FINANCE COMMITTEE MEETING

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1 FINANCE COMMITTEE MEETING Friday, June 3, 2016 at 8:00 a.m. Kern Health Systems 5701 Truxtun Avenue, Suite 201 Bakersfield, CA For more information, call (661) / 76

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3 AGENDA FINANCE COMMITTEE MEETING KERN HEALTH SYSTEMS 5701 Truxtun Avenue, Suite 201 Bakersfield, California Friday, June 3, :00 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, Melendez, Rhoades 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 / 76

4 Agenda Page 2 Finance Committee Meeting 6/3/2016 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 May 6, APPROVE 4) Proposed Amendment No. 16 to Physician Services Agreement and Amendment No. 31 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) APPROVE; REFER TO KHS BOARD OF DIRECTORS 5) Proposed Amendment No. 4 to Hospital and Other Facility Services Agreement with Kern Valley Hospital 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) APPROVE; REFER TO KHS BOARD OF DIRECTORS 6) Proposed Amendment No. 4 to Hospital and Other Facility Services Agreement with Tehachapi Valley Hospital 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) APPROVE; REFER TO KHS BOARD OF DIRECTORS 4 / 76

5 Agenda Page 3 Finance Committee Meeting 6/3/2016 Kern Health Systems 7) Proposed renewal and binding of insurance coverages for crime, property, general liability, malpractice-professional liability, workers compensation, fiduciary liability, excess cyber insurance, managed care errors and omissions, earthquake insurance and flood insurance from July 1, 2016 through June 30, 2017 (Fiscal Impact: $415,000 Estimated; Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 8) Proposed Agreement with Medversant Technologies, LLC, for Provider Directory Solution to comply with SB 137 from July 1, 2016 through June 30, 2018, in an amount not to exceed $66,750 (Fiscal Impact: $66,750; Non-Budgeted) APPROVE; REFER TO KHS BOARD OF DIRECTORS 9) Report on Kern Health Systems financial statements for April 2016 (Fiscal Impact: None) RECEIVE AND FILE; REFER TO KHS BOARD OF DIRECTORS 10) Report on Accounts Payable Vendor Report, Administrative Contracts under $100,000 budgeted and $50,000 non-budgeted, and non-claims paid through MHC system for April 2016 (Fiscal Impact: None) RECEIVE AND FILE; REFER TO KHS BOARD OF DIRECTORS ADJOURN TO FRIDAY, JULY 8, 2016 AT 8:00 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 / 76

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7 SUMMARY OF PROCEEDINGS FINANCE COMMITTEE MEETING KERN HEALTH SYSTEMS 5701 Truxtun Avenue, Suite 201 Bakersfield, California Friday, May 6, :00 A.M. COMMITTEE RECONVENED Members present: Deats, Casas, McGlew Members absent: Melendez, Rhoades 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 7 / 76

8 Summary Page 2 Finance Committee Meeting 5/6/2016 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)) CA-3) Minutes for KHS Finance Committee meeting on April 8, APPROVED McGlew-Casas: 3 Ayes; 2 Absent Melendez, Rhoades 4) Report on KHS investment portfolio for the first quarter ending March 31, 2016 (Fiscal Impact: None) RECEIVED AND FILED; REFERRED TO KHS BOARD OF DIRECTORS McGlew-Casas: 3 Ayes; 2 Absent Melendez, Rhoades 5) Proposed Agreement with Argus Health Systems, Inc., for Pharmacy claims processing and review from June 1, 2016 through May 31, 2019, in an amount not to exceed $0.22 per claim (Fiscal Impact: $800,000 per year; Budgeted) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS McGlew-Casas: 3 Ayes; 2 Absent Melendez, Rhoades 6) Proposed Agreement with Healthx, to provide a hosted software solution for a Provider and Member Portal to include implementation costs and recurring support and maintenance from May 12, 2016 through May 12, 2019, in an amount not to exceed $1,887,735 (Fiscal Impact: $1,887,735) APPROVED; REFERRED TO KHS BOARD OF DIRECTORS Casas-McGlew: 3 Ayes; 2 Absent Melendez, Rhoades 7) Report on Kern Health Systems and Kern Health Systems Group Health Plan financial statement for February 2016 and March 2016 (Fiscal Impact: None) RECEIVED AND FILED; REFERRED TO KHS BOARD OF DIRECTORS McGlew-Casas: 3 Ayes; 2 Absent Melendez, Rhoades 8) Report on Accounts Payable Vendor Report, Administrative Contracts under $100,000 budgeted and $50,000 non-budgeted, and non-claims paid through MHC system for February 2016 and March 2016 (Fiscal Impact: None) RECEIVE AND FILE; REFERRED TO KHS BOARD OF DIRECTORS Casas-McGlew: 3 Ayes; 2 Absent Melendez, Rhoades 8 / 76

9 Summary Page 3 Finance Committee Meeting 5/6/2016 Kern Health Systems ADJOURN TO FRIDAY, JUNE 3, 2016 AT 8:00 A.M. Casas 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. 9 / 76

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11 To: KHS Finance Committee From: Robert Landis, CFO Date: June 3, 2016 Re: Voluntary Participation in IGT Funding Distribution Background Department of Health Care Services (DHCS) is providing qualified local hospitals with the opportunity to participate in a voluntary IGT distribution. Besides Kern Medical, the two district hospitals in our service area also qualify for participation. Each hospital is required to contribute funding which is matched with federal dollars and returned through KHS to the respective institutions. Hospitals participating with their requested funding amounts include: 1. Kern Medical - $8,233, Kern Valley Healthcare District - $684, Tehachapi Valley Healthcare District - $589,442 Agenda items 4, 5 and 6 are proposed draft amendments to our respective hospital agreements with each institution which will need to be approved by the Board in order to facilitate the transfer of such funds. Requested Action Approve; Refer to KHS Board of Directors 11 / 76

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25 HEALTH PLAN/PROVIDER AGREEMENT AMENDMENT 4 This Amendment is made this 1 st day of July 2014, by and between Kern Health Systems, a county health authority, hereinafter referred to as "PLAN", and Kern Valley Hospital, hereinafter referred to as "PROVIDER". RECITALS: WHEREAS, PLAN and PROVIDER have previously entered into an Agreement effective January 1, 2001; Agreement; WHEREAS, Section of such Agreement provides for amending such WHEREAS, Kern Health Systems is a county health authority formed pursuant to Welfare and Institutions Code section and Chapter 2.94 of the Ordinance Code of Kern County; WHEREAS, PROVIDER is a general acute care hospital licensed by the state of California pursuant to Division 2, Chapter 2, Article 2 of the Health and Safety Code; WHEREAS, PLAN and PROVIDER desire to amend the Agreement to provide for Medi-Cal managed care capitation rate increases to PLAN as a result of intergovernmental transfers (IGTs) from Kern Valley Healthcare District to the California Department of Health Care Services ( State DHCS ) to maintain the availability of Medi-Cal health care services to Medi-Cal beneficiaries. NOW, THEREFORE, PLAN and PROVIDER hereby agree as follows: Article X, section of the Agreement is amended to read as follows: IGT MEDI-CAL MANAGED CARE CAPITATION RATE INCREASES 1. IGT Capitation Rate Increases to PLAN A. Payment Should PLAN receive any Medi-Cal managed care capitation rate increases from State DHCS where the nonfederal share is funded by the Kern Valley Healthcare District specifically pursuant to the provisions of the Intergovernmental Agreement Regarding Transfer of Public Funds ( Intergovernmental Agreement ) effective for the period July 1, 2014 through June 30, 2015 for, Intergovernmental Transfer Medi-Cal Managed Care Rate Range Increases ( IGT MMCRRIs ), PLAN shall pay to PROVIDER the amount of the IGT MMCRRIs received from State DHCS, in accordance with paragraph 1.E. below regarding the form and timing of Local Medi-Cal Managed Care Range Rate (LMMCRR) IGT PAYMENTS. LMMCRR IGT 1 Kern Valley Healthcare District/Kern Health Systems/101911/ C15 25 / 76

26 PAYMENTS paid to PROVIDER shall not replace or supplant any other amounts paid or payable to PROVIDER by PLAN. B. Health Plan Retention 1) Medi-Cal Managed Care Seller s Tax PLAN shall be responsible for any Medi-Cal Managed Care Seller s ( MMCS ) tax due pursuant to the Revenue and Taxation Code Section 6175 relating to any IGT MMCRRIs through June 30, If PLAN receives any capitation rate increases for MMCS taxes based on the IGT MMCRRIs, PLAN may retain an amount equal to the amount of such MMCS tax that PLAN is required to pay to the State Board of Equalization, and shall pay, as part of the LMMCRRI IGT PAYMENTS, the remaining amount of the capitation rate increase to PROVIDER. 2) PLAN will not retain any other portion of the IGT MMCRRIs received from the State DHCS other than those mentioned above. C. Conditions for Receiving Local Medi-Cal Managed Care Range Rate IGT Payments As a condition for receiving LMMCRR IGT PAYMENTS, PROVIDER shall, as of the date the particular LMMCRR IGT PAYMENT is due: of termination of the Agreement; (1) remain a participating provider in the PLAN and not issue a notice its emergency room; facilities. (2) maintain its current emergency room licensure status and not close (3) maintain its current inpatient surgery suites and not close these D. Schedule and Notice of Transfer of Non-Federal Funds (1) PROVIDER shall provide PLAN with a copy of the schedule regarding the transfer of Kern Valley Healthcare District funds to the State DHCS, referred to in the Intergovernmental Agreement, within fifteen (15) days of establishing such schedule with the State DHCS. Additionally, PROVIDER shall notify PLAN, in writing, no less than seven (7) calendar days prior to any changes to an existing schedule including, but not limited to, changes in the amounts therein. 2 Kern Valley Healthcare District/Kern Health Systems/101911/ C15 26 / 76

27 (2) PROVIDER shall provide PLAN with written notice of the amount and date of the transfer within seven (7) calendar days after the transfer of Kern Valley Healthcare District funds to the State DHCS for use as the nonfederal share of any IGT MMCRRI. E. Form and Timing of Payments PLAN agrees to pay LMMCRR IGT PAYMENTS to PROVIDER in the following form and according to the following schedule: (1) PLAN agrees to pay the LMMCRR IGT PAYMENTS to PROVIDER using the same mechanism through which compensation and payments are normally paid to PROVIDER (e.g., electronic transfer). (2) PLAN will pay the LMMCRR IGT PAYMENTS to PROVIDER no later than thirty (30) calendar days after receipt of the IGT MMCRRIs from State DHCS. F. Consideration (1) As consideration for the LMMCRR IGT PAYMENTS, PROVIDER shall use the LMMCRR IGT PAYMENTS for the following purposes and shall treat the LMMCRR IGT PAYMENTS in the following manner: (a) The LMMCRR IGT PAYMENTS shall represent compensation for Medi-Cal services rendered to Medi-Cal PLAN members by PROVIDER and shall represent compensation for Medi-Cal services to Medi-Cal PLAN members during the State fiscal year to which the LMMCRR IGT PAYMENTS apply. (b) To the extent that total payments received by PROVIDER in any State fiscal year under this Amendment exceed the cost of Medi-Cal services provided to Medi-Cal beneficiaries by PROVIDER during that fiscal year, any remaining LMMCRR PAYMENT amounts shall be retained by PROVIDER to be expended for health care services. Retained LMMCRR PAYMENT amounts may be used by the PROVIDER in either the State fiscal year received or subsequent State fiscal years. (2) For purposes of subsection (1) (b) above, if the LMMCRR IGT PAYMENTS are not used by PROVIDER in the State fiscal year received, retention of funds by PROVIDER will be established by demonstrating that the retained earnings account of PROVIDER at the end of any State fiscal year in which it received payments based on LMMCRR IGT PAYMENTS funded pursuant to the Intergovernmental Agreement, has increased over the unspent portion of the prior State fiscal year s balance by the amount of LMMCRR IGT PAYMENTS received, but not used. These retained PROVIDER funds may be commingled with other District funds for cash management purposes provided that such funds are appropriately tracked and only the depositing facility is authorized to expend them. 3 Kern Valley Healthcare District/Kern Health Systems/101911/ C15 27 / 76

28 (3) Both parties agree that none of these funds, either Kern Valley Healthcare District or federal matching funds, will be recycled back to the Kern Valley Healthcare District general fund, the State, or any other intermediary organization. Payments made by the health plan to providers under the terms of this Agreement constitute patient care revenues. G. PLAN s Oversight Responsibilities PLAN s oversight responsibilities regarding PROVIDER s use of the LMMCRR IGT PAYMENTS shall be limited as described in this paragraph. PLAN shall request, within thirty (30) calendar days after the end of each State fiscal year in which LMMCRR IGT PAYMENTS were transferred to PROVIDER, a written confirmation that states whether and how PROVIDER complied with the provisions set forth in Paragraph 1.F. above. In each instance, PROVIDER shall provide PLAN with written confirmation of compliance within thirty (30) calendar days of PLAN s request. H. Cooperation Among Parties Should disputes or disagreements arise regarding the ultimate computation or appropriateness of any aspect of the LMMCRR IGT PAYMENTS, PROVIDER and PLAN agree to work together in all respects to support and preserve the LMMCRR IGT PAYMENTS to the full extent possible on behalf of the safety net in Kern County. I. Reconciliation Within one hundred twenty (120) calendar days after the end of each of PLAN s fiscal years in which LMMCRR IGT PAYMENTS were made to PROVIDER, PLAN shall perform a reconciliation of the LMMCRR IGT PAYMENTS transmitted to the PROVIDER during the preceding fiscal year to ensure that the supporting amount of IGT MMCRRIs were received by PLAN from State DHCS. PROVIDER agrees to return to PLAN any overpayment of LMMCRR IGT PAYMENTS made in error to PROVIDER within thirty (30) calendar days after receipt from PLAN of a written notice of the overpayment error, unless PROVIDER submits a written objection to PLAN. Any such objection shall be resolved in accordance with the dispute resolution processes set forth in Section of the Agreement. The reconciliation processes established under this paragraph are distinct from the indemnification provisions set forth below. PLAN agrees to transmit to PROVIDER any underpayment of LMMCRR IGT PAYMENTS within thirty (30) calendar days of PLAN s identification of such underpayment. 4 Kern Valley Healthcare District/Kern Health Systems/101911/ C15 28 / 76

29 J. Indemnification Both parties agree to indemnify, defend and hold harmless the other party and their officers, agents and employees from any and all claims, demands, judgments, damages, costs, liabilities or losses arising from, or in any way relating to, any losses or delays in capitation payments as a result of intergovernmental transfers from PROVIDER to the State DHCS for the provision of IGT payments to PLAN. 2. Term The term of this Amendment shall commence on July 1, 2014 and shall terminate on September 30, All other terms and provisions of said Agreement shall remain in full force and effect so that all rights, duties and obligations, and liabilities of the parties hereto otherwise remain unchanged; provided, however, if there is any conflict between the terms of this Amendment and the Agreement, then the terms of this Amendment shall govern. SIGNATURES KERN VALLEY HOSPITAL KERN HEALTH SYSTEMS By: By: Timothy McGlew Douglas A. Hayward Chief Executive Officer Chief Executive Officer APPROVED AS TO FORM: 5 Kern Valley Healthcare District/Kern Health Systems/101911/ C15 29 / 76

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37 To: KHS Finance Committee From: Robert Landis, CFO Date: June 3, 2016 Re: Analysis of Insurance Renewals Background KHS carries and seeks to renew and bind the following insurance coverages: Crime Property General Liability Miscellaneous - Professional Liability Workers Compensation Fiduciary Liability Excess Cyber KHS does not currently carry the following insurance coverage: Managed Care Errors and Omissions Optional Quote Earthquake Optional Quote Flood Optional Quote KHS utilizes Alliant Insurance Services as its insurance agent to access the insurance carrier market and perform the day to day servicing of the account. Alliant has provided early indications for the expiring coverage. It is recommended that Kern Health Systems renew expiring coverage and/or consider other options presented. Crime Insurance Management recommends a renewal of the crime insurance policy. Carrying crime insurance is a DMHC requirement. National Union Fire Insurance Company of Pittsburgh, PA (AIG) Rating: Carrier has an excellent A XV rating from AM Best Term: July 1, 2016 through June 30, 2017 Coverage: This policy insures against employee theft, forgery, robbery and safe burglary, and computer fraud. KHS Employee benefits plans are also covered for theft of funds. Limit per Occurrence: $10,000,000 increasing the limit from $3,000, / 76

38 Deductible: $2,500 Annual Premium: $9,536. Prior year premium was $3,105 at the $3,000,000 limit. No claims were filed last year. Property Insurance Management recommends a purchase of the $ 350,000,000 per occurrence Hospital All Risk Property Program ( HARPP ) through Lexington Insurance. KHS has $19.7 million of property plant and equipment to insure. In addition, there is a $2 million Cyber Coverage rider that insures against the damages that occur related to computer system breaches. Rating: Carrier has an excellent A XV rating from AM Best Term: July 1, 2016 through June 30, 2017 Coverage: This policy insures against losses from property damage Limit per Occurrence: $350,000,000 repair or replacement cost Deductible: $5,000 Annual Premium: $23,377. Prior year premium was $22,222. No claims were filed last year. General Liability Insurance KHS is a member of Joint Power Authority, the California State Association of Counties Excess Insurance Authority (CSAC EIA). This association combines the risk of many California public agencies into one common pool. This year KHS provided the pool with the appropriate notice to tentatively withdraw from the pool as Alliant marketed our liability coverage due to the steady premium increases each year. Management recommends the withdrawal from participation in the CSAC EIA pool and move coverage to the (SLIP) Special Liability Insurance Program through Associated Industries Insurance Company. Rating: Carrier has an excellent A XI rating from AM Best Term: July 1, 2016 through September 29, 2017 (15 months) Policy will renew annually thereafter in September. Coverage: This policy insures against losses from (similar to expiring coverage with CSAC EIA): Bodily Injury Personal Injury Property Damage Public Officials Errors and Omissions (D&O Insurance) Automobile Liability Contractual Liability Employment Practices Liability Non-owned Aircraft Liability 38 / 76

39 Limit per occurrence or wrongful act: $25,000,000 Self-Insured Retention: $100,000 per occurrence or wrongful act Annual Premium: $168, (15 month premium - $208,172) TRIA Annual Premium: $3,372 (15 month TRIA premium - $4,117) Total Annual with TRIA: $172,172 (15 month with TRIA - $212,289) CSAC EIA 2016 renewal premium has increased to $218,988 (with the $11,012 dividend applied) and expiring premium was $188,849. Premium increase for CSAC EIA is based on the increase in payroll. Dividend is forfeited by leaving the pool. By moving coverage to Alliant Special Liability Program this provides KHS an annual savings of $46,816. Miscellaneous Professional Liability Insurance Management recommends replacing this coverage that provides professional liability covering Case Management and Administrative Services provided by the CEO, COO, CFO, and medical directors of Kern Health Systems with Managed Care Errors and Omissions Liability Insurance described under Optional Coverage listed on the last page. Landmark American Insurance Company Rating: Carrier has a superior A+ XIII rating from AM Best Term: July 1, 2016 through June 30, 2017 Limit per occurrence: $1,000,000 Aggregate: $3,000,000 Self-Insured Retention: $2,500 each claim Estimated Premium not to exceed $10,000. Last year s premium $8,256. No claims were filed last year. Workers Compensation Insurance Management recommends renewing participation in the workers compensation program offered by the Joint Authority, Special District Risk Management Authority (SDRMA). This agency was formed in 1986 to offer risk sharing and risk financing for California public agencies. KHS joined SDRMA on June 1, Rating: The pool is not an insurance company and no rating is available. Term: July 1, 2016 through June 30, 2017 Coverage: This policy insures against losses from work related injuries and the employer s liability to employees. Coverage is mandated by the state. Limit per Occurrence: Statutory for Workers Compensation and $5,000, / 76

40 for Employer s Liability Deductible: N/A The annual premium is a function of KHS annual payroll (estimated payroll $19,064,254). The estimated annual cost of this coverage is $107,582. The rate per payroll dollar remains unchanged and includes 15% in CIP points (Credit Incentive Program) - Indication only subject to SDRMA Board approval. Since joining SDRMA in 2010, KHS has filed 28 workers compensation claims with estimated losses of $228,289. Experience mod applied to rates decreased from 122% in 15/16 to 107% in 16/17. Fiduciary Liability Insurance Management recommends continued coverage for Fiduciary liability covering administrative errors and omissions claims, breach of duty claims and defense for employee benefit claims, such as failure to timely distribute assets, failure to choose/offer prudent investments, failure to monitor investments, breach of responsibilities and negligence in the administration of a plan. RLI Insurance Company Rating: Carrier has a superior A+ XIII rating from AM Best Term: August 1, 2016 through July 31, 2017 Limit per occurrence: $1,000,000 Aggregate: $1,000,000 Self-Insured Retention: $0 Non-indemnifiable losses $25,000 All other losses Annual Premium $3,000. Last year s premium $3,000. No claims were filed last year. Excess Cyber Liability Insurance Management recommends continued coverage for Excess Cyber liability. Included in the Property placement is the limit of $2,000,000 per incident and in the aggregate. This excess coverage provides KHS with an additional $2,000,000 in coverage. National Union Fire Insurance Company of Pittsburgh, PA (AIG) Rating: Carrier has an excellent A XV rating from AM Best Term: July 1, 2016 through June 30, 2017 Limit per occurrence: $2,000,000 Aggregate: $2,000,000 Self-Insured Retention: Primary coverage within the HARPP Program Annual Premium of $35,000. Last year s premium was $21,526 for the short term policy period of to No claims were filed last year. 40 / 76

41 Optional Coverage: Presently KHS does not purchase the following coverages and Alliant has provided quotes for consideration. Management recommends that Kern Health Systems bind coverage on these options: Managed Care Errors and Omissions Liability Insurance Management recommends the purchase of this coverage for professional liability covering Kern Health Systems operations for an act, error or omission in the performance of any health care or managed care financial, management or insurance services performed; the design, development and marketing of such service; vicarious liability for the conduct of others performing any such service on our behalf. Lexington Insurance Company Rating: Carrier has an excellent A XV rating from AM Best Term: July 1, 2016 through June 30, 2017 Limit per occurrence: $1,000,000 Aggregate: $1,000,000 Self-Insured Retention: $100,000 each claim Annual Premium: $35,251 This would replace the Miscellaneous Professional Liability listed above with an estimated premium of $10,000. The managed care E&O Liability coverage is broader as described above. Presently the Miscellaneous Professional Liability Insurance coverage only provides coverage for the Case Management and Administrative Services provided by the CEO, COO, CFO, and medical directors of Kern Health Systems. Earthquake Insurance Management recommends the purchase of Earthquake insurance coverage. Quota Share with two carriers Everest Indemnity Insurance Company (75%) and General Security Indemnity Company of AZ (25%) Rating: Carriers have an excellent A XV rating from AM Best Term: July 1, 2016 through June 30, 2017 Limit per occurrence: $5,000,000 Aggregate: $5,000,000 Deductible: 5% Per unit (unit is defined as replacement cost of the covered Property Building, Contents and Business Income separately), subject to a minim of $50,000 Annual Premium: $12, including taxes and fees Flood Insurance Management recommends the purchase of Flood Insurance coverage. Carrier: TBD National Flood Insurance Program NFIP 41 / 76

42 Rating: TBD Term: July 1, 2016 through June 30, Truxton Avenue Contents Only $500,000 Contents (maximum limit available) $1,000 Deductible Annual Premium Estimate $1, Stockdale Hwy Building and Contents $500,000 Building (maximum limit available) $500,000 Contents (maximum limit available) $1, Deductible Annual Premium Estimate $3, Requested Action Approve; Refer to KHS Board of Directors. 42 / 76

43 To: KHS Finance Committee From: Emily Duran, Director of Provider Relations Date: June 3, 2016 Re: Provider Directory Solution to Comply with SB 137 Background The Department of Managed Health Care is requiring health plans under the Knox-Keen Health Care Service Act of 1975, by way of SB 137 and a plan contract amendment, to enforce accurate reporting of provider network directories. Effective July 1, 2016, Kern Health Systems will need to be in compliance with Senate Bill 137 (2015). Health plans are required to have on-line and printed directory updates on a regular basis, and at a minimum quarterly. This will require KHS to reach out to our provider network of 1,500+ providers and review approximately 30 data elements that include details such as provider locations, hours of operation, physician specific schedules, fluency of languages, patient access, and update all our systems to reflect such changes. KHS does not have the staffing and capacity to implement this structure in such a short period of time and at an efficient cost. Therefore, we inquired what other local and state health plans were doing to comply with SB 137. KHS received the names of two companies that focus on directory integrity projects and are assisting health plans in California to be compliant. Noncompliance can result in provider delayed payments and fines to the health plan. After review of these two products, KHS staff recommends contracting with Medversant to perform the functions outlined in the scope of work attached. Requested Action Approve agreement with Medversant Technologies, LLC; Refer to KHS Board of Directors. 43 / 76

44 Proposed Administrative Contract over $50,000 (not budgeted), June 9, Operational Agreement with Medversant Technologies, LLC. a. Recommended Action Approve; Authorize Chief Executive Officer to Sign b. Contact Emily Duran; Director of Provider Relations c. Background SB 137 places much more stringent reporting and accuracy requirements on the health plan. Some of these requirements include weekly online updates and quarterly printed provider directory updates. In order for KHS to meet these requirements, an outside vendor is needed to collect and verify provider data for the entire network. This verification includes provider demographic data, clinic address verification, and other data elements as needed, including online credentialing applications and a web interface for KHS to process the data collected/verified. d. Discussion KHS engaged Medversant Technologies, LLC and Optum, Inc for these services. Medversant s solution was more complete and was able to adjust to KHS timeline for implementation. e. Fiscal Impact Not to exceed $66, per two years. 44 / 76

45 f. Risk Assessment SB 137 is a regulatory requirement imposed by the State. Findings of data inaccuracies or incompleteness could result in fines and penalties. g. Attachments An Agreement at a Glance form and the bid matrix is attached. h. Reviewed by Chief Compliance Officer and/or Legal Counsel This contract is pending Legal Counsel approval. 45 / 76

46 Contract Purchase Department Name: Provider Relations Contract Vendor: Medversant Technologies, LLC AGREEMENT AT A GLANCE Department Head: Emily Duran Vendor contact Name & Patric Wiesman partric.wiesmann@medversant.com What services will this vendor provide to KHS? Provider Directory Solution to comply with SB 137 Description of Contract Type of Agreement: Professional Services Background: SB 137 places much more stringent reporting and accuracy requirements on the health plan. Some of these requirements include weekly online updates and quarterly printed provider directory updates. In order for KHS to meet these requirements, an outside vendor is needed to collect and verify provider data for the entire network. This verification includes provider demographic data, clinic address verification, and other data elements as needed, including online credentialing applications and a web interface for KHS to process the data collected/verified. Establish a new agreement Previous Agreement No. or Amendment No. Amendment Continuation of an Existing Contract Replacement Date Agreement Began Brief Explanation: KHS engaged Medversant Technologies, LLC and Optum, Inc for these services. Medversant s solution was more complete and was able to adjust to KHS timeline for implementation. Addendum Retroactive Agreement Reason for delay in approval: Retroactive Date Summary of Quotes and/or Bids attached. Pursuant to KHS Policy #8.11-I, KHS will secure competitive quotes and bids to obtain the maximum value from the expenditures. Electronic ( /fax) solicitation may be used for purchases of up to Fifty Thousand Dollars or more if not budgeted ($50,000.00) and One Hundred Thousand Dollars or more if budgeted ($100,000.00) but must be documented on the RFQ form (Attachment A). Actual bid, sole or single source justification and/or cost price analysis documents are required for purchases over Fifty Thousand Dollars or more if not budgeted ($50,000.00) and One Hundred Thousand Dollars or more if budgeted ($100,000.00). Request for Proposal (RFP) shall be used to solicit bids for professional services over Fifty Thousand Dollars ($50,000). Lowest bid price not accepted must be fully explained and justified in writing. All bids will be treated as a not to exceed amount with change orders used to track any changes. ) Brief vendor selection justification: Sole source no competitive process can be performed. Brief reason for sole source: Conflict of Interest Form is required for this Contract HIPAA Business Associate Agreement is required for this Contract Form updated 11/17/15 46 / 76

47 Fiscal Impact KHS Governing Board previously approved this expense in KHS FY 2016 Administrative Budget NO YES Budgeted Cost Center GL# Will this require additional funds? NO YES Maximum cost of this agreement not to exceed: $66, per two years Notes: Price includes 50 hours of customization services Contract Terms and Conditions Effective date: 7/1/2016 Termination date: 6/30/2018 Explain extension provisions, termination conditions and required notice: Contract Owner: Department Head Date Reviewed as to Budget: Approvals Purchasing: Director of Procurement Date Recommended by the Executive Committee: Chief Financial Officer or Controller Committee Chairman Date Compliance Review: Chief Compliance Officer Date Legal Review: Legal Counsel Date Date Chief Executive Officer Approval: Chief Executive Officer Date Board of Directors approval is required on all contracts over $50,000 if not budgeted and $100,000 if budgeted. KHS Board Chairman Date Form updated 11/17/15 47 / 76

48 KHS Bid Matrix & Decision Detail Description of Item: Provider data outreach verification and comparison services Bid Matrix Vendor Name Medversant Technologies, LLC Vendor Name Optum, Inc. Contact Patric Wiesmann Contact Shawn R. Kearl Price $25,000 per year Price $35,000 per year Implementation cost $7, Implementation cost $3, Additional services $9, Additional services $0.00 Total cost $66, Total cost $73, Additional Comments Total cost includes a two year annual service fee, plus implementation cost, and 50 hours of customization services Additional Comments Total cost includes a two year annual service fee plus implementation cost 48 / 76

49 To: KHS Finance Committee From: Robert Landis, CFO Date: June 3, 2016 Re: April 2016 Financial Results The April results reflect a $3,341,213 Net Increase in Net Position which is a $1,552,991 favorable variance to the budget. Listed below are the major variances for the month: 1) Total Revenues reflect a $1.4 million favorable variance primarily due to: A) $.4 million unfavorable variance relating to Family and Other primarily due to lower than expected enrollment ($.1 million), lower than expected HEP-C revenue ($.1 million), and lower than expected Autism revenue ($.2 million). B) $2.0 million favorable variance relating to Expansion primarily due to higher than expected enrollment ($2.8 million), higher than expected Maternity revenue ($.3 million), and lower than expected HEP-C revenue ($1.0 million). C) $.5million unfavorable variance relating to SPD primarily due to higher than expected enrollment ($.3 million) and lower than expected HEP-C revenue ($.8 million). 2) Total Medical Costs reflect a $.6 million favorable variance primarily due to: A) $.8 million favorable variance in Physician Services primarily due to the new core system including the Physician Specialty component as part of Outpatient Hospital instead of separating under Physician Services. B) $1.3 million unfavorable variance in Inpatient primarily due to higher than expected Expansion enrollment along with higher than expected Expansion utilization. C) $2.3 million unfavorable variance in Outpatient Hospital primarily due to the new core system combining the Physician Specialty component as part of Outpatient Hospital instead of separating under Physician Services. D) $2.0 million favorable variance in Pharmacy primarily due to lower than expected HEP-C utilization. E) $.9 million variance for Expansion Risk Corridor Expense due to lower than expected medical expense utilization for the Expansion membership population. F) $2.0 million favorable IBNR adjustment from the prior year. The April Medical Loss Ratio is 88.4% which is favorable to the 91.6% budgeted amount. The April Administrative Expense Ratio is 5.4% which is unfavorable to the 5.0% budgeted amount due to the accrual for a litigation matter. The April Administrative Expense Ratio is 4.4% excluding the litigation accrual. The results for the 4 months ended April 30, 2016 reflect a Net Increase in Net Position of $9,639,357. This is a $2,247,655 favorable variance to budget and includes approximately $.1 million of unfavorable adjustments from the prior year. The year-to-date Medical Loss Ratio is 89.2% which is favorable to the 91.5% budgeted amount. The year-to-date Administrative Expense Ratio is 6.2% which is unfavorable to the 5.0% budgeted amount. The Administrative Expense Ratio is 4.3% excluding the litigation accrual. 49 / 76

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