1. Starting Financial Management Services in CLP & VD-HCBS: Strategic Considerations National Resource Center for Participant-Directed Services 6/3/10 Mollie Murphy

2. 2 Today FMS: What is it? Why have it? Models of FMS: Which is right for you? Providing FMS: Approaches  Piggybacking on an existing in-state program  Procuring services from a qualified provider  “In-house” at the AAA or SUA Pure Do-it-yourself A hybrid model

3. 3 FMS: What is it? FMS is Financial Management Services FMS is a participant-directed support; FMS supplements a participant-directed program Successful FMS ensures the following:  Participants act as employers or co-employers in compliance with federal, state and local laws  Employment taxes, workers’ compensation and other insurances are managed and paid in compliance with relevant laws  Payments are made in accordance with program rules and participant budgets

4. 4 FMS: Why have it? Directing and controlling one’s service and individual budget requires more than selecting workers/vendors and choosing how funds will be spent Early research in the Cash & Counseling program showed that, given the option, participants much prefer that someone other than them ensure taxes are paid, insurance is correct, workers are paid in compliance with regulations and spending is in accordance with the budget Robust FMS allows participants to focus on directing and controlling their service, while administrative duties are handled by professionals with a particular expertise

5. 5 Primary FMS Duties Enrollment  Employer enrollment  Worker enrollment  Vendor enrollment Budget Management Payments Taxes and Insurance Reporting Communication

6. 6 Models of FMS Fiscal/Employer Agent  Government Fiscal/Employer Agent  Vendor Fiscal/Employer Agent Agency with Choice

7. 7 Fiscal/Employer Agent Participant (or his/her representative) is common law employer Participant/representative employer designates the FMS entity to be the agent = Fiscal/Employer Agent (F/EA) As agent, the F/EA has joint tax liability and manages all administrative functions of being an employer (payments, taxes, insurances, reporting, enrolling participants as employers, providing paperwork and support to hire employees and contract with vendors) IRS has specific procedures outlining the relationship between the employer and agent, the tax liability, and the methods for filing and paying federal taxes

8. 8 Government & Vendor Fiscal/Employer Agent The duties of these models of Fiscal/Employer Agent are the same (aside from how IRS Form 2678 is filed on behalf of each employer) The difference is what kind of entity acts as the F/EA Government Fiscal/Employer Agent: government entity is agent and takes on joint tax liability with the employer  Government entity is responsible for performing F/EA duties OR  Government entity can contract with a sub-agent Sub-agent can be a vendor and the sub-agent ALSO takes on joint liability for federal taxes Vendor Fiscal/Employer Agent: a non-government entity (vendor) is agent and takes on joint tax liability with the employer  Non-government entity is responsible for performing F/EA duties  Government entity contracts with vendor; government entity takes on no liability

9. 9 Agency with Choice Agency (not participant) is common law employer Participant or representative may act as co- employer Participant or representative can identify workers and refer them to the agency for hire In general, Agency with Choice is considered a less participant-directed model of FMS, but one that can be easier to get going than F/EA

10. 10 Comparing FMS Models Agency with Choice Fiscal/Employer Agent Who is the employer?The agency, but participants can refer workers to the agency The participant Who pays workers and manages taxes and insurance? The Agency with ChoiceThe F/EA Who has liability for taxes? The Agency with ChoiceThe F/EA has joint liability with the participant

11. 11 Comparing FMS Models Agency with Choice Fiscal/Employer Agent Who trains workers?The agency has ultimate responsibility for this, but significant input can come from the participant The participant, but a counselor can help Who makes decisions about hiring workers? The participant refers workers to the agency, but the agency makes the final decision about hiring workers The participant, but the program may have rules about worker qualifications In whose name is the workers’ compensation policy? The Agency with ChoiceThe participant, but the F/EA procures and manages the policy

12. 12 Comparing FMS Models Agency with Choice Fiscal/Employer Agent Who sets the rate of pay for workers? The agency has ultimate responsibility for this, but significant input can come from the participant; the agency must maintain equity across employees per state & federal law The participant, but a program may have a set rate range Who determines whether a worker’s criminal background disqualifies the worker from being hired? The Agency with ChoiceThe participant, but the program can set parameters What is the cost of these services? Usually between $65 and $125 per participant, per month

13. 13 Decide what model is right for your program F/EA supports “pure” participant direction: the participant maintains full control, but has support from the F/EA Agency with Choice can be easier to establish because traditional agencies can provide it See the handout: FMS Model Quiz

14. 14 How will you provide FMS?: Piggybacking Identify other, established participant direction programs in your state and “piggyback” by using the same FMS provider Pros The cost of FMS is influenced heavily by economies of scale (more participants served means a lower FMS cost per participant). By using the same FMS provider as another program in the state and therefore increasing the number of participants served by the provider, you may be able to secure lower costs

15. 15 How will you provide FMS?: Piggybacking (Pros, continued) Pros The performance of the FMS provider will be known by the program you are piggybacking on An RFP may not be necessary since the FMS provider is already operational in the state The FMS provider may be able to launch services very rapidly since it is already operational in the state The FMS provider should already be familiar with participant direction and the culture of your state FMS providers may be apprehensive about investing in serving a program that can only commit to 1-2 years of operation; by piggybacking, you may be able to get a competitive rate because the provider has another long-term contract in the state

16. 16 How will you provide FMS?: Piggybacking, Other Considerations Other Considerations All participant-directed programs are not alike and therefore all FMS is not alike The VD-HCBS program is a pure “Cash and Counseling” model; many participant direction programs are not This means that the duties of the FMS provider in an existing program could vary greatly from what your program needs the FMS provider to do Therefore, the FMS provider’s capabilities may not fit what your program needs or the costs may be different

17. 17 How will you provide FMS?: Piggybacking, Recommendations Get in-depth information from other programs in your state that use the FMS provider about the provider’s performance Develop a comprehensive list of what you need the FMS provider to do in your CLP/VD-HCBS program (contact NRCPDS for help developing this list; there are many different ways to structure what the AAA/SUA does and what the FMS provider does) Get complete information from other programs in your state and/or the FMS provider on the duties and responsibilities of the FMS provider in the existing program Find out from the FMS provider if they have the capability to perform the duties your program requires Find out what the FMS provider’s fees would be to serve your program  Is there a standard monthly or transaction fee? What is it?  Are there any “start-up” or other fees?

18. 18 Piggybacking: Example 1 VD HCBS & CLP program used an F/EA provider already serving a Medicaid program with 8000 participants The existing Medicaid program did not have budget authority, did not allow participants to purchase non- employee goods or services; participants could not set rate of pay for workers and only three service codes are allowed The VD HCBS program planned full budget authority, purchase of goods and services, participant rate-setting and other flexible options The AAA and F/EA had to develop many aspects of the VD HCBS program separately from the Medicaid program, with the VD HCBS program requiring a broader range of services from the F/EA than the Medicaid program

19. 19 Piggybacking: Example 2 VD HCBS & CLP program used an F/EA provider already serving a Medicaid Cash and Counseling program serving 3500 participants The AAA and SUA were able to use almost an exact program structure as was being used for the Cash and Counseling program Because the programs were so similar, Policy and Procedure manuals, forms, and processes could be shared and re-used across the programs The F/EA provider was able to launch operations for the VD HCBS program very quickly because very few changes had to be made to existing operations By increasing the number of participants served by the F/EA provider, a very competitive per participant fee was negotiated

20. 20 How will you provide FMS?: Procure services from a qualified provider Go through a procurement process to select the FMS provider of your choice and contract with that provider. This will likely involve issuing a Request for Proposal, depending on your preferences or state requirements. Pros Go through a competitive process to get information on provider qualifications, capabilities and prices so you get the provider that is the best fit for your program

21. 21 How will you provide FMS?: Procuring Qualified Provider, Other Considerations Other Considerations An RFP process can be labor-intensive and slow going Providers may be apprehensive about investing in a program with few participants and/or a less than 2 year contract commitment If you are considering this option, contact NRCPDS to get help developing an RFP/provider qualifications Review the handout called Pre-procurement Tip Sheet

22. 22 How will you provide FMS?: “In-House” FMS AAA or SUA performs all functions as the Financial Management Services provider (either Agency with Choice or F/EA) Pros Counseling, administrative oversight and FMS can all be tightly integrated at the AAA/SUA AAA/SUA can develop expertise in FMS; can serve as FMS provider in future and for other programs in the state AAA/SUA can maintain more of the VD HCBS oversight fee “in-house”; can be a way to utilize existing AAA/SUA staff AAA/SUA staff have expertise in working with participants and this can be very beneficial in supporting participants to navigate the financial aspect of their programs

23. 23 How will you provide FMS?: “In-House” FMS, Other Considerations FMS is complex and the learning curve is steep; taking on this service will be a major investment for the AAA or SUA FMS can require a significant upfront investment in tools and training; recouping this investment could take some time, depending on the number of participants served When the AAA or SUA is an FMS provider, they take on a range of new liability Performing FMS in-house can take away from areas where the AAA or SUA has long-standing expertise FMS is still a relatively young industry, so tools and expertise are not prevalent (however, NRCPDS is always available to help)

24. 24 How will you provide FMS?: “In-House” FMS, Recommendations Consider a hybrid approach  Carve out the tasks that the AAA or SUA is well-positioned to perform (e.g. enrolling participants as employers, managing individual budgets, verifying timesheets)  Contract with a reporting agent that is experienced with participant direction programs and payroll to manage payments, taxes, and insurance A reporting agent is a specific type of agent, per IRS rules. Unlike a Fiscal/Employer Agent, a reporting agent does not take on joint liability with an employer. Therefore, in this hybrid approach, the AAA/SUA would have the joint liability with the employer. If the AAA/SUA does not want joint liability, then a contract should be executed with an experienced F/EA. The AAA/SUA can still carve out certain tasks and will likely therefore pay a lower rate to the F/EA than if the F/EA performed all tasks. Review handout called In-house AAA FMS

25. 25 Contact NRCPDS The National Resource Center for Participant-Directed Services is here to help We recognize that programs are unique and face unique challenges We are available to provide one-on-one help or direct you to applicable resources There is only so much that can fit into a large webinar; but there is a lot of information that can be provided directly to you based on your situation Please contact us as you consider implementing FMS

26. 26 Questions, Comments, Suggestions? Mollie Murphy 617-953-3914 mollie.grotpeter@bc.edu or mollie.murphy@annkissam.com