DSRIP Funds Flow Distribution Process Review of Model Framework
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1 DSRIP Funds Flow Distribution Process Review of Model Framework Deloitte Consulting LLP November 2014
2 Funds Distribution Framework Initial Guiding Principles Draft Guiding Principals Fund distribution framework will account for: Cost of project implementation (i.e. both repayment of committed capital in the PPS and provider internal investment) Revenue loss Internal PPS provider bonus payments (i.e. contribution of individual PPS providers to meet or exceed DSRIP project plan metrics) Costs for services not sufficiently covered by Medicaid DSRIP incentive payments are tied to the success of the State reducing the overall cost of care of the Medicaid population. Given that: Not all providers will be guaranteed to achieve revenue neutrality and positive ROI on investments into the PPS and DSRIP programs PPS should prioritize rewarding best practices and quality improvements that will help achieve DSRIP goals Keep the model simple and transparent, so that it can be easily understood by all PPS providers Use clear, objective measures to track performance and align metrics and fund distribution allocation with DSRIP s 5 year program metrics and goals The framework included in the December 22 nd project plan application should address the broad principles and high level supporting information required for a successful application Specific details and rules for fund allocation will continue to be refined subsequent to the submission of the initial application based on updated guidance and data available Model framework should be reviewed on an annual basis and recalibrated as needed to continue to enhance results Funds distribution needs to incentivize providers to work towards achieving DSRIP metrics and secure funding from the state (i.e., if metrics are not met, there are no funds to distribute) 2
3 DSRIP Funds Flow Allocation by Project This Funds Flow diagram is best viewed in tandem with the narrative description on the following slides Safety Net Performance Provider System Public Hospital Transformation High Performance Fund Years 2-5 Only 1 Carve-Outs carveouts PPS 2 Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 Project 8 Project 9 Project 10 Project 11 Funds for Project 1 Allocation of Funds to an Individual Provider Revenue Loss Distribution: % varies by year 3 Dependent upon the Provider s Portion of the PPS Revenue Loss 4 Investments Distribution: % varies by year >50% Dependent upon the Provider s Portion of the PPS Project 1 Investment Providers Meeting at Least 50% of Metrics are Eligible for the Superior Performance Bonus Pool Bonus Payments Distribution: % varies by year % of Metrics Met 25-50% Providers Meeting at Least 25% of Metrics are Eligible for the Standard Bonus Pool <25% Providers not Meeting at Least 25% of Metrics will not Receive a Bonus 3
4 Narrative Description 1 2 Step 1 Set Aside Funds for Carve-Outs: Carve-outs are items placed first in the hierarchy of the payouts A percentage of the funds received by the PPS will be allocated for the carve-out payments prior to distributing the remaining funds The carve-outs will include: Repayment of committed capital to PPS Members Contingencies reserves which are meant to be used to fund intervention for underperforming projects and geographic areas, and capital infusion for financially fragile providers. Disbursement of contingency reserves in future years will be at the discretion of the board through the governance process Operating expenses of the PPS including costs for PPS administration, rapid cycle improvement, and project implementation costs relevant to more than one project (e.g. introducing system wide disease management and/or population health capabilities) The carve-outs will not include: project-specific investments needed for implementation and organizational transformation. Funding for these investments will come out DSRIP funds allocated to projects (see step 3) Step 2 Allocate Funds to Projects: Funds remaining after setting aside carve-outs are allocated amongst the 11 projects and is dependent upon the project s portion of the overall PPS revenue received from the State during the year. By definition, the State s funds to the PPS for each project will vary based upon: The State s calculation of the maximum project application value The PPS achievement of DSRIP project metrics, and The % of funds the DSRIP program allocates to project s domains by year 4
5 Narrative Description (Continued) 3 Step 3 Allocate Project Funds between 1) Investments, 2) Revenue Loss, & 3) Bonus Payments: By definition, the funding to the PPS will shift in emphasis from reporting to performance based payments over the course of the waiver period. To align with DSRIP funding the PPS should: Put greater emphasis on investments in earlier years and Set aside greater amount of funds for PPS bonus payments in later years The table below is an illustrative example* of how the PPS could shift its emphasis from investments to bonus payments to align with the DSRIP project evaluation Year 1 Year 2 Year 3 Year 4 Year 5 Investments 80% 60% 50% 40% 30% Revenue Loss 10% 20% 25% 20% 15% Bonus Payments 10% 20% 25% 40% 55% *The values listed are meant to be directionally correct but do no suggest a final recommendation As we gather additional data and information from the parallel work streams (i.e., Population Health Analytics Milliman and Infrastructure Planning and Budgets Deloitte) we will incorporate this to provide a more directionally accurate view of how to distribute funds amongst these categories to best align provider incentives with DSRIP funding 5
6 Narrative Description (Continued) 4 Step 4 Allocate Funds to a Specific Provider: Revenue Loss: Dependent upon the provider s portion of the PPS revenue loss By allocating funds proportionate to revenue loss the model implicitly addresses geographic differences in revenue losses (i.e., counties with higher revenue loss will receive more funds) To ensure objectivity, revenue loss will be tied to provider-specific reductions in Medicaid (re)admissions, ER visits and other indicators that are directly attributed to the DSRIP projects Individual project plans will be leveraged to develop expected revenue loss estimates by year tied to project specific targets (i.e., cost related to closing beds, target ER visit reduction, etc.) If funds set aside for the revenue loss exceed the overall PPS revenue loss, the excess funds will be set aside in the contingency reserve 6
7 Narrative Description (Continued) 4 Step 4 Allocate Funds to a Specific Provider (continued): Investments: Dependent upon the provider s portion of the PPS investment in the project This category includes: Project-specific investments needed for implementation and organizational transformation, and Costs for services currently not (sufficiently) covered by Medicaid that are needed to achieve project goals (e.g. services needed to reduced (re)admissions and ER visits) The individual project plans will be used as the starting point to determine which project specific investments are needed; to control these costs, the budgets will be developed and approved by the board in advance of April 1, 2015 DSRIP performance year Funding for investments to a provider will be tied to the approved budgeted investments Mechanisms will be established to review and verify providers made project specific investments By allocating funds proportionate to investment, the model implicitly addresses geographic differences in investments needed (i.e., counties that are further behind and need more investment will receive a higher share of funds) 7
8 Narrative Description (Continued) 4 Step 4 Allocate Funds to a Specific Provider (continued): Bonus Payments: For each project, bonus payments will be set aside into two pools: the superior performance bonus pool (i.e. those providers meeting at least 50% of project metrics in year 1) and the standard bonus pool (i.e. those providers meeting at least 25% of metrics in year 1) The thresholds for both the superior and standard bonus pools will start out at the numbers shown above and increase by year This low threshold in early years is an essential stimulus for cooperation The increase in the thresholds over time would be tied to the DSRIP program s shift in emphasis from reporting to performance based payments over the course of the waiver period The State gives equal weighting to each performance metric when evaluating project funding The PPS may elect to use an equal weighting of performance metrics for fund distribution to align bonus payments more directly with funding received from the State The PPS may also elect to change the weighting or add additional metrics that (e.g. PCMH practices achievement of NCQA Level 3 PCMH standards) are vital for the realization of the core DSRIP milestones Prioritized metrics and weighting will be established prior to April 1, 2015 In years 2-5, the PPS is eligible for payments from the High Performance Fund if the project: Closes the gap between its current performance and the statewide targets by >20%, or Meets or exceeds the 90th percentile of statewide performance for a specific measure High performance payments may not exceed 30% of the maximum project application value High performance funds from the State will go 100% towards funding project bonus payments so as to directly reward providers that contributed to the PPS receiving additional funds for the project 8
9 Project Based Approach: Key Considerations and Draft Mitigation Strategies Key Considerations Some counties within the PPS may require additional resources to be successful on certain projects The DSRIP program funding for Domain 1 (Overall Project Progress) varies by year, starting at 80% of funds and declining over the course of the waiver period Some projects are more complex and may have metrics that are difficult to achieve. Providers participating in only a few difficult projects may be disadvantaged Draft Mitigation Strategies By allocating the investment pool of funds proportionate to investment made by each provider, the model implicitly addresses this issue The PPS can leverage the contingency reserves set aside in the carve-out pool to inject investments as needed into specific regions / providers to promote the future success of underperforming regions In early years, Domain 1 funds could be used to fund the carve-out pool Remaining Domain 1 funds could be allocated based upon performance of the DSRIP Domain 2 4 projects The PPS can use the contingency reserves set aside in the carve-out pool to inject additional funds as needed to specific projects / providers to promote the future success of underperforming projects 9
10 Project Based Approach: Key Considerations and Draft Mitigation Strategies Key Considerations Variation amongst providers in both the type and volume of Medicaid patients seen may not make it equitable for each provider to share equally in the bonus pool Certain provider types have no control over the PPS achievement of project metrics Draft Mitigation Strategies Cap the provider s total eligible incentive bonus at a certain percentage of their Medicaid revenue (e.g. 30% of Medicaid revenue). This will: Align bonus payments to the volume of Medicaid patients seen Be consistent with the State s High Performance Fund, which caps funding from the State to a specific project at 30% of its project application value Review project metrics for each project to determine which metrics apply to each provider type. Provider bonus payments will be based upon achieving the project metrics specific to their provider type For example, Project A has 10 metrics. The PPS review of the project metrics determined that only 8 metrics apply to Provider A. If Provider A achieves: At least 4 out of the 8 project metrics, it would be eligible for the superior performance bonus pool At least 2 out of the 8 project metrics, it would be eligible for the standard bonus pool Less than 2 project metrics, it would not be eligible for a project bonus 10
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