FINANCE COMMITTEE MEETING

Transcription

1 FINANCE COMMITTEE MEETING Friday, September 6, 2013 at 8:30 a.m. at 9700 Stockdale Highway Board Room 1 st Floor Bakersfield, CA For more information, call (661) /100

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3 AGENDA FINANCE COMMITTEE MEETING KERN HEALTH SYSTEMS 9700 Stockdale Highway 1st Floor Board Room Bakersfield, California Friday, September 6, :30 A.M. All agenda item supporting documentation is available for public review at Kern Health Systems in the Administration Department, 9700 Stockdale Highway, Bakersfield, during regular business hours, 8:00 a.m. 5:00 p.m., Monday through Friday, following the posting of the agenda. Any supporting documentation that relates to an agenda item for an open session of any regular meeting that is distributed after the agenda is posted and prior to the meeting will also be available for review at the same location. PLEASE REMEMBER TO TURN OFF ALL CELL PHONES, PAGERS OR ELECTRONIC DEVICES DURING MEETINGS. COMMITTEE RECONVENED Members: Deats, Casas, Rhoades, Sidhu, Smith ADJOURN TO CLOSED SESSION CLOSED SESSION (If public reporting is required by Government Code Section relating to the following matter(s), the public reporting of any action taken in closed session will be made at the beginning of the next regular meeting of the Board of Directors.) 1) Request for Closed Session regarding outcome of ERISA review and impact to Kern Health Systems APPROVE; REFER TO KHS BOARD OF DIRECTORS 3/100

4 Agenda Page 2 Finance Committee Meeting 9/6/2013 Kern Health Systems COMMITTEE TO RECONVENE 9:00 A.M. REPORT ON ACTIONS TAKEN IN CLOSED SESSION CONSENT AGENDA/OPPORTUNITY FOR PUBLIC COMMENT: ALL ITEMS LISTED WITH A "CA" ARE CONSIDERED TO BE ROUTINE AND NON- CONTROVERSIAL BY KERN HEALTH SYSTEMS STAFF. THE "CA" REPRESENTS THE CONSENT AGENDA. CONSENT ITEMS WILL BE CONSIDERED FIRST AND MAY BE APPROVED BY ONE MOTION IF NO MEMBER OF THE COMMITTEE OR AUDIENCE WISHES TO COMMENT OR ASK QUESTIONS. IF COMMENT OR DISCUSSION IS DESIRED BY ANYONE, THE ITEM WILL BE REMOVED FROM THE CONSENT AGENDA AND WILL BE CONSIDERED IN LISTED SEQUENCE WITH AN OPPORTUNITY FOR ANY MEMBER OF THE PUBLIC TO ADDRESS THE COMMITTEE CONCERNING THE ITEM BEFORE ACTION IS TAKEN. STAFF RECOMMENDATION SHOWN IN CAPS PUBLIC PRESENTATIONS 2) This portion of the meeting is reserved for persons to address the Committee on any matter not on this agenda but under the jurisdiction of the Committee. Committee members may respond briefly to statements made or questions posed. They may ask a question for clarification, make a referral to staff for factual information or request staff to report back to the Committee at a later meeting. Also, the Committee may take action to direct the staff to place a matter of business on a future agenda. SPEAKERS ARE LIMITED TO TWO MINUTES. PLEASE STATE AND SPELL YOUR NAME BEFORE MAKING YOUR PRESENTATION. THANK YOU! COMMITTEE MEMBER ANNOUNCEMENTS OR REPORTS 3) On their own initiative, Committee members may make an announcement or a report on their own activities. They may ask a question for clarification, make a referral to staff or take action to have staff place a matter of business on a future agenda (Government Code Section (a)(2)) CA-4) Minutes for KHS Finance Committee meeting on August 2, APPROVE 5) Report on impact of capitation rates on providers (Fiscal Impact: None) RECEIVE AND FILE 6) Proposed 4th Quarter, 2013 budget modification for increased Member enrollment under the Affordable Care Act (Fiscal Impact: $794,008; Not Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 4/100

5 Agenda Page 3 Finance Committee Meeting 9/6/2013 Kern Health Systems 7) Request from Kern Medical Center to advance Medi-Cal managed care intergovernmental transfer payments to Kern Medical Center (Fiscal Impact: None) APPROVE; REFER TO KHS BOARD OF DIRECTORS 8) Proposed Agreement with Optumas, for actuarial services, for the development of premium rates and supporting actuarial cost models with utilization and unit cost assumptions, under the Standard Silver Bridge Plan design, from August 8, 2013 through August 7, 2014, in an amount not to exceed $70,000 (Fiscal Impact: $70,000; Not Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 9) Proposed Agreement with CPAC, to provide hardware and software necessary to establish primary systems for the secondary Kern Health Systems Truxtun site, from October 1, 2013 through September 30, 2016, in an amount not to exceed $77,841 (Fiscal Impact: $77,841; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 10) Proposed Agreement with TW Telecom Holding, to provide voice and data services for the secondary Kern Health Systems Truxtun site, from October 1, 2013 through September 15, 2016, in an amount not to exceed $104,688 per 3 years ($8,724/2013, $34,896/2014, $34,896/2015, $26,152/2016) (Fiscal Impact: $104,688; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 11) Proposed Agreement with Dell, to provide a Dell PowerEdge VRTX server with storage and Microsoft Licensing necessary to establish primary systems for the secondary Kern Health Systems Truxtun site, from October 1, 2013 through September 30, 2016, in an amount not to exceed $45, 783 (Fiscal Impact: $45,783; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 12) Proposed increase to P4P Program to cover additional Awards for 2013, in an amount not to exceed $1,800,000 (Fiscal Impact: $1,800,000; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 13) Proposed Amendment No. 1 to Services and Software Licensing Agreement with Verisk Health Inc., for Healthcare Effectiveness Data and Information Set (HEDIS) software that is required to report annual health quality metrics to the State of Californian, from November 1, 2013 through October 31, 2016, in an amount not to exceed $336,150 per 3 years ($102,390/2014, $110,580/2015, $123,180/2016) (Fiscal Impact: $336,150; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 14) Request approval to increase the fee for the annual Medi-Cal Rate Setting Actuarial Assistance under the current agreement with Optumas in an amount not to exceed $23,000 (Fiscal Impact: $23,000; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 5/100

6 Agenda Page 4 Finance Committee Meeting 9/6/2013 Kern Health Systems 15) Report on Kern Health Systems and Kern Health Systems Group Health Plan financial statements for July 31, 2013 (Fiscal Impact: None) RECEIVE AND FILE; REFER TO KHS BOARD OF DIRECTORS 16) Proposed Accounts Payable Vendor Report and non-claims paid through MHC system for July 2013 (Fiscal Impact: None) RECEIVE AND FILE; REFER TO KHS BOARD OF DIRECTORS ADJOURN TO FRIDAY, OCTOBER 4, 2013 AT 8:30 A.M. AMERICANS WITH DISABILITIES ACT (Government Code Section ) The meeting facilities at Kern Health Systems are accessible to persons with disabilities. Disabled individuals who need special assistance to attend or participate in a meeting of the KHS Finance Committee may request assistance at the Kern Health Systems office, 9700 Stockdale Highway, Bakersfield, California, or by calling (661) Every effort will be made to reasonably accommodate individuals with disabilities by making meeting material available in alternative formats. Requests for assistance should be made five (5) working days in advance of a meeting whenever possible. 6/100

7 SUMMARY OF PROCEEDINGS FINANCE COMMITTEE MEETING KERN HEALTH SYSTEMS 9700 Stockdale Highway 1st Floor Board Room Bakersfield, California Friday August 2, :30 A.M. COMMITTEE RECONVENED Members present: Rhoades, Sidhu, Smith Members absent: Deats, Casas NOTE: The vote is displayed in bold below each item. For example, Smith-Deats denotes Director Smith made the motion and Director Deats seconded the motion. CONSENT AGENDA/OPPORTUNITY FOR PUBLIC COMMENT: ALL ITEMS LISTED WITH A "CA" WERE CONSIDERED TO BE ROUTINE AND APPROVED BY ONE MOTION. COMMITTEE RECOMMENDATION SHOWN IN CAPS PUBLIC PRESENTATIONS 1) This portion of the meeting is reserved for persons to address the Committee on any matter not on this agenda but under the jurisdiction of the Committee. Committee members may respond briefly to statements made or questions posed. They may ask a question for clarification, make a referral to staff for factual information or request staff to report back to the Committee at a later meeting. Also, the Committee may take action to direct the staff to place a matter of business on a future agenda. SPEAKERS ARE LIMITED TO TWO MINUTES. PLEASE STATE AND SPELL YOUR NAME BEFORE MAKING YOUR PRESENTATION. THANK YOU! NO ONE HEARD 7/100

8 Summary Page 2 Finance Committee Meeting 8/2/2013 Kern Health Systems COMMITTEE MEMBER ANNOUNCEMENTS OR REPORTS 2) On their own initiative, Committee members may make an announcement or a report on their own activities. They may ask a question for clarification, make a referral to staff or take action to have staff place a matter of business on a future agenda (Government Code Section (a)(2)) NO ONE HEARD CA-3) Minutes for KHS Finance Committee meeting on July 3, APPROVED Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 4) Proposed Amendment No. 22 to Hospital and Other Facility Services Agreement with Kern Medical Center for Medi-Cal Managed Care Capitation Rate Range Increases pursuant to the Intergovernmental Agreement regarding the transfer of public funds between the County of Kern and the California Department of Health Care Services (Fiscal Impact: None) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 5) Proposed Amendment to Hospital and Other Facility Services Agreement with Kern Valley Healthcare District for Medi-Cal Managed Care Capitation Rate Range Increases pursuant to the Intergovernmental Agreement regarding the transfer of public funds between Kern Valley Healthcare District and the California Department of Health Care Services (Fiscal Impact: None) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 6) Proposed Amendment to Hospital and Other Facility Services Agreement with Tehachapi Valley Healthcare District for Medi-Cal Managed Care Capitation Rate Range Increases pursuant to the Intergovernmental Agreement regarding the transfer of public funds between Tehachapi Valley Healthcare District and the California Department of Health Care Services (Fiscal Impact: None) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Sidhu-Rhoades: 3 Ayes; 2 Absent Deats, Casas 4) Proposed Agreement with AdvantMed, doing business as RecordFlow, for record retrieval, coding, and HEDIS services from August 8, 2013 through August 8, 2015, in an amount not to exceed $106,750 (Fiscal Impact: $106,750; Budgeted) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 8/100

9 Summary Page 3 Finance Committee Meeting 8/2/2013 Kern Health Systems 6) Proposed membership renewal with Local Health Plans of California for the period July 1, 2013 through June 30, 2014, in an amount not to exceed $70,000 (Fiscal Impact: $70,000; Budgeted) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 7) Proposed employee contributions to health benefit plan, effective September 1, 2013 (Fiscal Impact: None) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 8) Proposed renewal and binding of employee benefit plans for health, dental, life insurance and long-term disability, effective September 1, 2013 (Fiscal Impact: $3,036,780 Estimated; Budgeted) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Sidhu-Rhoades: 3 Ayes; 2 Absent Deats, Casas 9) Report on impact of capitation rates on providers (Fiscal Impact: None) WITHDRAWN 10) Report on status of Kern Health Systems executive search firm contract proposal for Chief Medical Officer recruitment, and request to develop agreement in an amount not to exceed $82,000 (Fiscal Impact: $82,000; Budgeted) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS TO AUTHORIZE CHIEF EXECUTIVE OFFICER TO SIGN SUBJECT TO APPROVAL AS TO FORM BY COUNSEL Sidhu-Rhoades: 3 Ayes; 2 Absent Deats, Casas 11) Unusual travel request for Kern Health Systems Information Technology (IT) Department, Data Management and Business Intelligence, Manager to attend The Data Warehousing Institute World Conference in San Diego, California from August 18, 2013 through August 22, 2013, in an amount not to exceed $3,963 (Fiscal Impact: $3,963; Budgeted) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 12) Report on Kern Health Systems and Kern Health Systems Group Health Plan financial statements for June 30, 2013 (Fiscal Impact: None) RECEIVED AND FILED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 13) Proposed Accounts Payable Vendor Report and non-claims paid through MHC system for June 2013 (Fiscal Impact: None) RECEIVED AND FILED; REFER TO KHS BOARD OF DIRECTORS Rhoades-Sidhu: 3 Ayes; 2 Absent Deats, Casas 9/100

10 Summary Page 4 Finance Committee Meeting 8/2/2013 Kern Health Systems ADJOURNED TO FRIDAY, SEPTEMBER 6, 2013 AT 9:28 A.M. Rhoades 10/100

11 To: KHS Finance Committee From: John Fisher, M.D. Date: September 6, 2013 Re: Presentation on impact of capitation for KHS providers Background In response to a referral made by a member of the KHS Board of Directors, Dr. Fisher will make a short presentation on the factors for consideration regarding capitated financial arrangements for contracted providers. This presentation will focus on clinical and regulatory aspects only. Requested Action No action required. Informational. 11/100

12 Payment Alignment for Improved Outcomes John Fisher, MD, MBA Kern Health Systems, /100

13 Capitation vs. Fee For Service Method of Payment Assumption of Risk Benefits to Provider Capitation Fixed payment determined by the size of assigned patient population and average expected care Providers (degree of risk will vary based on scope of services the cap payment is expected to cover) Set payment regardless of whether the patient seeks care (reliable cash flow) Fee for Service Providers bill for services when rendered and are paid a predetermined rate for each service Payers No downside risk created if utilization is greater than expected 13/100

14 Different Types of Care Acute Ambulatory Care (sprains, colds, etc.) Preventative Care/Screening (Vacc, CA, etc.) Major Condition/High Complexity & Chronic Illness (Diabetes, COPD, HTN) 14/100

15 Acute Ambulatory Care (sprains, colds, etc.) Capitation FFS Low motivation for access to MD Works well for 1-2 problems per visit Increased ER and UC use 15/100

16 Preventative Care and Screening Capitation Perception that providers are incentivized to under-serve Systems typically have HIT to prompt providers P4P helps but may not be enough Very effective FFS Can often be accomplished by ancillary providers (RN, MLP, MA) per protocol P4P highly effective if provider has capacity to get member in 16/100

17 Major Condition/High Complexity & Chronic Illness Inpatient hospital, ER and pharmacy costs are primary drivers Misaligned incentives (hospital, ER group, PCP, payer) Overutilization and poor care coordination 17/100

18 Major Condition/High Complexity & Chronic Illness Capitation FFS Most effective when full-risk Supports innovation and Care Management infrastructure Must be tied to outcome incentives to avoid underutilization Inadequate due to time pressure and complexity of conditions Lack of financial reimbursement for provider office-based outreach Does not support team-based care Patients most in need of care often resort to ER and UC for management of condition 18/100

19 Comprehensive Audit Requirements- UM, QI, Credentialing Program descriptions Annual Work Plans Policies & Procedures Criteria for Medical Necessity Annual UM statistics Credentialing & re-credentialing files Job descriptions of key personnel Committee minutes & agendas Annual Program Evaluations Annual Inter-Rater Reliability reports Sampling of denied and approved referrals Case Management files Facility Site Review & Medical Record Review worksheets, tools & summaries Organizational charts 19/100

20 Financial Viability Requirements Panel size matters Risk distribution among assigned members ( min panel size) DMHC requirements for Risk Bearing Organizations under SB260 positive working capital at all times maintain positive TNE at all times calculated and documented IBNR reimbursed, contested or denied at least 95 percent of its claims within 45 working days Periodic financial & organizational information disclosures per section of Title 28 Stop-Loss/Reinsurance 20/100

21 Potential Risks Underutilization No incentive for provider to see the member once capitation payment made unless tied to downside risk Redistribution of costs Potential for increased costs in UC, ER and IP settings Poor encounter data Dependence on data from PCPs for submission to DHCS for Plan rate calculation Failure of delegated provider Disruption in patient care and redistribution of members 21/100

22 Summary Not a one size fits all solution Varying clinical conditions of members Operational and financial capabilities of providers Utilization, Cost and Reimbursement risks 22/100

23 Tread slowly Recommendations Design based on strengths of providers and needs of members Consider Pilot(s) 23/100

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25 To: Finance Committee From: Doug Hayward, CEO Date: September 6, 2013 Re: 4th Quarter, 2013 Budget Modification Background Effective January 1, 2014, changes expanding Medi-Cal eligibility and health coverage under the Affordable Care Act will be implemented. As a result, it is estimated that KHS will see an increase of approximately 30,000 new members to begin phasing in the plan as of January 1, In preparation for the anticipated membership growth, Management is submitting a 2013, 4 th quarter budget supplement. The supplemental budget represents costs associated with increased staffing, expanded facilities and additional capital equipment that KHS will need in place prior to the new members effective enrollment date. Using current staff-to-member ratios for departments that are membership driven, and considering expenses related to the additional Medi-Cal eligible population that have already been previously presented to and approved by the KHS Board, additional expenses for the 4 th quarter budget for the calendar year ending December 31, 2013 are being requested as summarized in the table below. OPERATING EXPENSES $ SALARIES AND BENEFITS (see attachment A) $ 47,948 PROVIDER RELATIONS - ADDITIONAL EMPLOYEE EXPENSES 2,732 MEMBER SERVICES MEMBER NOTIFICATION MAILINGS 25,000 CORPORATE SERVICES RENT/UTILITIES FOR NEW SPACE AND DEPRECIATION FOR NEW ASSETS 95,228 NEW OPERATING EXPENSES ( Not previously approved by the Board) FOR 2013 $ 170,908 ADVERTISING - TELEVISION/RADIO/PRINT ADS (prior approved by the Board) 312,750 TOTAL INCREASE IN OPERATING EXPENSES FOR 2013 associated with Expansion $ 483,658

26 CAPITALIZED ASSETS $ STANDARD EMPLOYEE HARDWARE FOR NEW POSITIONS $ 40,000 NEW BUILDING - IT INFRASTRUCTURE** 185,000 NEW OFFICE FURNITURE AND CUBICLES** 280,000 TOTAL INCREASE TO BUDGETED CAPITALIZED ASSETS FOR 2013 $ 505,000 ** Includes allowance for tax and delivery charges that may be in addition to furniture costs. The advertising campaign targeting MCAL expansion members launched 2 nd Quarter 2013 following Board approval of content, medium, duration and costs associated with the campaign. The amount is included so that all costs in 2013 for expansion related activities may be represented here. Amounts highlighted in the table above represent the total amount of new expenses requested under the supplemental budget. At the Finance Committee meeting, staff will make a presentation providing more detail on the supplemental budget costs and expense assumptions. The presentation will cover: I. Overview a. Enrollment Projections b. Benefits Modifications c. Population Demographics and Impact on Utilization of Services II. Supplemental Budget Details a. Operating Budget i. Staffing Requirements and Rationale ii. Other Administrative Services Cost b. Capital Equipment Costs III. Facilities Expansion Costs and Expenditure Timeline a. Facilities Cost b. Furniture c. Technology

27 Requested Action 1. Following presentation, recommend approval of supplemental budget of $170,908 in operating expenses and $505,000 in capital equipment. 2. Due to timing difficulties between Board meetings, authorize CEO to execute equipment, furniture and technology related contracts over $10,000 and present to the Board of Directors for retro-approval.

28 2013 Expansion Budget Pre Early Expansion Staffing Requirements and Rationale The staffing requirements depicted here represent areas warranting staff increases in preparation for the large enrollment growth beginning January, The reason for this request is to have limited but necessary resources trained and in place to handle additional demand on each department that will be impacted prior to 1/1/2014.

29 Department October November December Enroll / Member Services 1 Utilization mgmt. 1 Quality Improvement and Care Management 1 Pharmacy 1 Provider Rel. 1 Health Education 1 Claims Processing 2 Rationale: Enrollment and Member Services: 1.0 FTE - Member Services Supervisor Current call volume associated with the age /sex mix of new population is similar to the SPD population whose call volume is 50% greater than standard MCAL membership. Additionally lengths of calls are longer dealing with multiple or more complex questions and /or concerns often requiring Supervisory level input or decisions. During high volume periods, the Manager is assist with such calls. With 85% of new enrollment represented by adults, a second Supervisor is required with the Department currently having only 1 Supervisor for 32 employees. Consequently, direct supervision is currently split between the Department Manager and Supervisor. Increased volume places additional pressure on other duties of the Manager who has responsibility for grievances, enrollment fulfillment and general department managerial functions (planning, meetings, staffing, scheduling, reports etc.) Utilization Management 1.0 FTE Care Coordinator The transition of LIHP members from their current coverage plan to MCAL begins October 1 st for an effective coverage date under MCAL of 1/1/2014. Currently, the LIHP plan has 10,000 members.

30 Several of these members are undergoing treatment whose care will require coordinating to new providers. DHCS requires KHS to provide these services. Following completion of the coordination of care, the employee will continue in this capacity to absorb the additional demand on these services from the increased membership expected in Quality Improvement and Care Management: 1.0 FTE - Quality Improvement and Care Management Supervisor Day to day direction for the Quality Improvement and Care Management area is supervised by 1 FTE covering 16 staff. The increase in membership and demographic change occurring in 2014 will increase demand for care management services resulting in the need to hire additional staff beginning Currently both the QI and CM areas are supervised by one person. With the additional staff necessary to handle greater demand on the department, QI and CM will be split and warrant a supervisor to oversee each area. Pharmacy: 1.0 FTE Pharmacy Technician With the new enrollment predominately represented by adults who utilize pharmacy benefits at 3 times the level of the conventional MCAL membership, it is anticipated with the advent of 10,000 members enrolled effective 1/1/2014, one additional Pharmacy Technician is needed to handle the volume of TARS associated with this population. Provider Relations: 1.0 FTE Provider Relations Representative Scheduled to be hired in 4th Quarter 2013 The expanded membership projected requires KHS to begin expanding its network prior to In order to accommodate the preparation of an expanded network of providers, Provider Relations will need to hire 1.0 FTE. The PR Rep will be cross trained and assist in the oversight of the credentialing component of this department. The credentialing department that is responsible for the new and existing providers currently has 1.0 FTE Credentialing Coordinator and 1.0 FTE Support Clerk. The need for additional assistance is justified by the sheer volume of total providers; slightly below 1,000. There are also changes in oversight such as periodic provider queries, regular lookup of MCAL Suspended and ineligible providers, and other checks and balances that will improve the re-credentialing process. It is envisioned this new hire will work 60% in a PR Representative capacity and 40% in credentialing.

31 Health Education: 1.0 FTE - Health Education Senior Support Clerk 1n anticipation for the new members enrolling in the 4th quarter of 2013, 1 new Health Education Senior Support Clerk will need to be hired in November to prepare for the increased call volume and referral processing for health education services and related projects. Departmental statistics revealed an 18% increase in call volume and a 43% increase in requests for health education services between 4th quarter 2012 and 1st quarter Hiring in November is necessary to allow for adequate staff training due to the scheduled holidays and potential staff vacation requests. Claims Processing: 2 new Claims Examiners 2 new Claims Examiners are requested for anticipated additional claims volume associated with new members that will be effective January 1, The addition of the new Claims Examiners in the 4th quarter will allow sufficient training time to prepare for the increase in claims volume beginning in Using the current average of.77 claims PMPM times the projected 10,000 new members on January 1st, this gives us an anticipated increase of 7,700 additional claims a month. With an average of 40% auto adjudication rate, this will mean an increase in claims volume for manual processing of 4,620 claims a month. These two new positions yield a member staffing ratio of 1 / 5,000 members.

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35 To: Finance Committee From: Doug Hayward, CEO Date: September 6, 2013 Re: Intergovernmental Transfer Advancement Request Background Enclosed is a letter requesting KHS advance KMC their intergovernmental transfer funds KMC receives from time to time from the State of California. KHS is the go between for such funds coming from the State. The amounts are predetermined in advance of the distribution from the State. The County is requesting a non-interest bearing cash advance to aid KMC in its effort to secure the IGT. Upon receiving the intergovernmental transfer funds from the State, KHS would be repaid the same amount advanced to KMC. Should the Board agree to advance these funds, without a formal documentation outlining the terms under which these funds will be repaid, the transaction would be considered a distribution of assets similar to excess reserves. To avoid the impact to reserves, KHS could secure the loan with a Promissory Note outlining the terms and conditions for repayment using the IGT funds KMC would be receiving as collateral. Payment would come from the IGT distribution which is expected to occur later this year. Since it would be a loan using the IGT funding as collateral, it would remain a valid asset until such time as the loan is repaid and therefore, have no impact to our reserves. Requested Action Recommend temporarily loaning $7,170,446 so that KMC could avoid reliance on the County General Fund in order to secure federal matching funds under the IGT reimbursement program. 35/100

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37 To: KHS Finance Committee From: Doug Hayward, CEO Date: September 6, 2013 Re: Bridge Plan Actuarial Services Background The California Health Benefit Exchange (Covered California) is seeking federal approval to implement a Bridge program which would provide low-cost healthcare coverage to the following populations up to 250% FPL: New Covered California enrollees who were previously enrolled in Medi-Cal Managed Care Plans who participate in the program; Family members eligible for coverage in Covered California whose families include enrollees in Medi-Cal Managed Care Plans participating in the program; and Parent or caretaker relative of a Medi-Cal enrolled child. The primary goal of the Bridge Plan is to help minimize Medi-Cal disruption and improve continuity of care in the event of income fluctuations. Covered California s goal is to have Bridge Plans offer premiums that are 5%-15% below the individual market s second lowest cost Silver plan. This will ensure affordability and maximize the premium tax credits available to this vulnerable population. Scope of Services Participation in Covered California s Bridge Plan will require each health plan to develop and certify actuarially sound premium rates. To engage in this effort KHS requested information on actuarial development of premium rates and supporting actuarial cost models from those in the industry. The project is to include the following: Projected membership of eligible Bridge participants for KHS. KHS Bridge Plan Premiums that factor in: 37/100

38 o Essential Health Benefits and the cost sharing plan design prescribed by CA- HBEX for the Silver Standard Copay plan. o Regional differences reflecting utilization patterns and unit costs. o Changes in the individual market due to the 2014 healthcare landscape. o Aggregate adjustments to convert the unit costs into various reimbursement scenarios. o Assumed medical management effectiveness. o Non-Medical expenses, including administration and risk margin. o The impact of the Exchange risk mitigation mechanics. Selection Process Bid requests were sent to the following actuarial firms: Mercer, Milliman, and Optumas (see the attached bid matrix for specific vendor submissions). After review and discussion, KHS is recommending moving forward with Optumas for these services. A brief presentation will be given to review the selection criteria including: Optumas familiarity with KHS member and financial data and demonstrated actuarial expertise through the existing services they provide KHS. Optumas will provide working models for both the population estimates, and the premium estimate worksheets. This will allow KHS to test various pricing scenarios without incurring additional subcontractor costs. No other bidder was able to offer a working model. Optumas is able to provide deliverables for each item in the Scope of Services and submitted a competitive bid. Requested Action KHS is requesting Finance Committee approval of the contract with Optumas for Actuarial Services in the amount not to exceed $70,000 for the duration of the project. 38/100

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63 To: KHS Finance Committee From: Doug Hayward, CEO Date: September 6, 2013 Re: Proposed Increase in P4P Program Funding Background In 2011 and prior years, KHS accrued $2.00 pmpm for Provider Risk Pool Programs. At the end of each year, unpaid funds remaining in the pool became available for future pool awards. The liability account was approximately $5 million in 2011 and the KHS Board approved staff s recommendation that KHS draw down on the remaining pool balance in 2012 rather than accrue additional funding. For the 2013 Budget, there was an estimated $2.2 million available in the P4P Pool. In the prior year, awards had averaged less than $500,000 per quarter, the decision was made not to accrue additional funds in the 2013 budget. Due to increase participation and provider scores, awards in 2013 have increased. The table below shows the actual awards for 2012, 1 st and 2 nd quarters of The 3 rd and 4 th quarter awards, as well as the annual measure awards, have been estimated. Based on estimates, KHS would need to accrue approximately $1.77 million or 1.16 pmpm in anticipation of funding the remaining 2013 awards. PROVIDER AWARDS YEAR 1st QTR 2nd QTR 3rd QTR 4th QTR Annual Measures* , , , , , , ,600 1,105, , , POOL BALANCE 1,702, ,045 (364,795) (1,282,642) (1,773,370) MEMBER MONTHS 1,528,527 Requested Action ADDITIONAL PMPM COST $1.16 Approve, refer to KHS Board of Directors 63/100

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71 To: KHS Finance Committee From: Robin Plumb, Controller Date: September 6, 2013 Re: Optumas development of Rate Development Template (RDT) Background Each year, Optumas assists KHS with the development of the Medi-Cal rates, including independent analysis and review of Kern analyses as requested, strategic discussions, and annual negotiation assistance with the Department of Health Care Services (DHCS) and the Managed Risk Medical Insurance Board (MRMIB), respectively. Optumas' rate setting process is based on replicating the processes that DHCS, MRMIB, and the State's actuaries, Mercer, will use as they develop the rates for their respective programs. Optumas balance of $32, was used to undertake the Excess Reserve study analysis which cost $28, This study reduced the funds available to engage Optumas support for the RDT rates for Discussion Optumas will assist KHS to complete a Rate Development Template (RDT) containing historical medical and administrative cost information for its covered populations as well as prospective assumptions for the future rating period. This RDT is used by DHCS when calculating the Medi-Cal capitation rates payable to each health plan. Previous year RDT cost was $19,000.00, KHS estimates that this year cost should be near $21, Recommendation Review and approve paying Optumas an amount not to exceed $23,000 to aid in completing KHS s 2013 Rate Development Template (RDT) for DHCS. 71/100

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