Among DYS Residential Programs Discussion Re-cap

16. 16 Previous View: Youth Intermediate-Term Stabilization Service Class Definition: Programs that provide a child, adolescent, or young adult a place of overnight housing in a specialized residential or hospital setting for a limited period of time to promote stabilization and transition to a less restrictive setting, to a permanent family home, to independence, or to another adult serving program. Department Activity CodeProgram Name Projected FY10 Spending * DCF FNGHFamily Networks Group Homes$ 88,870,785 FNCOResidential Schools**$ 87,755,729 RESGTeen Living Program$ 9,104,970 RES0Res Service$ 1,779,430 FNSTFamily Networks STARR$ 40,250,309 DMH 3079Child/Adol Residential Service$ 22,745,098 3080Intensive Residential Treatment$ 15,256,911 3081Clinically Intensive Resid Treatment$ 1,936,286 3075Individualized Support, Residential**$ 4,318,145 DPH3470Youth Residential$ 3,098,078 DYS 2503Group Care$ 18,687,243 2500Secure Treatment$ 11,775,661 2512Long Term Group Care$ 5,037,680 2516Trans. Indep. Living Program$ 1,010,316 2505Revocation$ 3,170,238 Total Projected FY10 Spending$ 314,796,879 * Potential 9c implications for DCF, DMH, and DPH not reflected in projected spend amount ** Through 808 CMR 1.00, the Operational Service Division (OSD) maintains statutory authority to set tuition prices for Chapter 766 approved private special education programs. Although the Chapter 766 components of DCF’s FNCO and DMH’s 3075 will be included in the procurement for this Service Class, the DHCFP POS Pricing Unit will not establish rates for these services.

17. 17 Current View: Youth Intermediate-Term Stabilization Service Class Definition: Programs that provide a child, adolescent, or young adult a place of overnight housing in a specialized residential or hospital setting for a limited period of time to promote stabilization and transition to a less restrictive setting, to a permanent family home, to independence, or to another adult serving program. DepartmentActivity CodeProgram NameProjected FY10 Spending DYS 2503Group Care$ 18,687,243 2500Secure Treatment$ 11,775,661 2512Long Term Group Care$ 5,037,680 2516Trans. Indep. Living Program$ 1,010,316 2505Revocation$ 3,170,238 Total Projected FY10 Spending$ 39,681,138

18. 18 Planned Procurement Approach and Timeline for Implementation In the coming months, DYS will be re-procuring all contracts under the Secure Treatment Program for contracts effective on or before January 1, 2011 The remaining four programs under the Youth Intermediate-Term Stabilization service class contain contract language that will allow them to adopt new rates by October 2010 DYS will develop a priority list for the re-procurement of the remaining programs with a focus on the oldest contracts

19. 19 Agenda Overview of Youth Intermediate-Term Stabilization Service Class Definition and Overview of Programs DYS Procurement Approach Timeline for Implementation Review of Cost Analysis to Date Discussion: Understanding Cost Drivers and Variations Among DYS Residential Programs Discussion Re-cap

20. 20 Daily program rates range from about $217 to $341. Daily rates were calculated from FY2010 contract budget data for the Secure Treatment, Group Care, Revocation and Transitional Living programs.* *An Independent Living program is not included in the above graph, as it has significant programmatic differences from the other residential programs.

21. 21 Non-specialized direct care salaries account for about 35% of program expenses.

22. 22 Staffing costs explain about 65% of the overall variation in daily rates. Note: The chart does not include teacher or education coordinator salaries, as those will be considered separately in the data analysis. Staffing costs include salaries for all direct care positions, as well as consultants and contracted direct care costs.

23. 23 HCFP will specify benchmark salary amounts and staffing intensities to meet the range of DYS program requirements. QUESTION: 1. Are you able to pay your direct care and clinical staff salaries comparable to staff salaries in residential programs purchased by other Departments that serve similar level of resident acuity? 2. Are there geographical differences in salary demands for Human Service Provider Programs? Averages and Ranges of Salaries by Staffing Category

24. 24 HCFP will specify benchmark salary amounts and staffing intensities to meet the range of DYS program requirements. Averages and Ranges of FTE Ratios by Staffing Category QUESTIONS: 1. Are there other factors that drive the variation in FTE ratios aside from the residents’ needs, security level, and the physical layout of a program? 2. Are there compromises in level, type or quality of services provided in DYS programs due to staffing limitations? 3. Should staff-to-client ratios vary by program model to reflect any set differences between program models regarding the factors listed above? 4. Are there additional staffing requirements specific to more/less secure settings and functions in DYS programs? 5. How do the current staff-to-client ratios compare to residential programs purchased by other Departments that serve similar level of resident acuity? 6. Are there staffing requirements – number, type, skills, function - specific to DYS programs not found in residential programs purchased by other Departments that serve similar level of resident acuity? 7. Are there differences in the specific skill sets and functions represented by specific staff titles/assignments across human service agencies? 8. DYS assumes that a program will require relief staffing levels equivalent to 14% of their full time FTEs. How does this percentage play out in reality? Why might it vary from program to program? 9. Are there staffing/cost drivers not accounted for in the current DYS rate structure? Specialists, medical, transportation, specialized consulting services, etc.?

25. 25 The percentage of tax and fringe benefits to salary costs varies widely across programs. QUESTION: 1. Has the cost of fringe benefits increased beyond the levels reported in FY10 contracts? What drives the variation in the percentage of tax and fringe?

26. 26 Occupancy costs vary significantly by ownership status. Occupancy Unit Cost $0 $10 $20 $30 $40 $50 $60 $70 $80 0510152025 State OwnedProvider OwnedLeased There are significant differences in average occupancy unit costs based on the provider's ownership status.

27. 27 Occupancy costs vary significantly by ownership status. HCFP will set rates that account for the different occupancy costs a provider faces depending on their ownership status. HCFP is currently reviewing whether or not there should be regional adjustments to occupancy costs as well. AVERAGE OCCUPANCY UNIT COST BY OWNERSHIP STATUS Provider Leased$40.34 Provider Owned$17.43 State Owned$6.32 QUESTION: 1. Do you have any additional information that would be helpful in explaining the variation in occupancy costs among the programs (building age, capacity, etc)?

28. 28 HCFP is currently reviewing whether or not there should be capacity adjustments to the schedule of daily rates as well. QUESTIONS: 1. Does the capacity of a program, specifically greater or less than 20 beds, have an impact on cost? 2. Should staff-to-client ratios differ based on capacity? Should there be a staffing minimum? Does it vary by program security/function? 3. Are there other cost drivers not accounted for above?

29. 29 Understanding DYS Youth Intermediate-Term Residential Services The following are discussion topics that will help facilitate smaller discussion groups: Staffing Levels Are there other factors that drive the variation in FTE ratios aside from the residents’ needs, security level, and the physical layout of a program? Are there compromises in level, type or quality of services provided in DYS programs due to staffing limitations? Should staff-to-client ratios vary by program model to reflect any set differences between program models regarding the factors listed above? Are there additional staffing requirements specific to more/less secure settings and functions in DYS programs? How do the current staff-to-client ratios compare to residential programs purchased by other Departments that serve similar level of resident acuity? Are there staffing requirements – number, type, skills, function - specific to DYS programs not found in residential programs purchased by other Departments that serve similar level of resident acuity? Are there differences in the specific skill sets and functions represented by specific staff titles/assignments across human service agencies? DYS assumes that a program will require relief staffing levels equivalent to 14% of their full time FTEs. How does this percentage play out in reality? Why might it vary from program to program? Are there staffing/cost drivers not accounted for in the current DYS rate structure? Specialists, medical, transportation, specialized consulting services, etc.?

30. 30 Understanding DYS Youth Intermediate-Term Residential Services Average Clinical and Direct Care Salary Costs Are you able to pay your direct care and clinical staff salaries comparable to staff salaries in residential programs purchased by other Departments that serve similar level of resident acuity? Has the cost of fringe benefits increased beyond the levels reported in FY10 contracts? What drives the variation in the percentage of tax and fringe? Are there geographical differences in salary demands for Human Service Provider Programs? Occupancy Do you have any additional information that would be helpful in explaining the variation in occupancy costs among the programs (building age, capacity, etc)? Capacity Does the capacity of a program, specifically greater or less than 20 beds, have an impact on cost? Should staff-to-client ratios differ based on capacity? Should there be a staffing minimum? Does it vary by program security/function? Other Are there other cost drivers not accounted for above?

31. 31 Agenda Overview of Youth Intermediate-Term Stabilization Service Class Definition and Overview of Programs DYS Procurement Approach Timeline for Implementation Review of Cost Analysis to Date Discussion: Understanding Cost Drivers and Variations Among DYS Residential Programs Discussion Re-cap