1. Next Generation Contracting 2.0 Fiscal Policy Studies Institute Based on RBA Next Generation Contracting and Virtual Funding Pool Principles developed by FPSI June 2011 An Approach to Flexible Funding and Integrated, Outcome-Based Contracting Draft Discussion Outline

2. Next Generation Contracting 2.0 Fiscal Policy Studies Institute An Approach to Flexible Funding and Integrated, Outcome-Based Contracting KEY FEATURES: 1. Allows fine tuning of the balance between control and fund flexibility. Draft 2 June 2011 2. Provides the benefits of "traditional" fund pools for mainstream funding, without the loss of fund identity, and with less accounting and administrative complexity. 3. Promotes partnership/alliance working on both population quality of life and service system performance improvement. Defines funder/contractor partnership for maximizing customer outcomes. 4. Makes use of simplified reporting on contract performance using RBA formats and the three RBA measurement categories: How much did we do? How well did we do it? and Is anyone better off? 5. Establishes 3 year rolling contracting (with safeguards) that prevents annual destabilization of service providers. 6. Institutionalizes contractor continuous improvement processes. 7. Provides funding for contractor management infrastructure.

3. Service Line Specifications 1. What is the role of the service in population quality of life? 2. Definition of the service 3. Service quality requirements 5. How many people will be served? (and relevant targets) 6. How much of what activities will be provided? (and relevant targets) 7. How well did we do it? and Is anyone better off? measures (The 3-5 most important measures) 4. Key partners & alliance relationships Fiscal Policy Studies Institute

4. General Contract Provisions 1. The contractor will use a continuous improvement process. 4. The funder and contractor will work as partners to maximize customer outcomes. 5. The funder will work with the funding community to simplify and standardize contracting and reporting requirements. 3. Targets, where used, will be set in relation to a baseline and will be negotiated so as to be fair and useful. 6. General provisions concerning management, due diligence, dispute resolution, termination, and other matters required by law. 2. The contractor will report on progress quarterly using a simplified format: Numbers, Accomplishments & Stories. Fiscal Policy Studies Institute

5. Financial Contract Provisions 1. Standard provisions for accounting, financial reporting, audit and general fiduciary responsibility. 4. Provide for rolling 3 year contract with new 3 rd year amendment to be negotiated by the end of each contract year. 5. Allow contractor to move funds of less than (10%) of budget between service lines in the interest of more effective services. 3. Provide 10% for management and infrastructure, adjusted for economies of scale. 6. Allow contractor to retain (across contract years) savings in medium/high intensive services to expand prevention services. 2. Specify budget by service line and fund source. Fiscal Policy Studies Institute

6. Virtual Funding Pool Managing "as if" funds were pooled: Accountability and flexibility without loss of fund identity Programs (using health examples) 1a. Health promotion 1b. Immunizations 1c. GP well visits 2a. GP sick visits 2b. Diagnostic testing 2d. Emergency room 3a. Hospital care 3b. Long term care 3c. Hospice care 4. Mgmt Infrastructure Prevention Low cost Intervention Med -High cost Intervention $ 1,000,000 3,000,000 4,000,000 2,000,000 1,000,000 1,000,000 10,000,000 4,000,000 5,000,000 2,000,000 10,000,000 25,000,000 50,000,000 60,000,000 5,000,000 10,000,000 11,000,000 22,000,000 160,000,000 Transfer between service lines or to new service Transfer savings from deep end to prevention Fiscal Policy Studies Institute