APPENDIX D: PROFILES OF RESTRUCTURING INITIATIVES IN FOUR STATES

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1 APPENDIX D: PROFILES OF RESTRUCTURING INITIATIVES IN FOUR STATES This appendix presents profiles of state restructuring initiatives in four states. Three of the states Alaska, Maine, and Texas are profiled because they already had restructuring initiatives underway prior to Nebraska is profiled because of the significant restructuring done to its health and human services system in 1996; the discussion here revisits that restructuring initiative and discusses lessons that have been learned. ALASKA Restructuring Overview and Goals Restructuring of the Alaska Department of Health and Social Services (DHSS), which was official in July 2003, is intended to reduce the costs of service provision, enhance customer services, reduce waiting lists, and improve governmental efficiencies. Priority for the initiative was placed on maximizing funds outside of state general revenue funds while maintaining programs and services. Emphasis is being placed on consolidation of key agency administrative functions and improving the state s structures for Medicaid financing. Impetus for Change Two factors provided much of the impetus for restructuring Alaska s DHSS: (1) a significant state budget crisis requiring a need to find agency efficiencies, and (2) an interest in improving the state s structures for Medicaid financing. Prior to restructuring, the former Alaska Division of Medical Assistance had been the single-state Medicaid agency. Over time, however, the provision of Medicaid services had moved to a more community-based delivery system, and several public programs (e.g., mental health) began seeking Medicaid reimbursement for services. In 1992, for instance, community mental health centers began billing the state for Medicaid reimbursement; by 2003, community-based mental health services constituted approximately $60 million of Alaska s Medicaid budget. The change in Alaska s overall service delivery system for low-income populations created a misalignment between the state s organizational structure for Medicaid and the financing and delivery of Medicaid services. Alaska s restructuring initiative is designed in part to more closely align Medicaid financing with how the public insurance delivery system for low-income Alaskans has evolved over the past decade. Through the restructuring initiative, Alaska s Medicaid program has been elevated within the overall health agency structure. The exact details of changes to state Medicaid financing are still in development. Highlights of Organization Design Alaska s restructuring initiative relies on both inter-agency and intra-agency restructuring to consolidate all health, social service, and senior service programs within DHSS. The restructuring of DHSS includes internal consolidations that will result in name and functional changes for four divisions, creation of a new department-wide program review function, and movement of a total of five programs from the Departments of Administration, and Education and Early Development to DHSS. 1 Two new units in the DHSS commissioner s office were established to reduce general fund expenditures and establish efficiency in rate setting across the DHSS: (1) the Office of Program Review, and (2) the Office of Rate Review. DHSS is now the single-state Medicaid agency, and the state Medicaid plan is housed within the Office of Program Review. D-1

2 » The Office of Program review will ensure that all programs meet projected goals, help Divisions identify strategies to maximize funding, and oversee interdepartmental coordination of key functions.» The Office of Rate Review will advise the commissioner on all rates paid by the department to providers of services under fee-based programs in order to standardize payment methodologies throughout the department. The primary functions of the Division of Public Health will be disease prevention and control, homeland security related to public health, and systems development and planning for a quality health care system. Programs and services serving the maternal and child health (MCH) population were moved to two different entities within DHSS the Division of Health Care Services, and the Office of Children s Services. The newly created Division of Health Care Services (DHCS) includes several functions formerly within the Division of Public Health i.e., infant screening and testing; genetic and specialty clinics; breast and cervical cancer screening; family planning; and the Early and Periodic Screening Diagnostic and Treatment program. DHCS also includes all former functions within the Division of Medical Assistance (formerly the Medicaid agency) except behavioral health and long-term care. Health care services (i.e., services received through health care providers and reimbursed by DHSS) serving the MCH population were placed within DHCS. The new Office of Children s Services is centered on helping families keep their children healthy and safe. Several child health programs the Special Supplemental Food and Nutrition Program for Women, Infants and Children; infant learning; and Healthy Families were placed in the office together with other programs including foster care, child protective services, and behavioral rehabilitation services. The Division of Public Assistance remains but is now a consolidation of programs that assist families to enter or remain in the workforce. The consolidation is also intended to reduce the number of applications that a family has to complete for services. This division includes Denali KidCare (the State Children s Health Insurance Program), formerly in the Division of Public Health, and Childcare Assistance, formerly in the Department of Education and Early Development. Restructuring Timeline Initiation: July 1, 2003 Completion: July 1, 2004 Governance Alaska s restructuring initiative was initially developed by the governor s transition team. The responsibility for overseeing the initiative s implementation rests with a project manager who was appointed by the governor and assigned to the DHSS commissioner s office. The project manager works with a work group, which includes the director of administration, two deputy commissioners, and other key agency staff, to implement the initiative. Additional Resources Additional information about Alaska s DHSS can be accessed on the agency s website at: D-2

3 Alaska State Contact Rod Moline, Project Manager Alaska Department of Health and Social Services Phone: (907) MAINE Restructuring Overview and Goals In May 2003, Maine Governor John E. Baldacci issued an executive order creating the Advisory Council for the Reorganization and Unification of the Department of Human Services and the Department of Behavioral and Developmental Services. This body was charged with preparing recommendations on how best to merge mental health, substance abuse, and developmental disabilities services with programs and functions in Maine s Department of Human Services an umbrella agency that currently houses health and human services programs including Medicaid, Temporary Assistance to Needy Families (TANF), food stamps, and public health. Maine s restructuring initiative is designed to improve services for consumers, reduce administrative costs, and improve fiscal and program accountability. Towards that end, the Advisory Council for the Reorganization and Unification of the Department of Human Services and the Department of Behavioral and Developmental Services is recommending broad organizational changes that would consolidate administrative functions including human resources, information technology, facilities, and contracting and licensing. Efforts to reform the state s health care system, another gubernatorial priority, will be closely coordinated with the restructuring initiative through the Office of Health Policy and Finance in the governor s office. Impetus for Change Several factors influenced Maine s restructuring initiative. The Department of Human Services and the Department of Behavioral and Developmental Services have similar missions and provide services to similar populations. Programmatic overlap between the departments created administrative duplication and additional costs to the state. Finally, duplicative and sometimes conflicting administrative requirements were being placed on community-based service providers. Highlights of Organization Design A core set of principles that focus on improving the health of Maine residents, promoting individualized and family-centered services, and assuring stakeholder input are at the core of the restructuring recommendations set forth by the Advisory Council for the Reorganization and Unification of the Department of Human Services and the Department of Behavioral and Developmental Services. The council recommended establishing several organizational entities that would be housed in a newly created department in the state: An Advisory Committee for Health and Human Services, housed within the newly created department and reporting directly to the commissioner, would advise on strategic planning and assure ongoing input from consumers and providers. Public programs would be housed within five main bureaus:» A Bureau of Medical Services would house the state s Medicaid program. D-3

4 » A Bureau of Children and Families would house the state Title V Maternal and Child Health (MCH) program, prevention (e.g., early intervention) programs, and child welfare programs.» A Bureau of Adult Services would include mental health, disability, elder services, and adult protective services programs.» A Bureau of Family Independence would oversee and administer the state s TANF program.» A Bureau of Public Health would house public health functions and substance abuse services. The existing Office of Health Policy and Finance, located within the governor s office, would closely coordinate state health care reform efforts with the new agency, particularly the Medicaid program. A new Office of Policy, Planning and Quality Improvement would be charged with overseeing and coordinating these functions for all programs within the agency. Several offices would be unified to centralize administrative functions within the agency.» An Office of Finance would oversee all budgeting, financing, and accounting functions.» An Office of Administration would have authority for the agency s facilities, contracting and licensing functions.» In addition, offices would be established for human resources, information technology, and communications. Information referral and intake procedures would be centralized so that state residents could easily access information. Whether Maine s automated client system, a computerized eligibility screener for multiple public programs, might be used to centralize these functions is under investigation. Restructuring Timeline Initiation: May 13, Advisory council report to the governor and legislature: January Completion: Within two years of an approved state restructuring plan. Governance Senior staff in Governor Baldacci s office are overseeing the overall planning and advancing of the state s restructuring recommendations. The governor appointed 12 members of the Advisory Council for the Reorganization and Unification of the Department of Human Services and the Department of Behavioral and Developmental Services, representing the public and private sector. In addition, the president of the House and speaker of the Senate were invited to appoint two council members each. The commissioners of the Departments of Human Services, Behavioral and Development Services, and Administrative and Financial Services, and the state s attorney general serve as ex officio members of the council. The approval of the Maine s state legislature is needed for restructuring to proceed, so legislation authorizing the merging of the two departments and possibly other restructuring recommendations will be submitted for the 2004 legislative session. It is expected that legislation needed for implementing additional restructuring recommendations will be forwarded by the governor s office during the 2005 legislative session. D-4

5 Additional Resources Additional information about restructuring in the Maine Department of Human Services can be accessed at: Maine State Contact Kathryn Monahan Ainsworth, Senior Policy Advisor to the Governor Phone: (207) NEBRASKA Nebraska underwent significant restructuring to its health and human services system in The Nebraska Partnership for Health and Human Services Act (Legislative Bill 1044), which was passed in 1996, authorized the reform of the state s health and human services system. The discussion here revisits that restructuring initiative and discusses lessons that have been learned since its inception. Lessons Learned Under the 1996 Nebraska Partnership reorganization, the Departments of Aging, Health, Social Services, and Public Institutions, as well as the Office of Juvenile Services, were functionally aligned to create three new state agencies that constitute the Nebraska Health and Human Services System. 2 The three new agencies that were created were the following: Health and Human Services Department. This department manages all direct and contracted services and programs. Programs housed within this agency include aging and disability services, child care, child support enforcement, food programs, behavioral services, public health, and Temporary Assistance for Needy Families (TANF). Health and Human Services Finance and Support Department. This agency develops integrated financial information and administrative management systems for the health and human services system. Administrative functions for the entire system, including legal, human resources and budgeting, are housed within this agency. In addition, the agency houses the state s Medicaid plan and budget. Health and Human Services Regulation and Licensure Department. This agency ensures system-wide responsibility for compliance, licensing, and quality assurance. Benefits from Restructuring The current Nebraska state administration did not create Nebraska s health and human services structure, but the members of the Nebraska Health and Human Services Policy Cabinet who were interviewed for this study 3 believe that there are key aspects of the structure that have proven extremely beneficial, particularly to intra-agency communication, collaboration, and coordination. Nebraska s health and human services structure, which consolidates health and human services under one umbrella agency, has yielded several benefits, among them the following: Promotes improved collaboration among health and human services programs and departments. Improved coordination is primarily achieved because programs, departments, or organizational D-5

6 functions that were previously located in separate agencies under the previous structure are now located within one organizational entity. The health and human services policy cabinet serves an important role in promoting and facilitating intra-agency collaboration. Directors from each of the system s three main divisions together with the medical director and policy director comprise the cabinet. Key policy and programmatic decisions, organizational changes, and initiatives affecting the system are deliberated and decided on by the policy cabinet. Fosters a team approach to decision making and enhances knowledge of health and human services programs among staff in multiple levels of the agency. As members of the policy cabinet, department directors must become familiar with all programs in the health and human services system. This facilitates a team approach to key policy decisions affecting the system no single director makes significant policy decisions without consultation and input from other cabinet members. In addition, enhanced program knowledge about health and human service programs is fostered within and across departments. For instance, because components of the Medicaid program are located within multiple departments rather than one, the structure facilitates a depth and breadth of awareness regarding Medicaid across the agency. Enables Nebraska to more efficiently and effectively marshal and leverage resources to address emergent issues. Since the inception of the new structure, at least two significant policy issues have required significant marshaling of resources to develop and implement bioterrorism and the local public health infrastructure. Having the health and human services programs within one structure enabled the agency to more effectively maximize resources that had previously been within different agencies. The Nebraska local health department system was made up of 16 health departments covering 22 out of the state s 93 counties; 71 counties had no legal county health entity. In spring 2001, Legislative Bill 692 was passed enabling use of the state s tobacco settlement funds for building the state s county health department system. As a result of this initiative, the local health department infrastructure is now comprised of 21 county health departments covering the state s 93 counties. Facilitates more timely and consistent responses to cross-department policy issues affecting multiple programs or organizational function areas. For instance, the state was able to quickly develop and implement the plan for the State Children s Health Insurance Program because all related programs serving children were located within one system. Fosters administrative efficiencies in areas including human resources, information technology, and promulgation of rules and regulations. Under the health and human services system, administrative functions are located within the health and human services regulation and licensure agency. One area that is consistently highlighted as an important product of restructuring is the Regulatory Analysis and Integration Division (RAID). RAID was created to serve as a clearinghouse for all regulations involving the health and human services system, which issues between 40 to 50 percent of all the state s regulations. RAID monitors all health and human service regulatory development, tracks legislation for any issues warranting legislative or regulatory changes, reviews all regulations written by program staff, and coordinates their processing. Establishing RAID has streamlined the regulatory process, thereby enabling division staff to improve the writing and consistency of state regulations, and issue regulations in a timely manner. D-6

7 Challenges to Restructuring Although Nebraska s combined health and human services system has yielded many benefits, its implementation has not been without challenges, as might be expected with any new organizational structure. The policy cabinet is in the process of determining whether any minor adjustments to the structure may be warranted. Some of the challenges and lessons learned in implementing the restructuring initiative are highlighted below: Administrative changes and consolidation under the new umbrella structure required significant management, oversight, and ongoing communication with staff and providers. As a result of restructuring, most central office employees were re-located to different offices and received changes to their job title and position description. These changes caused significant stress among many agency staff and resulted in a difficult period for the agency. Ongoing communications with staff at all levels of the system became critical during the planning, transition, and implementation periods of restructuring. The consolidated structure requires close working relationships among policy cabinet members, particularly for policy and programmatic decisions that cut across departments. Complexities in organizational placement and policy decisions can arise when there are functions or programs (e.g., child care licensure and regulation) which cross-over multiple divisions or agencies. The policy cabinet enjoys a close working relationship which is needed for this type of health agency structure, particularly when policy decisions are made. By plan, all policy cabinet members offices are physically located on the same floor, which helps foster regular communication and close working relationships. While agreement is reached on most issues, if needed, the cabinet will vote on issues where consensus has not been reached. Separating operational functions (e.g., delivery of health programs and services) from their related administrative and quality assurance functions (e.g., finance and budgeting, data collection and surveillance) can mean challenges to communications and collaboration. Costsavings can be achieved by co-locating administrative and quality assurance functions for multiple programs in one agency. However, this system requires that organizational processes be in place to enable optimal functions between departments. Memoranda of understanding are required between departments for administrative and quality assurance functions including budgeting and legal services. This can be cumbersome for some program areas and operations. Moreover, the current structure has been particularly challenging for the operation of the public health system. Public health quality assurance functions (e.g., disease surveillance, epidemiology, toxicology) are located within the health and human services regulation and licensure agency. Public health programs (e.g., maternal and child health) are located in the health and human services agency. Because the structure has made it more difficult to carryout core public health functions, it has reinforced the importance of housing public health functions in one organizational unit. Adequate data capacity and capabilities are essential regardless of a system s structure, but especially when health and human services are located within one organizational entity. The health and human service system s data capacity and capabilities have not been fully solved as a result of restructuring. Multiple data systems continue to exist for different programs, and the systems are large, outdated, and incompatible. In spite of these challenges, the Nebraska restructuring initiative has achieved its original goals of saving costs, promoting collaboration, and improving client services. As a result of restructuring, clients are served no matter what health or human service door they walk in. D-7

8 The Future Nebraska Governor Mike Johanns has made behavioral health reform a top priority during his administration. The policy cabinet is in the process of formulating recommendations for fundamental reform to the behavioral health system, which may include restructuring components of the current health and human services structure. Nebraska State Contact Chris Peterson, Policy Secretary, Policy Cabinet Nebraska Health and Human Services System Phone: (402) christine.peterson@hhss.state.ne.us TEXAS Restructuring Overview and Goals House Bill 2292, enacted in May 2003, directs Texas to consolidate 12 health and human service agencies into a single health and human service enterprise comprised of the Texas Health and Human Services Commission (HHSC) and four new departments. House Bill 2292 abolished the Departments of Human Services, Mental Health And Mental Retardation, Health, Aging, and the Texas Rehabilitation Commission, Commission for the Blind, Commission for the Deaf and Hard of Hearing, Texas Commission on Alcohol and Drub Abuse, Inter-agency Council on Early Childhood Intervention, and Texas Health Care Information Council. The Texas restructuring initiative is designed to improve client services, reduce administrative costs, strengthen accountability, and spend tax dollars more effectively. Emphasis is being placed on high-quality services and accountability for results. While consolidation of most agencies will begin to occur over the next year, the full implementation of the restructuring initiative is expected to take several years. What the restructuring initiative will mean for the alignment and structure of local public service delivery systems (e.g., area agencies on aging, local health departments, community mental health systems) remains to be seen. Most of these systems, with the exception of some functions, are independent and autonomous entities from the Texas state health and human services system. Other than through contractual arrangements, the state has no authority over how local service delivery systems structure themselves to deliver services. Discussions regarding the role and alignment of local service delivery systems will begin in January Impetus for Change Texas spends approximately one-third of its entire state budget, or approximately $39.8 billion for fiscal years 2004 and 2005, on administering and delivering health and human services in the state. 4 The previous health and human services system experienced gaps in services, a lack of coordination among agencies and programs, duplication of services, high administrative costs, and confusion among the general public on how to access services. In 1999, the Texas Sunset Commission, a 10-member legislative commission which typically reviews an agency s functions every 12 years, examined all Texas health and human services agencies. (The Texas Sunset process establishes a date by which an agency will be abolished unless legislation is passed to continue its functions. This process provides the legislature an opportunity to examine each state agency and make changes to an agency s mission or operations if warranted.) The sunset process served as a primary catalyst for the significant changes to the health and human services system outlined in House Bill Although restructuring initiatives were introduced in legislative sessions over the past four D-8

9 years, consensus on the health and human services restructuring initiative was not reached until Texas $9.9 billion dollar budget deficit was a significant factor in the decision to pass restructuring legislation in Highlights of Organization Design The health and human services restructuring initiative in Texas is designed to realign and consolidate 12 health and human services agencies into five agencies. All health and human service programs serving children, families, seniors, and the disabled are affected. An executive commissioner, appointed by the governor for a two-year term and confirmed by the state Senate, will oversee the operations of the entire health and human services system, as well as the day-to-day operations of the newly created Texas Health and Human Services Commission (HHSC). HHSC is the operating agency for Medicaid and the State Children s Health Insurance Program (SCHIP), with direct program-reporting lines to the Texas governor. In addition, core administrative functions (i.e., strategic planning and evaluation, audit, legal, human resources, information resources, purchasing, contract management, financial management, and accounting services) and policy functions will be housed within the Health and Human Services Commission. Under the HHSC, eligibility determination will be centralized for: SCHIP, Temporary Assistance to Needy Families (TANF_, Medicaid, nutritional assistance programs (e.g., Food Stamps), long-term care services, community-based services, and other programs as identified by the HHSC. The Department of Family and Protective Services (formerly the Department of Protective and Regulatory Services) includes child and adult protective services functions, and child care regulatory services. The Department of Assistive and Rehabilitative Services houses all functions of the former Texas Rehabilitation Commission, Commission for the Blind, Commission for the Deaf and Hard of Hearing, and the Inter-agency Council on Early Childhood Intervention. These functions include: rehabilitation services, blind and visually impaired services, deaf and hard of hearing services, and early childhood intervention services. The Department of Aging and Disability Services consolidates the state s mental retardation and state school programs, community care and nursing home services programs, and aging services programs which were housed in three different agencies under the previous agency structure. Health services (including public health functions), mental health services (including state hospitals and community services), and alcohol and drug abuse services are consolidated within the Department of State Health Services. Consolidation of this agency is expected to take the most time to complete. Restructuring Timeline A phased-in process involving planning, integration (e.g., appointment of leadership, transfer of staff and budgets, abolishment of former organizational units) and optimization (e.g., analyze and evaluate processes, implement transition plans) is occurring between spring 2003 and summer 2005, with additional implementation to possibly extend beyond this time period. Health and Human Services Commission: Department of Family and Protective Services: Consolidation occurring Consolidation begins January 2004 Consolidation begins January 2004 D-9

10 Department of Assistive & Rehabilitative Services: Department of Health Services: Department of Aging and Disability Services: Fall 2003 Summer 2005/beyond Consolidation begins spring 2004 Governance Planning and implementation of the restructuring initiative in Texas is under the direction of a transition legislative oversight committee comprised of two Senate and House members each, three members of the general public, and the commissioner of the HHSC. Department commissioners were named by the HHSC commissioner in December Additional Resources A copy of the organizational chart depicting the new Texas health and human services agency structure, and additional background materials on the restructuring initiative can be accessed at: Texas State Contact Victoria Ford, Health Services Policy Director Texas Office of the Governor Phone: (512) vford@governor.state.tx.us ENDNOTES 1 Alaska Department of Health and Social Services. Press release, March 4, National Governors Association, Transforming State Health Agencies, All members of the Nebraska Health and Human Services Policy Cabinet were interviewed for and contributed to this case study. The cabinet members are: Steve Curtiss, Director Finance and Support; Dick Nelson, Director Regulation and Licensure; Chris Peterson, Policy Secretary; Dr. Richard Raymond, Chief Medical Officer; and Ron Ross, Director Services. 4 Texas Health and Human Services Commission. HHS in Transition: An Overview of the Texas Health and Human Services Reorganization: Requirements and Process. Public Hearing Supplement. September D-10