FINANCE COMMITTEE MEETING

Transcription

1 FINANCE COMMITTEE MEETING Friday, December 5, 2014 at 8:30 a.m. Kern Health Systems 5701 Truxtun Avenue, Suite 201 Bakersfield, CA For more information, call (661) / 90

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3 AGENDA FINANCE COMMITTEE MEETING KERN HEALTH SYSTEMS 5701 Truxtun Avenue, Suite 201 Bakersfield, California Friday, December 5, :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 TO RECONVENE Members: Deats, Casas, McGlew, Rhoades, Sidhu 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 3 / 90

4 Agenda Page 2 Finance Committee Meeting 12/5/14 Kern Health Systems 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! 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)) CA-3) Minutes for KHS Finance Committee meeting on November 7, APPROVE 4) Proposed Agreement with Jacquelyn S. Jans, for marketing and corporate image consulting services for the KHS Public Image Campaign, from January 1, 2015 through December 31, 2015, in an amount not to exceed $43,200 (Fiscal Impact: $43,200; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 5) Proposed Agreement with J. Services, for janitorial services at the Stockdale Highway and Truxtun locations, from January 1, 2015 through December , in an amount not to exceed $87,000 (Fiscal Impact: $87,000; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 6) Proposed Agreement with Dell Marketing, to provide software maintenance and technical support for the VMWare software, from December 31, 2014 through December 30, 2017, in an amount not to exceed $52,022 (Fiscal impact: $52,022; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 7) Report on Kern Health Systems Core System (Fiscal impact: None) RECEIVE AND FILE; REFER TO KHS BOARD OF DIRECTORS 8) Proposed Agreement with Dell Marketing, to provide remote technical resources to augment the KHS technology staff in support of the TriZetto Core Conversion Project, from January 1, 2015 through February 28, 2015, in an amount not to exceed $35,320 (Fiscal impact: $35,320; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 4 / 90

5 Agenda Page 3 Finance Committee Meeting 12/5/14 Kern Health Systems 9) Proposed Agreement with Velocity Partners, to provide remote technical resources to augment KHS technology staff in support of the TriZetto Core Conversion Project, from January 1, 2015 through June 30, 2015, in an amount not to exceed $98,208 (Fiscal impact: $98,208; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 10) Proposed Agreement with DST Health Solutions, to provide KHS annual software maintenance and support for the PowerMHC core system, from January 1, 2015 through December 31, 2015, in an amount not to exceed $321,668 (Fiscal impact: $321,668; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 11) Proposed renewal policy with Munich Reinsurance America, Inc. for reinsurance to mitigate costs incurred by Kern Health Systems for members with high dollar inpatient admissions from January 1, 2015 through December 31, 2015, in an amount not to exceed $1,683,732 (Fiscal Impact: $1,683,732; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 12) Proposed Kern Health Systems 2015 operating and capital budgets (Fiscal Impact: None) - APPROVE; REFER TO KHS BOARD OF DIRECTORS 13) Report on Kern Health Systems and Kern Health Systems Group Health Plan financial statements for October 2014 (Fiscal Impact: None) RECEIVE AND FILE; REFER TO KHS BOARD OF DIRECTORS 14) Report on Accounts Payable Vendor Report and non-claims paid through MHC system for October 2014 (Fiscal Impact: None) RECEIVE AND FILE; REFER TO KHS BOARD OF DIRECTORS ADJOURN TO FRIDAY, JANUARY 9, 2015 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. 5 / 90

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7 SUMMARY OF PROCEEDINGS FINANCE COMMITTEE MEETING KERN HEALTH SYSTEMS 5701 Truxtun Avenue, Suite 201 Bakersfield, California Friday, November 7, :30 A.M. COMMITTEE RECONVENED Members present: Deats, McGlew, Rhoades Members absent: Casas, Sidhu NOTE: The vote is displayed in bold below each item. For example, Rhoades-Deats denotes Director Rhoades made the motion and Director Deats seconds 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 ACTION 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 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 7 / 90

8 SUMMARY Page 2 Finance Committee Meeting 11/7/2014 Kern Health Systems 3) Proposed Emergency Room Diversion Grant Modification Request by Polyclinic Medical Center (Fiscal Impact: $20,000; Not Budgeted) ANTOINETTE PLACENTI, POLYCLINIC MEDICAL CENTER, HEARD; APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-McGlew: 3 Ayes; 2 Absent Casas, Sidhu 4) Proposed Establishment of a Fiduciary Investment Committee for Kern Health Systems Retirement Plans (Fiscal Impact: None) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS McGlew-Rhoades: 3 Ayes; 2 Absent Casas, Sidhu 5) Proposed Assignment of Agreement from Financial Telesis, Inc. to Global Retirement Partners, LLC for investment advisory services effective November 13, 2014 (Fiscal Impact: None) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-McGlew: 3 Ayes; 2 Absent Casas, Sidhu 6) Proposed retroactive Agreement with TWE Solutions for purchase of Nimble Storage Solution hardware, technical support and hardware maintenance to support the core system from November 1, 2014 through November 1, 2019, in an amount not to exceed $639,384 (Fiscal Impact: $639,384; Budgeted) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-McGlew: 3 Ayes; 2 Absent Casas, Sidhu 7) Report on Kern Health Systems and Kern Health Systems Group Health Plan financial statements for September 2014 (Fiscal Impact: None) RECEIVED AND FILED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-McGlew: 3 Ayes; 2 Absent Casas, Sidhu 8) Report on Accounts Payable Vendor Report and non-claims paid through MHC system for September 2014 (Fiscal Impact: None) RECEIVED AND FILED; REFERRED TO KHS BOARD OF DIRECTORS Rhoades-McGlew: 3 Ayes; 2 Absent Casas, Sidhu ADJOURNED TO FRIDAY, DECEMBER 5, 2014 AT 8:30 A.M. 8 / 90

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23 To: KHS Finance Committee From: Richard Pruitt, Chief Information Officer Date: December 5, 2014 Re: Core System Update Background On September 10, 2014 the Board of Directors authorized KHS to enter into a contract with TriZetto, Inc. for a new core software system. Additionally, the Board authorized the Chief Executive Officer, Doug Hayward, to enter into core system related purchases and contracts, over $30K, with software, hardware, and consulting services in the amount not to exceed $2,026,522 for retrospective review by the Board of Directors due to timing in order to mitigate any delays with the project. TriZetto, Inc. and KHS have kicked off the project as of November 3, 2014 and the TriZetto QNXT software and license keys are installed on KHS systems. KHS has entered into two contracts/purchases that are listed on today s agenda and are related to the core system purchase: 1. Dell (Item 8) 2. Velocity (Item 9) The attached PowerPoint outlines the current system budget, brief overview of the two contracts/purchases on today s agenda. Requested Action Receive and File 23 / 90

24 Core System Project Richard M. Pruitt Chief Information Officer 12/05/ / 90

25 Board Approved Budget Approved at the September 10, 2014 Board of Directors Meeting Dell and Velocity are on the Agenda Related to the New System and are Included in the Other Budget Listed Below / 90

26 Dell/Velocity Professional Services Item 8 and Item 9 on today s agenda Approved by Board of Directors on 9/10/2014 Description of Goods/Services Professional Services for Technical Labor to Work with KHS Team on Core Conversion Procurement Methodology: Established Contracts per RFP process in / 90

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43 To: KHS Finance Committee From: Robert Landis, CFO Date: December 5, 2014 Re: Proposed Munich Reinsurance America, Inc. Reinsurance Renewal Annual renewal of the reinsurance policy Background KHS has purchased a reinsurance policy to mitigate the costs of catastrophic cases since the plan s inception. The KHS population has changed significantly over the last 3 years with SPD members incurring high medical costs. This increase in medical costs has led to higher reinsurance premiums over the years. Discussion Over the last 3 years KHS has recovered more in reinsurance claims than it has paid in premiums. For the policy years 2012 and 2013 KHS recovered approximately $3.0 million in reinsurance claims while paying premiums of approximately $2.0 million. Based on information through October 2014, KHS will already have received approximately $1.7 million in recoveries against approximately $1.2 million in premiums paid. These 3 years represent a 147% ratio of recoveries to expense. Based on this information, continuing with the reinsurance program is warranted. Fiscal Impact The lowest quote for renewal is with Munich RE at a blended rate of $ $1.38 PMPM with the current deductible of $125,000 per member and $.20 pmpm self-insured retention. KHS can lower the premium to a blended rate of $.73 PMPM by increasing the deductible to $175,000. This would save approximately $1,508,000 of reinsurance premiums, but would cost KHS an additional $50,000 per member that reaches the reinsurance deductible. The savings of $1,508,000 would be lost if the members reaching the $175,000 deductible exceeds 30 ($1,508,000 savings/$50,000 increase in deductible = 30). Based on utilization data of 24 members in 2013 and 22 members through September 2014, management expects the 2015 utilization to be less than 30 members. The 2015 Budget includes estimated reinsurance premium payments at a blended rate of $.73 PMPM and reinsurance recoveries at a blended rate of $.73 PMPM. Estimated fiscal dollar impact is $1,683,732. Risk Assessment Based on the last 3 program years, the continued expense of the SPD population, management believes that binding coverage is warranted for 2015 and is recommending the Munich RE option at a blended rate of $.73 PMPM and increasing the deductible at $175,000. Requested Action Approve; Refer to KHS Board of Directors 43 / 90

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45 To: KHS Finance Committee From: Robert Landis, CFO Date: December 5, 2014 Re: 2015 Budget Background The 2015 budget supports the KHS Goals and Objectives, Annual Projects and Strategic Plan Initiatives. The size and scope of the 2015 Goals and Objectives reflect the changing complexity that began in 2012 with the addition of the SPD population and continued in 2014 with the Childless Adults. During 2014 KHS successfully implemented the growth associated with the implementation of the Affordable Care Act. During 2015 KHS will be required to expand benefits and services along with the increased administrative responsibilities associated with our expanded role under State and Federal programs. Specifically, key factors (to name a few) impacting the 2015 budget includes: Projected growth of approximately 15,000 enrollees Multi-Government regulatory and organization compliance and performance responsibilities through: o DHCS o DMHC o Covered California o CMS Benefits and Program expansion into Autism treatment Benefits and Program expansion in Mental Health Implementation of ICD- 10 Continued implementation and monitoring of: o New Core System o Access to PCP and Specialty Care as well as Physician recruitment o HEP C medication and kick payment program o Kaiser Permanente Subcontract o KHS ER Diversion Grants and results achieved from grants o Onsite Care Management (Replacement of McKesson) 45 / 90

46 New and expanded provider collaborative programs. o Developing KMC Integration Health Care Concept o Creating a Diabetic Clinic site at Bakersfield Memorial Hospital and KMC o Expanding the Transitional Care Program to additional hospitals with a critical mass of patients o Increasing participation in the Hep C Program o Expanding TeleHealth Specialty Care services o Expanding the Disease Management Program o Instituting an Asthma Case Management Pilot Program o Enhancements to the Medical Management and Quality Improvement Programs o Expanding Auto Authorizations o Enhancing the Care Management Program o Expanding on site concurrent review program o Continuing with incentives to reward providers who demonstrate improved HEDIS outcomes o Instituting Medication Therapy Management program Increase in staffing requirements primarily in the following departments: o Information Technology Department requires 3 FTE s to accommodate the increased KHS staff and server infrastructure that has occurred along with support for desktop and system issues. Additionally, there is an increased demand for regulatory and company data analytics and reporting. o Claims requires 2 FTE s to keep up with the increased claim volume so that KHS can meet its regulatory requirement of processing 90% of all claims within 30 days as well as maintaining the auditing process for quality and accuracy of claim payments. o Utilization Management requires 2 FTE s to effectively case manage complex members due to an increase in membership along with an expected increase in high risk members being identified from the predictive model stratification. o Quality Improvement requires 2 FTE s to accommodate bringing HEDIS medical records retrieval in-house instead of using an outside vendor. During HEDIS 2014, our outside vendor did not meet the terms of the contract. The cost of insourcing this service is comparable to the cost of contracting with another vendor. The FTE s will also be able to assist in developing and spreading interventions aimed at improving HEDIS performance. o Health Education requires 2 new FTE s. Our member growth will require KHS to expand the number of Health Education classes and training activities. 1 FTE will conduct additional member health education classes required by the State on subject matters including: Nutrition, Asthma etc. A second FTE will serve as KHS s Cultural and Linguistics staff person. This position is responsible for ensuring all member correspondences and outreach materials are culturally competent and 46 / 90

47 linguistically appropriate for our non- English speaking population. Additionally, this person will oversee other DHCS mandated programs including tobacco cessation education and Staying Healthy Assessment Provider Training Programs. o Member Services requires 5 FTE s to keep up with the increased call volume so that KHS can meet its internal goals to answer all calls within 30 seconds, have an abandonment rate of 5% or less, have hold times of less than 2 minutes on 98 % of all calls and have at least 90% of all grievances closed in 30 days. Attached are the following documents relating to the 2015 Budget: 1) Consolidated Operating Budget 2) Operating Budget by Aid Category 3) Enrollment Assumptions 4) Revenue Assumptions 5) Medical Expense Assumptions 6) Administrative Expense Assumptions 7) Budgeted FTE by Department 8) Capital Budget for 2015 Requested Action Approve; Refer to KHS Board of Directors 47 / 90

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63 To: KHS Finance Committee From: Robert Landis, CFO Date: December 5, 2014 Re: October 2014 Financial Results The October results reflect a $1,061,000 profit which is a $333,000 favorable variance to the budget. Listed below are the major variances for the month: 1) Total Revenues reflect a $5.5 million favorable variance primarily due to: A) $3.1 million favorable variance relating to Family and Other primarily due to higher than expected Family and Other enrollment ($ 2.0 million), higher than expected maternity revenue ( $.2 million) and a non-budgeted rate increase from the State effective July 1, 2014 ($.6 million). B) $1.8 million unfavorable variance relating to Expansion membership due to lower than expected enrollment ($.8 million) and a non-budgeted rate decrease from the State effective July 1, 2014 ($1.0 million). C) $2.7 million favorable variance relating to higher than expected SPD enrollment ($1.1 million), a non-budgeted rate increase from the State effective July 1, 2014 ($1.1 million) and 2014 calendar year retroactive payments of $.5 million. D) $.6 million favorable variance relating to Rate/Income Adjustments relating primarily to 2013 calendar year retroactive payments for SPD members. 2) Total Medical Costs reflect a $5.0 million unfavorable variance primarily due to: A) $.6 million favorable variance for Other Professional Services due primarily to lower than expected mental health utilization. B) $1.1 million unfavorable variance in Other Medical due primarily due to greater usage of observation rooms, higher utilization of Skilled Nursing Facilities as appropriate which is approximately 1/3 the cost of a hospital day. C) $4.5 million unfavorable variance for Expansion Risk Expense due to lower than expected medical expense utilization for the Expansion membership population. The results for the 10 months ended October 31, 2014 reflect a net loss of $46,000. This is a $956,000 favorable variance to budget and includes approximately $ 3.7 million of favorable adjustments from the prior year and $.9 million of unbudgeted Grant Expenses for the current year. The Medical Loss Ratio is 93.7% which is favorable to the 93.8% budgeted amount. The Administrative Expense Ratio is 6.0% which is favorable to the 6.6% budgeted amount. 63 / 90

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