107 Health Care Authority. PL Policy Level

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1 Recommendation Summary Text The Health Care Authority (HCA) requests $1,096,000 total funds ($521,000 General Fund State) and 2.0 FTEs in FY15 to fund an Actuary Office to improve financial analytics and business intelligence capacity. In addition, HCA will also contract with an Industry Expert Advisor in Business Analytics/Business Intelligence to assist with implementation of recommendations from the Point B report. Package Description Health Care Authority (HCA) spends approximately $16 billion per biennium. More than half of the budget goes toward premiums to health plans who administer benefits for Medicaid enrollees and public employees. Currently there are about 80% of the total eligible are being served through the managed care delivery system. As part of the Medicaid expansion and other policy decisions, the share of managed care expenditures and eligible are expected to increase dramatically over the near term. As a result of this shift from Fee-for-Service to managed care, the HCA greatly need to revamp its business practices and processes including encounter data and financial analysis to properly support this policy. The HCA is in the process of preparing a report to the legislature on its staffing structure per the 13/15 budget proviso. This report will reflect the HCA s vision of being the best health purchaser for the State of WA with challenges and opportunities and how best to resource the new staffing structure. This request will address three main components as described below: The first component is internal actuarial expertise. Currently, HCA has limited internal expertise to set managed care rates, and this work is contracted out to a private actuarial company. HCA requests adding an actuary position to assist in setting preliminary managed care rates and overseeing the work conducted by contracted actuaries. The main job duties of the Actuary Office would be: Act as the primary financial consultant to decision makers on HCA managed care for Medicaid/PEB and provide analysis on the performance of managed care organizations; Develop methodology and collect encounter data to implement HCA preliminary managed care rate setting, procurement, and establish appropriate risk adjustment between plans; Provide consultation and analysis on payment reform opportunities; and Respond to managed care analysis requests by internal and external stakeholders. The second component is an increase in Medicaid financial analytics capacity. Sophisticated analytics are needed to: assess contract compliance, performance of managed care plans, analysis that will inform care variations between plans to reduce costs while improving patient outcomes as well as incorporating best practices for payment reforms. Examples of needed analytical resources are as follows: Health Care Authority is moving traditional fee-for-service clients into managed care arrangements, requiring assessment of the impact of these changes on affected - 1 -

2 populations, such as the SSI Blind and Disabled population and especially the expansion population. As Health Care Authority pursues further contractual requirements related to value-based purchasing in managed care contracts, further analytical capacity is needed to pursue appropriate adjustment for population characteristics and other contracting elements necessary to ensure the success of this approach. More than 90% of the full-benefit Medicaid population will be enrolled in managed care by January 1, The agency needs to strengthen evaluation of managed care organizations, using sophisticated data mining and utilization patterns to ensure quality, value and contract compliance. The third component is an independent consultant to advise the agency on further improvements to business analytics and intelligence capacity. HCA needs to contract with an Industry Expert Advisor in Business Analytics/Business Intelligence for a period of 12 months effective July 1, Funding pays for evaluating current analytics activities, gaps, and identifying necessary improvements in performance and reporting across the HCA s systems and programs. The contractor will also refine, drive and coordinate the recommendations made in the HCA Strategy and Roadmap Report prepared by Point B which was completed June Below are key recommendations from this report and attach is the Executive Summary. Key Recommendations Capability Aspect Organization/Culture People/Skills People/Skills Recommendation Establish a Management and Analytics Office Identify advanced data analytic skill needs and address gaps (train, hire, etc.) Establish formal training program for data management Define baseline set of key HCA-wide metrics for executive & senior management reporting Develop HCA-wide intake process and queue for data, reporting, analytics requests Establish Business Requirements framework and processes for Management and Analytics Develop Internal Collaboration & Knowledge Management Strategy & Standards Develop, adopt, and manage HCA-wide & Analytics Short-Term Strategic Plan Establish a HCA-wide data governance program and processes Develop strategy & policies for external collaboration & data interchange Document a high-level inventory of data sets, associated reports, and business questions Develop HCA-wide data architecture to support business data strategy Develop data standards for external collaboration & data interchange Develop strategy and plan for unstructured and "Big " management and analytics capabilities Implement existing technology to unify/integrate data across business lines Evaluate & implement user tools/technology for internal collaboration & knowledge management Complete evaluation of infrastructure technology for unstructured & big data management & analytic capabilities Evaluate business user tools for unstructured & big data management & analytic capabilities Implement technology solution for external collaboration & data interchange Questions related to this decision package should be directed to Thuy Hua-Ly at (360) or at thuy.hua-ly@hca.wa.gov

3 Fiscal Detail/Objects of Expenditure 1. Operating Expenditures: Fund GF-State $ - $ 521,000 $ 521,000 Fund 001-C GF-Federal Medicaid Title XIX $ - $ 539,000 $ 539,000 Fund HCA Admin Account $ - $ 36,000 $ 36,000 Total $ - $ 1,096,000 $ 1,096, Staffing: Total FTEs Objects of Expenditure: A - Salaries And Wages $ - $ 518,000 $ 518,000 B - Employee Benefits $ - $ 127,000 $ 127,000 C - Personal Service Contracts $ - $ - $ - E - Goods And Services $ - $ 418,000 $ 418,000 G - Travel $ - $ 1,000 $ 1,000 J - Capital Outlays $ - $ 32,000 $ 32,000 N - Grants, Benefits & Client Services $ - $ - $ - Other (specify) - $ - $ - $ - Total $ - $ 1,096,000 $ 1,096, Revenue: Fund 001-C GF-Federal Medicaid Title XIX $ - $ 539,000 $ 539,000 Total $ - $ 539,000 $ 539,000 Narrative Justification and Impact Statement What specific performance outcomes does the agency expect? By adding an in-house Actuary Office, HCA can: Better protect public resources by setting lowest possible actuarial sound managed care rate. Compliments the work with our external actuary; Better answer governor, legislature, and CMS questions related to HCA managed care; Better analyze impacts of different policies such as quality and value; Inform the payment reform conversations in our state; Develop modeling and strategies for sound fiscal projections to ensure monitoring of managed care expenditures; Develop processes to ensure quality and accuracy of managed care encounter data; - 3 -

4 Support clinical data mining to inform quality and value analysis; Support and provide fiscal analysis/impact for the agency s policy options; Coordinate with fiscal and program staff to ensure that budget implementations are align with budget assumptions, monitor and communicate variances in a timely manner; Develop monitoring reports specifically targeted for managed care environment; Coordinate the monitoring of encounter data in conjunction with IT staff and plans. ; Funding the consulting contract requested in this Decision Package will help HCA ensure investments achieve the desired results with improved analytics, business intelligence, and performance management capacity. Expected outcomes include: A planned approach and enterprise view on the way the HCA builds, organizes, and connects data across systems and programs to include: Better management of key financial and business information that balances governance with agility. Increased knowledge and capacity to apply analytical insights to solve business problems. Prioritized action plans that will make HCA s Business Intelligence and analytics initiatives more precise, transparent, and decisive. Useful data governance with best practices that ensure accessible, high-quality, secure data. Performance Measure Detail Activity Inventory H002 HCA Direct Operations Is this decision package essential to implement a strategy identified in the agency s strategic plan? Yes, this decision package supports the agency s ability to advance our mission to Improve the health of Washington's residents through efforts to: 1) Improve the services available under Medicaid and Public Employees Benefits in order to better serve our customers: the most vulnerable populations in Washington State, and the government workers and retirees in state programs. 2) Improve our policies and processes, working with both our provider partners and the health care industry to improve outcomes, reform our approaches to standardizing care and making quality improvements 3) Prepare our state for the advent of health care reform in the major areas of Medicaid expansion and the Health Benefit Exchange -- the new marketplace for low-income and cost-effective health care coverage. It is a strategic imperative for HCA to implement because expanding Medicaid enrollments coupled with a desire to improve outcomes and reduce costs are driving fundamental changes in Medicaid policy, the management of Medicaid funded programs, and health care in general. Improved methods of data management, data analytics, data presentation, and BI enables Washington State - 4 -

5 to take different approaches to managing providers, payments, and caring for those who need it most. It will uncover data management efforts to improve the effectiveness of our state Medicaid Programs and integrated healthcare. Does this decision package provide essential support to one of the Governor s priorities? Yes, this directly supports Governor Inslee s Results Washington - Goal 4: Healthy and Safe Communities, and Goal 5: Effective, Efficient and Accountable Government. Does this decision package make key contributions to statewide results? Would it rate as a high priority in the Priorities of Government (POG) process? Yes, this directly supports Governor Inslee s Results Washington - Goal 4: Healthy and Safe Communities, and Goal 5: Effective, Efficient and Accountable Government. What are the other important connections or impacts related to this proposal? The scope of funding this package is primarily internal to the HCA and therefore is largely transparent to external stakeholders, although ultimately they will benefit by having access to more meaningful data for decision-making. What alternatives were explored by the agency, and why was this alternative chosen? The only alternative available would be to continue operating within the current status quo and ad hoc measures all of which have been insufficient in addressing today s current demands, not to mention near-term future requirements and mandates. The disadvantage of staying as-is is that it will continue escalating the current challenges facing the HCA. What are the consequences of not funding this package? If this package were not funded, it would put at risk the agency s ability to respond to legislative requests, to meet reporting requirements for private and government grants, to meet new Affordable Care Act (ACA) implementation mandates, to monitor Managed Care Program activities and report on the impacts, and to make benefit design changes needed to manage cost trends of state medical coverage. What changes would be required to existing statutes, rules, or contracts, in order to implement the change? None. Expenditure and Revenue Calculations and Assumptions Revenue Calculations and Assumptions: HCA assumes that the portion of the expenditures related to Medicaid programs will be eligible for federal administrative matching funds

6 Expenditure Calculations and Assumptions: The expenditures for the consulting contract were calculated based upon the formulas below: CMS approved agency-wide administrative cost allocation methodology used to split the costs by funding source. HCA assumes that the contractor will be hired effective July 1, 2014, and would be under contract for a total of twelve months. Expenditures for one Actuary 4, two Actuary 3, and one Fiscal Information and Analyst position effective July 1, 2014, were estimated as shown on the table below: Which costs and functions are one-time? Which are ongoing? What are the budget impacts in future biennia? Distinction between one-time and ongoing costs: The consulting contract is a one-time budget investment and there would be no ongoing costs related to that activity. The FTEs would be permanent and the cost for those positions would be ongoing with the exception of the one-time start-up costs of $32,000 for the new positions. Budget impacts in future biennia: Estimated Hourly Rate Hours per Month Number of Months Contractor Type Total Cost Industry Expert Senior Advisor / Lead Consultant $ $ 360,000 Contract Total $ 360,000 Staffing Costs: FY 14 FY 15 A - Salaries And Wages $ - $ 518,000 B - Employee Benefits $ - $ 127,000 E - Goods And Services $ - $ 58,000 G - Travel $ - $ 1,000 J - Capital Outlays $ - $ 32,000 Total $ - $ 736,000 The continuing cost for the FTEs would be ongoing and would impact future biennia