Introductory Medicaid Financial Training for School Based Health Services State of West Virginia Department of Health and Human Resources Bureau for Medical Services Date: July 2012

Agenda Overview of Program Changes Medicaid Administrative Claiming Overview Introduction to the Cost Settlement Process Introduction to Financial Reporting Financial Reporting Data Elements MAC Calculation Process Cost Settlement Process RMTS Impact on Reimbursement Important Dates

Overview of Program Changes

Overview of Program Changes In response to CMS questions, West Virginia is implementing a new reimbursement methodology for school based services, effective July 1, 2012. Effective for dates of service beginning July 1, 2012, school based providers will be reimbursed using a cost based reimbursement methodology. School based providers will be required to participate in a Random Moment Time Study and complete an annual cost report as part of the new methodology. School based providers will still need to submit FFS claims for services rendered throughout the year. In addition to the changes for the direct services, West Virginia will also be implementing a Medicaid Administrative Claiming (MAC) program to capture additional funds for activities performed in support of the Medicaid program.

Medicaid Administrative Claiming (MAC) Overview

What is the MAC Program? The MAC program offers reimbursement for the costs of the administrative activities, such as outreach, that support the Medicaid program. The administrative activities fall into several categories: Medicaid Outreach; Facilitating Medicaid Eligibility Determination; Transportation Related to Medicaid Services; Translation Related to Medicaid Services; Program Planning, Policy Development, and Interagency Coordination Related to Medicaid Services; Medicaid-Related Training; Referral, Coordination and Monitoring of Medicaid Services.

MAC Overview LEAs participating in the MAC program are required to submit financial information on a quarterly basis, which includes: Salary and benefit costs for those staff members listed on the Random Moment Time Study (RMTS) Staff that are 100% federally funded should not be included on the RMTS or within the quarterly financial submission process. Costs may be included for Direct Service and Administrative Only cost pools. Staff Travel Costs for specific staff related travel, examples include: mileage and conference related travel expenses.

MAC Overview LEAs participating in the MAC program are required to submit financial information on a quarterly basis, which includes (continued): Staff Professional Dues and Fees Report by service the total costs for professional dues and fees associated with the staff listed in the Quarterly Financial Report. Materials & Supplies Materials & Supplies must be identified as used by the staff for which they are included: Materials & Supplies can be identified using a “reasonable allocation method.” Some methods include – headcount or FTE.

Introduction to the Cost Settlement Process

Introduction to the Cost Settlement Process Effective July 1, 2012, WV DHHR/BMS will implement a cost based reimbursement methodology for school-based service providers. This means that payments received for dates of service on or after July 1, 2012 will be subject to the cost reimbursement methodology. Any payments received for dates of service prior to July 1, 2012 will not be subject to a cost reimbursement and cost settlement process. Note: The cost report effective date is DATE OF SERVICE DRIVEN, not date of payment driven.

Introduction to the Cost Settlement Process What is cost based reimbursement? A cost based reimbursement methodology determines the actual cost of delivering SBHS medical services to special education students. Cost based reimbursement ensures that LEAs are reimbursed their costs for the delivery of medical services and that the Medicaid agency is not reimbursing providers more than cost. How will cost based reimbursement impact LEAs? In order to identify the costs of delivering Medicaid school-based services, LEAs will participate in an annual cost settlement process. The cost settlement process will include the submission of an annual Medicaid Cost Report.

Introduction to the Cost Settlement Process So what does the cost settlement process mean for LEAs? LEAs will complete an annual Medicaid cost report. The Medicaid cost report calculates the actual costs of providing Medicaid covered health related services and will be compared to Medicaid reimbursement received. HHS

Introduction to the Cost Settlement Process How does the SBHS cost settlement process pertain to the MAC program and the RMTS? The SBHS cost settlement process directly links to both the MAC quarterly financial submissions and the RMTS. Some cost data may be aggregated by the Medicaid Cost Reporting and Claiming System (MCRCS) for information submitted quarterly, which includes: Salary and benefit cost data for direct medical service providers. The RMTS is used to determine on average how much time direct medical service providers spend delivering direct medical services. This percentage is called the “direct medical percentage” and is used to calculate direct medical service costs. HHS

Introduction to the Cost Settlement Process Overview of Medicaid Allowable Costs and Cost Report Data Elements Medicaid Allowable Costs included in the yearly Medicaid Cost Report must : Include costs related to Special Education students; Relate to a direct medical service, specifically those included in the approved State Plan: Audiology and Speech-Language Therapy Services; Occupational Therapy; Physical Therapy; Psychological Services; Nursing Services; Health Needs Assessment and Treatment Planning; Care Coordination Services; Personal Care Services; and Specialized Transportation Services Tie back to an individual Special Education student’s IEP. HHS

Introduction to Financial Reporting

Introduction to Financial Reporting Reporting Requirements Quarterly Financial Submissions are required for the MAC program. The Quarterly Financial Submissions are necessary to calculate MAC reimbursement. The Cost Report must be submitted annually for cost reconciliation and cost settlement. The cost report is the key component in calculating cost settlement for LEAs.

Introduction to Financial Reporting The MAC and Cost Settlement calculations require various financial and statistical data elements, reported quarterly and/or annually. Data Element Quarterly (MAC) Annually (Cost Settlement) Direct Service Salaries X Direct Service Benefits Administrative Salaries Administrative Benefits Transportation Salaries Transportation Benefits Direct Service Contract Administrative Contract

Introduction to Financial Reporting The MAC and Cost Settlement calculations require various financial and statistical data elements, reported quarterly and/or annually. Data Element Quarterly (MAC) Annually (Cost Settlement) Direct Service Materials and Supplies X Direct Service Depreciation Administrative Non-Personnel Transportation Non-Personnel Transportation Depreciation Medicaid Eligibility Ratio IEP Ratio One Way Trip Ratio Specialized Vehicle Ratio

Financial Reporting Data Elements 19

Salary Costs Salary costs for eligible Administrative, Direct Service, and Transportation staff: Salaries Regular wages or extra pay Paid time off (e.g., sick or annual leave) Overtime Bonuses or longevity Stipends Cash bonuses and/or cash incentives Note: Salaries are those payments from which payroll taxes are deducted. The reported salaries should be the total gross earnings for the individual as paid by the LEA for the reporting period. HHS LEAs are required to report gross expenditures and then properly reduce expenditures for funds paid from other federal funding sources.

Benefit Costs Benefit costs for Eligible Administrative, Direct Service, and Transportation Staff: Benefits Employer-paid health/medical, life, disability, or dental insurance premiums, Employer-paid child day care for children of employees, Retirement contributions, Worker’s compensation costs Note: Report the expended amounts paid by the LEA which are directly associated with each staff member by type of employee benefit. HHS LEAs are required to report gross expenditures and then properly reduce expenditures for funds paid from other federal funding sources.

Salary and Benefit Costs Direct Service Salaries and Benefits Direct Service salaries and benefits are reported on a quarterly basis for MAC and annually for cost settlement. Only salary and benefit costs for staff included on the Staff Pool List are eligible for SBHS cost reimbursement. Administrative Salaries and Benefits Administrative salaries and benefits are reported on a quarterly basis for MAC only. Only salary and benefit costs for staff included on the Staff Pool List are eligible for MAC reimbursement.

Salary and Benefit Costs Transportation Salaries and Benefits Transportation salaries and benefits are included on the annual cost report. Eligible specialized transportation service providers include: Bus Drivers Bus Attendants Mechanics Substitute Drivers. Transportation providers do not participate in the RMTS. If a provider assists with transportation services in addition to performing a direct service to special education students in a school setting, their salaries and benefits should NOT be included under transportation; they need to participate in the RMTS to be eligible for reimbursement.

Contracted Staff Costs Contract Costs for Eligible Administrative and Direct Service Staff: Contracted Staff Costs Total Costs of contracts for the applicable contracted staff Note: The reported costs should be the total costs for the individual as paid by the LEA for the reporting period. Contracted staff costs include compensation paid for all services contracted by the LEA for an individual who delivered any SBHS services to Medicaid and/or non-Medicaid clients. LEAs are required to report gross expenditures and then properly reduce expenditures for funds paid from other federal funding sources. HHS 24

Contracted Staff Costs Direct Service Contracted Staff Direct Service contracted staff costs are included on the annual cost report. These costs include amounts paid by LEAs to contractors for the provision of direct medical services. The only costs that can be submitted are direct costs incurred by the LEA to purchase services from a non-LEA employed direct medical service provider. These are costs incurred for the benefit of, or directly attributable to, a specific service. Administrative Contracted Staff Administrative contracted staff are included on the quarterly financial submission for MAC. These costs include amounts paid by LEAs to contractors for the provision of MAC eligible services. Admin staff are contracted per service and invoiced accordingly throughout the school year. RESAs will need to develop rates for direct service and administrative staff to be billed to LEAs for direct and administrative services.

Direct Service Materials and Supplies Cost Direct Medical Service Material and Supply costs CMS has approved a very limited list of direct medical service material and supply costs. Only those items included within the approved list can be reported on the Medicaid cost report. Examples include: battery testers, hearing aid stethoscopes, electronic suction unit, wheelchair, blood glucose meter, etc. These costs are only collected and reported annually on the Medicaid cost report. Direct Medical Service Material and Supply Costs applicable only to General Education students should not be reported on the cost report. HHS 26

Direct Service Depreciation Costs Depreciation costs for Approved Direct Medical Service Materials and Supplies Allowable depreciation expenses for direct medical services include OMB-A-87 allowable methodologies, including pure straight-line depreciation. Straight-line depreciation method is a method of calculating the depreciation of an asset which assumes the asset will lose an equal amount of value each year. The annual depreciation is calculated by dividing the purchase price by the estimated useful life of the asset. HHS

Direct Service Depreciation Costs Depreciation costs for Approved Direct Medical Service Materials and Supplies (cont.) If a single direct medical service material and supply cost exceeds $5,000, then the item should be depreciated. Only those items included within the approved list can be reported on the Medicaid cost report. These costs are only collected and reported annually on the Medicaid cost report. HHS

Direct Service Depreciation Costs Depreciation costs for Approved Direct Medical Service Materials and Supplies (cont.) Example: A wheelchair is purchased by an LEA for $6,000 on July 1, 2012 and has a useful life of 5 years. How does the LEA identify what the useful life is of a wheelchair? The useful life of a wheelchair is estimated by the LEA. The LEA may use industry standards in order to report the useful life of a wheelchair. If the LEA does not have a fixed asset ledger that reports the useful life of an asset, an LEA may consult the "Estimated Useful Lives of Depreciable Hospital Assets", published by the American Hospital Association (AHA). HHS

Direct Service Depreciation Costs Depreciation costs for Approved Direct Medical Service Materials and Supplies (cont.) Example: A wheelchair is purchased by an LEA for $6,000 on July 1, 2012 and has a useful life of 5 years. How does the LEA calculate the depreciation cost of the wheelchair? Depreciation cost is calculated by dividing the acquisition cost of $6,000 by the estimated useful life of 5 years. This results in a calculated depreciation cost of $1,200 for state fiscal year 2013 (July 1, 2012 to June 30, 2013). HHS

Direct Service Depreciation Costs Depreciation costs for Approved Direct Medical Service Materials and Supplies (cont.) Example: A wheelchair is purchased by an LEA for $6,000 on October 1, 2012 and has a useful life of 5 years. How does the LEA calculate the depreciation cost of the wheelchair? The Medicaid cost reimbursement and settlement process was effective July 1, 2012, so this requires the LEA to prorate the expense. This is accomplished by dividing the annual allowable expense of $1,200 by the number of months in the fiscal year or 12 in this case. $1,200/12 = $100 per month. The $100 per month cost is then multiplied by 9, which is the number of months the wheelchair was in use for the reporting period (July 1, 2012 to June 30, 2013). HHS

Direct Service Depreciation Costs Depreciation costs for Approved Direct Medical Service Materials and Supplies (cont.) Example: A wheelchair is purchased by an LEA for $6,000 on October 1, 2012 and has a useful life of 5 years. How does the LEA calculate the depreciation cost of the wheelchair? Therefore, the final allowable depreciation cost would be $900 in this example ($100 of depreciation cost per month * 9 months = $900). For the remaining 4 years of the useful of the wheelchair, the allowable depreciation cost would be $1,200 per year. HHS

Administrative Non-Personnel Costs Materials & Supplies Materials & Supplies must be identified as used by the staff for which they are included. Materials & Supplies can be identified using a “reasonable allocation method.” Some methods include – headcount or FTE Please do not include any other costs used by direct medical service providers to deliver services to each individual student. Staff Travel Costs for specific staff related to travel for trainings. Examples include: Mileage to trainings Conference related travel expenses Staff Professional Dues and Fees Report by service the total costs for professional dues and fees associated with the staff listed in the Quarterly Financial Report. HHS 33

Transportation Non-Personnel Costs Approved Specialized Transportation Non-Personnel costs CMS has approved a list of specialized transportation non-personnel costs, including: Lease or Rental Costs Insurance Costs Maintenance and Repair Costs Fuel and Oil Costs Major Purchases under $5,000 Contract Costs – for transportation services and transportation equipment Only those items included within the above categories can be reported on the Medicaid cost report. These costs are only collected and reported annually on the Medicaid cost report. Costs can be reported as either specialized transportation only or not specialized transportation only. 34 www.pcghealth.com 34

Transportation Depreciation Costs Depreciation costs for Approved Specialized Transportation Non-Personnel Costs Depreciation for specialized transportation assets follows a similar process as that for the depreciation of direct medical service materials and supplies. If a single specialized transportation non-personnel item cost exceeds $5,000, then the item should be depreciated. These costs are only collected and reported annually on the Medicaid cost report. Costs can be reported as specialized transportation only or not specialized transportation only. 35 www.pcghealth.com 35

Medicaid Eligibility Ratio (MER) For many of the MAC activities performed by LEA personnel, the costs associated with these activities are only reimbursable to the extent they are allocable to the Medicaid enrolled population. These activities will be adjusted by the Medicaid Eligibility Ratio. The MER is calculated as the Total Number of Medicaid students divided by the Total Number of Students. = MER Ratio Total Number of Medicaid Eligible Students Total Number of Students

IEP Ratio Individualized Education Program (IEP) Ratio The IEP ratio is calculated and reported annually on the Medicaid SBHS Cost Report. The IEP Ratio is the total Number of Medicaid Eligible Special Education Students With a Prescribed Direct Medical Service in their IEP divided by the Total Number of ALL Special Education Students With a Prescribed Direct Medical Service in their IEP. Total Number of Medicaid Eligible Special Education Students With a Prescribed Direct Medical Service in their IEP IEP Ratio = Total Number of ALL Special Education Students With a Prescribed Direct Medical Service in their IEP

IEP Ratio Individualized Education Program (IEP) Ratio The purpose of the IEP ratio is to allocate direct medical service costs to the Medicaid program. In other words, it is used to determine Medicaid’s portion of direct medical service costs incurred by LEAs for the provision of SBHS direct medical services. DHHR/BMS and PCG are responsible for calculating the numerator and LEAs are responsible for reporting the denominator. The denominator must reflect the number of children enrolled in Special Education with a Prescribed Medical Service (billable under the SBHS program) in the IEP. The denominator must be from the December 1st student count for special education students that receive medical services each fiscal year. HHS

One Way Trip Ratio One Way Trip Ratio The One Way Trip Ratio is calculated and reported annually on the Medicaid SBHS Cost Report. The One Way Trip Ratio is the total Number of Medicaid One Way Trips divided by the Total Number of ALL One Way Trips. A Medicaid one-way trip is defined as a trip in which a Medicaid enrolled student who has specialized transportation services in their IEP and received another Medicaid-covered service provided by the LEA on the day of the trip. The numerator will be completed by PCG based on paid claims data. The purpose of the One Way Trip ratio is to allocate specialized transportation costs to the Medicaid program. In other words, it is used to determine Medicaid’s portion of specialized transportation costs incurred by LEAs for the provision of SBHS specialized transportation services. 39 www.pcghealth.com 39

Specialized Transportation Ratio Specialized Transportation Vehicle Ratio The Specialized Transportation Vehicle ratio is used when a LEA can not discreetly break out their specialized transportation costs from their general transportation costs. The Specialized Transportation Ratio is the Total Number of Vehicles used for Special Education Transportation Purposes divided by the Total Number of ALL Vehicles used for Transportation Purposes. The ratio is calculated and reported annually on the Medicaid SBHS Cost Report. The ratio is applied to those costs identified as “not specialized transportation only”. 40 www.pcghealth.com 40

MAC Calculation Process

MAC Calculation Process The MAC calculation is completed on a quarterly basis and is not subject to an annual cost reconciliation and settlement process. An example of the MAC calculation is shown below: Calculation Step Financial Reporting Element Description Value A MAC Eligible Salary Costs (net of federal funds) $300,000 B MAC Eligible Benefit Costs (net of federal funds) $75,000 C Contract Costs of Administrative Service Providers (net of federal funds) $10,000 D Administrative Non-Personnel Costs (net of federal funds) $8,000 E Total Administrative Service Costs (net of federal funds) (Sum of Steps A through D) $393,000 42 www.pcghealth.com 42

MAC Calculation Process MAC calculation (Continued): Calculation Step Financial Reporting Element Description Value E Total Administrative Service Costs (net of federal funds) (Sum of Steps A through D) $393,000 F Administrative Service % (from RMTS) 5.00% G Step E times Step F $19,650 H Indirect Cost Rate 1.15 I Step G times Step H $22,598 J Medicaid Eligibility Rate 12.00% K Step J times Step I $2,712 Net Administrative Claim (Step K times 50% (FFP Rate)) $1,356 43 www.pcghealth.com 43

Cost Settlement Process

Cost Settlement Process Now that we know about the required data elements, how do the pieces fit together? Cost Settlement for Direct Services: Calculation Step Calculation Step Cost Report Element Description Value A Salary Costs of Direct Service Providers (net of federal funds) $900,000 B Benefit Costs of Direct Service Provider $100,000 C Direct Medical Service Material & Supply Costs $65,000 D Direct Medical Service Material & Supply Depreciation Costs (net of federal funds) $24,530 E Total Direct Service Costs (Sum of Steps A through D) $1,089,530 HHS

Cost Settlement Process Cost Settlement for Direct Services (Continued): Calculation Step Cost Report Element Description Value E Total Direct Medical Service Costs (net of federal funds) $1,089,530 F Direct Medical Service % (from RMTS) 65.00% G Step E time Step F $708,195 H Direct Service Contract Costs $100,000 I Step G plus Step H $808,195 J Indirect Cost Rate 1.15 K Step I times Step J $929,424 L Individualized Education Program (IEP) Ratio 50.00% M Total Direct Services Medicaid Eligible Costs (Step K times Step L) $464,712 HHS

Cost Settlement Process Cost Settlement for Transportation: Calculation Step Cost Report Element Description Value A Salary Costs of SBHS Specialized Transportation Service Providers (net of federal funds) $225,000 B Benefit Costs of SBHS Direct Specialized Transportation Providers (net of federal funds) $65,000 C Specialized Transportation Non-Personnel Cost (net of federal funds) $45,000 D Special Transportation Non-Personnel Depreciation Cost (net of federal funds) $14,000 E Total Specialized Transportation Service Costs (net of federal funds) (Sum of Steps A through D) $349,000 www.pcghealth.com

Cost Settlement Process Cost Settlement for Transportation (Continued): Calculation Step Cost Report Element Description Value E Total Specialized Transportation Service Costs (net of federal funds) (Sum of Steps A through D) $349,000 F Indirect Cost Rate 1.15 G Step E times Step F $401,350 H Specialized Vehicle Ratio 32.00% I Step G times Step H $128,432 J One Way Trip Ratio 48.00% K SBHS Medicaid Eligible Specialized Transportation Cost (Step I times Step J) $61,647 www.pcghealth.com

Cost Settlement Process Now that we know how the SBHS Medicaid Direct Medical Service and Specialized Transportation Costs are calculated, how is the settlement determined? Calculation Step Cost Report Element Description Value Cost Report Element # A SBHS Medicaid Eligible Direct Service and Specialized Transportation Cost $526,359 See Step M for Direct Service and Step K for Specialized Transportation B SBHS Medicaid Interim Payments Received (Received through traditional billing process) $395,745 C Medicaid Cost Settlement Gross Amount $130,614 State Share at 27.96% $36,520 Federal Share at FY 2013 FMAP Rate of 72.04% (Federal Share based on FFP Rates published by the US Department of Health and Human Services) $94,094 D Payment Due to LEA (Federal Share Only) 49 www.pcghealth.com 49

RMTS Impact on Reimbursement

RMTS Impact on Reimbursement As was shown through the MAC and Cost Settlement Calculation Examples, the RMTS plays an integral role in determining a LEAs final reimbursement. When participants do not respond to moments or when responses are not appropriate, it may have an adverse effect on the reimbursement of the LEA. The example on the following page assumes all non-RMTS factors remain constant. A 15% decrease in the Direct Services Percentage from RMTS results in a decrease in Direct Medical Services Medicaid Eligible Costs by $93,972 (20%). Calculation Step HHS

RMTS Impact on Reimbursement Calculation Step Cost Report Element Description Original Value Updated Value Variance E Total Direct Medical Service Costs (net of federal funds) $1,089,530 $0 F Direct Medical Service % (from RMTS) 65.00% 50.00% (15.00%) G Step E time Step F $708,195 $544,765 ($163,430) H Direct Service Contract Costs $100,000 I Step G plus Step H $808,195 $644,765 J Indirect Cost Rate 1.15 K Step I times Step J $929,424 $741,480 ($187,944) L Individualized Education Program (IEP) Ratio 0.00% M Total Direct Services Medicaid Eligible Costs (Step K times Step L) $464,712 $370,740 ($93,972) Calculation Step HHS

Important Dates

Important Dates Official submission of the State Plan scheduled for the end of July. State Plan effective July 1, 2012. RMTS begins again on October 1, 2012. This will be the first quarter used in determining MAC and cost reimbursement for direct services. Quarterly Financial Submissions The first quarterly financial submission will be due mid-February. Annual Cost Report Submission The first annual cost report submission will be due by December 31, 2013. 54

Important Dates -Cost Report Training Quarterly Financial Submission Training October / November 2012 This training will provide: A Medicaid Cost Reporting and Claiming System (MCRCS) Demonstration for quarterly financial submissions. In-depth detail on each component of submitting the quarterly financial submission for MAC in MCRCS. Details on the MAC eligible costs to be included in the quarterly financial submissions. 55

Important Dates -Cost Report Training Annual Cost Report Submission Training Fall 2013 This training will provide: Detailed instructions for submitting the Annual Medicaid Cost Report. MCRCS demonstration for annual cost report submission. Details on eligible costs to be included in the annual cost reports. 56

Contacts and Questions

Public Consulting Group Contacts Public Consulting Group WVSBHS@pcgus.com 1-877-908-1745 Joseph Weber Lauren Rodrigues Leslie Tremberth Katherine Deptula Kenneth Cheung

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Public Consulting Group, Inc. PCG Health 4/6/2017 Public Consulting Group, Inc. 148 State Street, Tenth Floor, Boston, Massachusetts 02109 (617) 426-2026, www.publicconsultinggroup.com www.pcghealth.com