ALAMEDA ALLIANCE FOR HEALTH BOARD OF GOVERNORS REGULAR MEETING. October 14, :00 pm 2:00 pm 1240 South Loop Road, Alameda, CA

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1 ALAMEDA ALLIANCE FOR HEALTH BOARD OF GOVERNORS REGULAR MEETING October 14, :00 pm 2:00 pm 1240 South Loop Road, Alameda, CA SUMMARY OF PROCEEDINGS Board Members Present: Jane Garcia (Chair),Marty Lynch (Vice-Chair), Scott Coffin, Dr. Evan Seevak, Dr. Rollington Ferguson, Delvecchio Finley, Will Scott, Travis Stein, Feda Almaliti, Aarondeep Basrai, Nicholas Peraino, Wilma Chan, Dr. Ray Davis Jr., Rebecca Gebhart Excused: Dr. Bertram Lubin, Dr. Michael Marchiano Alliance Staff Present: Scott Coffin, Matt Levin, Matt Woodruff, Tim Reilly, Dr. Michael Griffis, Tiffany Cheang, Elia Gallardo, Craig Kellar, Aman Bhasin AGENDA 1. CALL TO ORDER M. Lynch 12:21 The regular board meeting was called to order by M. Lynch at 12:10 pm. A board quorum was established by a simple majority for the meeting. Attendees were offered the opportunity to speak at the meeting by completing a Request to Speak form. 2. AGENDA APPROVAL OR MODIFICATIONS M. Lynch M. Lynch inquired if there were any modifications to the agenda. There were no changes to the agenda. 3. INTRODUCTIONS M. Lynch M. Lynch and S. Coffin welcomed new board member, Rebecca Gebhart. R. Gebhart is currently the Interim Director of the Health Care Services Agency of Alameda County. She provided a brief description of her background. Introductions were made for those present. M. Lynch M. Lynch inquired if there were any modifications to the agenda. There were no changes to the agenda.

2 4. PUBLIC COMMENTS (NON-AGENDA S) M. Lynch M. Lynch requested comments from the public in regards to non-agenized items. There were no comments. 5. CEO UPDATE S. Coffin S. Coffin provided the following updates: Status of DMHC Remote Monitoring: Remote monitoring is scheduled to end on 10/31/16 Alliance will transition to corrective action plan (CAP) and normal operations reporting DMHC will be initiating the legal process to end the monitoring Health Plan Operations Dashboard: The goal of the dashboard is to include the operational metrics of all the departments to measure the health of the Alliance The dashboard will be used by the Sr. Management Team to discuss priorities and problem solve The goal is to increase transparency for overall operational performance FY2017 Priorities and Objectives: Forecasting Assumptions o $900M in revenue; $8M net income o Medi-Cal is 98% of Alliance business o Tangible Net Equity (TNE) is above 460% o Administrative Loss Ratio (ALR) will increase slightly to 7.1% o Whole Person Care Project to begin in early 2017 o Self-funded Health Homes Initiative starts Q Fiscal Management o Reviewing cost controls for both capital and operational needs o Quarterly re-forecasting throughout the year o Alliance workforce projected to grow from 258 to 300 Quality Improvement 23:49 o Goal to improve HEDIS scores 15% over three (3) years o Adding staff to utilization and disease and case management AAH BOG 10/14/ of 11

3 areas o Focus on the 5% of our members who incur 79% of the medical expenses Operations: o Continue to improve claim payment accuracy Staff o Improving communications with staff o Set clear expectations of priorities o Focus on productivity and morale o Follow up staff satisfaction survey scheduled at the end of the year o Alliance created a softball team as part of a local league; provided team building and camaraderie; mentors and builds leadership Chief Financial Officer (CFO) Recruitment Status: Tim Reilly continues as the Interim CFO An offer has been extended and accepted for the CFO position. An official announcement will be made within the next two (2) weeks. Tim Reilly will continue to serve during the transition process. Medi-Cal 50 th Anniversary Celebration October 26, 2016: The Alliance has taken the lead for Alameda County to celebrate the 50 th Anniversary of Medi-Cal On October 26, 2016, celebrations will take place in three (3) different locations: Fremont, Oakland and Berkeley 6. CONSENT CALENDAR M. Lynch M. Lynch requested a motion to approve the Consent Calendar. a. Approval of Minutes b. Ticket Policy Motion: E. Seevak Second: D. Finley Approved unanimously 7. a. BOARD BUSINESS STAFF PRESENTATION FINANCE AAH BOG 10/14/ of 11

4 T. Reilly Moss Adams - Presentation of independent audit findings: Presenters: Chris Pritchard and Rianne Suico Unmodified Opinion: Combined financial statements are fairly presented in accordance with generally accepted accounting principles. Asset Composition: Cash and cash equivalents balances were confirmed with bank reconciliations and were properly supported and recorded Premiums receivable balances were substantially collected; collectability of the receivables is correct and estimated properly in the financial statements Other assets/prepaid pension and deferred outflows of resource/restricted cash has remained fairly consistent in the last four (4) years Capital assets balances were in accordance with Alliance policies and with generally accepted accounting principles Liabilities and Net Position Balance: Proper inclusion or exclusion of the following expenses were recorded for FY 2016: Accounts payable, accrued expenses, long term debt, deferred inflows of resources, deferred and other liabilities Claims payable process was sound comparable to the prior year and there were no biases in terms of the estimation process The balance for payables to other governmental agencies and hospital fee payable increased dramatically due to Medical Loss Ratio (MLR) liabilities and state differentials in payments of cash and actual contracted rates Net position balances reflect changes in the operations of the Alliance Operating expenses: Largest expense is Medical Services followed by Administrative expenses and Premium Tax expenses Management has been recording these expenses in the same manner year to year and in accordance with adopted policies Revenues, Claims Expense and Claims Payable Comparison: Claims payable has been fairly consistent with an increase in 2014 with the clean-up of claims system The gap between revenue and claims expense represents net income and profit which has increased over the last three (3) years Trend of Medical Loss Ratio for All Lines of Business: In MLR was 90% of revenue AAH BOG 10/14/ of 11

5 was more average at 84% Significant improvement in management of claims, claims expense and operations over the last three (3) years Tangible Net Equity: 2013 through 2014 TNE was very close to DMHC requirements Since 2014, TNE has significantly increased Important Board Communications: Policies and procedures were reviewed and no deficiencies were found Accounting estimates are reasonable based on information provided No audit adjustments were made to the financial statements No issues or disagreements with management Audit ran very smoothly even with the transition of the CFO Two (2) Internal Controls Recommendations: o Recommendation for a formal policy related to the expense reimbursement for the executives; particularly approval of the CEO expenses; management has provided a plan to have the chair of the board approve the CEO s expenses. S. Coffin commented that after discussion with the Finance Committee, this recommendation will be effective today. o Recommendation for more frequent reporting to management on the volume of attempts of cyber activity attacks. Management will review the trends and look into being more proactive in the defenses of these attacks. S. Coffin reported that management agreed with this recommendation and reporting will be implemented within 60 days. R. Ferguson commented that overall the Alliance is in a sound financial position at this point in time. E. Seevak inquired if the Alliance has $130M saved in the bank somewhere? T. Reilly confirmed that amount is in the bank in addition to payables. E. Seevak inquired if there are standard practices on how to manage that amount of money? T. Reilly responded there are California statutes which guide the investments of public entities. Investments must be conservative cannot involve a lot of risk. Currently, the Alliance has a very conservative approach to investing. S. Coffin added that the Alliance s investment income is low not because of money management but because of the AAH BOG 10/14/ of 11

6 investment vehicles that do not pay that much. M. Lynch inquired of Moss Adams if there are any benchmarks in comparison with other plans. C. Pritchard responded that most of the plans in the state are doing very well. Many plans have substantial cash; however, a good portion of that is due back to the state. The Alliance is trending very well and consistent with most of the other plans. M. Levin added that DMHC has a dashboard on their website which shows comparison of all the plans in California. M. Lynch requested this information be included in the board packet. F. Almaliti inquired what it means when the money is due back to the state. T. Reilly explained that based on the Medi-Cal Expansion rates, the plans are currently being paid at a higher rate than the expected contracted rates so the difference is set aside as payables to pay back to the state. 53:20 We currently have $370M as payables back to the state. M. Lynch requested the financial comparisons of health plans from DMHC s website be included in the board packet. E. Seevak inquired about the assumptions made to fund the pension. Moss Adams auditor, C. Pritchard responded that CalPERS sends out estimates to the plans based on their actuary and it is usually a good estimate. R. Ferguson moved to accept the audit report from Moss Adams. The motion was seconded by F. Almaliti and passed unanimously. T. Reilly acknowledged the finance department staff for all their work for the audit. M. Lynch added thanks to the staff and management for the clean audit and last year s performance. Motion: R. Ferguson Second: F. Almaliti Approved unanimously Financial Reports for July 2016 and August YTD T. Reilly provided the following updates: July 2016: Net income $5.6M 7.8% Medical Loss Ratio (MLR) 86% Administrative Expenses 6% All key ratios including Tangible Net Equity (TNE) were also positive August YTD: Monthly net income ($291K); YTD $5,350K. The YTD figure is close AAH BOG 10/14/ of 11

7 to the overall budget and variances are expected month to month. The negative net income for the month was due to the required inclusion of costs from the prior period which were higher than initially estimated. Medical Loss Ratio (MLR) 89.7% Administrative expense 6.4% All balance sheet indicators are positive including the Tangible Net Equity (TNE) Overall the Alliance remains in a solid financial position R. Ferguson inquired how the state determines the TNE requirement. T. Reilly responded that a formula is used which is comprised of a variety of percentages including premiums, health care expenses, and inpatient expenses. The reserve requirement rises as the program grows. It is a moving target which changes every month. 1:02:50 E. Seevak pointed out the trend of membership for adults, children and MCEs are dropping while the SPDs and duals are rising. T. Reilly explained that the annual redeterminations tend to affect the child, adult and MCE categories more than the disabled and duals. The redeterminations are expected to adjust to a more normal pattern. In addition, we expect an impact from SB75 for uninsured undocumented children. S. Coffin commented that the current fiscal budget estimated an additional 14,000 members and three quarters (3/4) of that is estimated to be the undocumented children. 106:46 D. Finley inquired about the magnitude of the backlog for Alameda County. T. Reilly responded the Alliance is not significantly different from others. We can reach out to Alameda County Social Services to get a report regarding trends that apply to the Alliance and also identify reasons for fluctuations in membership. Reach out to Alameda County Social Services to for a membership report R. Gebhart commented on the redetermination process which takes place at the social service agency. She and Scott Coffin have been working with them to gather information about the process. AAH BOG 10/14/ of 11

8 R. Ferguson inquired if there is a point where the Alliance would look to compete with Blue Cross or Kaiser to gain members if our membership is declining. S. Coffin responded that he believes the Alliance is clearly the best option for healthcare in the county and our market share will continue to grow. The anomalies of current enrollment will be resolved over time. F. Almaliti commented that through her conversations with some parents who have requested services, there have been spontaneous, unexplained drops in coverage. M. Lynch added that the health centers continue to identify those who are due for recertification. When they come in for services the centers work with them to help them get recertified. E. Gallardo reported that the Department of Social Services is dealing with a unique situation because redeterminations were not conducted for the past two (2) years. Redeterminations are now being conducted for the current year and the past two (2) years. Currently our Member Services department collects information regarding address changes and reports it to Social Services. M. Lynch inquired about what drove the losses including the one-time determinations and Hep C payments. T. Reilly responded the monthly budget had projected some losses in the later months. Overall the margin is relatively small; any fluctuation could push us into the negative. The biggest estimated liability is generally the Incurred But Not Reported (IBNR) claims. The state recently decided to retroactively change the payment for Hep C cases, cutting the Hep C rate 23%. E. Seevak inquired if the change in Hep C payments has affected the way we are treating Hep C. M. Griffis responded the Alliance has updated the formulary accordingly with cost favorable medications. The pharmacy team is reaching out to the highest prescribers to educate and adjust medications accordingly. M. Lynch inquired about the expected cost reduction based on the planned development of a more robust management care program. M. Griffis AAH BOG 10/14/ of 11

9 responded in addition to the strategic goals and objectives, the Alliance will build the foundation and capacity to manage the care with trained staff and identify ways to work strategically with our partners regarding medical necessity and discharge planning. In addition, will consider ways to improve discharge planning and ensure capacity. R. Ferguson moved to accept the finance report for July and August The motion was seconded by F. Almaliti. The motion passed unanimously. Motion: R. Ferguson Second: F. Almaliti Approved unanimously 7. b. BOARD BUSINESS STAFF PRESENTATION ANALYTICS T. Cheang 1:25:21 T. Cheang presented the first version of the Operations Dashboard which is used by the Sr. Leadership team to identify and monitor key operational metrics. The dashboard will be prepared monthly and will be included in each board packet. Items highlighted in green, yellow, and red indicate areas to monitor and opportunities to focus and work on. The dashboard is comprised of the following eleven (11) sections and their subcategories: Financials o Income and Expenses o Liquid Reserves o Reinsurance cases o Balance Sheet Membership o Medi-Cal Members (by aid category) o IHSS Members o Total Membership o Members Assigned by Delegate Claims 1:35 o Claims Processing pended claims are currently higher than last month; auto-adjudication rate is lower than the internal goal of 80% due to updating versions of HEALTHsuite and different processes such as receiving authorizations. F. Almaliti inquired how many of the auto-adjudicated claims were denied and how many were paid out. The dashboard did not include those numbers; T. Cheang will provide those numbers. Temporary controls to prevent auto-denials are in T. Cheang to provide number of adjudicated claims that are being AAH BOG 10/14/ of 11

10 place. denied o Claims Auditing o Claims Compliance Member Services o Member Call Center Provider Services o Provider Call Center Provider Contracting o Provider Network Human Resources and Recruiting o Employees o Non-Employees (Temps/Seasonal) Compliance o Provider Disputes & Resolutions o Member Grievances o Member Appeals Encounter Data & Technology o Business Availability o Encounter Data HEALTHsuite Service Requests (SRs) o HEALTHsuite Medical Management Services o Authorization Turnaround o Inpatient Utilization o Emergency Department (ED) Utilization o Outpatient Authorization Denial Rates o Pharmacy Authorizations o Complex Case Management o Provider Credentialing M. Lynch suggested the board consider what information would be most helpful and create a subset to review. R. Ferguson suggested concentrating on the items highlighted in yellow and red as topics for board discussion. E. Seevak inquired if there are Quality metrics that could be included in the dashboard. Given the number of HEDIS measures, M. Griffis responded he would review the Quality metrics to see what would be reasonable to bring AAH BOG 10/14/ of 11

11 to the board for review. M. Lynch added that it is important to develop the internal targets for the utilization sections which are key to the success of the health plan. Also, consider breaking the data out by the line of business. E. Seevak added the metrics would be different when reviewing data for the different aid groups of children, adults and SPDs. 8. BOARD MEMBER REPORTS M. Lynch E. Seevak reported the Strategic Planning Committee will be meeting to finalize the Alliance s mission, vision, values and the 3-year strategic plan. The committee has been reviewing feedback from staff regarding the mission statement. 9. STAFF ADVISORIES ON BOARD BUSINESS FOR FUTURE MEETINGS M. Lynch There were no staff advisories. 10. ADJOURNMENT TO CLOSED SESSION M. Lynch M. Lynch adjourned the meeting at 1:55 pm Motion: R. Ferguson Seconded: D. Finley Motion passed unanimously Respectfully Submitted By: Lynda Fong, Compliance Coordinator AAH BOG 10/14/ of 11