Partnership HealthPlan of California Finance Committee Meeting Agenda August 21, 2019 | 8:00 a.m. to 9:30 a.m. Held at PHC’s Southeast Regional Office at 4665 Business Center Drive, Fairfield, CA 94534 (Board Room – 3 rd Floor) Video Conference Location PHC’s Southwest Regional Office at 495 Tesconi Circle, Santa Rosa, CA 95401, PHC’s Northwest Regional Office at 1036 5 th Street, Eureka, CA 95501, PHC’s Northeast Regional Office at 2525 Airpark, Redding, CA 96001, Yolo County Health and Human Services Agency at 137 N. Cottonwood Street, Suite 2500, Woodland, CA 95695 Finance Committee Members: Dave Jones, Chair, Dick Fogg, Letty Garza, Randall Hempling, Karen Larsen, Viola Lujan, Kathryn Powell, and Nancy Starck I. Agenda Items Lead Page # Time 1. Agenda Dave Jones, Chair 1 8:00 2. Finance Committee Minutes – June 19, 2019 - Decision Dave Jones, Chair 2 3. Commissioner Comments At this time, committee members may provide comments and announcements. Commissioners -- 4. Public Comments At this time, members of the public may address the committee on any non-agenda item of interest to the public that is within the subject matter jurisdiction of the committee. There will also be an opportunity to address the committee on a scheduled agenda item during the committee's consideration of that item. Speakers will be limited to three (3) minutes. Public -- II. New Business 1. CEO’s Health Plan Update – Information Liz Gibboney 8 2. Progress Report – New Building Expenditures - Information Patti McFarland -- 3. Wellness & Recovery Update – Information Margaret Kisliuk -- 4. Finance Department Update/Budgeting and Value Based Purchasing Priorities – Discussion Liz Gibboney/ Jeff Ingram / Patti McFarland 9 5. Approve May to June 2019 Metrics and Financials – Decision Patti McFarland 13 III. Closed Session 1. Closed Session: Action Pursuant to Government Code § 54957(b) – Personnel Exception (Information/Action) Liz Gibboney / Patti McFarland / Jeff Ingram -- IV. Adjournment 9:30 Government Code §54957.5 requires that public records related to items on the open session agenda for a regular finance meeting be made available for public inspection. Records distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all members, or a majority of the members of the committee. The Finance Committee has designated the Administrative Assistant to the CFO as the contact for Partnership HealthPlan of California located at 4665 Business Center Drive, Fairfield, CA 94534, for the purpose of making those public records available for inspection. The Finance Committee Meeting Agenda and supporting documentation is available for review from 8:00 AM to 5:00 PM, Monday through Friday at all PHC regional offices (see locations above). It can also be found online at www.partnershiphp.org. PHC meeting rooms are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation (including auxiliary aids or services) to participate in this meeting, or who have a disability and wish to request an alternative format for the agenda, meeting notice, agenda packet or other writings that may be distributed at the meeting, should contact the Administrative Assistant to the CFO at least two (2) working days before the meeting at (707) 863- 4207 or by email at [email protected]. Notification in advance of the meeting will enable the Administrative Assistant to make reasonable arrangements to ensure accessibility to this meeting and to materials related to it. This agenda contains a brief description of each item to be considered. Except as provided by law, no action shall be taken on any item not appearing on the agenda. Finance Committee Packet, 082119: Page 1 of 31
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Partnership HealthPlan of California
Finance Committee Meeting Agenda
August 21, 2019 | 8:00 a.m. to 9:30 a.m.
Held at PHC’s Southeast Regional Office at 4665 Business Center Drive, Fairfield, CA 94534
(Board Room – 3rd Floor)
Video Conference Location
PHC’s Southwest Regional Office at 495 Tesconi Circle, Santa Rosa, CA 95401,
PHC’s Northwest Regional Office at 1036 5th Street, Eureka, CA 95501,
PHC’s Northeast Regional Office at 2525 Airpark, Redding, CA 96001,
Yolo County Health and Human Services Agency at 137 N. Cottonwood Street, Suite 2500, Woodland, CA 95695
Finance Committee Members: Dave Jones, Chair, Dick Fogg, Letty Garza, Randall Hempling, Karen Larsen, Viola Lujan, Kathryn
Powell, and Nancy Starck
I. Agenda Items Lead Page # Time
1. Agenda Dave Jones, Chair 1 8:00
2. Finance Committee Minutes – June 19, 2019 - Decision Dave Jones, Chair 2
3. Commissioner Comments
At this time, committee members may provide comments and announcements.
Commissioners --
4. Public Comments
At this time, members of the public may address the committee on any non-agenda
item of interest to the public that is within the subject matter jurisdiction of the
committee. There will also be an opportunity to address the committee on a
scheduled agenda item during the committee's consideration of that item.
Speakers will be limited to three (3) minutes.
Public --
II. New Business
1. CEO’s Health Plan Update – Information Liz Gibboney 8
2. Progress Report – New Building Expenditures - Information Patti McFarland --
3. Wellness & Recovery Update – Information Margaret Kisliuk --
4. Finance Department Update/Budgeting and Value Based Purchasing Priorities –
Discussion
Liz Gibboney/
Jeff Ingram /
Patti McFarland 9
5. Approve May to June 2019 Metrics and Financials – Decision Patti McFarland 13
III. Closed Session
1. Closed Session: Action Pursuant to Government Code § 54957(b) – Personnel
Exception (Information/Action)
Liz Gibboney /
Patti McFarland /
Jeff Ingram --
IV. Adjournment 9:30
Government Code §54957.5 requires that public records related to items on the open session agenda for a regular finance meeting be made available for public inspection. Records distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all members, or a majority of the
members of the committee. The Finance Committee has designated the Administrative Assistant to the CFO as the contact for Partnership HealthPlan of California located
at 4665 Business Center Drive, Fairfield, CA 94534, for the purpose of making those public records available for inspection. The Finance Committee Meeting Agenda and
supporting documentation is available for review from 8:00 AM to 5:00 PM, Monday through Friday at all PHC regional offices (see locations above). It can also be found
online at www.partnershiphp.org.
PHC meeting rooms are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation (including
auxiliary aids or services) to participate in this meeting, or who have a disability and wish to request an alternative format for the agenda, meeting notice, agenda packet or
other writings that may be distributed at the meeting, should contact the Administrative Assistant to the CFO at least two (2) working days before the meeting at (707) 863-
4207 or by email at [email protected]. Notification in advance of the meeting will enable the Administrative Assistant to make reasonable arrangements to
ensure accessibility to this meeting and to materials related to it.
This agenda contains a brief description of each item to be considered. Except as provided by law, no action shall be taken on any item not appearing on the agenda.
Finance Committee Packet, 082119: Page 1 of 31
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HEALTHPLAN OF CALIFORNIA MEETING MINUTES
Committee: Finance Committee Date/Time: June 19, 2019 / 8:00 – 9:30 AM Members Present: Dave Jones –Chairperson, Richard Fogg, Randall Hempling, Viola Lujan, Karen Larsen, Kathryn Powell, Nancy Starck* Members Absent: Letty Garza Staff Present: Liz Gibboney, Patti McFarland, Sonja Bjork, Mary Kerlin, Kirt Kemp, Wendell Coats, Jeff Ingram, Michelle Rollins, Marisa Dominguez, Melanie Lam,
Margaret Kisliuk, Wendi West*, Danielle Ogren, Kamille Gholson, Olevia O’Donovan Staff Absent: Amy Turnipseed, Diane Walton Guests: Joseph D’Angina (Woodland Hospital)
* Attendance via Video Conference
DECISION AGENDA ITEMS DISCUSSION / CONCLUSIONS RECOMMENDATIONS / ACTION TARGET DATE DATE RESOLVED
Approval of May 15, 2019 Meeting Minutes
At 8:02am, Dave Jones, Chairperson, confirmed a quorum, stated there are no changes to the agenda; May 15, 2019, meeting minutes was presented for approval.
Action: Mr. Randall Hempling motioned to approve and Ms. Kathryn Powell seconded the motion.
All voted yes to approve.
AGENDA CHANGES AND DELETIONS
None
NEW BUSINESS
CEO’s Health Plan Update
Presenter: Liz Gibboney, CEO
Ms. Gibboney introduced Ms. Karen Powell via video conferencing in Woodland.
Pediatric Services/EPSDT Audit Ms. Gibboney stated that there are many requirements coming from the State, regarding the pediatric audit and the subsequent recommendations, as part of the continued effort to make changes in response to retroactive “new bar” of 50% for MPL. DHCS also announced additional quality measures under Prop 56, however some are not in alignment with our existing QIP. Currently, PHC is considering changes to the PCP QIP, which was already discussed at the Physician Advisory Committee (PAC) meeting earlier this month. PHC will also convene with primary providers in lower performing geographies towards January 2020.
Governor’s Executive Order on Pharmacy There is trailer bill language being pushed through on the pharmacy piece that requires the administration to be
Action: Information only
Finance Committee Packet, 082119: Page 2 of 31
transparent on the changes, which will have major impacts on the providers and members. Stakeholders are asking for clarity on what pharmaceuticals are included/excluded.
State Budget Status The State approved the budget to include the undocumented young adults, ages 19-26, effective January 2020.
Wellness and Recovery PHC is prepared for the onsite “Readiness Review during the 2nd week of July, and working with DHCS on the documents as required.
Federal Issues There are some changes to the 42 CFR Part 2, on substance abuse regulations and data sharing. The CFR regulations are outdated. Healthcare associations and lobbyists, along with the American Medical Associations (AMA) are advocating for the changes that will offer better coordination of patient care.
In response to Mr. Fogg, Ms. Gibboney stated that the rates will be covered in another part of the meeting.
Social Determinants Convening PHC hosted a Social Determinants conference in early June. Part of the discussion was regarding the concept of bringing in Whole Person Care to health plans. Jacey Cooper of DHCS was the speaker and provided updates to the health plans, including a presentation on “Future of MediCal”. She is leading the waiver planning at DHCS.
NCQA Accreditation & HEDIS Score Improvement Strategy PHC has completed submittal of Interim Survey requirements on June 4, 2019. We will know more in two weeks, with the preliminary report due back in mid-July.
Mr. Richard Fogg asked about updates on the rates.
Mr. Jones asked if there were any more questions.
No additional question was given.
Progress Report – New Building Expenditures
Presenter: Patti McFarland, CFO
Ms. Patti McFarland stated that there are small items that are still in progress, for example, speed bumps and the possible 3rd floor build-out. However, potential tenant requested the space be kept open, as they plan to place cubicles or work stations only; therefore, no additional build-out will be done. As of this report the budget has a surplus of $7.6 million, largely due in part from the hard work of the general contractor, by closely monitoring the subcontractors and recommending changes and clarifying
Action: Information only
Finance Committee Packet, 082119: Page 3 of 31
unnecessary items. For example, the suggested balcony on the top floor was more of a risk due to high winds. It is very rare for a building construction project to be under budget, especially starting from scratch. The final project expenditures will be given, including the capital on the 3rd floor, by the end of the year.
In response, Ms. McFarland stated that the potential tenant would use the site for disaster recovery.
Mr. Hempling asked about the building codes for the tenant.
Mr. Jones asked if there are other questions.
No other question. Wellness & Recovery Program Update
Presenter: Margaret Kisliuk
Ms. Margaret Kisliuk stated that PHC was in another conference call with DHCS, and is awaiting approval from CMS The proposed mandate will have the State contract with the counties, then the counties delegate to PHC. PHC will need to set-up and configure internally on how to be compliant with State regulations. Inland Empire HealthPlan is looking into a similar model, and expects it to be a complicated funding process.
Action: Information only
Mr. Jones ask if there are other questions.
No other question. Board Designated Reserve Policy, ADM-30
Presenter: Patti McFarland, CFO
This resolution approves the recommended changes to the policy to increase PHC’s allocation to an infrastructure fund.
Ms. McFarland presented the minor changes to the policy.
Decision: No questions were asked. Mr. Fogg motioned for approval; seconded by Mr. Hempling
All voted yes to approve.
Mr. Fogg recommended to either re-define or remove the word “owner” under Section III.A – Definitions, Tangible Net Equity.
Capital Assets Policy, FIN-700-201
Presenter: Patti McFarland, CFO
This resolution approves the recommended changes to the policy language under Section VII.B, for recording acquisition of capital assets.
Ms. McFarland presented the minor changes to the policy by adding language, with actual cost, instead of purchase cost, and adding to the definition. There are no changes to the procedure, just clarifying the language.
Decision: No questions were asked. Mr. Fogg motioned for approval; seconded by Ms. Powell.
All voted yes to approve.
Finance Committee Packet, 082119: Page 4 of 31
Final Budget for FY 2019-2020
Presenter: Patti McFarland, CFO
This resolution approves PHC’s final budget for our core business.
Ms. McFarland presented the final budget from page 3, as all-encompassing with highlights, rather than a stand-alone, as historically been done and presented. This is the final stage which took all elements, trends, and changes into the budget, including version control.
In response to Mr. Fogg, Ms. McFarland stated that the State can do so, and PHC is prepared to provide data on a granular level, should the State require.
Per Ms. McFarland, it is possible, as some managed care plans cover the rural areas it is difficult to encourage members to seek medical help. The rural areas are the ones that bring down the HEDIS scores.
Ms. McFarland stated that the deficit is .3%, not even a full 1%, to keep in perspective. A lot of rigor went into the budget preparation that started in January 2019.
In response, Ms. McFarland stated that the SUR can be estimated and have the $47M earmarked for behavioral health
Capital Projects: Some items are carry-over from the prior year. There isn’t a material increase from prior years, except for the big concentration on the new claims system, including the implementation resources.
In response, Ms. McFarland stated that the Board approves the capital projects. Based on the approved budget, the Executive team decides which capital projects will go forward based on the organization’s need. In some cases, projects will be placed on hold given other priorities. For projects that meet a certain cost threshold, such as those related to IT, the purchase may go out to bid. In some instances, they may not necessarily be the lowest bid/cost, but PHC also looks at strategic benefit, resources/ staffing, and technology.
Per Ms. McFarland, Facilities are doing very well at the maintenance piece, where the staff do the maintenance
Decision: Mr. Hempling moved to approve and Mr. Fogg, seconded the motion.
All voted yes, to approve the budget.
Mr. Fogg asked if the State is reasonable to roll-out MCO into one regional rate.
Ms. Kathryn Powell asked if it is possible for PHC not to be rolled into a single regional rate.
Ms. Lujan asked what percentage is the $9M deficit of the budget.
Mr. Fogg asked if the SUR can be called the Unrestricted Reserves.
Mr. Fogg asked who approves the capital expenses.
Mr. Hempling asked if PHC is staying within budget of its capital needs.
Finance Committee Packet, 082119: Page 5 of 31
internally, which gives us a lot of savings, and are budgeted ahead of time. There could be some challenges from the tariffs, if some of our items or equipment are affected, for example, IT/technology industry. Fortunately, the new building construction has been completed. Mr. Jones asked if there are any more
questions.
No additional questions. Year in Review: Financial Management Changes in FY 2018-2019
Presenter: Liz Gibboney, CEO; Patti McFarland, CFO; Jeff Ingram, Director of Financial Planning & Analytics
Ms. Gibboney stated that there were modifications to the Finance Department due to new processes being implemented, mandates from the State, and membership decline.
Ms. McFarland added that the department was reorganized considering the staffing levels. PHC is changing the focus to more analysis of data and make data retrieval more efficient with collaboration from IT.
The course for the next five years is to be aligned with the State mandates. Staff will implement budget processes and open communications with other departments.
In response, Ms. McFarland stated that PHC goes through an audit about once every month. Finance also created an internal audit position (Dell Coats), with a dotted line to Ms. Gibboney.
Action: Discussion
Mr. Fogg asked how many audits a year PHC goes through.
Approve April 2019 Metrics and Financials
Presenter: Patti McFarland, CFO
Ms. McFarland started with page 35, and stated that for the month ending April 30, 2019, PHC is a little positive. Some are due to the settlements and IBNR adjustments, as well as the increase of $6.0 million in State Capitation Revenue, in comparison to prior month. Other Revenue decreased by $3.2 million, primarily from the previous month’s recording of the administrative component of the 2017/18 IGT program.
In response to Ms. Powell, Jeff Ingram stated that the main driver was the aid code proportions and the split between the State and Federal contributions, which was based off the 17-18 higher medical expansion population.
Decision: Mr. Fogg motioned to approve the April 2019 financials, seconded by Ms. Powell.
All voted yes to approve.
Ms. Karen Powell asked for clarification on why the IGT they received was higher than anticipated.
III. New Business –CLOSED SESSION
Closed Session: Action Pursuant to Government Code § 54956.9 – Existing Litigation
Action: Decision
No action taken. Finance Committee Packet, 082119: Page 6 of 31
Minutes Prepared and Submitted by: Olevia E. O’Donovan and Kamille Gholson Minutes Reviewed and Submitted by: Jeff Ingram
Chairman Signature of Approval_______________________ Date__________________
Closed Session: Action Pursuant to Government Code § 54956.87, Record Exempt; County Health Plan No action taken.
Adjournment Meeting adjourned at approximately 9:48 am.
Finance Committee Packet, 082119: Page 7 of 31
Finance Committee
Report from the Chief Executive Officer
August, 2019
DHCS & Legislative Issues
Governor’s Executive Order on Pharmacy
Wellness & Recovery Program & Youth Opioid Response Grant
Prop 56 Funding Opportunities
General
Public Charge Regulations
ACA Constitutionality/Texas v. US and the 5th Circuit Court
NCQA Accreditation & HEDIS Score Initiatives
FY 19‐20 Team Goals
Finance Committee Packet, 082119: Page 8 of 31
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Summary of Changes: Ongoing Response to PHC Fiscal Challenges Update August 2019
Executive Summary PHC’s Finance Department has been faced with an increasing work load over the previous five years
stemming from rapid expansion, increased oversight from regulators, and an increased demand for
internal support. The increased workload left minimal resources dedicated to innovation, process
improvement, and quality control. Over the past couple of years the Finance Department has worked
diligently to identify risks and begin working through mitigation plans. This has been—and still is—an
ongoing process. The Department has made significant strides in transforming processes and increasing
transparency in operations to help ensure a better fiscal understanding PHC wide. Notably, this year,
Finance has made several structural, process, and workflow changes to help ensure sound fiscal
operations.
Structural, Process, and Workflow Changes Evaluation and Approach The Finance Department worked to formally establish what a “high functioning” department meant.
Through a series of meetings, functional reviews, and goal discussions the department leadership
articulated the following working priorities for the department:
Fosters fiscal stewardship throughout the organization through shared review and responsibility
for asset control and risk management.
Provides timely, reliable, accurate and useful analytics that allow for proactive and informed
decision making/executive action.
Support of shared values: transparency, integrity, collaboration (inter/intra departmental),
Administrative Capacity The Finance Department has made changes to increase overall capacity to meet the evolving
organizational needs. The Finance Department Leaders reviewed the Department’s existing positions
and experience levels to determine the best allocation of responsibilities. From this analysis, certain
open positions were repurposed or eliminated and certain duties for existing positions were re‐
distributed. As a result, the number of full‐time equivalents remained the same from fiscal year 2018‐19
to 2019‐20. However, the overall capacity has improved significantly. As of June 2019, the Finance
Department had ten new hires, providing a varying level of experiences and skill sets to complement
Finance Committee Packet, 082119: Page 9 of 31
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existing staff. As processes are refined and responsibilities change, personnel considerations will be
recommended as needed.
Budget Development For the 2019‐20 fiscal year, the Finance Department designed a completely new budget process for
membership, revenue, and healthcare costs. The new approach utilized a financial model that allowed
for frequent data refreshes in addition to scenario planning. The model allowed for detailed
documentation to track data sources, contributors, and iterations.
As for the administrative budget, to improve the review process of personnel requests, the due date for
the personnel budget was set earlier in the process. The earlier due date allowed the Executive Team
more time to meet with all the directors regarding their requests and to reach a joint conclusion on
what would be the best fit for the organization. A similar process was adopted for the development of
the capital asset budget. Additionally, to further enhance the directors’ understanding of the
administrative budget process, Finance met individually with the directors, conducted group‐training
sessions, and created standing agenda items on the bi‐weekly Ops meeting along with the bi‐monthly
MOR meeting.
The overall annual budget was approached as a departmental initiative with all materials stored on the
internal SharePoint site to maximize transparency. The Finance Department Leadership met on
numerous occasions to review and challenge all elements of the budget to yield a mutually agreed upon
target. The budget presentation to the Finance Committee and Board of Commissioners was also
refreshed to provide a running narrative of risks and opportunities by category. Staff will track the
actual financial performance and continue to keep the Organization and Governing Committees
apprised of favorable and unfavorable budget developments.
Fiscal Monitoring Finance is making strategic use of analytic and documentation tools like Tableau, SharePoint, and others
to support a more rigorous ongoing fiscal monitoring. The primary focus has been around budget
variance, healthcare cost trends, SUR reporting, revenue reconciliation, and cost avoidance.
Budget variance and cost trending are two of the most important functions related to fiscal
monitoring. The Finance Department has designed comprehensive models to track the
healthcare cost trends as well as utilizers against budget assumptions. Early detections of cost
runs can save a health plan millions over a small amount of time. These increases could be
attributable to contract changes, configuration updates, utilization trends, facility mixes, or
overall economic factors.
Improved Strategic Use of Reserves (SUR) accounting: During fiscal year 2017‐18, the Accounting
team worked with department directors to develop a reporting structure that would allow
Finance to report on the financial status of a SUR as needed. As a result, an updated summary
of outstanding SURs is presented to the Finance Committee each month. Additionally, the
Analyst team revised the data collection process for health care cost related SURs processed in
Amisys. The result was a restatement of the Hospital Outpatient Rate Increase, LTC Provider
Finance Committee Packet, 082119: Page 10 of 31
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Rate Increase and Medicare Copays and Deductibles SURs to more accurately reflect the balance
of those SURs.
Revenue reconciliation improvements: The Finance Department has implemented a process to
review the 820 report for data quality issues and reconcile the 820 report to cash receipts on a
monthly basis. We report data quality issues to DHCS as part of this process. The Finance
Department has also identified major issues with the data quality provided by DHCS for the prior
and current periods, incomplete and duplicate entries, and is working with the State to
determine the best solutions to address the data quality issues. With the June 2019 capitation
payment, DHCS changed its systems for the 820 report and is no longer providing invoices that
Finance used to validate and identify data quality issues with the 820 report. Finance now needs
to reevaluate the revenue reconciliation process. As part of this reevaluation process, members
of the department have joined a state wide workgroup, the Electronic Accounting Modular
Interface (EAMI), which consists of representation from all health plans and key representatives
from DHCS. The goal of the workgroup is to work through technical issues and questions with
DHCS so that plans can efficiently and effectively reconcile the 820 report to support their
accounting records. The workgroup has identified and raised numerous issues with DHCS and is
in the process of working through those issues with DHCS. Finance also continues to work with
the IT department to make changes to our EDI process to accommodate these changes and
assist with the reconciliation process.
Quality Control Through the changes made with the Department’s personnel, as indicated above, the Department has been able to have more segregation, additional reviews, and transparency to existing processes. The Department has also made strides in automating manual processes, increasing efficiencies and mitigating risk of errors. The Department plans to continue the process of automation where it makes sense, allowing more resources to be committed to improving the quality of the analytics and other information published by the unit.
In May 2019, a new internal audit and treasury position was added to the department. This new position will provide leadership, direction, and management of all aspects of the internal audit and treasury functions through a systematic and disciplined approach to identify risks, monitor compliance with organization's policies and internal controls, evaluate whether such internal controls/governance practices are working effectively, and educate and train staff. This position will participate with, and support the Chief Financial Officer (CFO) in the continuous assessment process, in the development and maintenance of the Internal Audit Plan and provide oversite of the company's financial activities.
This new position will also provide the Finance Department an independent review of financial and analytic reports that are produced for upper management, board and external users; for accuracy, documentation, and reasonableness.
Communication The Finance Department has worked hard to elevate budget and fiscal communication generally, across
key organizational departments, as well as across intra‐divisional units. For example, the Finance
Department hosts a bi‐monthly Finance meeting, Monthly Operating Reports (MOR), to present findings
Finance Committee Packet, 082119: Page 11 of 31
4
and financial performance to a cross section of key leaders and staff from the Organization. This
meeting allows for an open feedback loop to address concerns Finance may have, but allow for outside
departments to raise issues of their own. Over the last year, staff has also provided fiscal trainings to
outside departments to support a broader fiscal understanding. In addition to the meetings and
trainings, an email inbox was created and shared to allow any and all PHC Staff to contribute ideas,
concerns, and solutions related to financial performance. The inclusion of the broader audience ensures
the Finance Department and Leadership continue to make informed decisions.
Provider Contracting A significant amount of work has been done over the last year to improve PHC’s contracting approach
and process as well as increase value‐based purchasing efforts. Increasingly, the state and federal
government, expect and require certain value‐based purchasing models and programs. For example,
the State recently enacted a required managed care value‐based purchasing program for physicians
related to certain tobacco tax related funding. This new program will provide risk‐based incentive
payments to physicians for certain high‐cost or high‐need populations that meet certain performance on
identified metrics.
During the 2018‐19 fiscal year, PHC worked on a very ambitious team goal to strengthen contracting and
value‐based purchasing to meet our fiscal stewardship and budgetary needs. This included modernizing
contract templates to reflect state requirements, NCQA goals, Quality Improvement Programs (QIP) and
other priorities. It also included re‐vamping the contracting process with greater finance linkage,
supporting documents and analytics, and finally, the development of a conceptual fiscal strategic plan
that outlines PHC’s philosophic approach to risk‐based contracting and fiscal priorities.
Ongoing Work PHC continues to make efforts to evaluate and implement needed improvements to make the
department’s output internally and externally sound. Finance views this as a continuous, iterative
process that will support the evolution of the Organization and industry.
Finance Committee Packet, 082119: Page 12 of 31
FINANCIAL HIGHLIGHTS Of The Partnership HealthPlan Of California For the Period Ending June 30, 2019
Financial Analysis for the Current Period
Total (Deficit) Surplus For the month ending June 30, 2019, PHC reported a surplus of $9.1 million, reducing the year-to-date deficit to $54.6 million. Significant variances are explained below.
Revenue June’s State Capitation Revenue of $234.8 million decreased by $13.0 million in comparison to the prior month, primarily due to a year-to-date adjustment provided by DHCS booked in May 2019.
Healthcare Costs Total Healthcare Costs are lower than budget by $10.1 million for the month, and higher by $41.9 million year-to-date. Notable variances are as follows:
Physician Services is unfavorable to budget $6.2 million year-to-date, which is primarily attributable to higher incurred expenses than anticipated.
Total Inpatient Hospital has an unfavorable year-to-date variance of roughly $15.0 million. Partnership is actively engaged in contract negotiations with various network hospitals in addition to closely monitoring expense development.
Long term care is favorable to budget by $2.4 million for the month and $4.8 million year-to-date. The favorable variance is due to timing of budget expectations related to retro-rate adjustments.
Pharmacy remains unfavorable year-to-date with a variance of $13.9 million, attributable to higher utilization along with higher than anticipated costs related to the renewed MedImpact contract. As previously discussed, PHC has been working with the PBM in an effort to restructure the contract to receive more favorable financial outcomes.
Capitated Ancillary Services has a year-to-date favorable variance of $2.1 million which is attributable to favorable contract development related to vision services. Non-Capitated Ancillary Services is over budget $14.2 million year-to-date due to a number of accrued liability true-ups primarily for outpatient services. The Transportation expense within Other Medical remains over budget on a year-to-date basis and now includes a ground emergent medical transportation program (GEMT) component that was released with the 2018-19 final rates.
Administrative Costs Total administrative costs are under budget by $18.1 million for the year. The larger year-to-date variances are from Employee Costs, which are due to open positions that were budgeted for but were not filled during the year. Occupancy Costs also contributed to the variance as several budgeted capital items were not purchased during the year, which resulted in lower depreciation costs; many of these budgeted capital purchases will be carried over into the following fiscal year.
Finance Committee Packet, 082119: Page 13 of 31
FINANCIAL HIGHLIGHTS Of The Partnership HealthPlan Of California For the Period Ending June 30, 2019
Balance Sheet Total Cash & Cash Equivalents increased by $29.3 million for the month. The increase is primarily related to the annual QIP payments disbursed in May for $27.7 million.
The Strategic Use of Reserve balance decreased by $600 thousand for the month bringing the balance to $60.6 million. The SUR Project initiatives that contribute to this decrease for the month include Access projects for $353 thousand, Community Partnership projects for $258 thousand, and other projects for $28 thousand. In order to not understate the balance for uncompleted SURs, the SUR amounts that have exceeded their original budget have been excluded in calculating the ending balance. See reconciliation of the unspent SUR to date on the Strategic Use of Reserves Update schedule.
General Statistics
Membership Membership had a net decrease of 2,412 members for the month. Medi-Cal Rate Regions 1 and 2 had net membership decreases of 1,392 and 1,020, respectively.
Current Ratio/Required Reserves (Excluding Capital Assets) Current Ratio Including Required Reserves 1.97 Current Ratio Excluding Required Reserves: 1.24 Required Reserves: $481,630,143 Total Fund Balance: $604,225,818
Days of Cash on Hand Including Required Reserves: 88.05 Excluding Required Reserves: 44.51
Finance Committee Packet, 082119: Page 14 of 31
Partnership HealthPlan of CaliforniaStrategic Use of Reserves UpdateAs of June 30, 2019
Other Non-Current AssetsDeposits 68,269 65,636Board-Designated Reserves 375,797,730 376,327,068Knox-Keene Reserves 300,000 300,000Net Pension Asset 1,018,026 1,018,026Deferred Outflows Of Resources 1,077,039 1,077,039
Total Other Non-Current Assets 378,261,064 378,787,769
Total Non-Current Assets 483,793,477 483,739,113
Total Assets 1,116,539,884 1,089,443,754
PARTNERSHIP HEALTHPLAN OF CALIFORNIABalance Sheet
As Of June 30, 2019
Finance Committee Packet, 082119: Page 22 of 31
June 2019 May 2019
PARTNERSHIP HEALTHPLAN OF CALIFORNIABalance Sheet
As Of June 30, 2019
L I A B I L I T I E S & F U N D B A L A N C E Liabilities
Current LiabilitiesAccounts Payable 101,316,847 88,334,777Unearned Income 165,355 213,080Suspense Account 669,517 1,378,673Capitation Payable 5,955,152 8,314,962State DHS - Cap Payable 6,562,106 6,562,106Claims Payable 60,575,481 82,592,331Incurred But Not Reported-IBNR 281,776,933 247,845,258Quality Improvement Programs 54,833,915 58,595,832
Total Current Liabilities 511,855,306 493,837,019
Non-Current LiabilitiesDeferred Inflows Of Resources 458,760 458,760
Total Non-Current Liabilities 458,760 458,760
Total Liabilities 512,314,066 494,295,779
Fund BalanceUnrestricted Fund Balance 61,949,573 52,309,966
Reserved FundsReserve Fund-Board Designated 360,797,729 361,327,067Reserve Fund-Board Designated-Infrastructure 15,000,000 15,000,000Reserve Fund-Board Designated-Capital Assets 105,532,414 104,951,344Reserve Fund-Strategic Use Of Reserve 60,646,102 61,259,598Reserve For Restricted Fund-Knox-Keene 300,000 300,000
Total Reserved Funds 542,276,245 542,838,009
Total Fund Balance 604,225,818 595,147,975
Total Liabilites And Fund Balance 1,116,539,884 1,089,443,754
Finance Committee Packet, 082119: Page 23 of 31
Current Month Activity Year-To-Date Activity
CASH FLOWS FROM OPERATING ACTIVITIES:Cash Received From:Capitation from California Department of Health Care Service 233,243,717 2,852,792,872 Other Revenues 188 543,738Cash Payments to Providers for Medi-Cal Members
Capitation Payments (31,761,194) (468,451,262) Medical Claims Payments (160,731,697) (2,007,627,603)
Cash Payments to Vendors (3,052,108) (565,881,195) Cash Payments to Employees (6,544,149) (85,476,447) Net Cash (Used) Provided by Operating Activities 31,154,757 (274,099,897)
CASH FLOWS FROM CAPITAL FINANCING & RELATED ACTIVITIES:Purchases of Capital Assets (2,878,380) (25,515,865) Net Cash Used by Capital Financial & Related Activities (2,878,380) (25,515,865)
CASH FLOWS FROM INVESTING ACTIVITIES:Board-Designated Reserve Transfers 529,338 83,343,574Interest and Dividends on Investments 527,535 6,034,241Net Cash (Used) Provided by Investing Activities 1,056,873 89,377,815
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS 29,333,250 (210,237,947)
RECONCILIATION OF OPERATING (LOSS) INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
TOTAL OPERATING (LOSS) INCOME 8,479,408 (60,921,465) DEPRECIATION 755,310 7,707,473CHANGES IN ASSETS AND LIABILITIES:Other Receivables 3,852,551 (35,960) California Department of Health Services Receivable (1,557,804) (24,786,231) Other Assets 1,607,005 (8,872,046) Accounts Payable and Accrued Expenses 9,865,379 (287,956,623) Accrued Claims Payable 11,914,825 94,948,657Quality Improvement Programs (3,761,917) 5,816,298Net Cash Provided (Used) by Operating Activities 31,154,757 (274,099,897)
PARTNERSHIP HEALTHPLAN OF CALIFORNIAStatement of Cash Flow
For The Period Ending June 30, 2019
Finance Committee Packet, 082119: Page 24 of 31
-
ACTUALMONTH
BUDGETMONTH
$ VARIANCE MONTH
ACTUAL MONTH PMPM
BUDGET MONTH PMPM
ACTUAL YTD
BUDGET YTD
$ VARIANCE
YTD
ACTUAL YTD
PMPM
BUDGET YTD
PMPM
544,864 544,864 - TOTAL MEMBERSHIP 6,615,058 6,615,058 -
For The Period Ending June 30, 2019Statement of Revenues and Expenses
**The Notes to the Financial Statement are an Integral Part of this Statement
Finance Committee Packet, 082119: Page 25 of 31
PARTNERSHIP HEALTHPLAN OF CALIFORNIA
NOTES TO FINANCIAL STATEMENTS
June 30, 2019
Page 1 of 3
1. ORGANIZATION
The Partnership HealthPlan of California (PHC) was formed as a health insurance organization,
and is legally a subdivision of the State of California, but is not part of any city, county or state
government system. PHC has quasi-independent political jurisdiction to contract with the State
for managing Medi-Cal beneficiaries who reside in various Northern California Counties. PHC is
a combined public and private effort engaged principally in providing a more cost-effective
method of health care. PHC began serving Medi-Cal eligible persons in Solano in May 1994. That
was followed by Napa in March of 1998, Yolo in March of 2001, Sonoma in October 2009, Marin
and Mendocino in July 2011, and eight Northern Counties in September 2013. Beginning July
2018 and in accordance with direction from the Department of Health Care Services (DHCS), PHC
has consolidated its reporting from these fourteen counties into two regions; these are in alignment
with the two DHCS rating regions.
As a public agency, the HealthPlan is exempt from state and federal income tax.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING POLICIES:
The accounting and reporting policies of PHC conform to generally-accepted accounting
principles and general practices within the healthcare industry.
PROPERTY AND EQUIPMENT:
Effective July 2015, property and equipment totaling $10,000 or more are recorded at cost; this
includes assets acquired through capital leases and improvements that significantly add to the
productive capacity or extend the useful life of the asset. Costs of maintenance and repairs are
expensed as incurred. Depreciation for financial reporting purposes is provided on a straight-line
method over the estimated useful life of the asset. The costs of major remodeling and
improvements are capitalized as building or leasehold improvements. Leasehold improvements
are amortized using the straight-line method over the shorter of the remaining term of the
applicable lease or their estimated useful life. Building improvements are depreciated over their
estimated useful life. Buildings purchased are recorded at cost and are depreciated on the straight-
line basis over their estimated useful lives.
INVESTMENTS:
PHC investments can consist of U.S. Treasury Securities, Agency Notes, Repurchase Agreements,
Shares of Beneficial Interest and Commercial Paper and are carried at fair value.
BOARD-DESIGNATED & KNOX KEENE RESERVES:
In April 2004, PHC’s Board established a policy to set aside in a reserve account a designated
Finance Committee Packet, 082119: Page 26 of 31
PARTNERSHIP HEALTHPLAN OF CALIFORNIA
NOTES TO FINANCIAL STATEMENTS
June 30, 2019
Page 2 of 3
amount that represents the Knox-Keene Tangible Net Equity (TNE) requirement. This policy was
subsequently revised in May 2012 and beginning July 2012, the new methodology has been
reflected on the balance sheet. Based on this policy and as of As of June 2019, PHC has Board-
Designated and Knox-Keene Reserves of $481.3 million and $0.3 million respectively. To account
for the Board approved Strategic Use Of Reserves (SUR) initiatives, $60.6 million has been set
aside as a “Reserve Fund-Strategic Use of Reserve.” The amount represents the net amount
remaining of all of the SUR projects that have been approved to date; this balance is periodically
adjusted as projects are completed.
3. STATE CAPITATION REVENUE
Medi-Cal capitation revenue is based on the monthly capitation rates, as provided for in the State
contract, and the actual number of Medi-Cal eligible members. Capitation revenues are paid by
the State on a monthly basis in arrears based on estimated membership. Prior to January 2010,
enrollment was subject to retrospective adjustments by the State upon completion of the 6th and
12th months following the month of service. Effective January 2010, the retrospective adjustments
have been replaced with monthly reconciliations with the State. As such, capitation revenue
includes an estimate for amounts receivable from or refundable to State for these retrospective
adjustments. These estimates are continually monitored and adjusted, as necessary, as experience
develops or new information becomes known.
Effective with the enrollment of the Adult Expansion Population per ACA in January 2014 the
HealthPlan was subject to State requirements to meet a minimum 85% medical loss ratio (MLR)
for this population. Specifically, the HealthPlan was required to expend at least 85% of the Medi-
Cal capitation revenue received for this population on allowable medical expenses as defined by
the State. In the event the HealthPlan expended less than the 85% requirement, the Health Plan
would be required to return to the State the difference between the minimum threshold and the
actual allowed medical expenses. This difference was recorded as a reduction to Medi-Cal
capitation revenue and the related liability was recorded in State DHS – Cap Payable. As of June
2019, the remaining amount due to the State is $6.6 million.
Effective with California SB 78 and beginning July 2012, the health plans were required to pay a
gross premium tax on Medi-Cal Revenue. The rate in effect from July 2012 to June 2013 would
remain at 2.35% and beginning July 2013, the tax rate increased to 3.94% and expired in June
2016. Effective July 2016, SB X2-2 revised the MCO Tax, which is implemented by DHCS. The
tax is calculated by DHCS and is based on projected membership. Projected tax for fiscal year
2018/19 is $134.4 million.
4. HEALTH CARE COST
PHC continues to develop completion factors to calculate estimated liability for claims incurred
Finance Committee Packet, 082119: Page 27 of 31
PARTNERSHIP HEALTHPLAN OF CALIFORNIA
NOTES TO FINANCIAL STATEMENTS
June 30, 2019
Page 3 of 3
but not reported. These factors are reviewed and adjusted as more historical data become available.
Budgeted capitation revenues and health care costs are adjusted each month to reflect changes in
enrollee counts.
5. QUALITY IMPROVEMENT PROGRAM
PHC maintains quality incentive contracts with acute care hospitals and primary care physicians.
As of June 2019, PHC has accrued a Quality Incentive Program payout for Fiscal Year 2018/2019
is $54.8 million.
6. ESTIMATES
Due to the nature of the operations of the Partnership HealthPlan, it is necessary to estimate
amounts for financial statement presentation. Substantial overstatement or understatement of these
estimates would have a significant impact on the statements. The items estimated through various
methodologies are:
- Value of Claims Incurred But Not Received
- Quality Incentive Payouts
- Earned Capitation Revenues
- Total Number of Members
- Retro Capitation Expense for Certain Providers
7. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the HealthPlan is party to claims and legal actions by enrollees,
providers, and others. After consulting with legal counsel, HealthPlan management is of the
opinion any liability that may ultimately be incurred as a result of claims or legal actions will not
have a material effect on the financial position or results of the operations of the HealthPlan.
8. UNUSUAL OR INFREQUENT ITEMS REPORTED IN CURRENT MONTH’S
FINANCIAL STATEMENTS
None noted.
Finance Committee Packet, 082119: Page 28 of 31
Partnership HealthPlan of CaliforniaInvestment ScheduleJune 30, 2019
Name of Investment Investment Type Yield to Maturity
Trade Date Maturity Date
Call Date Face Value Market Value Credit Rating Agency
Credit Rating
FUNDS HELD FOR INVESTMENT:
Highmark Money Market Cash & Cash Equiv NA Various NA NA NA 1,514,033$ NA NRCertificate of Deposit for Knox Keene Cash & Cash Equiv 0.00015 9/12/2015 12/30/2018 NA NA 300,000$ NA NR
FUNDS HELD FOR OPERATIONS:
Merrill Lynch Insitutional Cash for Operations NA NA NA NA NA 67,941,096$ Merrill Lynch MMA - Checking Cash for Operations NA NA NA NA NA 309,774$UBOC - General/MMA and Checking Cash for Operations NA NA NA NA NA 582,787,033$ Government Investment Pools (LAIF) Cash for Operations NA NA NA NA NA 65,000,000$ Government Investment Pools (County) Cash for Operations NA NA NA NA NA 39,364,051$ West America Payroll Cash for Operations NA NA NA NA NA 3,407,059$ Petty Cash Cash for Operations NA NA NA NA NA 3,300$
(1) Investment balances include Restricted Cash and Board Designated ReservesYTD for Cash & Investments is average year-to-date
(2) Computed yield is calculated by annualizing the current month's interest divided by the current month's average balance.
(3) Total Rate of Return is computed based on year-to-date interest income annualized divided by an average of the fiscal year's portfolio's market value at month-end.
(4) LAIF limits the amount a single government entity can deposit into LAIF; currently that amount is set at $65 million.