21 May 2014 – 28 May 2014 Disability Support Services Development of nationally consistent pricing methodologies and models Price models

1 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Agenda 10:00Welcome and Introductions 10:10Project update 10:20Recap of prior cost collection and price mechanism activities 10:50Pricing and transition: SL HCSS 11:30Break 11:40Pricing and transition continued: CRL Facility based Respite 12:20Other services update: Carer Support Subsidy ATR CDS 12:40Discussion 13:00Lunch

2 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Purpose of today Development of nationally consistent pricing methodologies and models Recap of completed project activities Pricing principles Cost and activity survey Carer Support Subsidy carers survey Pricing methodologies New prices for services New pricing models for Disability Support Services Transitional considerations Implementation Opportunity for comment

3 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Project objectives To develop nationally consistent pricing methodologies and pricing models for selected Disability Support Services That result in: Nationally consistent pricing Cost reflective pricing Equity and clarity for providers Equity and clarity for service users That in the longer term contribute towards: Sector development that focuses on: sustainability, efficiency, and quality Best long-term outcomes for: clients, providers, and the disability support sector as a whole

4 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Project update – scope of project Pricing models and prices to be developed for: Supported Living (SL) Home and Community Support Services (HCSS) Community Residential Living (CRL) Facility based Respite Child Development Services (CDS) Assessment, Treatment & Rehabilitation (ATR) Carer Support Subsidy

5 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Project update Develop the basis under which pricing methodologies and prices will be determined Pricing Principles Ensure common understanding and agreement as to how services are described and counted Service Descriptions Review data availability and quality and develop data collection tool Develop data collection tool Sector wide data collection to identify costs of service delivery Data Collection Review contemporary approaches to pricing and consider suitability in the NZ context Approach to pricing Set prices and develop and implementation and management plan Setting prices and implementation planning

6 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Project update Sector Forums: 1 to 12 July Pricing Principles Consultations / site visits: 1 to 12 July Service Descriptions Pilot Survey: 5 August to 16 August Develop data collection tool Sector wide data collection: 26 August to End December Data Collection Second consultation Phase: 25 November to 6 December Approach to pricing Price modelling and implementation: January to Present and onwards Setting prices and implementation planning

7 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Before we start… THANK YOU Thank you again to those of you who have given your: time, knowledge and data to this project. We have appreciated your input and guidance.

Recap of prior cost collection and price mechanism activities Pricing Principles Survey of Services and Costs Pricing methodologies

9 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Pricing Principles A series of Pricing Principles were developed to guide both pricing and implementation of new pricing: Pricing enhances the ability of disabled people to exercise self-determination Pricing should result in nationally consistent and transparent prices Pricing must always drive efficiency Pricing enhances sustainability of a quality disability support system Pricing promotes an equitable and responsive disability support system that advances continuous quality improvement and choice Underpinning Pricing Principles is the recognition of the importance of: Respect of the rights of people with disabilities Open and ethical relationships between funder and provider

10 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Surveys of costs and services The cost and services surveys highlighted: The profiles of costs incurred by organisations have high levels of consistency: Consistency in the unit cost of inputs (e.g. the cost of an hour of staff time) Consistency in each disability service of types of costs (e.g. labour versus non labour costs) Where providers incur higher unit costs in one area they typically manage these by switching decisions regarding the balance / volume of units used These variations are not driven by structural factors such as provider size or location. The high levels of commonality align with the concept of consistent national pricing There are two services whose underlying costs are highly variable: RIDSAS-CRL CRL for the most complex clients (packages >$160,000) There will be no changes to the price / purchasing arrangements for these services as a result of this project

11 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Profile of activity by service team The profile of activity by service team members reflects the nature of disability support service type: Respite requires higher levels of planning administration and management compared to CRL due to the constantly changing clients SL needs higher levels of planning compared to HCSS due to the service lines objectives

12 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Profile of service team wage costs The profile of costs in home based and facility based services are broadly similar: For all services 86 to 88 percent of staff costs are incurred by client facing staff CRL and Respite spend marginally more on management than HCSS and SL reflecting: higher average cost of managers in CRL higher volumes of management time required in Respite

13 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Service team staff costs CRL management rates reflect presence of more complex management structures All services had similar levels of on-costs at around 20% uplift on labour rates These include: all forms of leave, ACC, KiwiSaver, and some allowances HCSS Hshld Management

14 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Profile of all cost types The profile of total costs incurred to deliver a service reflects the nature of the service model / specification Home based services have lower rates of non- labour costs reflecting their lower reliance on infrastructure and non- labour inputs In CRL higher rates of direct costs are incurred compared to facility based respite reflecting the wider range of service inputs used for longer term clients

15 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Units of service and pricing units – driving considerations The survey told us that providers manage to a common set of delivery units: HCSS and SL: hours of client service …though the precise definition of hour appears to vary between providers re: client face-to-face hours versus travel hours versus planning hours when away from client CRL: place in house Facility based respite: place in facility (full day/half day) Last round of consultations with sector indicated that pricing units: Should be aligned with either these delivery units or inputs The sector and the services are not ready for outcome based pricing

16 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Units of service and pricing units – driving considerations continued Pricing Principles indicated that pricing should be: Transparent – i.e. be clear and simple about what is being purchased Enhance the ability of disabled people to exercise self determination – i.e. be priced in a manner that: is clear to a person what they are purchasing helps a person understand the trade offs between different purchase decisions (Increasingly relevant in the context of Individualised Funding)

17 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Units of service and pricing units HCSSSLCRLRespite Delivery unitClient hour Place in housePlace in facility (full or half day) Client purchase perspective Time of staff member in clients home Time of staff member: with client and spent organising and planning for client Place in house and amount of staff time available to client Place and care Pricing principleSimple pricing structure Pricing structure that reflects what the client perceives in the purchase Proposed price unitHour of service timePlace in facility (full or half day) Basis of cost treatment in price unit Reflect standard costs of inputs: Staff costs of hours for service time plus Staff costs for service team supporting delivery of service time Labour on-costs on top of staff costs (e.g. leave, ACC) Direct non-labour service delivery costs (e.g. food in CRL) Organisational management costs (share) Organisational overheads (share) (Maybe modified for changes to service model: e.g. CRL in client rented property) Per three other service lines …plus… Modification for: Standard hours to deliver place Standard utilisation rate

18 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Consistent pricing and consistent assessment Nationally consistent pricing that delivers provider and client equity requires: Prices, supported by: Consistent needs assessment practice by NASCs Consistent use of a single pricing tool for a service type Currently there are low levels of consistency due to a range of pricing tools Pricing reform will eliminate this variability The reform process will be managed by MoH to ensure that the transition to new prices and consistent tools do not result in changes that: Compromise the viability of the provider Jeopardise the delivery of services to clients Compromise the capacity of MoH to purchase services

19 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Questions?

New pricing models New prices Transition

21 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Supported Living

22 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. SL Current purchasing arrangements: A single type of SL is purchased (in contrast to HCSS) NASCs assess the number of SL hours required by a client Providers deliver SL through organisation specific delivery models Future purchasing arrangements: No change in specification regarding what is covered by SL No change in process to define number of SL hours required by a client No change to pricing unit Provider will continue to decide how the service is structured, staffed, and delivered to the client

23 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. SL observed costs One hour of service Hourly RateCalculation factorPrice component SL service delivery 60%DSW worker$ % of SL team $ %Planning Co-Ordinator$26.54 $10.62 Non client facing service team: Administration$20.753% / 92%$0.66 Direct management$30.615% / 92%$1.60 $23.47 Labour on-costs20% of labour cost$4.69 TOTAL LABOUR COST84.3% of total costs $28.17 Non-labour costs Direct costs7.6% of total costs$2.53 Management and overheads8.1% of total costs$2.70 TOTAL COST100.0% of total costs $33.40 Observed cost of SL service delivery 2012/13 (survey)

24 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. SL Pricing Observed costs 2012/13 $33.40 Increment to reflect 2013/14 indexation 1.54% Increment of cost for minimum wage decision 0.00% Total increment: 1.54% Adjusted observed cost (at May 2014): $33.92 Current prices at May 2014: All SL: $33.63 Adjusted observed cost ($33.92) to be used as base for price setting prior to the normal annual price adjustment Will apply from the annual contract renewal in 2014/15.

25 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. SL impact on providers All providers will receive a real increase of price of 0.86 per cent as a result of the prices being set at the observed cost base

26 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Home and Community Support Services

27 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. HCSS Current purchasing arrangements: Two types of HCSS at two prices: Personal Care (PC) and Household Management (HM) NASCs assess the number of PC and HM hours required by a client Providers deliver HCSS through a range of delivery models Future purchasing arrangements: No change in specification regarding what is covered by PC and HM No change in process to define number of PC and HM hours required by a client PC and HM to be combined into a single price Single price reflects the strong overlap between PC and HM service delivery Single price reflects the client experience of HCSS: where a difference between PC and HM staff or activity is frequently not apparent New price aligns with single price approach in ACC Provider will continue to decide how the service is structured, staffed, and delivered to the client

28 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. HCSS observed costs One hour of service Hourly RateCalculation factorPrice component HCSS service delivery HCSS worker$ % of HCSS team $15.08 Non client facing service team: Administration$20.755% / 90% $1.15 Direct management$30.615% / 90% $1.70 $17.93 Labour on-costs20% of labour cost $3.59 TOTAL LABOUR COST85.9% of total costs $21.51 Non-labour costs Direct costs (incl. current Travel costs)0.7% of total costs $0.19 Management and overheads13.4% ot total costs $3.35 TOTAL COST100.0% of total costs $25.05 Observed cost of HCSS service delivery 2012/13 (survey)

29 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. HCSS Pricing Observed costs 2012/13 $25.05 Increment to reflect 2013/14 indexation 1.56% Increment of cost for minimum wage decision 1.87% Total increment: 3.43% Adjusted observed cost (at May 2014): $25.91 Current prices at May 2014 PC: $26.14 HM: $24.31 Average price paid to providers based on average PC and HM mix: $25.32 Adjusted observed cost ($25.91) to be used as base for price setting prior to the normal annual price adjustment Will apply from the annual contract renewal in 2014/15.

30 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. HCSS impact on providers Key: Red line = New Price Blue line = Current average price per provider Providers will receive an average increase funding of 2.3 per cent

31 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Travel Providers were asked to describe travel costs that they incur for HCSS service delivery Providers described a range of circumstances Where providers were able to describe their travel costs KPMG undertook an analysis of the genuine cost of travel Based on a limited data set: the cost of travel appears to range between 8 to 13 per cent of staff cost ex. on-cost (urban and rural areas respectively) The HCSS price in the preceding slides are based on the current cost base in HCSS The price reflects the rate at which travel costs are currently incurred The price does not reflect where travel requirements are not fully reflected in the sectors costs of business – these latent costs are reflected in KPMGs estimate The Ministry is undertaking a wider piece of work regarding the latent cost of travel and how it should be addressed

32 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Morning tea break

33 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Community Residential Living

34 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL Current purchasing arrangements: NASCs assess client need and use one of 10 pricing models to establish funding level Providers and Clients receive varied rates of funding depending on the above: inequitable Future purchasing arrangements: No change in CRL specification(s) Sleepover adjustment to be merged into CRL package calculation A single national pricing model to be used by all NASCs for client packages under $160k Packages will be defined by the number of support hours required by client based on client needs and housing and price per hour Numbers of hours will be standardised in a set of bands

35 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL Two CRL services will be excluded from new pricing: RIDSAS (high and complex) Clients on individual CRL packages in excess of $160,000 In both these cases the inputs used by the services can vary significantly and hence are not suitable for nationally consistent pricing

36 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL observed costs One hour of service Hourly RateCalculation factorPrice component CRL service delivery 96%DSW worker$ % of CRL team $ %Planning Co-Ordinator$22.64 $0.81 Non client facing service team: Administration$ % / 95.3%$0.51 Direct management$ % / 95.3%$0.95 $18.52 Labour on-costs20% of labour cost$3.70 TOTAL LABOUR COST71.7% of total costs $22.22 Non-labour costs Direct costs20.2% of total costs$6.49 Management and overheads8.1% ot total costs$2.53 TOTAL COST100.0% of total costs $31.25 Observed cost of CRL service delivery 2012/13 (survey)

37 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL Pricing Observed costs 2012/13 $31.25 Increment to reflect 2013/14 indexation 1.41% Increment of cost for minimum wage decision 0.84% Total increment: 2.25% Adjusted observed cost (at May 2014): $31.95 Current prices at May 2014: N/A Adjusted observed cost ($31.95) to be used as base for future price setting prior to the normal price adjustment

38 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL translating to new prices Currently CRL packages exist across a range of funding levels This variability reflects the range of pricing models currently in use A new nationally consistent pricing tool will result in clients hours of assessed need being translated into specific price points The following slides: Explain how the transition between the old and new pricing regime will occur Provides a worked example to illustrate the process.

39 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL translating to new prices – the process STAGE 1: Incorporating the nationally consistent price into packages 30 daily price points will be used for translating existing packages: PackageIncrementPackageIncrementPackageIncrement $ 34,219 $ 62,7344.8% $ 108,3595.6% $ 37,0708.4% $ 66,6136.2% $ 114,0635.3% $ 39,9227.7% $ 70,3775.7% $ 119,7665.0% $ 42,7737.1% $ 74,1415.3% $ 125,4694.8% $ 45,6256.7% $ 78,0195.2% $ 131,1724.5% $ 48,4776.3% $ 81,7834.8% $ 136,8754.3% $ 51,3285.9% $ 85,5474.6% $ 142,5784.2% $ 54,1805.6% $ 91,2506.7% $ 148,2814.0% $ 57,0315.3% $ 96,9536.3% $ 153,9843.8% $ 59,8835.0% $ 102,6565.9% $ 159,6883.7%

40 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL translating to new prices – the process STAGE 1: Incorporating the nationally consistent price into packages 1.Total current client package value calculated Current CRL package PLUS Client share of provider sleepover adjustment Example: $58,567 plus $3,867 = $62,434 2.Point on price card (preceding slide) closest to total package value identified Example: $62,734 being the nearest to $62,434 3.New client package value set at identified point i.e. $62,734, giving a price rise of 0.5 per cent Maximum potential change to a package is +/- 4.2 per cent: being half the maximum increment between the 30 prices

41 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL translating to new prices – impact modelling STAGE 1: Incorporating the nationally consistent price into packages Modelling of the Stage 1 translation on packages indicates that: 4 per cent of packages will decrease by more than 2 per cent 81 per cent of packages will move by less than 2 per cent 15 per cent of packages will increase by more than 2 per cent

42 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL translating to new prices – impact modelling STAGE 1: Incorporating the nationally consistent price into packages Modelling of the Stage 1 translation on providers indicates that: Total funds to providers will increase in real terms by 0.1 per cent 1 per cent of providers will receive a decrease in total funding of over 2 per cent For 61 per cent of providers total funding will move less than 0.5 per cent 15 per cent of providers will receive an increase in total funding of over 1 per cent

43 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL translating to new prices STAGE 2: Incorporating the ICARe tool The Stage 1 transition is only half of the price reform process that puts every package on a consistent range of prices Stage 2 will occur as clients are progressively reassessed and their packages are determined through use of the ICARe tool The resulting support hours from the ICARe tool will calculate a client package using the $31.95 rate From 2014/15 onwards the ICARe tool will be used to determine support hours for calculating the CRL package for: All new CRL clients All reassessments of current CRL clients: In the case of these pre-existing clients whose packages were translated through Stage 1 the new package will replace the package from Stage 1

44 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. CRL translating to new prices STAGE 2: Incorporating the ICARe tool KPMG and the Ministry have modelled the likely impact of moving to the ICARe tool The modelling indicates that the Stage 2 process should, over the long term, be funding neutral for the sector as a whole However, some client packages may increase and some decrease due to the Ministry of Healths commitment to ensure that there is equity of funding between clients Equity delivered through having every persons package calculated by a single pricing model. Where necessary, the Ministry of Health will work with providers to moderate the impacts arising from changes to their total of clients packages

45 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Facility Based Respite

46 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Facility Based Respite The cost of respite varies significantly across the country as a result of: Current service contracts that use different purchase arrangements (e.g. block funding and fee for service basis) Variations in service models (e.g. facility based and community based). Variations in utilisation performance that significantly impact on the cost of a unit of service The Ministry is currently working with the sector to address these variations In light of the above, no change to existing contracts and/or prices will occur until ongoing works are complete The next two slides summarise the hourly cost of facility based respite as observed and their linkage to a potential fee based price through a standardised view of: Utilisation Staff hours required to deliver a unit of service (1.0/0.5 bed day)

47 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Facility Based Respite observed costs One hour of service Hourly RateCalculation factorPrice component Respite service delivery DSW worker$ % of Respite team Non client facing service team: Administration$ % / 90.0% $1.14 Direct management$ % / 90.0% $1.69 $19.88 Labour on-costs20% of labour cost $3.98 TOTAL LABOUR COST66.6% of total costs $23.85 Non-labour costs Direct costs14.8% of total costs $5.29 Management and overheads18.5% ot total costs $6.60 TOTAL COST100.0% of total costs $35.74 Observed cost of Respite service delivery 2012/13 (survey)

48 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Facility Based Respite Pricing Observed costs 2012/13 $35.74 Increment to reflect 2013/14 indexation 1.37% Increment of cost for minimum wage decision 1.54% Total increment: 2.91% Adjusted observed cost (at May 2014): $36.78 Using the following, the observed hourly cost can be translated to a day rate: Average bed utilisation of 75 per cent Observed rates vary between 62 and 92 per cent Standardised staff hours Calculated utilised day rate for Respite (at May 2014): $258 Calculation: Hourly observed cost x Standard hours x Utilisation Adjustment Current prices at May 2014: N/A – varied ($200-$315)

49 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Questions?

Disability Support Services Development of nationally consistent pricing methodologies and models Other services

51 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Carers Support Subsidy Survey of carers endorsed: Increase in daily subsidy rate (Currently $76 per day) Could be used to reduce out of pocket expenditure or purchase more expensive care Relaxation of qualification rules regarding who the subsidy can be paid to or what it is used for Reform to the level of administration required Response: Ministry does not propose to increase the subsidy rate Ministry will work with the Carers Alliance to identify ways to improve the flexibility of CSS use Changes may increase Subsidy use by an estimated 3 per cent

52 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Assessment Treatment and Rehabilitation (ATR) and Child Development Services (CDS) ATR and CDS costs and service models indicate: Significant variations in service models, inputs and services, caused by Varied presence of complementary and/or alternate funding streams that influence how MoH funding is applied Variances in local catchment service systems that require differential service response (e.g. access to particular health professionals) Variances in organisation type and hence the resources they use (DHBs v NGOs) Low levels of comparability across service providers regarding outputs CDS cost data still being provided from parallel project

Disability Support Services Development of nationally consistent pricing methodologies and models Next steps

54 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Proposed implementation plan Supported Living New prices will be implemented from the annual contract renewal date Home and Community Support New single price will be implemented from the contract renewal date

55 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Proposed implementation plan Community Residential Transition to the new price points is planned for March 2015 Current sleepover funding arrangements will cease from transition to the new price points, as these incorporate the sleepover funding Refresher training on the ICARe tool for NASCs will occur over the next six months From March 2015, all new CRL clients will have their funding package calculated using the ICARe tool From March 2015, current CRL clients will have their funding package calculated using the ICARe tool when they are due for review or reassessment

56 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Proposed implementation plan Facility based Respite MOH will work with providers over the next two years to: Move to a fee-for-service pricing model at a 24-hour bed-day rate of $258 (May 2014 price adjusted for future years) Work towards an average 75% utilisation rate Identify exceptions to this requirement

57 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Proposed implementation plan Carer Support Subsidy MOH will work with Carers Alliance to identify options for: Increasing the flexibility of use of CSS and Reducing the administration requirements for carers accessing the subsidy

58 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Questions?

59 © 2014 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in New Zealand. Thank you again for you participation today, and over the last year If youd like to make any comment to KPMG or the Ministry of Health please contact: Fred Halliday Barbara Crawford KPMGMinistry of Health Peter Chew KPMG