Managing Performance through

Contract Reimbursement:

Challenges of a Participative and Rapidly

Evolving Programmatic Environment

Rachel Miller, MBA

Derek Coursen, MS, MS, MS

Public Health Solutions

New York, NY

Goals

To provide a practitioner perspective on the tensions

and tradeoffs that emerge in implementation of a

performance-based reimbursement model for a large

portfolio of outsourced services.

Trends in HIV/AIDS

New York City, 1981–2010

As reported to NYCDOHMH by September 30, 2011.

PLWHA, Persons living with HIV/AIDS.

*Data on deaths outside New York City are incomplete.

3

0

20,000

40,000

60,000

80,000

100,000

120,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,0001981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

*2009

*2010

Nu

mb

er o

f Rep

orte

d P

LW

HA

Nu

mb

er

of

New

HIV

/AID

S D

iag

no

se

s a

nd

Dea

ths

Calendar Year

First cases of

PCP, KS reported

from NYC, LA

AIDS enters the

nomenclature

AIDS case

definition

expanded (CD4

<200, 26 OIs)

•

NYS HIV reporting

law takes effect

HIV identified as

causative agent

First commercial EIA,

screening of US blood

supply begins

AIDS case

reporting

mandated

by NYS PLWHA=Persons living with HIV/AIDS

* Data on deaths outside New York City are incomplete

CDC AIDS case

definition (23 OIs)

implemented

Reported Persons Living with

HIV (non-AIDS)

Reported Persons

Living with AIDS

Deaths to

Persons

with AIDS

New AIDS

Diagnoses

HIV surveillance

expands to include

incidence surveillance

NYS expands

AIDS reporting

to include HIV

New HIV

Diagnoses

1987: AZT

1988: PCP prophylaxis

1992: Combination therapy

1994: ACTG 076: AZT reduces perinatal transmission

1995: Protease inhibitors

1996: HAART

Clinical M ilestones in the

History of the HIV / AIDS E pidemic

As reported to NYCDOHMH by September 30, 2011

Source:

http://www.nyc.gov/html/doh/downloads/pdf/dires/2011_2nd_semi_rpt.pdf

Funded Services

• HIV testing and linkage to care

• Treatment adherence and supportive services for

HIV-positive individuals (e.g., medications, mental health

services, substance abuse treatment, food and nutrition,

legal services, housing)

• HIV Prevention (e.g., condom distribution, health

screenings, behavioral and community mobilization

interventions)

HIV

Planning

Group

Policy

Advocates

Contractor

Coalitions

Elected

Representatives

Researchers

History of vocal, effective activism and advocacy

Funders

HRSA

CDC

City Council

NYCDOHMH

City of New York

Public Health Solutions

Contractors

Consumers

Planning

Council

NYSDOH

HIV Contract Portfolio: 2012

Contract Size

Minimum size $5,328

Maximum size $17,251,667

Mean size $399,903

Median size $210,985

N = 227

Portions of portfolio generally

re-bid every 4-6 years

HIVCS Portfolio by Organization Type

CBO

77%

Government

Agency

3%

Hospital

18%

University

2%

CBO

Government Agency

Hospital

University

Emergence of Performance-based

Contracting in the Human Services

• 1980s-90s: expanding interest among public and private funders in outcomes and impact

• Political and economic imperatives for accountability

• Regional legislative pressure

• Interest in innovation for quality improvement

• Conviction that private sector practices could improve success of non-profits

• NYC: employment services, foster care, senior services, homeless services, HIV/AIDS

Sources: Mary Myslewicz, Review of Performance-Based Contracting Models in Child Welfare (Casey Family Programs, March 2008)

Lawrence L. Martin, Approaches to Performance-Based Contracting (PBC) for Social Services

Market-driven business model:

Pay for Outcomes

Advantages for Government Advantages for Service Providers

Shifts risk to service providers (pay only

for performance)

Increased performance may carry

financial benefit

Moves audit focus from accounting to

more meaningful service delivery

Budget & operational autonomy;

freedom from time-consuming financial

audits

Lowers purchase cost (competitive bids) Compels bidders to understand true cost

structure; rewards efficiency

Aligns reimbursement with public policy

goals; strategic incentives reward desired

outcomes. Encourages innovation,

efficiency and excellence.

Ability to achieve operational efficiency,

leading to costs < payments;

Reimbursement Methodology,

HIV/AIDS Portfolio 2012

Reimbursement

methodology

Percent of portfolio

(% of contracts)

Performance-based:

fee-for-service (outputs +

outcomes)

65%

Performance-based:

capitated daily rate

10%

Performance-based:

Project milestones (deliverables)

18%

Cost-based (line-item budget)

7%

LESSONS LEARNED:

Tensions emerging from

performance-based payment

models

Essential Tensions

• Independence vs. Interdependence

• Autonomy vs. The Auditors

• Innovation vs. Standardization

Independence vs. Interdependence

Assumption: Performance-based contracting is based on perfect market conditions

Reality: Externalities Operational Implications

Providers are not fungible; many

have unique catchment areas,

relationships with target populations

or programmatic expertise.

Barriers to entry exist which

constrain universe of providers.

Government needs them as much as

they need government funding!

Necessary to establish contract

terms that work for providers.

Examples: contract period,

reimbursement points and rates,

program and administrative

requirements.

Need to invest in TA and

technological tools.

Autonomy vs. The Auditors

Assumption: Pay for Performance means a clear focus on outcomes, not inputs or process.

Logical Consequences of Market

Model

Reality: Limit of Model

Emphasizes outcomes – audits focus on

work, not expenditures (but quality still

matters!)

Confers financial autonomy – no need

for budget modifications

Confers operational autonomy – no need

for prescriptive programs

Surplus of contract payments over

expenses remains with provider for

discretionary use

Rewards efficiency

Legislative & administrative regulations

impose restrictions on spending and

program model

Double audits (program and financial)

result in admin burden

Discomfort with idea of “surplus”

results in restrictions on any overage,

including reduction in unit reimbursement

rates (penalty for success)

Restrictions placed uniquely on non-profit

vendors

Innovation vs. Standardization

• Funders’ desire to standardize inputs and process in order to: – Equity: same payment for the same services

– Efficacy: only evidence-based models should be funded; process indicators demonstrate adherence to prescribed models

– Evaluability: study of program models requires standardization across sites

• Uniform reimbursement rates based on averages may underpay or overpay individual providers

• Standardization may constrain innovation and opportunities for efficiency

Assumption: Outcomes focus makes irrelevant the means to getting there…and YET:

Significant interest in consistency across portfolios

Performance-Based HIV/AIDS Services

in NYC: A Status Report

• Analytical limitations:

– New reimbursement model, new program model

– Limited scope: contracts support larger clinical endeavors

• Payment points matter! Confirmatory HIV test results given to clients: rate nearly doubled when this became a discretely billable event.

• Significant provider exits in some areas, leading to greater aggregate efficiency (strongest providers adapt)

• Enormous investment in TA and technology. Unprecedented accuracy, currency and ownership of client-level data.

• Peer-led discussion groups: “PBC methodology has made us more introspective.”

– Greater communication among program, fiscal and data management staff

– Adaptations in human resources, data systems, business procedures

– Appreciation of budgetary autonomy

– Enhanced understanding of true program costs.

Conclusions

• Implementation reveals that human services are not a perfect market!

• Acknowledge necessity of give and take. Our contractors’ success is our success.

– Provide fair compensation with workable payment points and rates

– Allow providers to retain operating surpluses

– Solicit input and feedback from providers in formulating payment terms

• Promote focus on client services, not onerous administrative reporting and audits – Design more creative ways of evaluating compliance with federal spending rules

• Fund evidence-based interventions, but allow for innovation among provider-experts.

Bibliography

• Chen, Bin and Krauskopf, Jack, “Accountability or Discretion? Challenges for Multi-service Nonprofit Agencies in Performance-Based Contracting in New York City: A Preliminary Report.” Baruch College, City University of New York, Center for Nonprofit Strategy and Management Working Paper Series, January 2009.

• Desai, Swati, “Performance-Based Contracts in New York City,” Rockefeller Institute Brief, Rockefeller Institute of Government, June 2012.

• The Henry K. Kaiser Family Foundation, “Medicaid and HIV: A National Analysis.” October 2011.

• Myselewicz, Mary, “Review of Performance-Based contracting Models in Child Welfare

• Casey Family Programs,” March 2008.

• Martin, Lawrence L., “Approaches to Performance-Based Contracting (PBC) for Social Services.” University of Kentucky School of Social Work: http://www.uky.edu/SocialWork/qicpcw/documents/PBCsocialservicetypes.pdf, n.d.

• Martin, L. L. (2005a). “Performance-based contracting for human services: Does it work?” Administration in Social Work 29 (1):63-77.

• Miller, Clara, “The Looking-Glass World of Nonprofit Money: Managing in For-Profits’ Shadow Universe.” The Nonprofit Quarterly, Nonprofit Reality Shows: Live and Unrehearsed, Vol. 12, Issue 1, Spring 2005.

• New York City Department of Health and Mental Hygiene, HIV Epidemiology and Field Services, Semi-Annual Report, Vol. 6, No. 2, October 2011: http://www.nyc.gov/html/doh/downloads/pdf/dires/2011_2nd_semi_rpt.pdf

• AIDS Institute, New York State Department of Health, New York State HIV/AIDS Surveillance Annual Report, August 2011.

• Rosenthal, Stephen, CPPB, “Performance-Based Contracting for Human Services.” http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheadername1=Content-Disposition&blobheadername2=Content-Type&blobheadervalue1=inline%3B+filename%3D%22Performance-Based+Contracts+for+Human+Services.pdf%22&blobheadervalue2=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251693662434&ssbinary=true, n.d.

• Smith, Dennis G. and Grinker, William J., “The Transformation of Social Services Management in NYC: ‘CompStating Welfare,” SEEDCO report, March 2005.

• Smith and Grinker, “The Promise and Pitfalls of Performance-Based Contracting,” SEEDCO report, June 2004.

Acknowledgments

• Public Health Solutions: Ellen Rautenberg, CEO; Steve

Newman, Senior Vice President and Chief Operating

Officer; Lauren Feldman Hay, Deputy Director for

Analysis and Reporting, HIV Care Services; Rick

Goldfarb, Manager of Operations & Special Projects

• NYC Department of Health and Mental Hygiene

Contact

Rachel Miller

Vice President for HIV Programs and Special Initiatives

(646) 619-6570

rmiller@healthsolutions.org

Derek Coursen

Director of Planning and Informatics, HIV Care Services

(646) 619-6590

dcoursen@healthsolutions.org