Financial Management in a Managed Care Environment. MACMHB Learn and Share June 1, 2016

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1 Financial Management in a Managed Care Environment MACMHB Learn and Share June 1, 2016

2 Facilitators Amanda Horgan, Deputy Director Mid-State Health Network Bryan Krogman, Deputy Director for Administration Community Mental Health for Central Michigan

3 Agenda Topics Managed Care Capitated Revenue Payments Risk Management Cost Allocation Methods Cost and Utilization Analysis Managed Care Regulations and Rules

4 Managed Care Capitated Revenue Payments Capitated payments are fixed per member per month payments paid in advance rather than a payment per service provided (fee-for-service). Payments are based on an enrolled population whether or not a person seeks care

5 Actuarial Rate Setting Milliman, Inc. is the actuary retained by the State of Michigan to develop capitation rates for the Managed Specialty Services and Supports Waiver Rates are required to be certified as actuarially sound Per Member Per Month (PMPM) rate structure

6 Service Population PMPM o Temporary Assistance for Needy Families (TANF) o Disabled, Aged, Blind (DAB) Gender Age Geographic Factors

7 Source: Milliman, Inc. Specialty Services and Supports Waiver Capitation Rates Proposed Paid Rates Quarters 3 and 4 of State Fiscal Year 2016, March 15, 2016

8 Enrollment Analysis Main categories for Medicaid eligibility o Parents and children o Elderly o Disabled Means-tested: income and resource tests Medicaid expansion (Healthy Michigan) o Single adults age at or below 133% of federal poverty level

9 Enrollment Analysis (cont.) Age Gender Program Populations o TANF: Temporary Assistance for Needy Families o DAB: Disabled, Aged, Blind o C-Waiver: Habilitation Supports Waiver Program Codes Scope/coverage Geographic Factor

10 Enrollment Analysis (cont.) Enrollment related files: o 834 Medicaid enrollment file o 820 Payment file o Key fields Medicaid ID Begin Date Program Code Coverage Code Gender Age Redetermination Date

11 Proposed Paid Rates April 1, 2016 to September 30, 2016 State Plan B3 MH-TANF $14.99 $0.76 MH-DB $ $ MH-TANF Male SP Female SP Male B Female B MH-DAB Male SP Female SP Male B Female B

12 Rates MH-TANF Male SP $20.34 $19.09 $13.25 $13.13 $11.66 $16.46 Female SP $15.33 $15.43 $19.15 $24.33 $22.83 $6.49 Male B3 $0.96 $0.45 $0.55 $0.75 $1.12 $0.02 Female B3 $0.56 $1.31 $1.58 $1.66 $1.59 $0.02 MH-DAB Male SP $ $ $ $ $ $67.78 Female SP $ $ $ $ $ $41.09 Male B3 $19.17 $ $ $ $ $82.93 Female B3 $13.55 $ $ $ $ $45.46

13 Population Statistics TANF Male TANF Female DAB Male DAB Female Revenue Estimate Total TANF Male $190,394 $12,858 $15,231 $6,480 $2,224 $33 $227,219 TANF Female $137,178 $32,831 $63,975 $21,571 $4,054 $0 $259,609 DAB Male $204,749 $194,801 $557,449 $362,033 $706,285 $138,809 $2,164,125 DAB Female $109,084 $115,357 $376,102 $291,033 $592,786 $165,564 $1,649,926 Total $641,404 $355,847 $1,012,756 $681,116 $1,305,349 $304,406 $4,300,878 PIHP Adm -$29,781 HRA -$102,290 Net $4,168,807

14 Habilitation Supports Waiver Rate Base: $2, Residential Living Arrangment Private Residence with Spouse or Non-family/Supported Indepdendence Program $4, Specialized Residental Home $1, Private Residence with Family of Foster Home $1, Multiplicative Factor PIHP PIHP PIHP PIHP PIHP PIHP PIHP PIHP PIHP PIHP

15 Medicaid Fund Sources Michigan s Medicaid Fund Sources o State Plan Services o Alternative B3 Services and Supports o C-Waiver Habilitation Supports Waiver Services o Healthy Michigan o Autism Payment Schedule o B/B3/HMP 4 th Thursday of the month o HSW, Autism, DHS Incentive 2 nd Thursday of the month

16 Medicaid Fund Sources General Ledger Account Codes o Medicaid State Plan o Medicaid B3 o Medicaid HSW o MDHHS DHS Incentive o Autism o Healthy Michigan

17 Risk Management In Michigan, the 1915(b)/(c) Waiver Programs are managed on a shared risk basis by specialty Prepaid Inpatient Health Plans (PIHP s). Key elements of managed care risk management: o Risk corridor o Reinvestment of savings o Risk Management strategy

18 Risk Corridor Unexpended Medicaid funds, up to 7.5% of Medicaid revenue may be retained by the PIHP Overspending of funds is as follows: o PIHP s are at full risk for 100% and 105% of funds contracted o PIHP s shall be responsible for 50% of the financial liabilities above the risk corridor between 105% and 110% of funds contracted o The PIHP shall not be financially responsible for liabilities incurred above the risk corridor over 110% of funds contracted

19 Internal Service Fund What is it? How is it accounted for? Are there funding amount limitations?

20 What is an ISF? The establishment of an Internal Serve Fund is one method for securing funds as part of an overall strategy for covering risk exposure under a managed care financing arrangement A set of self-balancing accounts are maintained for the ISF and generally accepted accounting principles (GAAP) apply. Maintained as a separate proprietary fund in the governmental entity s set of financial statements

21 How is an ISF funded? To establish an adequate funding level to cover risk corridor requirements, payments may be made up to the total potential liability relative to the applicable risk corridor Payments to the ISF may be based on either actuarial principles, historical cost experience or historical cost assumptions covering at least the most recent two years

22 ISF (cont.) If the ISF becomes over-funded is shall be reduced within one fiscal year through abatement If the abatement is inadequate to reduce the ISF to the appropriate level it shall be reduced through refunds

24 Medicaid Savings PIHP s may earn and retain Medicaid savings Up to 7.5% of the Medicaid managed care funding may be retained and included in the PIHP s reinvestment strategy All Medicaid savings funds reported at fiscal year end must be expended within one fiscal year following the fiscal year earned

25 Reinvestment Strategy Services and supports must be directed to the Medicaid population May include development of treatment, support and services models including: o o o o o Expansion or continuation of state plan/(b)(3) services to address projected demand increases Community education, prevention and/or early intervention initiatives Treatment, support and/or service model research and evaluation Up to 15% of savings for administrative capacity and infrastructure Benefit stabilization

26 Assurance of Financial Risk Protection A specific written risk management plan is required to be submitted to MDHHS each year. The plan must identify how the risk commitment will be met: o o o Amount of reserves available Insurance Other revenues available

27 Cost Allocation Methods Fund Source Assignment Administrative Cost Allocation

28 Organizational Structure Cost Allocation o PIHP o CMHSP o Core Provider Agencies o Managed Care Provider Networks Chart of Accounts Structure Overhead Administration o Direct service administration o Benefit administration

29 Chart of Accounts Natural Account o Wages o Supplies o Community Living Support Reporting Unit/Cost Center o 210 Residential o 401 Outpatient o 810 Finance o 811 Information Systems o 812 Quality Improvement Fund Source o Overhead o 110 Medicaid State Plan o 114 Healthy Michigan Plan o 120 General Fund

30 Chart of Accounts Account String: o o Direct wages for outpatient therapist providing individual therapy services to a consumer with Medicaid Fund Source Mapping o o o o Consumer demographics HCPCS/CPT Code Direct Service Contractually Provided Service Reporting Unit/Cost Center o o Functional Service Administrative Function

31 Fund Source Allocation based on Service Splits Not all EMR systems are the same so being able to pull out encounters and have fund sources attached to them by Cost Center is the goal. Using your current rates by each of the services in a cost center and knowing which Fund Source those belong to you can start developing Splits. This method can be done for all service cost centers that are attributable to Medicaid, Healthy Michigan and General Funds. Keeping an Autism Cost Center separate helps with keeping those costs separate from other fund sources

32 Cost Allocation Example Cost Center Code Encounter Units Rates Fund Source Medicaid Cost Healthy Michigan Cost General Fund Cost Residential Home 1 H Mediciad 2, Residential Home 1 H Healthy Michigan Residential Home 1 H GF Residential Home 2 H Mediciad 3, Residential Home 2 H Healthy Michigan Residential Home 2 H GF Residential Home 3 H Mediciad 4, Residential Home 3 H Healthy Michigan Residential Home 3 H GF Cost Center Medicaid Cost Healthy Michigan Cost General Fund Cost Total Cost Medicaid Split HM Split GF Split Residential 1 Split 2, , % 11.36% 3.41% Residential 2 Split 3, , % 15.79% 6.56% Residential 3 Split 4, , % 8.97% 6.93%

33 Types o Building o Supervisor o Vehicle Distribution Methods o Square Feet o Full Time Equivalents o Miles Overhead Overhead Allocation Flow

34 Administrative Cost Allocation MDHHS Required Reporting These administration cost reporting requirements are based on the functions and guidance contained in the Establishing Administrative Costs Within and Across the CMHSP System (originally issued for FY04 MUNC, Revised December 2011 Guidance). This guidance also applies to the administrative cost information reported in the Medicaid Utilization and Net Cost Reports (MUNC), General Funds Utilization and Net Cost report (GFUNC), the Sub-element Cost Report (SECR)as well as the Administrative Cost Report (ACR).

36 Administrative Cost Allocation Types of Administration o Direct Service Administration o Managed Care Benefit Plan Administration Administrative Components o General Administration o Financial Management o Information Systems Management o Provider Network Management o Utilization Management o Customer Services o Quality Management

37 Administrative Cost Allocation Administrative Function Cost Center Finance 810 Information Services 811 Quality Improvement 812 Provider Network Management 813

38 Administrative Cost Allocation Methods for determining amounts to allocate between direct service administration and benefit plan administration o o o Time Studies Questionnaires Staff Interviews

39 Administrative Cost Allocation Admin Function Direct Service MCO Benefit Plan Finance 64% 36% QI 55% 45% Provider Network 10% 90%

40 Administrative Cost Allocation Per administrative cost reporting instructions, administration must be charged relative to the provision of services to consumers based on their program eligibility and services covered by that benefit plan

41 Administrative Cost Allocation Cost Center Medicaid Healthy MI Autism Child Waiver SED Waiver General Fund Exec Dir Finance PNM IS HR QI

44 Cost/Utilization Analysis Penetration Rate Population Analysis Service Mix Cost Per Case Unit Rate Analysis

45 Penetration Rate What is the need? o Prevalence of SMI, SED, I/DD o Annual submission community data sets Population census Medicaid enrollment Prevalence data How many people are served? o Historical data o Low, medium, high range estimates Access Considerations o Level of Care determinations o Benefit array

46 Population Analysis Persons with Intellectual/Developmental Disability (I/DD) Serious and Persistent Mental Illness (SMI) Children with Serious Emotional Disturbance (SED) Sub-Element Cost Report o o o o o Population focus Service (CPT/HCPCS) Cases Units Cost

47 Population Analysis Diagnosis Level of Care o LOCUS o CAFAS o DECA o ASAM Service Utilization

48 Service Mix Count of consumers served by diagnosis/level of care Number of units per CPT/HCPCS code by level of care grouping Average duration of service by staff

49 Cost Per Case Cost per case by diagnosis Cost per case by population o DD $49.5M/1,500 cases = $33,000 per case o SMI $27M/4900 cases = $5,510 per case o SED $5.5M/1700 cases = $3,235 per case Identification of high utilizers Value vs. Volume

50 Value-Based Purchasing VVVVV = QQQQQQQ CCCC Use of Evidenced-Based Practices Social Determinates of Health

51 Unit Rate Analysis Rate setting process

52 Unit Rate Analysis Fee-For-Service Arrangements o Medicare o Children s Waiver & SED Waiver o Commercial Insurance o Private Pay Lower of screen or cost MUNC Data o Comparison with region members average rates o Comparison with statewide PIHP average rates Use by Actuary o MUNC unit rate data by PIHP applied to encounters o Relative Value Unit (RVU) to account for unit base changes

PIHP Data Quality Meeting Review & Relative Value Unit Methodology

PIHP Data Quality Meeting Review & Relative Value Unit Methodology Presented by: Paul Houchens, FSA, MAAA Jeremy Cunningham, FSA, MAAA May 28, 2015 Phases of Data Quality Review 1. Overall completeness