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

1. Chapter 257 of the Acts of 2008 Provider Information and Dialogue Session: DDS Placement & Adoption Services & Supports March 21, 2012 www.mass.gov/hhs/chapter257 eohhspospolicyoffice@state.ma.us

2. Agenda • Chapter 257 of the Acts of 2008 • Overview of DDS Placement & Adoption Services & Supports • 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

3. 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.

4. In implementing Chapter 257, EOHHS will leverage three POS Reform Strategies to improve services and client outcomes POS Reform POS Reform Strategy 1. Create Service Classes 2. Develop Rational Rates 3. Reform Contracting • Develop service class structure defined by outcomes • Enhance POS taxonomy database • Align activity codes to service classes Maximize Statutory Requirement Service Value + • # of contracts shared across departments • # contracts w/ performance features • Use of Master Agreements • Overall POS governance structure Immediate Term 1/1/12 40% of system ~$880M Enabling 1/1/13 30% of system ~$660M Minimize 1/1/14 30% of system ~$660M Integrated data management systems Improved reporting • # POS contracts for similar services • Use of cost reimbursement contracts - Contract consolidation across agencies Rates to be reviewed every two years Increased Administrative Efficiency Simplification and improved coordination of administrative processes for agencies and providers More resources directed toward client activities Near Term Improved Client Outcomes Rational resource base and stronger provider system More clients served w/ higher quality services Long Term Improved quality management Improved client outcomes

5. The Cost Analysis and Rate Setting Effort has Several Objectives and Challenges Pricing Analysis, Rate Development, Approval, and Hearing Process Objectives and Benefits • Development of uniform analysis for standard pricing of common services • Rate setting under Chapter 257 will enable: • Predictable, reimbursement models that reduce unexplainable variation in rates among comparable, economically operated providers • Incorporation of inflation adjusted prospective pricing methodologies • 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 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

6. Providers Purchasing Department Purchasing Department Purchasing Department Purchasing Department Purchasing Department Purchasing Department In Many Cases, Contract Reform is Necessary to Implement Chapter 257 Today Vision for FY15 Providers • Secretariat or DepartmentMaster • Agreements • By Service Class • DHCFP rate schedules • Panel of qualified providers • Departments purchase via rate agreements Dept Dept Dept Dept Dept Dept Dept • 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 • Reduced contract complexity and redundancy • Greater amendment flexibility for providers and agencies • Greater opportunity for provider engagement • Streamlined, centrally-managed procurement cycles managed

7. Agenda Chapter 257 of the Acts of 2008 Overview of DDS Placement & Adoption Services & Supports 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

8. DDS Placement & Adoption Services & Supports Service Class Definition: Programs that provide a continuum of services relating to foster care, shared living placements and adoption, including recruitment, placement, and supports to individuals, families, and caregivers to promote stability in the temporary or permanent family placement.

9. 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

10. DDS Placement & Adoption Services & Supports Procurement Plan • DDS will develop a qualifying list RFR. • All bidders who meet the standards will be eligible to provide the service. • Provider selection will be made primarily on the basis of the individual choosing the provider. • Continued placement with existing service providers will be affirmed by the service recipients. • 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.

11. Agenda Chapter 257 of the Acts 2008 Overview of DDS Placement & Adoption Services & Supports 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

12. Overview of DDS Placement & Adoption Services & Supports: 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 available sources • UFR, if needed, to enrich data analysis of specific cost elements

13. Expenses as a Percent of Total Cost • “Other Program Expenses” account for over 60% total cost of the program.

14. Care Giver Stipends are a Major Expense • Caregivers Stipends comprise the bulk of expenses within Other Program Expenses -- nearly $25 million annually.

15. Caregiver Stipend as a Indicator of Total Cost • The Caregiver Stipend unit cost does not influence total cost to a significant degree • However, the Caregiver Stipend remains a major cost component of the service

16. Caregiver Stipends as a portion of total cost • Caregiver Stipends contribute a significant portion of the program cost. • They also vary greatly from contract to contract. • Setting aside the cost associated with the Caregiver Stipends allows for the remaining data to be more accessible to analysis. • Removing the Caregiver Stipend expense deducted an average of $63 from the total unit cost per day.

17. Proposed Rate Structure The proposed rate structure breaks the pricing scenario into two primary components: • Program Operations • One or more rates that price the program activities (home finding, matching, follow-up support, etc.) • Caregiver Stipend • A range of rates that support the level of care needed by the individual in their home or placement 

18. Program Operations Cost(Excluding Caregiver Stipends) • Because the caregiver stipends vary greatly among contracts, the following slides will focus on unit cost without caregiver stipends included.

19. Total Capacity as a driver of Unit Cost • Total Unit Capacity has no significant impact on Unit Cost (without caregiver stipends). • No economies of scale observed where one might expect large contracts costing less per unit to operate.

20. Staff Unit Cost as a Driver of Total Cost • Direct Program Staff Unit Cost has no significant impact on Total Unit Cost.

21. Other Possible Cost Drivers The following data analysis yielded non significant findings and used data excluding Caregiver Stipends: Calculated Unit Cost by Total FTE R² = 0.0825 Calculated Unit Cost by Adj. Admin M&G Unit Cost R² = 0.2713 Calculated Unit Cost by Occupancy Unit Cost R² = 0.1269 Calculated Unit Cost by Tax and Fringe Unit Cost R² = 0.568 Calculated Unit Cost by Other Program Unit Costs R² = 0.3608 Regional Variation -- No significant differences were observed looking at Program Staff Unit Costs or Calculated Unit Costs

22. Caseload Per FTE • Approximately 80% of the service population falls within a caseload per FTE range of 2 – 10. • We are interested in possible reasons for the other 20% outside of that range. • Is this variance a reflection of varying intensities or other factors?

23. Caregiver Stipend Unit Cost Variability • Caregiver Stipends range widely from $3.35- $160 per day • Majority fall between $20- $120 –Are ranges purposeful? • How are stipends determined? • Ideas on how to differentiate/structure between levels?

24. Agenda Chapter 257 of the Acts of 2008 Overview of DDS Placement & Adoption Services & Supports 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

25. Updated Implementation Timeline and Key Milestones for DDS Placement & Adoption Services & Supports July 1 • 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.

26. Questions/Feedback eohhspospolicyoffice@state.ma.us