1. Commonwealth of Massachusetts Executive Office of Health and Human Services Chapter 257 of the Acts of 2008 Provider Information and Dialogue Session: Adult Long Term Care June 20, 2012 www.mass.gov/hhs/chapter257 eohhspospolicyoffice@state.ma.us

2. 2 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Residential Rate Precepts Review of Preliminary Occupancy Survey Results Updated Draft model Budget Framework Breakout Discussions 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. Additional funding was not appropriated to finance any potential cost increases associated with the law. 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 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

5. 5 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Residential Rate Precepts Review of Preliminary Occupancy Survey Results Updated Draft model Budget Framework Breakout Discussions Timeline and Key Milestones

6. 6 Adult Long Term Care Service Class Service Class Definition: Programs that provide individuals a place of overnight housing for a long- term period of time in a specialized residential facility with necessary daily living, physical, social, clinical and/or medical support. Transition to a less restrictive setting, while ideal, is not a common goal for individuals receiving services in these settings.

7. 7 Adult Long Term Care Services: Residential Rate Precepts House rates will be assigned at the program level, rather than at the individual level All existing residential programs will be placed into a program model that best reflects the needs of most of the individuals living in the program The funding level in a program model should be the same across all programs of the same type and capacity There is a different staffing pattern for each model of service that reflects the differences in the populations served. Program models that require direct care workers to have higher-level skills and experience will reflect higher paid direct care staff than more basic models. PSS is omitted for now as part of the rate- this is an individualized service that will be added on top of the rate model that serves a particular group of people. Occupancy and related expenses should be considered separately for pricing purposes from the actual program pricing models. Program expense models will cover everything but occupancy. That is, program rates should include funding for staffing, vehicles and program furnishings, among other operational considerations.

8. 8 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Residential Rate Precepts Review of Preliminary Occupancy Survey Results Updated Draft model Budget Framework Breakout Discussions Timeline and Key Milestones

9. 9 EOHHS Occupancy Survey Background The 2012 EOHHS Occupancy Survey gathered information on the occupancy costs for the Adult Long Term Residences. The data collected will inform the pricing structure and rates to be developed for the facility component of Adult Long Term Residential services. The 2012 Occupancy Survey was electrically submitted to over 200 Residential providers. The data from 2012 Occupancy Survey represents the responses from over 1,400 caregiver sites across Massachusetts. Survey Gizmo was the survey tool used to administer the survey.

10. 10 Statistics: What do we look for? R 2 is a statistical method that explains how much of the variability of a factor can be caused or explained by its relationship to another factor. An R 2 of 1.0 indicates that the two factors are perfectly aligned. A R 2 value of.023 reflects a weak relationship between two factors where an R 2 value of.98 indicates a very strong relationship between them. In this data, a strong relationship would indicate that a factor is an occupancy cost driver, a weak relationship would indicate that the factor does not significantly influence occupancy unit cost. ANOVA tests are used to analyze two variables where one of the variables is represented by categories (e.g., type of heating fuel or DDS regional location). The ANOVA is represented by a P-Value. A P-Value of 0.05 or less indicates a possible relationship. Opposite from the R 2, a P-value of.023 reflects a strong relationship where a P- value of.98 indicates a weak relationship. An F-Crit score of greater than 2.0 is desirable. >= 25 pieces of data must be present in each category data group.

11. 11 EOHHS Occupancy Survey Results: Unit Cost --------------------------------------------------------------------------------- Majority of caregiver sites fall within approximately $10.09 - $49.73 cost per client per day range. Notice the sharp upturn at the $50.00 cost per client per day indicator.

12. 12 EOHHS Occupancy Survey: List of Variables Explored Physical Condition Type of Site (Apartment or House) Type of Heat Improvements for Accessibility Economies of scale Type of Ownership Location Year site placed into service

13. 13 EOHHS Occupancy Survey Results: Physical Condition of Facility Physical condition of the facility is not a cost driver. 75% of EOHHS sites are functional and not in need of immediate repair.

14. 14 EOHHS Occupancy Survey Results: Site Layout P-value 0.191932 *The site layout is not statistically significant. Site layout is not a cost driver.

15. 15 EOHHS Occupancy Survey Results: Heat P-value 0.473681 The majority of sites (55%) use natural gas as heat. Overall cost of utilities (Water + Heat + Electricity) is relatively the same, regardless of type of heat used at a site. Additionally there is a high P-Value indicating that the type of heat used is not an occupancy cost driver. --------------------------------------------------------------------------------------------------------------------

16. 16 EOHHS Occupancy Survey Results: Impact Of Accessibility Features Accessibility Features: -Wheelchair Ramp -Widened Hallways -Handicapped BR -Hoyer Lift -Elevator -Sprinkler -Adaptive Equipment for Blind -Security Alarms The Accessibility Score is the sum of any specific modifications that have been done to the site. The R 2 score is not close to 1.00 so there is no correlation the Accessibility Score and Cost Per Client Per Day. R 2 = 0.0226

17. 17 EOHHS Occupancy Survey results: Dynamic Capacity (Economies of Scale) “Base Units” was calculated by finding the greater number of either bedrooms or client occupancy then multiplied by 365. This comparison looks for economies of scale. The R 2 calculation is very low thus there appears to be no relationship.

18. 18 EOHHS Occupancy Survey Results: Mortgage and Rent Overview Both Mortgage and Rent are significant cost drivers. --------------------------------------------------

19. 19 EOHHS Occupancy Survey: Ownership _______________________________________________________________________ P-value 0.021533 P-value 0.184778 The majority (52%) of caregiver facilities are owned. With a P-Value of less than 0.05, there appears to be statistical value here. Caregiver facilities that were leased in any manner were grouped together resulting in the “Lease Group” category. The resulting P- Value was greater than 0.05 demonstrating a a lack of statistical value. F crit 2.61113

20. 20 EOHHS Occupancy Survey: Leases from Related Parties There is statistical significance between the unit costs of facilities that are “Lease from Related Party” when compared to all others categories combined. Leased from Related Party does have a cost impact Lease + Own + Lease to own VS. Leased from Related Party No cost impact without Lease From Related Party Lease VS. Lease to Own VS. Own *Lease from Related Party removed P-Value: 0.014084 P-Value: 0.172641 No cost impact without Lease From Related Party Lease VS. Own + Lease to own *Lease from Related Party removed Without “Lease from Related Party” there is no statistical significance among ownership types. P-Value: 0.160725 Yet, when “Lease from Related Party” is removed, the statistical significance is lost.

21. 21 EOHHS Occupancy Survey Results: EOHHS and HUD Rental Values -The EOHHS/HCFP/DDS/MCB/MRC team used the data to compare the monthly rental values of DDS residences with regionally- equivalent HUD rental allowances. -The analysis took an “apples to apples” approach; additional amenities provided and factored into EOHHS site cost were removed to align HUD payments to those paid by DDS regions for the closet comparison possible. -EOHHS spends more on rental costs per client than HUD does.

22. 22 EOHHS Occupancy Survey Results: EOHHS and HUD Rental Values

23. 23 EOHHS Occupancy Survey Results: Respondents by DDS Region Sites are very evenly distributed amongst the DDS regions.

24. 24 EOHHS Occupancy Survey Results: Regional Variation by DDS Region DDS Regions: Central West Metro North East South East The DDS region in which the site is located is not a cost driver. Site location has no significance within the scope of DDS Regions.

25. 25 EOHHS Occupancy Survey Results: Respondents by HUD Region

26. 26 There are not 25 pieces of data in each data group so the HUD regions must be consolidated to evaluate whether region is a cost driver. EOHHS Occupancy Survey Results: Regional Variation by DDS Region

27. 27 EOHHS Occupancy Survey Results: Respondents by Consolidated HUD Region

28. 28 Site location is a significant cost driver when looked at by consolidated HUD Regions. P-valueF crit 0.0279362.01701 HUD region consolidated Western Worcester to Worcester Eastern Worcester to Worcester Berkshire to Pittsfield Franklin County to Springfield Easton/Raynham, Taunton, New Bedford to Brocton Lawrence to Lowell EOHHS Occupancy Survey Results: Regional Variation by Consolidated HUD Region

29. 29 EOHHS Occupancy Survey Results: Year Site was Placed Into Service Cost per client per day increases slightly in more recently opened sites.

30. 30 P-value 0.128072 No valid cost driver conclusion s can be made as each data group does not contain 25 data samples. Consolidation of data into the last 20 years and prior also does not yield a significant relationship. Average cost per client per day does increase as sites are put into service in more modern times. This encouraged further analysis. EOHHS Occupancy Survey Results: Year Site was Placed Into Service

31. 31 There is a strong relationship between unit cost and the decade that a residence was placed into service. P-valueF crit 9.11E-082.611614 EOHHS Occupancy Survey Results: Unit Cost by Year Site was Placed Into Service

32. 32 EOHHS Occupancy Pricing Draft Construct: Consolidated HUD Regions and Categories of Year Site Placed into Service KEY -Numbers in boxes represent the number of EOHHS sites within the region and decade of service. - Box color represents HUD region.

33. 33 EOHHS Occupancy Pricing Draft Construct: Lease From Related Party Sites by Consolidated HUD Region The numbers under “Total” represent the number of Lease From Related Party EOHHS Sites within each HUD region.

34. 34 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Residential Rate Precepts Review of Preliminary Occupancy Survey Results Updated Draft model Budget Framework Breakout Discussions Timeline and Key Milestones

35. 35 Draft Model Budget – DDS Basic 2 Basic Level 2 Model Budget (Capacity 4) Beds:4Bed Days:1,460 FTEExpense Management0.32 $XX.XX DC Supervisor1.00 $XX.XX DCI + DCII + DC III4.725 $XX.XX Overnight Asleep0.00 $XX.XX Overnight Awake1.40 $XX.XX Relief A0.94 $XX.XX Relief B0.00 $XX.XX Support0.13 $XX.XX Total Program Staff 8.52 $XX.XX Expenses Tax and Fringe21.71% $XX.XX Total Compensation $XX.XX [Consulting Services] Hourly Rate Hours per year Expense Registered Nurse (RN)$xx.xx52.00 $XX.XX Psychologist (BA level)$xx.xx52.00 $XX.XX Total Consulting Services $XX.XX Unit Cost Occupancy$0.00 $XX.XX Food $XX.XX Client Transportation $XX.XX Staff Mileage $XX.XX Vehicle Expenses/Depreciation $XX.XX Other Expenses - (Food+CT+SM+VED) $XX.XX Direct Admin Expenses $XX.XX Total Reimb excl M&G $XX.XX Admin. Allocation10.98% $XX.XX TOTAL $XX.XX CAF: 3.93% $XX.XX UNIT RATE: TBD Now, Consulting Services are separated out from FTEs. Occupancy Expense is removed from service model budget. DHCFP is conducting facility related expense analysis and this rate will be set under separate provision. Transportation Expenses include Client Transportation, Staff Mileage, and Vehicle Expenses/Depreciation. These components are individually presented in the model budget. An estimated cost adjustment factor (Source: Health Care Cost Review from Global Insight MA CPI-Forecast – Spring 2012), 3.93% would be applied to account for inflation between the FY12 base year through the prospective rate period FY15.

36. 36 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Residential Rate Precepts Review of Preliminary Occupancy Survey Results Updated Draft model Budget Framework Breakout Discussions Timeline and Key Milestones

37. 37 Staffing, Models and Occupancy: Provider Break-Out Groups DDS, MCB and MRC will now lead break out group discussions to gather your feedback on the proposed programs, models and occupancy approach. Among other items, these groups will touch upon: What aspects of these proposed programs and structures appear most adaptable for general use? What is your general reaction to the occupancy construct? Are the resources assigned to each model in line with the needs of the clients that would be in those model’s homes?

38. 38 Agenda Chapter 257 of the Acts of 2008 Overview of Adult Long Term Care Services Definition and Overview of Programs Residential Rate Precepts Review of Preliminary Occupancy Survey Results Updated Draft model Budget Framework Breakout Discussions Timeline and Key Milestones

39. 39 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 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 Adult Long Term Care July 1

40. 40 Questions/Feedback Please Email Questions & Comments to: eohhspospolicyoffice@state.ma.us Please Visit the Chapter 257 Website: www.mass.gov/hhs/chapter257