Reimbursement Rate Reform Joint Appropriations Subcommittee on Health and Human Services

1. State of Montana Department Public Health & Human Services Developmental Disabilities Program January 2005 Reimbursement Rate ReformJoint Appropriations Subcommittee on Health and Human Services Davis Deshaies, LLC

2. BOTTOM LINE GOOD PEOPLE • Talented Pool of Department staff • Committed Case Management staff GOOD PROVIDERS • Well-Managed • Good Quality CHANGING FEDERAL & LEGAL EXPECTATIONS • Medicaid is limiting funding & increasing accountability NEED PREDICTABLE & STABLE FUNDING • Balance quality, utilization, cost, and access

3. Mother Theresa Meets Robin Hood

4. Project Purpose FAIRNESS & EQUITY • Refine Individual Needs Assessment process • Refine Provider Reimbursement rates REDESIGN PRINCIPLES • Person - Centered Planning • Self - Directed Choice PREDICTABLE AND STABLE FUNDING • Balance quality, utilization, cost, and access

5. Summary of Approach • Conduct Market Analysis • CollectCost Data and Service & Utilization Data • Define Cost Drivers • DesignIndividual Needs AssessmentTool • Define Standardized Reimbursement Rates • IntegrateSelf-Directed ServicesTools • Model & Forecast Future Program & Financial Impact

6. Medicaid Trends

7. Medicaid Pressures • Profitability versus Growth • Shifts in Utilization Management • Retreat from Risk • Consumer Directed Supports • Increased Drug and Staff costs

8. State Trends

9. Summary STATES ARE GOING BROKE STATES ARE GETTING OUT OF THE BUSINESS • Cost Shifting to local government & consumers • Outsourcing the Uncomfortable stuff • Merging with Medicaid / Long Term Care; Insurers rather than Providers • Rationing: Self-directed Service by any other name MORE PEOPLE WANT MORE SERVICE FOR MORE TIME

10. Estimated State Deficits for FY 2004 (Center for Budget & Policy Benefits)

11. Estimated State Deficits for FY 2004 (Center for Budget & Policy Benefits)

12. Estimated State Deficits for FY 2004 (Center for Budget & Policy Benefits)

13. Estimated State Deficits for FY 2004 (Center for Budget & Policy Benefits)

14. National Expenditures SFY 2004Annual Per Capita Cost for HCBS STATEPer Capita Cost Montana $ 30,000 / person Florida $ 24,000 / person California $ 19,100 / person Texas $ 42,900 / person Pennsylvania $ 56,000 / person BEWARE OF STRANGE COMPARISONS!!!

15. Market Analysis

16. Market Analysis • Expenditure & Caseload Growth • Provider Financial Viability • Geographical & Economical Factors • Comparisons with Benchmark States • Performance Outcome Best Practices

17. DD Enrollment Trends New People Enrolling 3% 15% 2% 10% 70% Children Birth to 6 years Children 7 yrs. to 18 yrs Adults 19 yrs. to 21 yrs. Adults 22 yrs. to 44yrs. Adults 45 yrs. to Death 1 out of 4 drop out 1 out of 10 drop out 1 out of 12 drop out 1 out of 7 drop out 1 out of 5 drop out People Leaving

18. Montana Total DD Expenditure by State Fiscal Year

19. Total Expenditure by Age Group State Fiscal Year 2003

20. Percentage of Enrollees by Age Group

21. Percentage of Expenditures by Age Group

22. Distribution of Individual Costs(Example – Not Montana)

23. Individual Service Guidelines

24. Assumptions • People use similar amounts of services in very different ways • Determining how much paid staff support is needed is more importantthan why it is needed. • People and families are the best predictors of the amount of service needed. • Historical costs don’t always predict need.

25. Individual Cost Guideline Factors • Age and Family Living Situation • Geography of Residence • Personal Cost Factors • Community Inclusion • Behavior Supports • Health and Wellness Supports • Current Abilities

26. Step 1 Determine Individual Cost Guidelines Step 3 Test for Fairness $ All of the Parts Step 4 Apply Standard Rates Step 5 Utilization Review if Needed Step 2 Plan, Cost Out & Budget Step 6 Select Provider & Implement Plan Appropriate services and supports at a fair rate Step 7 Measure personal outcomes

27. DEMONSTRATION:MONA & Individual Cost Plan

28. Rates: Pricing, Purchasing, & Performance

29. Individual Needs-basedRate Model Individual Needs Assessment Standard Rate Market Analysis Cost Per Unit of Service Individual Budget & Flexible Services Number of Units of Service Cost Drivers X X =

30. Rate Components • Direct Care Staff Salaries • Employee - Related Expenses / Benefits • Program - Related / Clinical Supervision • General & Administrative

31. Pricing Trends • Wage Parity across all services and employer type. • Employee-Related Expenses are reflecting actual Workers’ Compensation, FICA experience, and geographical differences. • Program-Related Costs have the highest variability. • General and Administrative Costs will be fixed.

32. MONTANA BENCHMARK:Direct Care Salaries

33. MONTANA BENCHMARK: Employee-Related Expenses

34. RATES BENCHMARKS: Summary

35. Counties with Geographical Factors

36. Rates with Geographical Factors Rates expressed as Direct Care Staff Hours

37. INITIAL RATES v. CURRENT SFY 2004 Contracts 5%+ decrease 0%-5% decrease 0%-5% increase 5%+ increase DECREASE INCREASE 13 Providers 4 Providers 9 Providers 10 Providers

38. Provider Readiness Review

39. Liquidity Ratios • Current Assets to Current Liabilities • Debt to Net Assets • Net Cash from Operations to Operating Expenses • Cash to Operating Expenses

40. Shadowing, Piloting, and Implementation

41. Next Steps(Start Dates) • Design Development – October 2003 to August 2004 • Shadowing – Sept. 2004 to November 2004 • Initial Pilot – January 2005 to March 2005 • Expanded Pilot – March 2005 to December 2005 • Phased Implementation – Begin January 2006

42. SHADOWING

43. SHADOWING: Initial ResultsCompensation: Direct Care Hourly Salary

44. SHADOWING: INITIAL RESULTSService Hours: Hours Per Person Per Day

45. SHADOWING: COMPARISON WITH MONA SERVICE UTILIZATION STANDARDS Service Standards: Range of Hours Per Person Per Day Davis Deshaies, LLC

46. SHADOWING: Comparison of Salary Benchmark to Initial Results Compensation: Direct Care Hourly Salary

47. Shadowing: Comparison of STANDARD RATES to Sept. / October Shadowing Compensation: Direct Care Hourly Salary

48. PILOTS

49. Pilots People in the Pilot: • Receive Individual Allocations • Using Person-Centered Planning, build an Individual Cost Plan and Key Personal Outcomes • Receive technical assistance as needed from Pilot Team (to be selected by DDP) • Select service and Case Manager initiates contract • Participate in Outcome Study

50. Pilots Providers in the Pilot: • Receive Business Development Assistance • Market Analysis • Cash Flow Management • Human Resource Management • Strategic Planning • Receive Technical Assistance on Implementing Self-Directed Supports • Choice & Empowerment