1. Commonwealth of Massachusetts Executive Office of Health and Human Services Chapter 257 of the Acts of 2008 Provider Information and Dialogue Session: Child & Family Nutrition Services April 6, 2012 www.mass.gov/hhs/chapter257 eohhspospolicyoffice@state.ma.us

2. 2 Agenda Chapter 257 of the Acts of 2008 Overview of Child & Family Nutrition Definition and Overview of Programs Procurement Approach Review of Pricing Analysis and Methodologies What does c.257 mean for WIC providers? Data Sources & Rate Considerations Timeline and Key Milestones

3. 3 Chapter 257 of the Acts of 2008 Regulates Pricing for the POS System Chapter 257 places authority for determination of Purchase of Service reimbursement rates with the Secretary Of Health and Human Services under MGL 118G. The Division of Health Care Finance and Policy provides staffing and support for the development of Chapter 257 pricing. Chapter 257 requires that the following criteria be considered when setting and reviewing human service reimbursement rates: Reasonable costs incurred by efficiently and economically operated providers Reasonable costs to providers of any existing or new governmental mandate Changes in costs associated with the delivery of services (e.g. inflation) Substantial geographical differences in the costs of service delivery Many current rates within the POS system may not reflect consideration of these factors. Services that are 100% federally funded are excluded from the Chapter 257 mandate. Chapter 9 of the Acts of 2011 establishes new deadlines for implementing POS rate regulation as well as requires that related procurements not go forward until after the rate setting process is completed. Jan 2012Jan 2013Jan 2014 Statutory Requirement: Percent of POS System with Regulated Rates 40%30% Spending Base Associated with Statutory Percentage (based on current projection of $2.278B POS Baseline to be implemented) ~ $880M~ $660M

4. 4 In implementing Chapter 257, EOHHS will leverage three POS Reform Strategies to improve services and client outcomes POS Reform Strategy –# POS contracts for similar services –Use of cost reimbursement contracts 3. Reform Contracting +# of contracts shared across departments +# contracts w/ performance features +Use of Master Agreements +Overall POS governance structure 2. Develop Rational Rates 1. Create Service Classes Minimize Maximize Increased Administrative Efficiency Simplification and improved coordination of administrative processes for agencies and providers More resources directed toward client activities Immediate Term Near Term Long Term Improved Client Outcomes Improved quality management +Develop service class structure defined by outcomes +Enhance POS taxonomy database +Align activity codes to service classes Enabling Integrated data management systems Improved reporting More clients served w/ higher quality services Improved client outcomes Contract consolidation across agencies Rational resource base and stronger provider system POS Reform 1/1/12 1/1/13 1/1/14 Statutory Requirement Service Value 40% of system 30% of system ~$880M ~$660M Rates to be reviewed every two years

5. 5 The Cost Analysis and Rate Setting Effort has Several Objectives and Challenges Objectives and Benefits Development of uniform analysis for standard pricing of common services Rate setting under Chapter 257 will enable: A.Predictable, reimbursement models that reduce unexplainable variation in rates among comparable, economically operated providers B.Incorporation of inflation adjusted prospective pricing methodologies C.Standard and regulated approach to assessing the impact of new service requirements into reimbursement rates Transition from “cost reimbursement” to “unit rate” Challenges Ambitious implementation timeline Data availability and integrity (complete/correct) Unexplained historical variation in reimbursement rates resulting from long-term contracts and individual negotiations between purchasers and providers Constrained financial resources for implementation, especially where pricing analysis warrants overall increases in reimbursement rates Cross system collaboration and communication Coordination of procurement with rate development activities Pricing Analysis, Rate Development, Approval, and Hearing Process Data Sources Identified or Developed Provider Consultation Cost Analysis & Rate Methods Development Provider Consultation Review/ Approval: Departments, Secretariat, and Admin & Finance Public Comment and Hearing Possible Revision / Promulgation

6. 6 Reduced contract complexity and redundancy Greater amendment flexibility for providers and agencies Greater opportunity for provider engagement Streamlined, centrally-managed procurement cycles managed Thousands of individually negotiated contracts Multiple contracts within and across departments with the same providers. Services with core similarities purchased individually by agencies and regions Low capacity for rate management, cross-agency coordination, performance assessment In Many Cases, Contract Reform is Necessary to Implement Chapter 257 Today Vision for FY15 Purchasing Department Providers Dept Providers Secretariat or Department Master Agreements By Service Class DHCFP rate schedules Panel of qualified providers Departments purchase via rate agreements

7. 7 Agenda Chapter 257 of the Acts of 2008 Overview of Child & Family Nutrition Services Definition and Overview of Programs Procurement Approach Review of Pricing Analysis and Methodologies What does c.257 mean for WIC providers? Data Sources & Rate Considerations Timeline and Key Milestones

8. 8 Child & Family Nutrition Service Class Service Class Definition: Programs that provide specialized nutrition services, health education and healthy foods for families, including women, infants, and children. WIC is a fully federally funded program, but in Massachusetts there is also $12.4M in state funding for child and family nutrition services The combined state and federal $28M WIC Nutrition program is a part of the larger WIC funding system which also includes $90M in federal funding for food and nutritional service support $23.5M retained revenue for food $1.5 M in state-only funds WIC contracts contain both federal and state dollars at a 65/35 ratio

9. 9 EOHHS, HCFP and DPH WIC continue to work collaboratively to adequately define and price WIC services DPH will continue to administer all WIC programs in compliance with federal laws and state regulations and policies. WIC Centers will continue to receive funds for the Federal-only programs on a cost reimbursement basis. Services will : Reach same level of clients Support existing staff : client ratios

10. 10 Child & Family Nutrition Procurement Plan DPH will procure their Child & Family Nutrition (WIC) services upon adoption of the rate regulation so that services can be reimbursed under the regulated rates in SFY14. The RFR will comply with all USDA requirements regarding reporting, payments and spending categories. The RFR for those services brought under Chapter 257 rate regulation will result in rate contracts. Fully federally funded components will remain cost reimbursement. Contracts will continue to designate services areas. Separate correspondence from DPH will outline the expected billing level for the fiscal year.

11. 11 Agenda Chapter 257 of the Acts 2008 Overview of Child & Family Nutrition Services Definition and Overview of Programs Procurement Approach Review of Pricing Analysis and Methodologies What does c.257 mean for WIC providers? Data Sources & Rate Considerations Timeline and Key Milestones

12. 12 How will the transition to a unit rate from a cost reimbursement rate impact WIC providers? Changes outlined above pertain solely to services applicable to Chapter 257 rate regulation. Current WIC Payment OperationsUnit Rate WIC Payment Operations Caseload is negotiated between DPH and the WIC Provider. Financial needs are based upon size, geography, agency type and other considerations. The WIC provider receives payment based on a cost reimbursement contract. The WIC provider will receive payments based upon defined unit(s) of service. Exceptions and other payments are determined in annual contract negotiations The unit rate will include service delivery costs and the per-client cost associated with exceptions and other payments Other program components and cost variants are considered. Other program components and cost variants will be considered in rate development process.

13. 13 Child & Family Nutrition Rate Analysis: Data Sources FY11 Contract Budgets Participation data Costs included in the rate development include caseload rate, recurring and one-time exceptions. Facility based offsets are also considered Rates will consider program size, geography, agency type, etc.

14. 14 WIC: Rate Considerations The WIC program currently pays 3 distinct bands with accommodations made for smaller programs (<1,000) on an annual case load basis. –A WIC provider’s given band does not change throughout the duration of the procurement period; it is reevaluated during each procurement to ensure the determining factors still apply. Considerations in rate development will include: Current rate bands Personnel, occupancy and other cost drivers Provider stability will be an important concern in the rate development process. What are some operational realities that may not be captured in the budgets but should be considered within rate development?

15. 15 Agenda Chapter 257 of the Acts of 2008 Overview of Child & Family Nutrition Definition and Overview of Programs Procurement Approach Review of Pricing Analysis and Methodologies What does c.257 mean for WIC providers? Data Sources & Rate Considerations Timeline and Key Milestones

16. 16 Department Service Design Finalized: All service components, staffing ratios, staff qualifications, other program inputs have been decided by the purchasing department. Provider Sessions: For each rate setting project, EOHHS conducts an average of 2-3 provider input sessions prior to Executive Sign-Off and the Public Hearing Process to allow for greater depth in understanding core program components, cost drivers, and procurement considerations. Executive Sign-Off: Commissioner and C257 Executive Committee sign-off on draft rates and implementation plan. EO485 Submitted to ANF: Draft rate regulation to ANF; Will better align the rate regulation proposal with budget planning. Public Hearing: DHCFP and purchasing departments consider testimony in advance of rate adoption. Procurement Process: The procurement will be issued after the rates have been adopted. Rates Effective: Where possible, reimbursement under regulated rates will align with beginning of SFY to minimize mid-year contract amendments for both purchasing Departments and providers. Updated Implementation Timeline and Key Milestones for Child and Family Nutrition Services July 1

17. 17 Questions/Feedback Please Email Questions & Comments to: eohhspospolicyoffice@state.ma.us Please Visit the Chapter 257 Website: www.mass.gov/hhs/chapter257