Agenda

1. March 10, 2011Commonwealth of PennsylvaniaOffice of Developmental Programs Prospective Payment System Year 3 Cost Reporting Debrief

2. Agenda • Purpose of Town Hall • Overview of Year 3 Cost Report and Desk Review Statistics • Common E-help Desk Questions • Desk Review Highlights • Summary of Provider Survey Results • Proposed Year 4 Approach • Questions

3. Overview of Year 3 Cost Report and Desk Review Statistics • 446 MPIs had an active ODP website user account for purposes of submitting a cost report • Of these requests, 392 MPIs attempted to upload a cost report and 382 MPIs were successful • 10 MPIs attempted to upload a cost report but did not make it past the real-time edits • 536 initial cost reports were submitted by the 382 MPIs • AEs performed desk reviews on 536 initial submissions; the majority of these cost reports required resubmission • While some cost reports required only minor revisions or clarifications, other cost reports required significant corrections due to non compliance with the cost report instructions • AEs performed desk reviews on roughly 790 resubmissions • 512 cost reports from 366 MPIs passed the desk review, while 24 cost reports from 16 MPIs failed the desk review

4. Common E-help Desk Questions The E-help desk was staffed for provider questions from mid-July 2010 through October 15, 2010 Several questions were submitted related to the depreciation policies Use allowances Expensing versus depreciating fixed assets Expenses for improvements and renovations Other common themes included questions on how to report: Expenses for service locations that opened or closed during the reporting period Transportation expenses Units available versus units delivered Revenue reconciliation payments and recoupments Cost allocation methodologies and audited cost allocation plans

5. Desk Review HighlightsPurpose • For Year 3, the cost report submission process involved a standardized Excel template and upload via a website containing real-time edits • These features helped to increase the validity and consistency of provider reporting • The second method ODP used to validate provider reporting was the desk review • The desk review was performed on cost reports to ensure provider reporting was accurate, complete and reasonable

6. Desk Review HighlightsCommon Findings Certification Pages Service location codes appeared on more than one cost report Selected procedure codes were not consistent with the procedure codes billed through PROMISe during FY 2009/2010 Waiver census and vacancy reporting was inconsistent with the size of the home indicated by the procedure code Schedule A — Expense Report Non-allowable expenses were not separately reported in Column E In cases where a provider did not have non-allowable expenses, a comment was not included on the Comments tab Outlier unit costs and unexpected unit cost relationships among different levels of a given service were not accompanied by any explanations

7. Desk Review HighlightsCommon Findings • Schedule B — Income Statement • In cases where investment income, non-restricted contributions and/or government grants were not allocated to the Waiver, an explanation was not included on Comments tab • Schedule Ds — Staff Expenses • Staff positions often reported on incorrect schedule (e.g., HR personnel reported as Other Program Staff on D-1 instead of Administration Staff on D-3) • CEO compensation in excess of allowable limits was not classified as non-allowable expense • Costs for Family Living Home (FLH) stipends not properly allocated to only FLH procedure codes in Schedule A

8. Desk Review HighlightsCommon Findings • Schedule Es — Provider Depreciation and Amortization Expenses • Depreciation taken was accelerated and/or was claimed on fully depreciated assets • Supporting depreciation schedules: • Were missing required columns of information • Did not clearly tie to totals on Schedule Es • Were not completed appropriately (e.g., annual depreciation expensed did not agree with total cost divided by useful life) • Schedule F — Other Program Expenses • Lack of itemization/support provided for large expenses on Line 14: Other • Lack of sufficient descriptions for program supply expenses

9. Desk Review HighlightsCommon Findings • Schedule G — Related Party Transactions • Insufficient information provided in cases where related party transactions were identified • Supporting information was not clear as to the financial terms of the related party transaction • Schedule H — Program Expense Allocation Procedures • Allocation methodologies were often not sufficiently explained or supported • The allocation methodology submitted in the cost report was often not consistent with the expense allocation across procedure codes and across other lines of business on Schedule A • All Schedules • General lack of required supporting documentation • In cases where supporting documentation was provided, it was often unclear how it tied to the expenses reported in the cost report schedules

10. Summary of Provider Survey Results • To help understand providers’ experience with the Year 3 cost reporting process, ODP conducted a survey • Who responded to the survey? • 163 provider responses were collected • Almost two-thirds of providers responding to the survey had Consolidated and P/FDS Waiver revenue greater than $500,000 • Most respondents submitted one cost report (i.e., 1 of 1) in Year 3 (81% compared to 71% in Year 2)

11. Summary of Provider Survey Results • The top three aspects of the Year 3 cost reporting process that providers found most challenging included: • Understanding the cost report instructions • Understanding how to complete each of the cost report schedules • Completing the cost report in the time allowed • Providers responded that the following cost report schedules were the most challenging to complete: • Schedule A — Expense Report • Schedule B — Income Statement • Schedules E through E-2 — Provider Depreciation and Amortization Expenses

12. Summary of Provider Survey Results • 86% of survey respondents attended the July 2010 introductory cost report webcast training session in preparation for the Year 3 cost report submission process • 31% of attendees indicated the training was effective or highly effective • 41% were neutral • 28% indicated the training was somewhat ineffective or highly ineffective • In preparation for Year 3, respondents indicated they were generally familiar with basic reporting requirements for each schedule • Would like training to shift focus to various targeted sessions on complex topics (e.g., depreciation, allocation methodologies) • Also want summaries of key changes between each reporting year

13. Summary of Provider Survey Results 57% of survey respondents attended the July/August 2010 on-site cost report training session in preparation for the Year 3 cost report submission process 41% of attendees indicated the training was effective or highly effective 37% were neutral 22% indicated the training was somewhat ineffective or highly ineffective 79% of respondents attended the September 2010 webcast training session as a follow-up to the July/August 2010 training session 29% of attendees indicated the session was effective or highly effective 45% were neutral 26% indicated the session was somewhat ineffective or highly ineffective

14. Summary of Provider Survey Results The top three resources used by providers when completing the cost report included: Cost report instructions Training materials and sample completed cost report posted on the ODP Consulting website Submission of questions to and holding discussions with the AE assigned to the desk review Although many providers also submitted questions to their Regional Fiscal Officer and the E-help mailbox, these resources were not used as often as those mentioned above Respondents indicated that each of the above resources was beneficial and they would use them again in Year 4

15. Summary of Provider Survey Results Respondents reported the following regarding their overall satisfaction level with the Year 3 cost reporting process: Very satisfied: 1% Satisfied: 25% Neutral: 49% Dissatisfied: 19% Very dissatisfied: 6%

16. Summary of Provider Survey Results The top two aspects of the Year 3 desk review process that providers found most challenging included: Completing the resubmission request in the time allowed Understanding the feedback received from the AE and the changes required Respondents reported the following regarding their overall satisfaction level with the Year 3 desk review process: Very satisfied: 8% Satisfied: 48% Neutral: 28% Dissatisfied: 13% Very dissatisfied: 3%

17. Summary of Provider Survey Results Although timelines for cost report and desk review submission were stated as challenges, the majority of respondents want ODP to continue with the cost report process in future years, instead of adding more services to the fee schedule About 28% of respondents support ODP adding more services to the fee schedule in future years (compared to 25% in Year 2) The most common services suggested to be moved to a fee schedule (outside of the requests for all services to be on a fee schedule) included: Respite Unlicensed Home & Community Habilitation Supported Employment

18. Proposed Year 4 ApproachProvider Comments • In addition to feedback on the Year 3 process, providers also used the survey to offer the following feedback on preferences for Year 4 • Respondents expressed strong preference to keep the cost reporting process the same from year to year • Prefer no significant changes are made to the cost report template, instructions or policies • Respondents requested clarification and detail be added to the cost report instructions around complex topics including: • Depreciation • Expense Allocation • Instead of training that provides a general overview of each schedule, respondents expressed a strong desire for Year 4 training sessions to be targeted on specific reporting topics and to highlight any changes between Year 3 and Year 4

19. Proposed Year 4 ApproachProvider Comments Provider feedback continued: Respondents requested cost reports be due at the same time as the audited financial statements Note that due to the time required for reviewing cost reports and developing rates by early May, it is not feasible to move the cost report deadline to align with the audit deadline Respondents requested information on which Excel version ODP would use for the Year 4 cost report template Roughly 60% of respondents anticipated using Excel 2007 or 2010 for Year 4 cost report completion, while around 40% anticipated using Excel 2003 or earlier versions Respondents requested that ODP consider more closely aligning the cost report instruction reporting requirements with the desk review procedure requirements

20. Proposed Year 4 ApproachPotential Changes ODP does not anticipate making significant changes to the cost report template or instructions for Year 4 The changes will likely mainly focus on clarifying issues and policies within the present template and instructions No change to cost report submission or desk review timelines is anticipated Year 4 potential changes may include, but are not limited to: Additional clarification in cost report instructions regarding topics where questions were frequently asked and issues that change from Year 3 to Year 4 Rather than providing a general overview of all schedules, a shift to targeted training sessions on complex cost report schedules and reporting policies

21. Proposed Year 4 ApproachPotential Changes Year 4 potential changes (continued): Continuation with Excel 2003 cost report template In addition to the cost report website accepting files in the “.xls” format, Year 4 website may be enhanced to also accept files in the “.xlsm” and “.xlsx” format

22. Questions?