1. Unit Cost at the Speed of Sound

2. Overview zWhat it is and what it “ain’t” zWhy the hype? zThe dreaded calculation z“Whussup”with us? zNow what?

3. Unit Cost -What Is It? zIt is a measurement of direct service hours to total Center costs (expenses) zIt is a measurement of efficiency zIt is a benchmark by which Medicaid measures the “bang” for each “buck” paid zIt is not a quality measure; rather a quantitative measure (neither valid alone)

4. Unit Cost -What Is It? zThe measurement is not related to revenues received or revenue sources (i.e., bringing in more revenue does not impact unit cost) zIt is not directly related to Center Charges (though a basis for those rates – charges are more closely tied to revenue sources)

5. Why Do We Care? zStewards of Public Funds zSole Source not always guaranteed zState Medicaid compares unit cost to the FFS costs as justification to keep capitation model zHigher costs indicate excess funds beyond the “norm” (we could lose funds!)

6. How Is It Calculated? zLet’s assume the following example: yA Therapist’s salary and fringe for full-time work is $50,000 yThe employee is a full-time worker with 2080 hours available in a given year yThey have similar duties and entitlements to each of your staff, including direct service time, paperwork, training, vacation, sick, holidays and travel time

7. How Is It Calculated? The Direct/Billable hours worked are the revenue generating hours. Unit Cost is the relationship of these billable hours to the total staff time and total cost. What would an hour of service cost in this scenario?

8. How Is It Calculated? The $50,000/yr staff, working 34% of their time in direct billable hours, or 710 hours, would have to bill a sufficient amount during those 710 hours to cover all other non-billable hours as well.

9. How Is It Calculated? However, not only must the Direct Service Provider’s salary and fringe be covered, but the additional costs, such as: Support Staff Supervisory Staff Administration Operating Costs must also be covered!

10. How Is It Calculated? zAggregated versus Disaggregated zAggregated is most simple ya single unit cost for all types of services provided ylacks much meaning zDisaggregated is more complex yrecognizes different activities yserves management better zMedicaid’s model is Disaggregated

11. How Is It Calculated? zEach Direct Care Provider’s salary and fringe are allocated to the direct service, or “revenue generating” activities

12. How Is It Calculated? zTotal Direct program costs are then allocated to Service Activity Codes zAdmin and Overhead are allocated zTotal Activity Costs divided by Units Provided

13. How Is It Calculated? OIN Direct Staff Cost of $123,000 for 1730 hours Then add Support ($37k) and Operating/Overhead ($74k)

14. How Is It Calculated? OIN A total cost of $234,000 to provide 1730 hours of OIN $234,000 divided by 1730 hours equals an OIN unit cost of $135.00/hour

15. Where Do We Stand? zIndividual Therapy - $168/hour zGroup Therapy - $19/hour zMD Med Management - $133/encounter zAdult Skills Development - $10/hour zTargeted Case Management - $151/hour Examples

16. How Do We Change It? zUnit Cost = Total Center Expense Total Units of Service zTherefore, as Unit Cost is the comparison of Total Expenses to Units of Service Provided, it can be impacted by: yDecreasing Overall Expenses yIncreasing Units of Service Provided

17. Decrease Expenses zConsider Operational Costs yrents, leases, supplies, training, travel zConsider Cost of Salaries and Benefits yStaff mix, distribution of duties zConsider Administrative and Overhead Costs

18. Increase Direct Care Units zConsider Direct Care Expectations zLook at Excess Cancellations zIs there Excessive Training and/or Meetings? zRedefine Direct Care yCreative Interventions

19. How Do We Change It? As Managers and Supervisors, it is our responsibility to assist staff in increasing service hours. Staff cannot be expected to squeeze more time into this pie than is already available.

20. Supervisors and Managers must help shift the pie! How Do We Change It?

21. The Greatest Impact zOperational and Administrative reductions help, but require large reductions to significantly reduce Unit Cost zModerate Direct Service Unit increases can significantly impact Unit Cost figures

22. Conclusion “Man is a strange animal. He doesn’t like to read the handwriting on the wall until his back is up against it.” Adlai Stevenson