Chapter 257 of the Acts of 2008 Provider Information and Dialogue Session: Adult Long Term Care

Commonwealth of MassachusettsExecutive Office of Health and Human Services

Chapter 257 of the Acts of 2008 Provider Information and Dialogue Session:

Adult Long Term Care

February 29, 2011 www.mass.gov/hhs/chapter257

[email protected]

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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

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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 2012 Jan 2013 Jan 2014

Statutory Requirement: Percent of POS System with Regulated Rates 40% 30% 30%Spending Base Associated with Statutory Percentage (based on current projection of $2.278B POS Baseline to be implemented) ~ $880M ~ $660M ~ $660M

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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 EfficiencySimplification and improved

coordination of administrative processes for agencies and providers

More resources directed toward client activities

Imm

edia

te T

erm

Nea

r Ter

mLo

ng T

erm 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

30% of system

~$880M

~$660M

~$660M

Rates to be reviewed every two years

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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

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• 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 FY15Purchasing Department

Purchasing Department

Purchasing Department

Purchasing Department

Purchasing Department

Purchasing Department

Providers

Dept

Dept

Dept

Dept

Dept

Dept

Dept

Providers

Secretariat or Department

Master Agreements

• By Service Class

• DHCFP rate schedules

• Panel of qualified providers

• Departments purchase via rate agreements

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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

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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.

Service Class Agency Activity Code Program Name

Total Projected Program

Spending ~

MCB 2143 RESIDENTIAL/DAY PROG. - SR 8,489,639$ DDS 3161 BLANKET RESIDENTIAL 2,420,000$ DDS 3153 24 HOUR RESIDENTIAL SERVICES 578,610,000$ MRC 2242 TBI Residential 5,710,212$ MRC 2245 Rolland Waiver Residential 1,305,202$ MRC 2247 Rolland Residential 4,004,604$ MRC 2226 SHIP - RESIDENTIAL 7,439,251$

607,978,908$

Adult Long-Term Care

Total Spending

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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

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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.

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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

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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, 2012.

• UFR, if needed to enrich data analysis of specific cost elements.

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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

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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

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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~$100 1 0.43%

$101~$200 16 6.87%

$201~$300 166 71.24%

$301~$400 41 17.60%

$401~$500 9 3.86%

Above $500 0 0.00%

Total 233 100%

AVG: $268.00

MRC # of Data

% of total Data Point

$0~$100 2 1.32%

$101~$200 5 3.31%

$201~$300 23 15.23%

$301~$400 42 27.81%

$401~$500 49 32.45%

Above $500 30 19.87%

Total 151 100%

AVG: $400.10

DDS Unit Cost Data Distribution MRC Unit Cost Data Distribution

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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

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Major Cost Driver - Staffing

• There is a high level of correlation between the staff-per-unit and the daily rate

• R2 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.

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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.

•R2 is .4889

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Transportation Cost

• Transportation costs do not explain much variation in rates

•R2 is .1086

• Transportation costs include Staff Mileage/Travel, Client Transportation, Vehicle Expenses, and Vehicle Depreciation.

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Occupancy Cost

• Variation in Occupancy costs explain some of the variation in unit cost but the relationship is modest.

•R2 is .4073

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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)

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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 IndividualsIntervention

Model2-3 4-5 6+

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.00++ $Y.00++ $Z.00++

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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?

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Draft Pricing Structure (cont’d)

Model Budget - Basic Services (Capacity Level 2-3)Beds: 3 Bed Days: 1,095    FTE ExpenseManagement 0.2House Manager 1.00Direct Care I 1.00Direct Care II 1.00Relief XX% X.XX

 Total Program Staff 7.15 Tax and Fringe XX.xx% Total Compensation     $Expenses Unit CostOccupancy $ XX.00 $ XX,XXXOther Expenses $ XX.00 $ XX,XXXFood $ XX.00 $ XX,XXXTransportation $ XX.00 $ XX,XXXDirect Admin Expenses $ XX.00 $ XX,XXX

$ XXX,XXX

Total Reimb excl M&G     $ XXX,XXX.XX

Admin. Allocation XX.xx% $ XX,XXX

TOTAL     $ XXX,XXX

CAF: X.xx% $ XXX,XXX

Rate with CAF

RATE: $ XXX.XX $ XXX.xx Utilization Rate: XX%$ XXX.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

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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

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Fall 2012 Summer 2013Winter 2013Summer 2012Winter/Spring 2012

Procurement Process

Department Service Design Finalized and Rate Development

Executive Sign-Off EO 485 to ANF Public Hearing

Rates Adopted Rates Effective

Provider Sessions and Feedback

• 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

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Questions/Feedback

[email protected]

Or Visit the Chapter 257 Website:

www.mass.gov/hhs/chapter257