Preparing for the Financial Impacts of being a CDC Provider

1. Preparing for the Financial Impacts of being a CDC Provider Graeme Wickenden, CFO Villa Maria Leanne Bell, Finance Manager, Villa Maria Tri-State Conference 23rd to 25th February 2014

2. Agenda • Organisational Overview – Villa Maria • National Disability Insurance Scheme (NDIS) • Overview • Consumer Directed Care (CDC) • Overview • Trial Participation • Budgeting • Systems and Processes • Villa Maria’s Experiences

3. Organisational Overview and Structure • Celebrated 100 years in 2007 • Catholic ethos and background • Supports over 5000 persons • About 1200 employees and over 300 volunteers • Delivers 60 programs in over 42 locations across Victoria • Main operating segments: • Disability Services • Educational Services • Residential Aged Care and Retirement Services • Community Services • Direct Care

4. Villa Maria – Disability Services Overview Includes: • Group Activities during the week, both centre based and in the community • Individualised options to support people living in their home with a disability or in the community • 12 Shared Supported Accommodation houses for adults • Purpose built state-wide facility for ten people with ABI and complex medical needs • Five children’s respite houses • Flexible respite recreational activities – weekends, camps, holiday after school care for both children and adults • Case Management Total Annual Funding: $19m

5. Villa Maria – Community Care Services Includes: • Community Aged Care Packages (825) • Extended Aged Care in the Home (61) • Extended Aged Care in the Home – Dementia (37) • Assistance with Care and Housing for the Aged • Community Rehabilitation Centre • Dementia Specific Care • Carer Support Services • Respite programs, both day and overnight Total Annual Funding: $25m

6. NDIS Overview • The NDIS is a once in a generation economic and social reform which has been agreed to by all governments and will benefit all Australians • Social insurance that will cover the cost of care and support for people with permanent and serious disabilities • In 2011 Productivity Commission reported that the current disability system is “inequitable, underfunded, fragmented and inefficient” • In 2009 the ABS reported that 45% of people with a disability in Australia live in or near poverty

7. NDIS Overview Three key pillars underpin the NDIS design: Insurance Approach Choice and Control Community and Mainstream

8. NDIS Overview • Will fund individual support for people with a disability that involves more choice and control and a life-time approach to a person’s needs through individualised funding • The scheme will provide funding so people can get the care and support they need, based on their individual support needs, goals and aspirations. • Administered by the National Disability Insurance Agency (NDIA) – an independent statutory agency established to implement the National Disability Insurance Scheme (NDIS)

9. NDIS Overview – Launch Sites & Rollout

10. NDIS – The Change OLD Program 1 contracts Program 2 Funding and monitoring Program 3 Capped Funding Limited Choice Limited Control NEW Support Support Plan and Budget Support Support Individualised Funding Choice & Control Supports, not programs

11. NDIS – Support Provided Basic rules will define the types of supports funded: • Will fund “reasonable and necessary” supports • Reasonable and necessary supports should: • address the effect of an impairment on the individual’s capacity to undertake everyday activities, including participation in social and economic life • allow a person to achieve their goals, objectives and aspirations • Funding available through the Practical Design Fund

12. NDIS – Financial Considerations Financial Risk • Need to understand costs and set pricing accordingly • Move from payment in advance to payment in arrears, with working capital implications • Greater focus on Balance Sheet management to ensure solvency • The current regime of fixed maximum prices for NDIS supports in trial sites will end in mid-2014

13. NDIS – Financial Considerations Financial Risk (cont.) • The NDIA will continue to set individualised budgets • Will allow greater flexibility for participants to negotiate with providers about the quantity and type of supports they receive • Cashflow planning essential • Rationalisation of service providers – growth opportunities

14. NDIS – Financial Considerations Financial Risk (cont.) • Potential risk for reliance on a small number of high value clients • Marketing essential – service providers now competing against each other • Potential for acuity risk over time, with potential profitability implications • Administrative processes and supporting IT systems fundamental to success

15. NDIS – Systems and Processes System considerations • Track that what was planned to be delivered was delivered i.e. “buyer/seller” relationship • Participant’s plan and statement of support entered into the NDIA system • Unlike in previous service models (e.g. Day Programs), no obligation to provide planning for participants, nor manage the achievement of planned outcomes unless that’s what a provider has been engaged to do • Focus is on, did the provider deliver what they were engaged to do

16. NDIS – Systems and Processes System considerations (cont.) • The plan will specify agreed supports and funding required • Providers will need to report at least monthly to NDIA about the supports provided to each participant; whether they are fee-for-service or block or case-based funded • Providers will submit reports and lodge claims for payment to NDIA through the online provider portal

17. NDIS – Launch Site Update Some early data from the launch sites: • Average package costs about 30% higher than expected • Package costs were expected to be about $35,000 pa; after 3 month’s operation about $45,000 pa • Expected more than 2,200 people to have completed plans; to date less than a 1,000 have • These are early indicators only and need to be treated with caution. As more information becomes available a clearer picture will develop.

18. NDIS – Launch Site Learnings Common issues from launch sites: • Provider anxiety on price setting • Limited community understanding of the NDIS • Operational issues – understanding the NDISregistration process • Engagement of providers in the new process of planning and understanding how providers work with the Agency

19. CDC Overview • Aims to provide a consumer led and directed aged care service system • All new allocation required to be delivered on a CDC basis from 1st August 2013 • From July 2015 all packages will operate on a CDC basis • CDC allows consumers to have greater control and choice on: • type of care they receive, and • who will deliver that care • Consumers decide what level of involvement they wish to have in managing their package

20. CDC Overview Department of Health’s guiding principles that underpin the operation and delivery of CDC packages: • Consumer choice and control • Rights • Respectful and balanced partnerships • Participation • Wellness and re-enablement • Transparency

21. CDC – The Change OLD Service delivery, monitoring and reassessment Moving or Exiting – ongoing reassessment Contracts Care Plan on assessed needs Capped Funding Limited Choice Limited Control NEW Service delivery, monitoring and reassessment Moving or Exiting – ongoing reassessment Individual budget developed with consumer Setting goals, Care Planning Individualised Funding Choice & Control Supports, not programs myagedcare.gov.au

22. CDC Overview Key considerations for providers: • Quantifying admin tasks and overheads • Communicating to consumers about available brokered services and how to make choices that provide better quality of care and life • Rationalising suppliers while still maintaining choice, and establishing Supplier Agreements with them • Establishing operational structures and systems that are flexible enough to respond to consumer choice • Determining the margin to be applied to packaged care • Management of budget allocations that is transparent

23. CDC Overview • Funding still provided to the provider – not the consumer • Home Care Provider administers the package on behalf of the consumer: • transparent • meet quality & accountability requirements • Must have an individualised budget: • Consumer must be provided monthly Income & Expenditure Statement • Must include balance of funds

24. CDC Overview – Client Agreement • An agreement must be offered before the package commences • Must contain specific clauses covering: • Date care started • Explanation of security of tenure and any variation must be by mutual consent • Copy of consumer’s care plan and itemised fees payable and how they are calculated • Right to, and how to, complain without fear of reprisal, • Right to request copy of audited accounts

25. CDC Overview – Funding New Package Structure Rates as at August 2013

26. CDC Overview – Income Subsidy Optional Subject to Means Test where reduction and Income Tested Fee applies ITF Negotiated, maximum at 17.5% of the aged care pension plus 50% of other income Base Fee Fee for Service

27. CDC Overview – Budget Details • Format of the budget must be simple • If required, the provider must provide the budget in a language other than English • Budget must breakdown income and expenditure • Must be based on the care planning process • Must be developed in partnership with the consumer • Time period determined by provider and consumer (i.e. weekly, monthly, quarterly or annual)

28. CDC Overview – Budget Details • Income includes: • All government subsidies, including supplements • Any consumer contribution (i.e. care fee) • Expenditure includes: • Core advisory and Case Management services • Service and Support Provision and/or purchasing • Administrative Costs • Budget may (but not essential) include a Contingency • Provide for emergencies and unplanned events • Increased care needs • As a guide, DSS say should be no more than 10% of the total annual budget

29. CDC Overview – Budget Details Determining the Contingency: • Amount to be held for each consumer for unforseen circumstances (no greater than 10%) • A separate item should be set up for each consumer and shown on their statement. • As expenditure is made against it then the balance should be reported to the consumer • Cannot be pooled with other consumers

30. CDC Overview – Budget Details • Any unspent funds (including contingency) must be carried forward into the next month, quarter, year • Format can be negotiated e.g. hardcopy, email or web-based

31. CDC Overview – Setting the Margin Determining the Margin: • Need to model scenarios to ensure an appropriate margin is applied for future sustainability • Margin will form part of the overall admin expense charged to the consumer • If the budgeted margin is not being maintained then the admin rate will have to be reviewed to reflect a new cost structure

32. CDC Overview – Unspent Funds Treatment of unspent funds: • Remain with the consumerif moving to another package with the same provider • Remain with the providerif the consumer moves to another provider and can be used on other consumers or infrastructure purposes (unless otherwise negotiated) • Remain with the providerif the consumer dies or moves into residential care • Except, funds the consumer has contributed to the package must be returned to the consumer or their estate

33. CDC Overview – Building the Budget Managing individualised budgets: • Budgets set by each consumer for the care needs required based on the consultation process and their list of required services. • Agree on the budget period, e.g. Weekly, monthly, quarterly or annually • A separate consumer "ledger" should be kept which carries the consumer’s budget and records actual expenditure against each budget

34. CDC Overview – Building the Budget Managing individualised budgets: • Monthly reporting of the actual expenditure against the budget • Show any variations and provide explanations • Make any necessary amendments to the package at next review date, with corresponding budget amendments

35. CDC – Systems and Processes System Requirements • Need to provide individualise budgets with daily, weekly and monthly views • Planned and Actual income tracking required • Statement reporting of client leave entitlements, daily rates and episodes • Capacity to set-up and manage the DSS Planning Regions and Special Need allocations

36. CDC – Villa Maria’s Preparation • Previous dependency on brokerage model • Identified two years ago the need to changedue to Productivity Commission report then subsequent LLLB • Have created Villa Maria Direct, our in-home service • Building up Fee for Service clients • Implementing systems to support this (CareLink+) • Steering Committee established to monitor and resource the project

37. CDC – Villa Maria’s Experience • Participated in CDC Trial • Review of traditional case management model to determine unit costs of activities • Individualised budget development • Supporting staff, consumers and service providers about what consumer self management and coordination of services means • Learning experience for staff about managing consumer expectations under CDC • Learning experience for the consumers about what they can do under a CDC package

38. CDC – Villa Maria’s Preparation • Modeling management structures to identify most efficient and cost effective • Shift from case management to service coordination • Developing standardised pricing for services • Undertaking costing analysis to identify breakdown of costs • Identify the margin • Same process for NDIS and CDC

39. CDC – Villa Maria’s Preparation • Established two taskforces (NDIS and CDC) to oversee preparation • Various staffing structures identified • Modeling in Calumo • Calumo is data repository we use for our management reporting • Provides the ability to quickly develop various scenarios

40. Villa Maria’s Systems Experience • Key requirement to have an IT solution that addressed both the Disability and Home Care requirements • Disability Services previously dependent on Excel spreadsheets in MS SharePoint • Inefficient • Open to human error • Undertook a complete review of our Client Management System requirements

41. Villa Maria’s Systems Experience • Comprehensive Requirements Analysis completed • Reviewed various solutions and reference tested • Developed detailed Business Case for Board approval • Established a governance framework • Developed project plan identifying involvement across various areas and resourced accordingly • Currently preparing for rollout concurrently across Disability, Community and Home Care

42. Villa Maria’s Systems Experience • Commitment from all areas for a “vanilla” implementation to reduce timeframes, i.e. no customisations • Key issue of developing interfaces to other systems: • payroll • financial • time & attendance/award interpretation

43. Villa Maria’s Systems Experience • Benefits: • Previous systems not sustainable under a CDC and NDIS environment • Elimination of inefficiencies and duplications • Automation of manual processes • Improved reporting and monitoring • Integration with other systems • Improved receivables and cash flow management • Compliance to CDC and NDIS requirements

44. Our Conclusions • Understanding of costs is critical • Identification of costs and correct allocation is fundamental to establishing viable budgets • Development of a model to provide costs review and margins • Need to ensure all costs are captured • understanding the real cost of delivering care, • calculating appropriate labour rates, overhead rates and margins

45. Our Conclusions Key learning: how to adjust to CDC model Organisations can build internal capacity to adjust to the new policy and funding model by ensuring: • financial recording systems are in place • relevant staff understand the overall costs of providing home care • regular reviews and evaluation of care levels are undertaken • increased attention to and awareness of costing activities • staff are supported and guided in their transition to CDC

46. Questions?