COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES
HUMAN SERVICES COMMITTEE HEARING
STATE CAPITOL HARRISBURG, PA
CAPITOL EAST WING ROOM 60
MONDAY, JUNE 4, 2012 10:30 A.M.
PRESENTATION ON IMPACT OF POLICY AND PAYMENT PROCEDURES ON HOME AND COMMUNITY-BASED SERVICES FOR INDIVIDUALS WITH INTELLECTUAL DISABILITIES
BEFORE: HONORABLE GENE DiGIROLAMO, MAJORITY CHAIRMAN HONORABLE SHERYL M. DELOZIER HONORABLE MARCIA M. HAHN HONORABLE SUSAN C. HELM HONORABLE THOMAS H. KILLION HONORABLE THOMAS P. MURT HONORABLE MICHELLE F. BROWNLEE HONORABLE MADELEINE DEAN HONORABLE PAMELA A. DeLISSIO HONORABLE EDDIE DAY PASHINSKI HONORABLE KEN SMITH
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Pennsylvania House of Representatives Commonwealth of Pennsylvania 2
1 I N D E X
2 TESTIFIERS
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4 NAME PAGE
5 KEVIN FRIEL DEPUTY SECRETARY, 6 OFFICE OF DEVELOPMENTAL PROGRAMS, PA DEPARTMENT OF PUBLIC WELFARE...... 4, 61 7 GENE BIANCO 8 PRESIDENT AND CEO, PA ASSOCIATION OF REHABILITATION FACILITIES...... 41 9 GABRIELLE SEDOR 10 COMMUNICATIONS DIRECTOR, PA ADVOCACY AND RESOURCES FOR AUTISM 11 AND INTELLECTUAL DISABILITIES...... 49
12 LINDA DRUMMOND POLICY SPECIALIST, 13 PA COMMUNITY PROVIDERS ASSOCIATION...... 53
14 BRIAN BAXTER CONSULTANT, INTELLECTUAL DISABILITIES 15 AND AUTISM SERVICES COALITION OF PA...... 58
16 MARK J. MURPHY CEO, DISABILITY RIGHTS NETWORK OF PA...... 75 17
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1 P R O C E E D I N G S
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3 MAJORITY CHAIRMAN DiGIROLAMO: Good morning,
4 everyone. If I could have everybody's attention.
5 The hour of 10:30 having arrived, I'd like to call
6 the meeting of the Human Services Committee to order and ask
7 everybody to rise for the Pledge of Allegiance.
8
9 (The Pledge of Allegiance was recited.)
10
11 MAJORITY CHAIRMAN DiGIROLAMO: Okay. Good morning
12 to everyone, and welcome to the committee meeting. And we
13 would like to remind everyone that the cameras are on and we
14 are being recorded.
15 And the first order of business, maybe I'll allow
16 the Members to just give a short greeting and identify
17 themselves.
18 Representative Killion.
19 REPRESENTATIVE KILLION: Tom Killion from Delaware
20 and Chester Counties.
21 REPRESENTATIVE HAHN: Marcia Hahn from Northampton
22 County.
23 REPRESENTATIVE HELM: Good morning.
24 Sue Helm, Dauphin County.
25 MAJORITY CHAIRMAN DiGIROLAMO: Gene DiGirolamo, the 4
1 Republican Chairman from Bucks County.
2 REPRESENTATIVE MURT: Tom Murt, Philadelphia and
3 Montgomery Counties.
4 REPRESENTATIVE DEAN: Madeleine Dean -- good morning
5 -- Montgomery County.
6 REPRESENTATIVE BROWNLEE: Good morning.
7 Michelle Brownlee, Philadelphia County.
8 REPRESENTATIVE DeLISSIO: Pam DeLissio, representing
9 parts of Philadelphia and Montgomery County.
10 MAJORITY CHAIRMAN DiGIROLAMO: And Representative
11 Delozier has just arrived also.
12 I think we'll just get right down to business, and I
13 just have, you know, I'd like to ask the first panel to come
14 up, which is Kevin Friel and John Cox.
15 DEPUTY SECRETARY FRIEL: I'm sorry, John could not;
16 he's unable to join us.
17 MAJORITY CHAIRMAN DiGIROLAMO: Okay.
18 Kevin, just briefly, before we begin, I mean, we had
19 in December a committee meeting, back in December, and we heard
20 from some of the providers and the Department of Public Welfare
21 on the issues arising from the changes in policy and funding at
22 the direction of the Federal Government, and as a follow-up to
23 that meeting, today's participants want to discuss the
24 continued impact of the funding and the policy changes on
25 consumers with intellectual disabilities. 5
1 Last week, I believe you have a copy or you've seen
2 a copy of a letter that I addressed to Secretary Alexander
3 with, you know, the four topics -- the residential rates for
4 room and board and the costs associated with them; second is
5 the fee schedule rates; third is the occupancy factor in
6 setting residential rates; and the fourth is the RAF, the rate
7 adjustment factor.
8 Policy: I posed some questions in that letter to
9 Secretary Alexander, and it would be my hope and expectations
10 that you might be able to answer some of them questions today.
11 DEPUTY SECRETARY FRIEL: Sure.
12 MAJORITY CHAIRMAN DiGIROLAMO: So whenever you're
13 ready, you know, please begin your testimony.
14 DEPUTY SECRETARY FRIEL: Okay. Thank you.
15 What I'd like to do, if I could, is summarize the
16 testimony. Obviously we had submitted it so we do have enough
17 time for others and also for any of the questions that you
18 referred to.
19 So I'll start with good morning. It's a good way to
20 start. I say good morning to all and to all the Members.
21 My name is Kevin Friel. I think the last time I was
22 here, as the Representative said, was back in December. I say
23 thank you for having us here this morning to give you an update
24 on rate-setting for the coming fiscal year and also talk about
25 some of the events of the past year in the Office of 6
1 Developmental Programs.
2 As you're aware, the program office provides
3 services for persons with intellectual disabilities, important
4 services to an obviously very vulnerable population. We are
5 committed to ensuring the program can provide these services
6 now and well into the future.
7 ODP services have altered significantly over the
8 course of the years, moving from delivery in State institutions
9 to a system primarily offering a wide array of services in the
10 community, and then more recently, that system obviously
11 changed itself about 3 years ago, in July of 2009, when it
12 moved from a county-based to a State-operated program.
13 The transition, while necessary to comply with CMS
14 requirements and continue receiving matching funds, has been
15 challenging and has led to rapidly increasing costs through a
16 combination of limited fiscal controls and managerial
17 accountability.
18 The process, known as revenue reconciliation,
19 something intended to ease the transition from the county-based
20 to the State-based system, was paying beyond units of service
21 billed. And in some, as we finished our analysis over the last
22 2 years, for fiscal years '09-10 and '10-11, and again, for
23 that second year, some dollars were spent from the '11-12
24 budget, that total now is in excess of a quarter of a billion
25 dollars. 7
1 As I mentioned in previous testimony, we performed a
2 forensic scrub in order to reach a point where the office could
3 not only understand what we had spent but more clearly
4 understand where we were going, not only in terms of spend or
5 projected spend but to understand across the system, in the
6 different administrative entities or counties or regionally,
7 what was going on in terms of authorizations of service and
8 also utilizations as well.
9 The process was also important to inform us to
10 understand the impact of several policy decisions that have
11 been made since inception of the PPS, including, for example,
12 paying for empty bed days beyond Federal match and Federal
13 requirements. The review itself was necessary to make the
14 informed decisions about the program and to ensure viability
15 for those who need the services now as well as for those who
16 need the services in the future.
17 Admittedly, the road has been bumpy. People in
18 positions of responsibility, we have seen over several years
19 that the additional dollars did not equate to additional
20 services or, unfortunately, necessarily additional people
21 served. The administration takes seriously its legal and moral
22 obligations to help provide for those in need, especially
23 persons with intellectual disabilities, and do it in a way that
24 is effective, efficient, and compassionate.
25 The good news that I can report to this committee 8
1 today is that this department took prudent, sometimes difficult
2 steps, and our collective efforts today should focus on the
3 future.
4 Addressing the waiting list is a priority of this
5 administration. We look forward to working with you and others
6 in the Legislature to find and devote the resources to begin to
7 provide needed services to persons on the waiting list. After
8 nearly a year and a half, the department finally has a basis
9 for making decisions, both programmatic and financial, that
10 will enable us to begin to move forward towards a program to
11 provide services to persons on the waiting list, helping them
12 to achieve their goals. This should be our collective goal.
13 It is our hope that the budget discussions in front of us will
14 enable us to quickly roll out this initiative.
15 My staff and I have met with self-advocates, with
16 families, providers, and other stakeholders, all of whom have
17 provided excellent ideas on best practices for dealing with the
18 waiting list. This administration and the Governor on down is
19 committed to helping persons on the waiting list lead full and
20 productive lives.
21 The department is also actively pursuing alternative
22 proposals, including an expansion of the Shared Living Program,
23 which has been in existence for awhile, to open it up to allow
24 for family members themselves to be caregivers of the service
25 for loved ones. We believe that this would open up the 9
1 program. We believe it is a program that could be and would be
2 more cost efficient, and in a lot of instances, if not all, it
3 would have better outcomes for the individuals served, for the
4 families, and from a programmatic perspective.
5 These are but a few of the changes in the pipeline.
6 Let me repeat, without real fiscal and programmatic integrity
7 to the home and community-based service programs, it will be
8 difficult for a longer termed and sustained effort to realize
9 significant improvements, including addressing the waiting
10 list.
11 I wanted to provide some historical perspective as
12 well on the Consolidated and P/FDS Waivers. In the past
13 11 years, we have seen, from 2000 to fiscal year 2011, growth
14 of 141 percent. The increase has been from $752 million in
15 that base year of 2000 to $1.81 billion. In that time or
16 during that time, we have served only an additional 7,500
17 individuals on the waiting list. There are currently over
18 16,000, 16,000 individuals waiting, either for more than
19 partial services or for services themselves.
20 While the changing needs of individuals that are
21 being served in the system right now or are enrolled in the
22 program have played some part in the increased spending, it
23 does not account entirely for the dramatic rise in costs for
24 the programs.
25 As part of our fiscal planning for the coming year, 10
1 for fiscal year '12-13, we determined there was a potential
2 shortfall in the ODP appropriation as promulgated by the
3 Governor in February of this year for fiscal year '12-13. We
4 were pleased to, through the rebudget process, add an
5 additional or propose the add of an additional 1 million State
6 dollars to the budget to undo that budgetary shortfall that we
7 see in terms of the forecast.
8 We have performed thorough analysis -- and I think,
9 Representative, this is to your question or questions, some of
10 them here in terms of the analysis on costs. Those kinds of
11 things are what we project or trend, which we will provide to
12 the committee. And it was provider-specific analysis that we
13 did by category of revenue and then compositor overall, and
14 I'll talk a little bit more about that later.
15 In terms of residential services. The rates for
16 residential services that were outlined or sent out 10 days
17 ago, on the 25th of May, which include a combination of both
18 cost report based or residential eligible services and market
19 based or fee schedule rates, combining those two --
20 residential, again, which is cost report based, and residential
21 ineligible, which is fee based -- our projections show that
22 80 percent of providers of residential services will have a
23 projected increase in revenue during fiscal year '12-13, and
24 that is without trend. That is year to year, if they build the
25 same number of units moving forward. 11
1 If you do forecast, because part of the difficulty,
2 I think, in getting a handle on and understanding not only what
3 we spend, but I say it this way, being able to book, I call it
4 the contingent liability, to understand what it will mean
5 moving forward, trend analysis and changes in utilization, if
6 that is considered, that number is then 85 percent in terms of
7 residential.
8 Cost-based rates, again, for the eligible side, for
9 fiscal year '12-13, represent about $1.1 billion of the total
10 projected spending of $1.87 billion. The average residential
11 eligible rate increase across all providers from this current
12 year of '11-12 to next year is estimated to be 6 to 7 percent,
13 with unit cost growth of approximately 2 1/2 percent.
14 The decision to alleviate the rate adjustment factor
15 moving forward means this: If we look collectively at the cost
16 report data that we had in front of us for setting cost
17 report-based rates, it basically means it "restores," is the
18 word we use, the 6-percent rate adjustment factor that was
19 imposed on November 15, 2011, and forward to June 30 of '12 and
20 recognizes the cost report-based rate increases in the cost
21 reports in front of us.
22 In terms of residential ineligible rates. In
23 developing the market-based fees, we evaluated information from
24 the U.S. Bureau of Labor Statistics, the Department of
25 Agriculture, the Department of Housing and Urban Development, 12
1 and data from approved cost reports as applicable. This move
2 to market-based fees brings greater equity to our program,
3 certainly greater predictability.
4 The methodologies for both residential ineligible
5 and other services that were moved to a fee schedule were not
6 only very recently approved by CMS as far as our application
7 approval, which I believe was about 2 weeks ago for the
8 waivers, but the move as well from cost reimbursement to fee
9 schedule is also supported by them.
10 For fee schedule services, again, they are
11 nonresidential. A few things we'd like to point out.
12 Historically, a very small amount of services were part of the
13 fee schedule. We decided for '12-13 to move nonresidential
14 respite and residential ineligible, which I've already
15 mentioned.
16 Under the cost-based rate system that we've had,
17 we've noticed a few things. First of all, it does not provide
18 an incentive for providers to reduce margins and therefore
19 potentially increase margins. Fixed fee schedule rates also
20 allow providers certainty in rates and revenues and increase
21 incentives to be cost efficient as well.
22 A few things to note regarding the fee schedules
23 that we've put out, again, on May 25. The projection is that
24 for total fee schedule services, we expect a growth of
25 3 percent. If you factor in the trending and utilization, that 13
1 number is actually 9.4 percent. And I'd also like to cite the
2 ones as well for residential ineligible, which we forecast to
3 be 5.21 percent without trend and 7.84 percent with trend and
4 utilization or billing.
5 If I could, too, for the committee, I'd also like to
6 mention the issue of an occupancy factor for fiscal year
7 '12-13. Effective July 1, 2012, for the new fiscal year,
8 providers will no longer bill for vacancies or temporary leave,
9 for residential payment rates will reflect a vacancy factor.
10 This means the providers do not bill for days when individuals
11 are not receiving services but rather are paid at a higher
12 rate, or as we call it, a grossed-up rate, for days when the
13 participant is receiving services.
14 CMS is willing to provide an enhanced or additional
15 Federal match on eligible expenditures based on application of
16 a factor, thus alleviating some of the burden we had shouldered
17 in part historically for bearing the entire cost with
18 State-only dollars.
19 The factor for fiscal year '12-13 is set at
20 97 percent. Prior to the release of the rates -- I'm going to
21 go back to February and March when we released draft
22 regulations for home and community-based services -- in the
23 draft regulations, we did speak to the potential for a uniform
24 factor. We did identify a factor of 95 percent. However,
25 during the period of time when we were examining and more 14
1 recent data was being examined to put together our rates, no
2 matter how we looked at the utilization data in our Medicaid
3 management information system, which we call PROMISe, whether
4 it was by size of home or it was by size of provider, that data
5 did lead us to the 97-percent number. It is supported by that
6 data. We believe it also affords us greater ease in capacity
7 management and is also administratively easier to administer.
8 As this committee knows, as I testified back in
9 December, arguably, and I still stick to the concept or notion
10 that arguably the most difficult decision I've made in my
11 14 years with the department was the application of the rate
12 adjustment factor, which was effective November 15.
13 To explain it again to the committee briefly, a
14 budget analysis is prepared or is conducted annually to compare
15 estimated waiver expenditures, based on rates and projected
16 unit growth, to budget appropriations for the program. The
17 rate adjustment factor may be necessary when the projected
18 expenditures exceed the appropriation. That factor is only
19 applied -- only applied -- to rates that are cost-based
20 services.
21 For fiscal year '12-13, the RAF would have only been
22 applicable to residential eligible, obviously, as we moved a
23 greater sector to the fee based. The decision to not provide a
24 rate adjustment factor or to apply one to residential eligible
25 services, again, not only restores the prior year's RAF but 15
1 recognizes the growth of about 2 1/2 percent enterprisewide in
2 the cost reports we had in front of us for rate setting for
3 this year.
4 In regard to the regulations. The department was
5 promulgating regulations under the expedited Act 22 authority.
6 They mirror the recently approved CMS waivers to improve
7 provider qualifications and the delivery of service in a
8 cost efficient way that would ensure continued Federal funding
9 for the home and community-based service programs and create
10 cost savings.
11 Currently, as most of you know on the committee,
12 there are no regulations outlining provider qualifications or
13 rate-setting requirements for not only the Consolidated and
14 P/FDS Waivers but also the Adult Autism Waiver. We strongly
15 believe without the regulations, the department historically
16 has struggled to exercise appropriate fiscal oversight and to
17 ensure integrity within the program.
18 In concluding, the department acknowledges that this
19 past fiscal year, fiscal year '11-12, has been a challenging
20 one for all stakeholders. ODP has worked to improve the
21 controls, the tools, and our abilities with those tools to
22 measure the spend, to forecast the spend, and predict the
23 trends that we see in the future.
24 Current projections indicate that waiver spending
25 will be very close for this year to the '11-12 appropriation. 16
1 There is a lot more work to be done -- that, we recognize -- to
2 ensure both quality or program improvements as well as fiscal
3 integrity in the home and community-based service programs. We
4 believe the new regulations that will be promulgated shortly
5 will achieve that.
6 The department also wants to thank the variety of
7 different stakeholders, and they are different, and they're all
8 unique in terms of their perspectives. They certainly include
9 a multiple group of people, a diverse group of people, and I
10 was also pleased to participate, probably I will say right
11 after the holiday period, January up to and including last
12 week, on Wednesday. Especially out of the stakeholders what
13 was most compelling and interesting for us was to get out to
14 places from Philadelphia to Pittsburgh to Indiana. Last week
15 we were in Lewisburg and in Wilkes-Barre to meet with
16 self-advocates, to meet with parents. I strongly believe it
17 was listening, gathering information. Some of them were
18 stories -- these were real stories, human stories -- and
19 actually spending some time with some of the families in their
20 homes. I strongly believe it was a coupling of collecting
21 those stories, understanding those stories, and presenting them
22 to the administration.
23 More recently, in the last 2 months, coupled with
24 demonstrating to the administration that the tools we have
25 developed do allow us to accurately, we believe, predict what 17
1 we spent but more importantly where we're going, I do think
2 those two things together were what was necessary for us to
3 make the point to the administration that additional funding
4 for stability was needed so we can look forward, move forward
5 together, and work on continued improvement.
6 I want to thank the committee for having me here
7 today, and I'll take any questions you might have.
8 MAJORITY CHAIRMAN DiGIROLAMO: Thank you, Kevin.
9 I was going to ask you -- I see some of the Members
10 do have questions.
11 DEPUTY SECRETARY FRIEL: Sure.
12 MAJORITY CHAIRMAN DiGIROLAMO: I was going to ask
13 you to stick around until the end to come back up to answer
14 questions, but seeing some of the Members have questions, maybe
15 I'll just leave you right there for about 10 minutes, because I
16 want to ensure that everyone gets a chance for their testimony.
17 So maybe we could just take a few questions right now, and then
18 would you be able to stick around until the end?
19 DEPUTY SECRETARY FRIEL: I will stay through the
20 duration.
21 MAJORITY CHAIRMAN DiGIROLAMO: Okay.
22 Representative Helm.
23 REPRESENTATIVE HELM: Thank you.
24 I just have a question on the waiting list. Like,
25 you briefly went over that, but even in your statement here it 18
1 says, "With almost 16,000 persons with intellectual
2 disabilities on the waiting list hoping to enroll in the
3 system, the need for reform is urgent." Could you just explain
4 to me more about how that's being handled? And I don't believe
5 there was money put into this -- was there money given to
6 providers but not considered the waiting list?
7 DEPUTY SECRETARY FRIEL: And again, I will say this
8 to the committee: One of the fun parts of my job, I recognize
9 the diverse people, some of whom are sitting behind me. I find
10 all of them, or I should say most of them, good people. They
11 do have different opinions. I find them all to be interesting.
12 One of the things the committee should know -- I
13 need to know and understand, and I'm being very frank -- I
14 believe two things. I should say I believe one and know
15 another. I believe very strongly, based upon the analysis that
16 we have done and the conversations that we have had, for
17 example, with providers -- and these are good providers -- that
18 the rate adjustment factor that was applied was difficult for a
19 lot of them.
20 Historically, if you and I were providers, and let's
21 say it doesn't mean programmatically or quality-wise I was not
22 good, but if I were a greater or bigger spender in a
23 cost-reimbursed system than you were, if you were economical
24 and efficient, the rate adjustment factor was more difficult
25 for you. We recognize that. 19
1 When we looked at the numbers, and if I remember
2 right, the budget that was pitched in February, I believe for
3 the waiver line, was $870 million -- net. When we took those
4 numbers and ran it against all the tools we've developed,
5 including the trending, we strongly believed at the end of the
6 day that that was going to result in the need for another or an
7 additional rate adjustment factor. I don't think that would be
8 good for the program moving forward, so we did pitch or
9 advocate for a greater number to provide for what we thought
10 was sustainability.
11 One of the more difficult conversations I have to
12 have -- this is the second item, Representative, or the one
13 that I believe more than something that I know -- I've talked
14 to many parents since our rates have gone out, just 10 short
15 days ago, and understandably, to some degree, those parents are
16 not necessarily pleased that we're singularly adding funding to
17 address the stability issue. I understand that, but I also
18 believe if we didn't have the stability, we would have further
19 erosion in terms of either quality or ability to provide
20 services.
21 That being said, I do think, as I indicated in my
22 testimony, that based upon taking the information, those
23 stories we heard -- and we did listen to many families, and
24 we're grateful for that -- taking that information and also
25 demonstrating to the administration the tools we've developed, 20
1 we are optimistic and want to work with the Legislature to make
2 sure that we do have a waiting-list initiative for this coming
3 year.
4 REPRESENTATIVE HELM: Well, thank you, and I hope
5 you will do that, because that's what I've heard mostly about
6 from people, is the waiting list.
7 Just a real quick -- block grants. Like, that's
8 something that I think ever since I've been in office I've been
9 hearing about. Can you just talk a little bit more about block
10 grants and how you plan to work with that?
11 DEPUTY SECRETARY FRIEL: Sure.
12 Again, around the block grants, I think a couple of
13 things. We do have, we can say now -- and certainly I
14 recognize the hour or the date -- I do believe right now we
15 believe we have a good and general agreement with CCAP. We do
16 recognize there are still a lot of things to iron out
17 programmatically and administratively.
18 I still am optimistic that if we do those things
19 right -- and occasionally we can get things right if we think
20 clearly and strategically -- we believe that that could
21 mitigate any of the risks from the proposed cuts.
22 REPRESENTATIVE HELM: All right.
23 Well, thank you for your testimony, and we're here
24 to work with you.
25 DEPUTY SECRETARY FRIEL: Thank you. 21
1 MAJORITY CHAIRMAN DiGIROLAMO: Representative
2 DeLissio.
3 REPRESENTATIVE DeLISSIO: Good morning. Thank you,
4 Mr. Chairman.
5 I have a couple of quick things.
6 Mr. Friel, as I hear you describe some of these
7 meetings that happened across the Commonwealth, and I remember
8 very vividly our last discussion, the meetings, the hearings,
9 et cetera, and, you know, one best business practice that's
10 used, hopefully throughout the public and private sector, is
11 the idea of the appropriate people at the table in the room at
12 the same time to discuss what the department's issues are, to
13 discuss the challenges and the vision and the opportunities
14 from the stakeholders' standpoint.
15 Please, did I hear that you've had meetings
16 throughout the State but these meetings have been very
17 individualistic as opposed to convening a meeting? And I
18 remember my fellow Representative, Mr. Pashinski, was also sort
19 of behind this concept and had offered to help to orchestrate
20 that -- everybody in the same room at the same time.
21 So these meetings, it sounds like they were on an
22 individualized basis throughout -- and any type of information
23 gathering is to be applauded, but there is a definite
24 difference between going out there and sort of being in one
25 individual's, you know, house, understanding their particular 22
1 issue, versus sitting down in a room in a planning mode to
2 discuss this in context. It sounds like, from the description
3 I heard this morning, that that has not happened since
4 December.
5 DEPUTY SECRETARY FRIEL: If I could. I don't want
6 to parse words, but just so I'm clear when we talk about the
7 meetings that we had or the, I'll call them, and I couldn't
8 think of a better word or phrasing, "listening to," part of a
9 day, for example, if we spent it in Pittsburgh or Philadelphia,
10 might be in with an individual, and it could be a parent or two
11 parents and their child.
12 Many of the sessions that we had, I would describe
13 them as large. The one in Philadelphia, literally, I didn't
14 take a census, but it was literally hundreds of people in the
15 room making points to us, addressing concerns they have with
16 us.
17 The one most recently or more recently last week was
18 a different kind of a mix, because in the room you did have
19 some providers -- regional; this was in Lewisburg -- I would
20 say at least 100 parents and self-advocates, if we put those
21 folks together, and I believe a couple of Legislators, to talk
22 about, share information and exchange.
23 So I recognize one of the most difficult parts, and
24 so you know one of the arguments that we made -- certainly that
25 I made when I spoke earlier to the last question to the point 23
1 of not having a rate adjustment factor for this year -- it's
2 not something that most folks want to hear, but I believe it's
3 a fact. One of the most difficult challenges we have with the
4 PPS, particularly since the rate adjustment factor, was every
5 day, almost every day, I described it as, you know, treading
6 water just to get through the next issue, the next meeting,
7 the next discussion, that provider that maybe is showing a
8 $1 or $1 1/2 million loss through March of this year.
9 I am very optimistic that as we provide for some
10 kind of, I will call it predictability, sustainability, we can
11 continue to have the dialogue that we've had. I can assure
12 you, since I was here in December, I've been to multiple
13 provider association meetings, probably the same or more number
14 of meetings, again I would describe them as large forums, with
15 families. We did them in Carlisle, we did them here in town in
16 Dauphin County, and the ones that I mentioned to you
17 previously. So these were not just individual sessions with
18 one or two people; they were large forums.
19 REPRESENTATIVE DeLISSIO: Well, I appreciate the
20 further explanation. Again, I think in my own mind, I think of
21 that as information gathering as opposed to a context of
22 sitting down and planning coherently and cohesively with the
23 stakeholders who are serving some of our most vulnerable folks.
24 I actually -- and I have a specific question on the
25 shared living. When you said it's going to be open to family 24
1 members, is that open to family members that they're currently
2 living with or is this a family member that is outside of the
3 immediate---
4 DEPUTY SECRETARY FRIEL: The goal would be this, is
5 both. I think it would be both.
6 What we have noticed, again, and there are other
7 States, frankly, that are different, maybe in my opinion
8 further ahead or it's more progressive, and it's a simple
9 recognition that we have had it here for awhile, the particular
10 program. But what we see in several other places, some of them
11 very close to us -- I think I'll just say Connecticut, but
12 we're actually just looking at theirs now. Probably a good
13 example would be Massachusetts where they're expanding not only
14 the populations that are served outside of intellectual
15 disabilities but also for long-term living. But one of the
16 unique features in order to grow it was to afford the ability
17 or opportunity for family members to be the caregivers for the
18 individuals.
19 Certainly we think it's something the person needing
20 the services would want. We think it's something the families
21 would want. So it's not necessarily just those living with; I
22 think it's just opening it up to other family members so they
23 could actually be the caregivers themselves.
24 REPRESENTATIVE DeLISSIO: Okay. And one last
25 thing. 25
1 I do have a provider based in the district, and the
2 rate situation, I think their latest cost report was in the
3 twelves. Their new rate letter came out as in the sevens.
4 This is an entity with a multimillion-dollar budget but in the
5 low, you know, low seven figures, like not in excess of
6 $2 million.
7 And inasmuch as I understand that for cost-based
8 reimbursement, you know, there's no incentive, the department
9 is saying, and fixed fee has some predictability, the very
10 cynical side of me says, at the moment, for some providers my
11 concern is that that fixed fee and the only certainty that's
12 out there is that they will probably go out of business---
13 DEPUTY SECRETARY FRIEL: Well---
14 REPRESENTATIVE DeLISSIO: ---and I'm sure that's not
15 the intent of the department. And I'd like to echo
16 Representative Helm, that we're here to genuinely help, but
17 this information seems to still be hitting providers in a way
18 that's, as you admitted, sending shock waves and is
19 jeopardizing the viability of their own programs. These are
20 businesses.
21 I think if any other business sector -- now, this is
22 how I think of it right now, Kevin. This is a business sector
23 that has been under attack, and if any other business sector in
24 the Commonwealth -- manufacturing, real estate, you name it --
25 was under this type of attack, their business happens to be the 26
1 delivery of services to people. So, you know, I think there
2 would be a lot, even more pushback. In fact, I don't think
3 this particular type of attack would even have occurred.
4 So I am very concerned. It will be interesting to
5 see to what degree some of these providers are -- their
6 business model is now jeopardized, they don't have any options,
7 and then our constituents will become underserved, if not
8 totally unserved, as a result of this.
9 More of a comment than looking from me to you, than
10 looking for an answer, because I understand everything that you
11 had said, but I have some serious concerns about the ability of
12 some providers to continue to serve.
13 DEPUTY SECRETARY FRIEL: If I could, understanding
14 it's not a question so much, and one certainly not from me. I
15 don't want any stakeholders or providers, it doesn't matter who
16 they are, to feel under attack.
17 I will say this to you: I alluded to the difficulty
18 sometimes in terms of the balance right now.
19 REPRESENTATIVE DeLISSIO: Yes.
20 DEPUTY SECRETARY FRIEL: I can tell you this, that
21 it was recognizing the need for stability, which is different
22 -- obviously it's the antithesis to an attack -- when we were
23 lobbying for or advocating for the additional funds for this
24 year coming up.
25 I completely and fully recognize the challenges for 27
1 some providers. We will provide this committee with the
2 analysis that we did, and if I could just make a few points to
3 this because I think it's very important.
4 One, to give you an example, and it's anecdotal to
5 consider or a metaphor for the struggle, really to try to get a
6 handle on not only what we have but moving forward, for one
7 particular -- I will cite one particular service,
8 nonresidential, that was moved from cost to fee.
9 I understand when I look at the figures that the
10 amount of reduction across the enterprise, and it's not
11 provider-specific, is very significant. But a couple of things
12 that were interesting, because the numbers and the data tell us
13 a lot.
14 One, in the Commonwealth, and I understand the
15 difference between markets, and I don't want to single out, but
16 if we just pick urban and rural. I understand there's going to
17 be a range.
18 REPRESENTATIVE DeLISSIO: Yes.
19 DEPUTY SECRETARY FRIEL: But for one particular
20 procedure code that is billed for this system right now, we
21 currently have a range, based upon cost reports, of $20 to
22 $200 per unit -- $20 to $200, which I think, again, just speaks
23 to the period of time that we've operated under cost
24 reimbursement.
25 I want to assure this committee, we put together, by 28
1 residential ineligible only, by nonresidential services only, a
2 separate analyses provider by provider, coupled ineligible with
3 eligible, and then did composites of overall revenue that we
4 see.
5 When we did that analysis, another interesting thing
6 came out. I'll give you one, that -- again, I just have some
7 of these, unfortunately, memorized, because it's a difficult
8 and challenging decision -- one was looking at two providers
9 who right now, currently, under the cost-based system, have
10 about the same revenue, and if I remember right, the revenue is
11 about $1.7 million. The first provider, if I could call them
12 that, Provider A, 95 percent of their revenues derive from
13 nonresidential. The other one, it's entirely nonresidential or
14 100 percent of their revenues. The interesting thing was that
15 when you looked at a conversion, if I could call it that, from
16 if they build those units from this year---
17 REPRESENTATIVE DeLISSIO: Okay.
18 DEPUTY SECRETARY FRIEL: ---next year, under the fee
19 schedule, the one admittedly would go down significantly, to
20 your point. They would go down, if I remember right, to about
21 1.4. It's about a 17-percent reduction. The second provider
22 actually would go up to 2.3.
23 And it tells me something interesting, that right
24 now, even though both of them are receiving about the same in
25 revenues in the same geographical area -- and again, there's 29
1 not precision in this because there's a lot of different
2 services baked into there---
3 REPRESENTATIVE DeLISSIO: Okay.
4 DEPUTY SECRETARY FRIEL: ---it does show us that
5 we're obviously paying a higher cost report-based rate to the
6 first provider than the second one. Again, though, we don't
7 deny that.
8 The second thing I want to say in closing on this
9 and my commentary to it is that we will work with providers.
10 We've worked with them during trying to understand or wrestle
11 with the implications of the rate adjustment factor. We will
12 work with them.
13 One example and I'm done. Just last Wednesday when
14 we were in Lewisburg, I had four or five providers, again, with
15 self-advocates, with the families, with some Legislators. I
16 think one or two people who were in the room today were there
17 with me. But one of the providers indicated to me last week
18 that the fee service rates that we put out preceding Friday was
19 going to result in a reduction of 38 percent.
20 I would certainly sit down with them and compare
21 data. The data that I have suggests, that I just looked at
22 last Thursday -- and this is not for trending -- the data I
23 have suggests that they're actually going to increase
24 17 percent. So I think that's part of it too sometimes, the
25 TA, and I don't mean that in a condescending way. It's just I 30
1 think we need to make sure we're comparing apples to apples.
2 REPRESENTATIVE DeLISSIO: All right.
3 Well, I look forward to working with you, and I
4 appreciate your indulgence, Mr. Chairman.
5 MAJORITY CHAIRMAN DiGIROLAMO: Okay; thank you.
6 I have three more Members who are going to ask
7 questions, Kevin, and then we're going to move on to the other
8 panels. And if I could ask you to just stick around for a
9 little bit afterwards.
10 DEPUTY SECRETARY FRIEL: Sure.
11 MAJORITY CHAIRMAN DiGIROLAMO: So if anybody else
12 has any questions---
13 DEPUTY SECRETARY FRIEL: Brendan said if I stayed,
14 he'd buy me lunch, so I'm going to stay.
15 MAJORITY CHAIRMAN DiGIROLAMO: Okay. All right.
16 You got a deal.
17 First, Representative Murt.
18 REPRESENTATIVE MURT: I want to know whose budget
19 that lunch is being taken from.
20 But I just want to make sure that we know what we're
21 talking about when we talk about the waiting list. We're
22 talking about families who care for adult children with special
23 needs. We're talking about parents that are in their sixties,
24 seventies, eighties, and even into their nineties; parents that
25 are 90 years old caring for a son or a daughter that might be 31
1 65, even 70 years old that has an intellectual disability, what
2 we used to call mental retardation. These are families that
3 live in every legislative district in the Commonwealth.
4 So, you know, when we talk about the waiting list,
5 and I guess that's a nice moniker for it, but, you know, many
6 of these families have been on the waiting list for literally
7 years, even decades, and they're not going to get any services
8 unless one of the parents dies. And the disabled population is
9 living longer, just like the nondisabled population. So I just
10 wanted to make that comment.
11 The other question I wanted to ask Kevin,
12 Mr. Secretary, the rate adjustment factor, is this a concept
13 that's applied to any other department, any other line item,
14 other than this mission for caring for adults with special
15 needs? Does anybody else have to go through this process other
16 than this?
17 DEPUTY SECRETARY FRIEL: I'm not sure if they use
18 the same terminology as a "rate adjustment factor," but
19 certainly my experience has been there have been other
20 applications, adjustments to the rates, some of them in
21 programs, some of them, too, are with providers, some with
22 contractors.
23 We went through a similar exercise this year in ODP,
24 I know, with all of our contractors and grants, recognizing the
25 budget we had. And I think, if I remember correctly, all of 32
1 those contracts or grants were reduced during the '11-12 year
2 by about 10 percent.
3 I also understand the uncertainty that the rate
4 adjustment factor gives any provider. A couple of things,
5 though, if I could, Representative, point out. I think that if
6 it doesn't eliminate -- I know there's always some element or
7 degree of risk, but hopefully, at a minimum, it significantly
8 tamps down or reduces the risk, if I could say it that way, of
9 a rate adjustment factor. One, certainly, again, it's a
10 powerful tool. It should be wielded wisely. I recognize that.
11 I also recognize that it is part of the approved waiver, the
12 approval we receive from CMS.
13 I think very important, though, are a couple of
14 elements. One, just to put some of this in perspective, the
15 rate adjustment factor, I think the likelihood of it is tamped
16 down by a couple of things. One is the move to a fee schedule,
17 all right? With struggles and all that we recognize for some
18 providers, it comes with -- remember, the tool itself, as
19 approved by CMS, is only or can only be applied to cost-based
20 rates.
21 Secondly, I think one of the things that was kind of
22 interesting, when we were building the tools that we built this
23 year, it's very good to know what you spend. It's a little bit
24 more interesting to know what you're going to spend 6 days,
25 6 weeks, or 6 months out. We feel very confident; it hasn't 33
1 changed in the last five or six billing cycles, which are
2 weekly. With the tools we built, we think, in a range, we're
3 going to end this fiscal year probably $3 to $4 million over.
4 That isn't too bad.
5 And again, I want to be clear -- I know we expressed
6 it this way several times to the folks from CMS -- it is not
7 the reason for applying the rate adjustment factor, but the
8 numbers are interesting looking backwards, and what they tell
9 us is this: If we end this year, in my hypothetical, even at
10 $5 million short, State dollars, and if we had the wherewithal
11 to pay the 30 million State dollars back for the 6-percent rate
12 adjustment factor, November 15 forward, and pay the
13 approximately $10 million rate adjustment factor back for the
14 period July 1 to November 14, which was a 2 1/2 percent, do the
15 math, and that would put us somewhere in the ballpark of
16 $45 million in the hole, so to speak, at State dollar signs.
17 Give consideration to the fact that during this
18 year, we paid out the final rev rec payment from last year,
19 which was significant, with 60 million State dollars. We look
20 now and we look at the data and say, if we had not incurred
21 that cost -- and again, rev rec to us, it was a quarter billion
22 dollars over 2 years; State and Federal, not just State; it was
23 a significant, significant cost for us -- but if you do the
24 math, it says this year we could have paid for every unit we
25 think we'll be billed, not had rate adjustment factors of 34
1 either ilk, either before or after November 15, and the numbers
2 come out that we would have ended with a surplus this year.
3 So I do think that if, moving forward, that's not
4 part of the mix, revenue reconciliation, and again, as we move
5 some things to the fee schedule basis, I think that also tamps
6 down on the risk of the rate adjustment factor.
7 REPRESENTATIVE MURT: I just want to mention that
8 over 90 percent of these service providers are nonprofits.
9 They're not in this to make money.
10 And also, the reason I asked about whether or not
11 any other line item or any other department is going through
12 this rate adjustment factor process is that I don't think it's
13 fair that adults with special needs should have the budget
14 balanced on their backs and on the backs of their family. So
15 thank you.
16 DEPUTY SECRETARY FRIEL: I understand.
17 REPRESENTATIVE MURT: Thank you, Mr. Chairman.
18 MAJORITY CHAIRMAN DiGIROLAMO: Thank you.
19 Representative Brownlee and then Representative
20 Killion.
21 REPRESENTATIVE BROWNLEE: Thank you, Mr. Chair.
22 Good morning, Mr. Friel.
23 DEPUTY SECRETARY FRIEL: Good morning.
24 REPRESENTATIVE BROWNLEE: One question I have is
25 regarding the waiting list. It says 16,000 on the waiting 35
1 list. If this budget does not address the waiting list, what
2 plans do you have to address this situation?
3 DEPUTY SECRETARY FRIEL: That's the question.
4 That's the question we've had for decades.
5 To go back to the previous point that was made, it's
6 difficult. The waiting list has been here. It has been here
7 before the PPS. It has been before -- I think what is even
8 more interesting, it certainly doesn't contradict the last
9 statement, but I think it enhances it. When you talk 16,000,
10 remember a couple of things. Certainly some of the folks
11 waiting are elderly caregivers. They are kids aging out. Out
12 of that 16,000, there are a significant number, though, that we
13 would classify, these are emergencies; they're important. I
14 don't disagree with that.
15 The question being, what are we planning on doing,
16 again, two things, I think, at a minimum. One is, again, as I
17 mentioned earlier, to work with the Legislature on developing
18 the initiative. It is something that we are interested in
19 doing with the Legislature.
20 We're also, I think, I hope, all on the same page
21 that moving forward, we need to do some other things. When you
22 do the numbers and look at the numbers right now, it's probably
23 going to be significantly more than any of the initiatives
24 we've had before or the one that we're contemplating now with
25 the revenue picture to address the number. 36
1 So I think we have to do a couple of things. One,
2 difficult as it might be, to continue to move in a way where we
3 are developing a system that is more cost efficient, and also
4 then, hopefully with some predictability and sustainability, do
5 two other parts that are sub-elements. One would be to develop
6 programs that are more risk based, that are more flexible, and
7 to expand. I don't know how many arrows I need in the quiver,
8 is the metaphor I use a lot, and if it's 54 or 58, I'll take
9 them.
10 In having a conversation with some parents last
11 week, somebody asked me, for example, well, what do you think
12 of the expansion of shared living where we would have family
13 members being caregivers? What would that do? And I said, I
14 don't know if it's 17 or 487, but I'll take it. You know,
15 we'll take all those things.
16 So I think it is a coupling of, obviously, no matter
17 what we do in terms of more intelligent designs, program
18 designs, more efficiencies, more flexibilities, certainly at
19 some point it's going to take funding. But I still think it's
20 going to take a coupling of a lot of those things over the next
21 several years to address it.
22 REPRESENTATIVE BROWNLEE: And then my next question,
23 I want to direct your attention to the proposed block grant,
24 human services block grant. What do you think the impact of
25 this block grant, the human services block grant, will have on 37
1 the MHID Act of 1966?
2 DEPUTY SECRETARY FRIEL: I mean, first of all, I'm
3 not an attorney, to be clear, so I'd rather speak more to the
4 program than the act, if I could. It's probably the same kind
5 of question, if it's not identical.
6 REPRESENTATIVE BROWNLEE: Okay.
7 DEPUTY SECRETARY FRIEL: Certainly I think one of
8 the risks that I think we're trying to address in the
9 conversation with CCAP is answering that. We talk a lot about
10 the program design, the benchmarks, the reporting for those
11 kinds of things. Regardless of what I've suggested to many
12 people, and some folks in here might have heard me say it --
13 certainly I know some of either family members or providers or
14 others have heard me say it -- is, for a minute, forget about
15 the cuts and let's make sure that we're getting the design part
16 right. I'd like to think we are working sincerely with CCAP to
17 make sure, again, that any of the potential risk erosion --
18 there's, again, risk in anything, particularly new -- any of
19 that risk that is there can be offset by the flexibility.
20 One of the things, hypothetically, again -- it could
21 be a stretch, but it's hypothetically possible -- is that
22 depending on the design and the implementation, it could mean
23 the same funding or not as much of a reduction as you think.
24 I do believe that there's a lot to be said for
25 flexibility. I do believe, though, that there's more work to 38
1 do and things to nail down between the department, say the
2 department or the administration and CCAP. I think right now,
3 it's very hard. I think it's one of the risk areas. I think
4 we need to make sure that we have those designs down moving
5 forward.
6 REPRESENTATIVE BROWNLEE: Thank you.
7 Thank you, Mr. Chair.
8 REPRESENTATIVE KILLION: Thank you, Mr. Chairman,
9 and I'll be very brief.
10 A question on the vacancy factor for residential
11 services. I spent a number of years on two boards in my
12 county, Elwyn and CADES, the former Delaware County cerebral
13 palsy, and at first blush it seems to make sense: Why pay when
14 you're not providing services when there's a vacancy? And you
15 talk about a gross-up rate, but as you know, these institutions
16 have fixed costs that don't go away while they're waiting to
17 fill that unit.
18 Will the gross-up -- two quick questions. Will the
19 gross-up rate be enough to cover those fixed costs on the units
20 or will the providers have to take a loss on that? And
21 secondly, you say that it will save money that could flow to
22 other areas, including the waiting list. Do you have a number?
23 Do you have any idea what that number is?
24 DEPUTY SECRETARY FRIEL: Well, if I could answer the
25 second one first. I think it's easier and more quick. 39
1 Just to be clear, I don't think it's saving money to
2 the tune, frankly, of the waiting list. It does tamp down on
3 historically what we've been paying with State-only dollars, to
4 be clear. It does result in some enhanced funding. That was
5 part of the calculation even before when we were looking at
6 rates at the original budget proposal back in February.
7 The first question was around the factor itself.
8 "I don't know" is the answer, but I'd like to explain a few
9 things. I don't know what it will mean necessarily. There is
10 risk in any business relationship. I do believe that when we
11 do the trends, we can say this: Back to the issue that we
12 think there is going to be a significant number of providers,
13 we will have an increase on the residential side, which
14 includes, again, eligible and ineligible.
15 And the other thing I think that's very important
16 in terms of the factor itself is recognizing it's not
17 person-specific, it is not site-specific, but it is
18 provider-wide. We think, again, it doesn't eliminate it, but
19 we think that expands, or if I could say waters down the risk
20 somewhat.
21 And finally, we do build in to our provisions what
22 I'll call an exception process. We recognize some of the rules
23 of the road are good. We also recognize that things can
24 happen, particularly when you're talking about hypothetically a
25 provider maybe that is smaller, 4 or 5, and if something out of 40
1 the ordinary happens to 3 or 4 of the folks served, 97, no
2 matter how many times we ran the data and it looked great, it
3 might not be sustainable for them. So we do allow for what I
4 describe as an exception process to the factor.
5 REPRESENTATIVE KILLION: Thank you. And I encourage
6 you to work with the providers, because the costs are
7 significant, even when they have the vacancies, and, you know,
8 it could be very significant.
9 Thank you.
10 MAJORITY CHAIRMAN DiGIROLAMO: Kevin, and again if I
11 could ask you to stick around.
12 And just real briefly, I mean, I'm just thrilled to
13 hear you say that addressing this waiting list is a priority
14 for the department and the administration, because I think it
15 should be, and I'm looking forward to working with you and the
16 administration in addressing that waiting list.
17 And second, and I don't mean to pick on you here on
18 the budget issue, as far as the block grant goes, we are moving
19 way too fast with this block grant. It is going to be a
20 disaster. Nobody, I have not heard from anybody in the field
21 that's providing these services or receiving the services that
22 is saying that this block grant is a good thing.
23 I think we ought to slow down. We ought to try a
24 pilot program, a demonstrator program in some of the counties
25 that are willing to do this. But moving forward full speed 41
1 ahead with this block grant is going to be a disaster for the
2 people receiving the services in our counties, and I just
3 wanted to state that for the record.
4 You know, I don't want to pick on you or ask you to
5 comment, but I would hope that moving forward, if we can do
6 away with this block grant for this year. We want to give it a
7 try. Work with us. I mean, we're willing to try a pilot
8 program or a demonstrator program, not a full-speed-ahead block
9 grant program.
10 So thank you, and I would ask you to stick around if
11 you could.
12 And I'd like to call up our next panel: Gabrielle
13 Sedor, the Communications Director for PA Advocacy and
14 Resources for Autism and Intellectual Disabilities; Linda
15 Drummond, Policy Specialist with the Pennsylvania Community
16 Providers Association; and Gene Bianco, President and CEO of
17 the Pennsylvania Association of Rehabilitation Facilities.
18 MR. BIANCO: Thank you very much, Mr. Chairman.
19 MAJORITY CHAIRMAN DiGIROLAMO: Welcome, and you can
20 begin whenever you'd like and whatever order you would like.
21 MR. BIANCO: Thank you very much.
22 Good morning, Chairman DiGirolamo and Members of the
23 committee.
24 My name is Gene Bianco. I'm the President and CEO
25 of the Pennsylvania Association of Rehabilitation Facilities. 42
1 My colleagues this morning are Gabrielle Sedor,
2 Communications Director for PAR, Pennsylvania Advocacy and
3 Resources for Autism and Intellectual Disabilities; Linda
4 Drummond, who is the Policy Specialist for the Pennsylvania
5 Community Providers Association; and Brian Baxter, a former DPW
6 official and consultant to the Pennsylvania Intellectual
7 Disabilities and Autism Coalition.
8 The coalition represents numerous organizations,
9 advocacy organizations, provider service organizations, and
10 others, that are most focused on intellectual disability and
11 autism services.
12 Before I begin my remarks and talk about the system
13 and the operations of the system, know that we're here, really,
14 to talk this morning about the response of providers, provider
15 organizations -- this panel is -- to decisions of the
16 Department of Public Welfare, and we're particularly focused on
17 rates as I'm making some distinction between budget, the
18 decision that Legislators have to make in terms of budget, and
19 rate setting, decisions that the Department of Public Welfare
20 has to make in terms of administering their system.
21 You should know that we have a long history of
22 working with the Department of Public Welfare. We have a long
23 history of working with various administrations, with
24 legislatures, with committees and stakeholders. We've been at
25 this for a long time, because what we've achieved over the last 43
1 30 years, really the past 45 years, is to develop a system of
2 home and community-based services to move people away from
3 reliance on State institutions to reliance on a home and
4 community-based service system.
5 We have worked with you on waiting lists over the
6 years. This is not anything new. This year, there's no money
7 for waiting lists. No matter what intentions are announced,
8 the fact is that in the budget, there's no designated funding
9 for waiting lists, that if there are emergencies, it will have
10 to be handled through other funds.
11 We worked with you on improving quality of services
12 and at least maintaining the quality of the services, and our
13 lingo was COLA's, cost-of-living increases each year in order
14 to be sure that we could recruit qualified people to maintain
15 the quality of services. We worked with the department on
16 various initiatives. Shared living is not anything new.
17 Shared living is in fact something old. We've been at that for
18 a long time, and our provider organizations have been very much
19 involved in it.
20 The guiding principle in all of this is that in
21 moving away from the reliance on State institutions, we have
22 had to be careful and always protect individuals. This is not
23 a game of averages. This is not just summing up things or
24 setting up a formula or a tool. This is affecting people's
25 lives. Everybody counts. That has been the principle that you 44
1 have applied in budgets, that's the principle that we've
2 applied in planning, and that's the principle that has been
3 attained for many years by the Department of Public Welfare.
4 So since the time of deinstitutionalization, we've
5 been at it. We've been at it, one, to protect the quality of
6 service, and we've been at it to sustain the service. You
7 don't only pay people; you don't only pay organizations. You
8 assure that organizations are there to provide services to
9 people who need them. That's our job. That's what we do.
10 So over the past 45 years, we developed that system.
11 Right now, we support over 50,000 people with intellectual
12 disabilities. It's a budget of $2 billion, so it's serious
13 money.
14 These home and community-based services are provided
15 by over 400 mostly nonprofit organizations. They rely totally
16 on you. There's no such thing as "you can take a loss." A
17 loss from what? You are the payer; you are the payer. There
18 is no other place to go. There is no other funding stream in
19 intellectual disability services.
20 Over 35,000 people work in this system. Now, these
21 are people who are faced with and organizations faced with
22 this: there hasn't been a COLA in 2 years, and that is part of
23 the context in which we're discussing this matter of rates and
24 how money gets moved around and what money is used for.
25 The community-based organizations are there and they 45
1 are basically what one has. When one looks at the State
2 institutions, you're talking about a thousand people there, the
3 average cost, $250,000 per person, more than twice the
4 individual cost for folks providing services in the
5 community-based system, some of them with equal level of
6 disability. Some of the severest disabled people in
7 Pennsylvania are in the home and community-based system.
8 They're not just in State institutions. It's a myth.
9 The community-based organizations that provide
10 services to people with intellectual disabilities therefore are
11 tightly regulated, and they should be tightly regulated, to
12 provide for the safety and for the quality of service.
13 Detailed prescriptions are developed by teams of
14 experts. They're run through individual service plans. They
15 can be as many as 100 pages long. The plans serve as the
16 authorization. In other words, any service that's ordered up
17 is not ordered up by the provider; it's ordered up by the
18 individual service plan by government. Government makes the
19 decision on the volume of service to be provided. It's not a
20 provider who does that. They're not the driver of costs.
21 Providers are subject to annual licensing
22 inspections, to ongoing monitoring by county officials with
23 compliance with Federal requirements. Progress notes are used.
24 Unusual incidents are reported. This is a tightly regulated
25 system. 46
1 And it's not only tightly regulated on the quality
2 side; it's tightly regulated on the cost side. If there's any
3 system where you know the costs, it's in this system. You know
4 costs. There are other systems where you may not know that:
5 well, what does it really cost to provide that particular
6 educational service? You may not know that. In here, because
7 you're the payer 100 percent in, you know the cost of the
8 service. That's the way it was built over 30 years.
9 And you all as Legislators have been responsible for
10 supporting the system. You've seen there's increasing need,
11 and therefore, you've appropriated funds. But we asked
12 ourselves last year, under this new rate system -- remember,
13 the sea change came in the intellectual disabilities service
14 system when the Federal Government said, enough is enough; you
15 in Pennsylvania have to move away from a county-based system to
16 a State-based system with uniform rates being applied. That
17 was the principle.
18 Now, the great challenge of the State of
19 Pennsylvania is, how do we do that and keep services stable?
20 How do we do that and sustain services in Pennsylvania? Well,
21 let's look to the last few years of this.
22 You supported, the Legislature supported funding for
23 community services for people with intellectual disabilities,
24 and you didn't make cuts in the ID Community Waiver
25 appropriation. Well, then we asked, why did DPW cut? In other 47
1 words, we're not looking just to provider behavior. What was
2 the behavior of the department in dealing with the budget?
3 Well, you can say, however the department behaved,
4 it was in large part because of the Federal Government. After
5 all, the Centers for Medicare & Medicaid Services and the
6 Federal Government pay more than half of the cost of the
7 services, and they were about establishing rules for home and
8 community-based service waivers. They're still developing
9 those rules.
10 As a result, during 2009, DPW directed providers to
11 supply additional services to existing waiver participants,
12 because not only did CMS say you have to establish a new
13 payment system, but they have another proviso, which is, you
14 have to provide services to people in the waiver according to
15 their need.
16 And the CMS response to matters of budget, for your
17 information, is simply this: Budget is a matter of the State,
18 not the Federal Government. You will have to increase your
19 budget. If there are additional costs for services, you would
20 have to do that. That is their response. That's not
21 necessarily the response of State governments.
22 But you did provide funds, but the system found
23 itself having to respond to these needs for additional
24 services to existing waiver participants, and that cost over
25 $100 million more than DPW had budgeted. Providers who were 48
1 legally bound to supply these services understandably expected
2 to be paid for supplying the services, but DPW, with the
3 support of the Governor's Office and the Legislature, provided
4 increased funding needed to pay for these services. That was
5 back in 2009-2010.
6 The following year, DPW budgeted far less than the
7 cost of the services, and when this overspending was discovered
8 2 months after the end of the fiscal year, DPW didn't request
9 additional funding from the Governor's Office or the
10 Legislature to cover the cost of DPW's overexpenditure.
11 Instead, they implemented a $150 million payment cut to
12 providers in the fiscal year. You could have called it rate
13 adjustment factors; you could have called it revenue adjustment
14 factors; you could have called it a rate adjustment after the
15 fact. You could have used any term you wished. It was a cut
16 to providers, essentially saying the providers would have to
17 cover the cost of this additional service.
18 We looked at that example in looking ahead. It's
19 simple: ID waiver providers can't save money by serving fewer
20 people because they're paid on a fee-for-service basis. ID
21 waiver providers can't save money by reducing the services
22 provided to waiver participants because DPW prescribes in
23 detail what services must be provided. And they can't save
24 money by thinning out the services, because DPW sets the
25 staffing ratios for each service. The only option available to 49
1 providers to respond to the $150 million payment cut were
2 simply this: to reduce their clinical staff, to reduce support
3 staff; to go inside the organization and reduce supervisory
4 staff responsible for assuring the health and safety of waiver
5 participants.
6 Our surveys show that's exactly what was done in
7 that year, in that time. So now we have a system that has
8 taken out a great number of employees. More than 800 employees
9 have been laid off over the last several months, according to
10 our surveys, far more jobs have been eliminated through
11 attrition, and we believe this is going to have an effect on
12 the quality of service.
13 Now we look to what happens in the future with
14 possible further reductions coming our way given that current
15 circumstance, and for that I've asked Gabrielle Sedor to report
16 to you on surveys that were conducted by the coalition.
17 MS. SEDOR: Thank you, Gene.
18 Good morning, and thank you for the opportunity to
19 speak to you this morning.
20 Ten days ago, DPW announced payment rates for the
21 year beginning July 1, and we've heard this morning that
22 providers should be pleased that the across-the-board 6-percent
23 rate cut was restored for the upcoming fiscal year in those
24 residential rates.
25 Now, by "restored," I mean that the rates for the 50
1 upcoming fiscal year won't have 6 percent removed from them.
2 There's no backfilling of the funds, the jobs, the services
3 that were lost because of that 6 percent that occurred this
4 November.
5 By "restored," I mean that for about two-thirds of
6 the services providers supply, providers will be paid next year
7 the costs they incurred last year with no recognition of the
8 increased cost of doing business. Like Gene mentioned, a COLA,
9 a cost-of-living adjustment, is a foreign word to us. So
10 there's no recognition of employee health benefits, gasoline,
11 insurance.
12 Many of our direct support professionals, who are
13 the people that touch the individuals they serve -- they are
14 the people that are with them an overwhelming amount of time --
15 sometimes our direct support professionals know these people
16 better than anyone else, and it's a loss when we lose them.
17 But they're paid so low that some of them are on food stamps,
18 and often they leave their jobs to take higher-paying jobs in
19 fast-food restaurants because it's easier.
20 DPW also announced that beginning on July 1,
21 market-based rates will be used for the first time to pay for a
22 wide range of services previously paid through rates reflected
23 on our provider cost reports. Our initial analysis of the
24 impact of these rates suggests that even with the restoration
25 of the 6-percent rate cut for the cost-based rates, DPW has 51
1 decided to pay providers, overall, $40 million less than their
2 allowable approved costs of supplying these services next year.
3 And there are winners and there are losers. The
4 losing providers will see their payments reduced by $75 million
5 while winning providers will gain $35 million, but the real
6 losers are the people with intellectual disabilities whose
7 services are going to be disrupted.
8 You might recall, in last year's budget DPW proposed
9 to cut payment for food and housing expenses by $27 million.
10 You restored $22 million of this cut in recognition of the fact
11 that these expenses are fixed costs and they can't be cut. Our
12 preliminary analysis of the rates that DPW just announced is
13 that for next fiscal year, food, mortgages, utilities, home
14 maintenance, these will be paid around $17 million less than
15 the actual cost. If this payment policy isn't reversed, some
16 providers will have no choice but to consider closure of the
17 group homes, because they won't be able to make their mortgage
18 payments. This needlessly displaces people with intellectual
19 disabilities from the places they've called home.
20 And you all know these people. These are the people
21 that filled the rotunda last month, hundreds of them. Many of
22 these families and these individuals have come to see you in
23 your district offices. You've seen their letters; you've heard
24 from their parents. Some of you even listened to hundreds of
25 families describe their daily challenges back in March when you 52
1 had a hearing especially for them. When we talk about services
2 shutting down, these are the individuals it will affect. These
3 are the lives that will be disrupted.
4 DPW's new market-based rates will result in payment
5 to many providers of several hundred thousand dollars less than
6 their costs last year. And it's interesting, these will also
7 directly affect the people with intellectual disabilities that
8 have jobs in the marketplace.
9 Thousands of people with intellectual disabilities
10 go to work every day. They make products that are sold in the
11 private markets. These folks will lose their jobs as these
12 programs are forced to close their doors. You may have even
13 heard Secretary Alexander reference visits to some of these
14 places where the people we support are actively working in the
15 community, yet these are some of the programs that are most at
16 risk with these new proposed market-based rates.
17 On average, payment for these services will be cut
18 by nearly 30 percent among providers whose payments are being
19 reduced. Similarly, services to people in adult training
20 facilities will be cut by nearly 20 percent for providers whose
21 payments are being reduced. As we mentioned before, there are
22 winners and there are losers, which doesn't seem to be an
23 effective use of taxpayer dollars.
24 These untested market-based rates will cut payment
25 to some providers by millions of dollars, payment cuts which 53
1 are likely to force the closure. On the other hand, there are
2 some taxpayer dollars that will be wasted by provider rates
3 that will dramatically increase. We question a payment policy
4 that will pay some providers hundreds of thousands of dollars
5 more than their costs while at the same time forcing others to
6 go out of business. These aren't rates based on merit or how
7 well a provider has provided services in the past. There are a
8 lot of factors -- acuity, geography. The rates that we're
9 seeing are simply based on calculations, seemingly without
10 regard for the individuals that they'll impact.
11 DPW needs to go back to the drawing board and work
12 with the stakeholder community immediately to develop rates
13 that work for both the taxpayer and the people these services
14 are designed to support. In the meantime, we recommend that
15 DPW go back to setting rates, starting July 1, based on the
16 cost in last year's cost reports to ensure the continuation of
17 community-based services.
18 This is just one of the cuts that will create
19 significant challenges beginning July 1. There are more, and
20 I'm going to turn it over to my colleague, Linda Drummond, to
21 discuss some of those.
22 MS. DRUMMOND: Thank you.
23 I'm going to talk about people with intellectual
24 disabilities do not live "in the average," because that is what
25 DPW and ODP have determined with the new fee schedule and rates 54
1 that they are implementing.
2 These payment cuts mask another serious deficiency
3 in DPW's approach to setting rates for people with intellectual
4 disabilities. While DPW intends to pay providers at average
5 rates, the people we serve do not live "in the average" due to
6 their extensive disabilities and wide range of disabilities
7 that they have. Their needs and the cost for the services
8 required to meet their needs vary greatly. Not every provider
9 supports a group of people whose needs are, quote, "average."
10 People with medical conditions, for an example, are
11 more likely to spend time in hospitals than the average.
12 Unfortunately, even though most people with intellectual
13 disabilities are living far longer today in their homes and the
14 community than when they lived in State institutions in the
15 past, people living with medical conditions tend to pass away
16 at rates higher than the average.
17 Providers who specialize in serving these
18 individuals will be penalized financially by DPW's payment
19 policy that pays for residential vacancies as a statewide
20 average, and that vacancy factor is 97 percent. My agency's
21 providers are telling me that that will cover about 11 days of
22 a consumer being absent from a program. So for those who are
23 in the hospital, then in nursing homes, those who want to go on
24 vacation, those that want to go to a residential camp during
25 the summer, the provider, after about 11 days, will start to 55
1 lose money because they cannot bill for that time that the
2 individual is not there.
3 For more than 4 years, we have advocated for a
4 change in payment policy that would save State dollars by
5 generating additional Federal matching funds to recognize the
6 costs that providers must continue to incur when residents are
7 temporarily out of their group homes -- in the hospital,
8 visiting families, et cetera. We have advocated that the
9 State's policy recognize the critical differences among
10 providers of the people they serve through a system of
11 provider-specific occupancy factors in setting rates for
12 residential services.
13 DPW has chosen, however, to implement a statewide
14 rate based on averages that provides a windfall of taxpayer
15 dollars to some providers -- that would be providers where the
16 consumer never leaves the residential program -- and a
17 financial penalty to others, where consumers go home for the
18 weekend, go on trips, whatever. This basically makes no sense
19 to us.
20 An example of our concerns with payment policies
21 based on averages is DPW's decision to pay all providers and
22 each of three regions in the State the same amount for food and
23 housing costs. This simplistic approach to a key payment
24 policy again results in arbitrary and wasteful windfall
25 payments to providers who developed their group homes years ago 56
1 and are experiencing lower-than-average debt service, because,
2 as we know, mortgages and the cost of homes and rent was a lot
3 cheaper years ago. Regional costs for food and housing costs
4 also unfairly and arbitrarily penalize those providers who have
5 responded to DPW's request that they open new group homes in
6 recent years and are therefore incurring debt service costs
7 higher than the average.
8 We continue to advocate for a payment policy that
9 recognizes the differences between the needs of the people we
10 serve and the differences in the legitimate costs incurred by
11 different providers. In the meantime, existing payment
12 policies should be maintained until DPW can develop sensible
13 payment policies for these costs.
14 And before I turn this back over, I just wanted to
15 share with you that the second week -- we talked a little bit
16 about 800, at least 800 staff being laid off, and the second
17 week of September each year is recognized nationally as "Direct
18 Support Professionals Recognition Week." In September 2011,
19 Governor Corbett issued a proclamation for our direct support
20 staff, which we were very thankful for, and we also encouraged
21 a lot of different activities from that standpoint.
22 Our concern this year, with the money that has been
23 cut because of the rate adjustment factor in the current fiscal
24 year and the proposed rates for the next fiscal year, but
25 basically rather than handing them a recognition from the State 57
1 or the Governor recognizing their initiatives and their work,
2 they'll be getting their pink slip with their termination
3 notice.
4 Thank you.
5 MAJORITY CHAIRMAN DiGIROLAMO: Thank you.
6 With that, we're going to open it up for a few
7 questions. I understand we got permission to continue to use
8 the room until about 12:30, so we got a little bit extra time
9 past 12 o'clock. I have to leave at 12, and I'm going to turn
10 the hearing over then to Representative Tom Murt, who is the
11 Chairman of the Committee on Human Services.
12 With that, I'll give the Members who did not have a
13 chance to ask questions in the first round.
14 Representative Pashinski.
15 Mr. BIANCO: Mr. Chairman? Mr. Chairman, I would
16 ask that Members of the committee look at our testimony,
17 because we do offer some conclusions, essentially which state
18 that during this time of turbulence, and there is tremendous
19 turbulence, we are particularly concerned about not that
20 there's just topsy-turvy but in fact that there's turbulence
21 that's going to cause some services to crash in certain parts
22 of Pennsylvania.
23 And I think we described why we're concerned about
24 that, because no longer, as Deputy Secretary Friel reported to
25 you, no longer will people be paid at cost for a whole variety 58
1 of services that are nonresidential services, services provided
2 during the daytime, but they will be provided payment at rates
3 which may not sustain those services.
4 And so I ask that you'll look through the
5 conclusions that we do offer. Thank you.
6 MAJORITY CHAIRMAN DiGIROLAMO: Representative
7 Pashinski.
8 REPRESENTATIVE PASHINSKI: Thank you very much,
9 Mr. Chairman.
10 Thank you all for your testimony here today.
11 I'm troubled by the examples that you've given on
12 page 5, where some of your providers are going to be penalized
13 with less subsidy and certain other providers will receive
14 considerably more money than necessary.
15 Could you please establish for us here some specific
16 examples and offer your opinion as to why that is?
17 MR. BAXTER: Representative, in terms of one of the
18 key items that we discussed, which is the payments for room and
19 board, or we call food and housing, some providers developed
20 their programs 30 years ago and they paid off the mortgages for
21 those houses, those group homes. Other providers have entered
22 into leases the last 5 years, or have bought group homes with
23 the approval of the counties involved up to a couple of years
24 ago, and their debt service costs are much higher than the
25 average. 59
1 By setting a payment at an average rate, you overpay
2 some providers for no reason at all. It's a complete windfall,
3 and in my opinion, a waste of taxpayers' money. Why would you
4 pay someone for more than the cost of their mortgage or their
5 food and other providers are not going to be able to meet their
6 mortgage payments?
7 Now, we've advocated for a system there that
8 reimburses providers for the costs, for the fair costs of what
9 they're actually having to spend for food, for the clients, for
10 the mortgages, for the utilities, and for the home maintenance
11 that's required by licensing, and we think that the rates ought
12 to match what those costs are rather than overpaying some and
13 underpaying others, just because of the time in which they
14 developed their services and bought their group homes.
15 MS. SEDOR: Representative, in addition to the
16 timing, like Brian mentioned, the types of individuals that you
17 serve in group homes could also greatly fluctuate the rates
18 that you see.
19 For example, if you're dealing with somebody that's
20 nonambulatory, if they can't move on their own, you have to
21 ensure that their bedrooms are much larger, their hallways are
22 much larger. You have to have specialized bathrooms. If you
23 need more staff to assist someone, you need more off-street
24 parking. You know, these are things that aren't that
25 obvious. 60
1 You know, it might make a lot of sense on face value
2 to give folks a standard rate, but as Brian mentioned, it's
3 timing, it's geography, it's the people you serve, it's the
4 acuity levels at which they are able to function at. All of
5 these things come into the explanation of why rates vary around
6 the State.
7 REPRESENTATIVE PASHINSKI: Okay. And it's safe to
8 say that you're operating -- other than your debt service has
9 also increased. Your utilities have gone up; your food costs
10 have gone up; your fuel has gone up. Anything else that is
11 significant that would increase your costs?
12 MR. BAXTER: I think that's a lot of it. I mean,
13 the health benefits and insurance costs have also been going
14 up.
15 But here we're just simply talking about the
16 methodology for setting rates. Why would you set a rate for
17 everyone in a third of the State to be paid the same amount of
18 money for the housing costs to maintain and purchase a group
19 home when those costs vary from provider to provider, because
20 they serve different people, as Gabrielle said, and their costs
21 are appropriately different, or they happen to have done it at
22 a different time, 20 years ago versus last year.
23 REPRESENTATIVE PASHINSKI: But even eliminating your
24 debt service, the cost of providing your service will vary
25 dramatically from Philadelphia to Lancaster to Wilkes-Barre, 61
1 et cetera, so.
2 MR. BAXTER: Yes.
3 REPRESENTATIVE PASHINSKI: Now, since we have the
4 department here, has that been a consideration when you
5 developed the overall formula that you've put together?
6 DEPUTY SECRETARY FRIEL: I'm sorry; could you repeat
7 the question, please?
8 REPRESENTATIVE PASHINSKI: Yes.
9 We've gotten an excellent explanation about why it's
10 unfair, the system that the department has developed is unfair
11 in payment when some folks, because of a debt service or
12 reduction of debt service, are actually going to be making far
13 more money than those that are providing the service with new
14 debt service.
15 Keeping that in mind, was that involved, was that
16 issue discussed thoroughly, before you determined how to set
17 the rates for payments?
18 DEPUTY SECRETARY FRIEL: Yes. A couple of things,
19 if I could. I apologize; I'm having a hard time talking here.
20 I think I've overdone it already.
21 Related to the rates, first of all, a couple of
22 things. One, as I said earlier during my testimony, not
23 discounting the likelihood that for some providers there are
24 challenges, one of the interesting things is certainly, again,
25 if it was an outcome, it certainly wasn't the reason for 62
1 anything, but one of the interesting conversations we've had
2 with some providers -- and again, I want to make sure I say
3 this right -- not the reason why we applied a rate adjustment
4 factor.
5 I remember having a conversation when I stepped into
6 this role, at least in an acting capacity last spring -- and I
7 think it was referenced through this. I think there was a
8 $7,000 cap per person. It was a proposal the department had
9 then -- and I remember having a very good conversation with a
10 provider about what that would mean. It made sense to me
11 quickly. But during that conversation, I asked the provider a
12 question about an amortization table or a schedule of mortgage
13 payments they were showing me, and I asked what I thought was a
14 fair question, "Why are you paying that much interest?"
15 REPRESENTATIVE PASHINSKI: What was that?
16 DEPUTY SECRETARY FRIEL: Why are you paying that
17 interest rate? And I think to the point that some of the folks
18 here made, some of them do go back 3, 5, or greater years.
19 Again, and I wasn't trying to be disingenuous at
20 all, but what I thought, frankly, afterwards was, the reason
21 why they were still paying that interest rate was because it's
22 cost reimbursed.
23 One of the interesting things, again, not the reason
24 why we did the RAF, and I know it hasn't happened everywhere,
25 because it couldn't in some places, but I've had many 63
1 conversations with providers who have told me that when the
2 rate adjustment factor was applied, they did revisit leases;
3 they did renegotiate leases. They did revisit financing terms,
4 leverage for mortgages, and made appropriate reductions, and I
5 think it's good.
6 In terms of the delta, and I think it's pointed out
7 here -- and I don't like using the terms "winners" and "losers"
8 here. The difficulty, I think, here in terms of the change is
9 a philosophical one. I recognize some of the points here that
10 not everything is the same, but, you know, again, we're talking
11 provider-wide, we're not talking site-specific.
12 I will say this: Most of the folks here to my left
13 I've known for, some days I think too long, most days I would
14 say long enough. I know them, I've gotten along with them
15 well, but I will say this, and it's not meant disrespectfully
16 to them: I have a hard time listening to what is described as
17 the waste for providers who are overpaid when I recognize
18 historical arguments that have been presented to me where
19 providers, frankly, have asked for a cost-reimbursed system, a
20 cost-reimbursed system where on top of that we would add a
21 3- to 5-percent margin.
22 So I don't know if, when we talk about providers who
23 are debt free, in the example of the residential ineligible, or
24 even on the other fee schedules where the fee derived is excess
25 to their costs, I think I would describe that as what I call a 64
1 more manageable margin for us, but it also provides that. It's
2 certainly more manageable than 5 percent on top of potentially
3 $1.8 billion in costs, which we don't have but has been
4 suggested. So I don't know that it's wasteful.
5 I can say to you again that at some point to this
6 committee, we will provide you with a thorough, thorough
7 revenue analysis. That's ultimately, in essence, your
8 question -- did we consider it? -- and the answer is a
9 resounding yes.
10 REPRESENTATIVE PASHINSKI: Okay. And I appreciate
11 that. But even if you eliminated the debt service situation,
12 their costs are continually going up through utilities, food,
13 specific maintenance, et cetera, et cetera, and yet the dollars
14 are going down. So how do you, how do you come up with a fair
15 appraisal dollar amount of what the kind of money they need is
16 in order to provide those services?
17 I mean, if we don't provide enough, you've been able
18 to make sure that we've received the Federal dollars, because
19 we couldn't exist without the Federal dollars, right? Okay.
20 So we're just under that borderline on making sure that we
21 don't lose that. The question, though, that I have is, if
22 these folks or some folks are going to go out of business, then
23 that means people that are totally dependent on this service
24 will really have no other place to go other than an
25 institution. 65
1 And I look at the costs of an institution at
2 approximately $250,000; there is just no financial rhyme or
3 reason why we would consider that as the alternate course of
4 action. So at $250,000 an individual, it behooves all of us
5 here to come up with a solution to keep these people in
6 business so they can provide the service at a reasonable rate
7 that the taxpayers can afford.
8 We're all aware, you know, that we've tightened our
9 budgets here, but I believe that this group has definitely
10 shown how they have eliminated, I believe, all the extra costs
11 involved. You have, I believe, eliminated staff, and your
12 testimony has identified the fact that you are really down to
13 the bone and any further cuts will put you out of business, and
14 therefore, will put those patients, those clients, somewhere
15 other than home health care.
16 Now, this might be -- and bear with me,
17 Mr. Chairman. We did talk about this some time ago. We do
18 have everyone in the room, and I would ask that the department
19 seriously consider the ramifications of that decision. And
20 please, I'd ask you, for the sake of the patients, to
21 reevaluate what you're doing and try to come up with a figure.
22 Gene, is there a figure that you need in order to
23 balance this out?
24 MR. BIANCO: Well, we're talking about rates and not
25 the budget here--- 66
1 REPRESENTATIVE PASHINSKI: Yeah, but the rates will
2 provide you the budget.
3 Okay. I don't want to put you on---
4 MR. BIANCO: I think we showed it at $40 million in
5 terms of what would be needed in order to see that costs were
6 covered.
7 REPRESENTATIVE PASHINSKI: But what I'm
8 suggesting---
9 MR. BIANCO: State and Federal money.
10 Now, if you can just allow me a moment, because one
11 of the things we do want to clarify, in our testimony we've
12 indicated one of the difficulties in the system as we have
13 seen it through rate announcements is that what you have, as
14 Brian Baxter has explained to you, you will have winners and
15 losers. You will have, as Deputy Secretary Friel said, you
16 will have certain people having increases in their rates and
17 other people not having that increase. You will see certain
18 gives and takes.
19 What we're saying is that we're most concerned here
20 about what's being done, because what we have is a situation
21 where you will have failure, and the thing that we're most
22 concerned about is a system that pushes one toward failure, and
23 that's our chief concern and that's what we've tried to report
24 to you on.
25 REPRESENTATIVE PASHINSKI: Well, what I'm suggesting 67
1 is that there's a certain amount of dollars that is going to
2 level you out, okay?
3 MR. BIANCO: Right; right.
4 REPRESENTATIVE PASHINSKI: And I'm saying there is
5 some money that hasn't been touched yet in this budget---
6 MR. BIANCO: Yes; right.
7 REPRESENTATIVE PASHINSKI: ---and to prevent a
8 catastrophe where there may be human suffering involved, I'm
9 suggesting that we explore that avenue, okay?
10 MR. BIANCO: Right.
11 REPRESENTATIVE PASHINSKI: And again, both folks are
12 here and all of you are in the room; I wonder if you could
13 continue your conversation and then get back to us to
14 determine, you know, how we can help.
15 Thank you.
16 DEPUTY SECRETARY FRIEL: Can I respond as well,
17 please?
18 REPRESENTATIVE MURT: Yes.
19 DEPUTY SECRETARY FRIEL: Thank you, and thanks,
20 Gene.
21 A couple of things. One, there's not extra money in
22 the budget to make up the 40. Again, I don't want to make the
23 point for the folks here to my left, but I think the point is
24 that where you would derive the moneys for the shortcomings
25 would be from what they're describing as the "winners," I think 68
1 the net out of that.
2 Again, I think I don't -- I love being here. I love
3 the job, but I don't have to be here for 40 years, and a lot of
4 people stay that long. While I am here, I will do everything I
5 can to make sure that we have a more equitable system.
6 I understand it's going to be very difficult. I
7 understand that it's going to be challenging for some providers
8 to change their business models. We are committed to working
9 with them. We'll share with you folks and anybody else that we
10 can the revenues that we see forecast here.
11 Again, two points, if I could, to this. They're
12 both anecdotal. One is the story from last week where a
13 provider told me they were losing 31 percent. I'd like to sit
14 down at some point with that provider, and we did reach out to
15 them I think the day after, Thursday, but haven't completed the
16 conversation. Our data shows quite different. That's not
17 about trends or utilization.
18 The other one, again, is that what we're not hearing
19 is that when you do make these changes, the benefits long term,
20 because they're difficult. We can't fix this overnight, and
21 I've said that, not only to different providers -- and to me,
22 no disrespect -- but more importantly to a lot of the families.
23 It will take some time.
24 But I want to point out that on Thursday of last
25 week, 6 days after our rates went out, I had a conversation 69
1 with some folks in Philadelphia. One of our biggest concerns,
2 my biggest concern, has been the issue of placements in
3 institutions. It has been the issue of identifying providers
4 who can help us honor the settlements that we've made with
5 stakeholders in terms of moving folks out.
6 Four or five days after we promulgated the new
7 rates, suddenly -- and I think this is a good thing --
8 suddenly, four providers stepped forward and said "We'll do
9 it." And this came up, I know, a couple weeks ago on a Friday.
10 It was May 25 when the coalition and myself met with CMS, and
11 it was a fair point to be made: What impact is the RAF having
12 on inabilities to honor that agreement or move folks out? I
13 don't disagree. I do take it seriously. I do think that there
14 are some providers, I don't want to say they're "winners";
15 their revenues are better.
16 One I want to remind this committee of or share with
17 you is this: There's one in particular, the question asked
18 earlier -- are we working with providers in terms of a RAF
19 analysis? -- this is important. This provider over the
20 2 years, we're at 2 1/2 percent for 12 months-plus, 10, 11 up
21 to November 14 of this current fiscal year, and then the
22 6 percent forward has probably incurred a $3 million loss -- a
23 $2 to $3 million loss.
24 I've seen audited financials. I've seen financials
25 year-to-date through March. When we make the adjustment -- 70
1 this is one of those providers, again, where I think they did
2 not have the historical spend that insulated them from the RAF.
3 For this provider, the change there is different. They
4 actually, again, they're still going to have a challenge
5 because they've got a line of credit they have maxed out --
6 maxed out; $5 million; it's huge -- but the growth for them
7 moving to not an average rate but a market-based approach is
8 significant.
9 I recognize there are challenges, but I would ask
10 this committee, certainly the folks to my left -- again, I make
11 jokes, but these folks I've known for a long time -- we will
12 share the data with them. We'll work with providers if TA is
13 needed. It might be, because some of the numbers we have are
14 not quite as, if I could use the word, "draconian."
15 I think everybody should reserve that judgment until
16 -- I understand you probably couldn't do a scientific survey.
17 We did a very precise -- I was not doing a fee schedule this
18 year again after last year until I knew every darn thing about
19 every provider in terms of what it meant in terms of revenue.
20 And that's not to sugarcoat it that there's not challenges;
21 there are. But there are providers, I think, and the system is
22 all -- it's not maybe as bad as you might think.
23 MR. BIANCO: I think that our testimony has been
24 focused on the equity provided to individuals who will lose
25 service. Is it fair to the individuals whom you've pledged 71
1 providing service to that they will have provider organizations
2 not able to provide service, and in certain areas of the State,
3 and we don't quite know where, when, or how, because this
4 assessment is being conducted right now. After all, rates were
5 just announced -- was it 1 or 2 weeks ago? -- 10 days ago. We
6 don't know the impact, but the impact may be that, and we're
7 focused on the impact.
8 No anecdote can cure it. No piece of statement
9 about the aesthetic of a rate system can cure it, and no appeal
10 that rate systems will create incentives to save money -- of
11 course they do -- that won't cure it either. We need to pay
12 attention to failure in various districts and places throughout
13 Pennsylvania, and that's what we've come to you to talk about,
14 the possibility of that failure in this system given these
15 approaches and given the experience we've had over the last
16 2 years.
17 REPRESENTATIVE PASHINSKI: Thank you, Mr. Chairman.
18 Thank you.
19 REPRESENTATIVE MURT: We have, I think, two more
20 questions and one more testifier.
21 MR. BIANCO: Okay; that's fine.
22 REPRESENTATIVE MURT: Representative Dean.
23 REPRESENTATIVE DEAN: Thank you, Representative
24 Murt.
25 Welcome, and I'm a brand-new member of this 72
1 committee, so I hope you'll bear with me. I really appreciate
2 your testimony, both of the department and of the coalition
3 today. It's very informative to me.
4 So as I say, I'm brand new to this conversation;
5 what I'm not new to is constituents and families who talk about
6 the difficulties they're having. And so my question is really
7 if you could help me simplify the complex and costly issue
8 we're talking about here by giving me some numbers to follow
9 up, really, on what Representative Pashinski says. What is it?
10 What is the need, the dollar need, to, A, deal with the waiting
11 list, because everybody seems committed to recognizing this is
12 a disastrous problem and one that has gone on for way too long.
13 What's the dollar line item that that would take to really,
14 truly address that? And then on the cost side, on the rate
15 side, what's the line item number that it would take? Just to
16 help somebody new like me.
17 MR. BIANCO: Well, I'm going to have various folks
18 who have studied this address it. But I would tell you this,
19 is that we are looking to the rate system itself. So this has
20 to do with manmade turbulence that comes from what is done in
21 terms of designing a rate system. So it may come from the rate
22 system itself.
23 Then there's the matter of, is there sufficient
24 money in the Department of Public Welfare to set the rates
25 right, which is a second set of questions. 73
1 REPRESENTATIVE DEAN: Right.
2 MR. BIANCO: So for the second set, and I think
3 that's what you're primarily focused on, let me have Mr. Baxter
4 and Ms. Sedor talk to that.
5 MR. BAXTER: One of the things that the coalition
6 has done each year and we did again this year is to provide
7 every Member of the Legislature with a detailed analysis of the
8 budget and what we think it would take to solve problems. And
9 we had sent to all of you about 2 weeks ago a set of
10 recommendations, and one of them was around the waiting list,
11 and we had recommended an increase of $15 million in State
12 funds for this fiscal year.
13 That would do three things. It would provide for
14 the 700 graduates of special education, that I'm sure parents
15 have come to see you about, that would provide them with an
16 appropriate work opportunity or training program during the day
17 for the upcoming year. It would provide for the needs of the
18 sons and daughters of 431 parents who are over 60 years old
19 and, as Representative Murt indicated, someone in their
20 seventies and eighties and nineties, who for the most part
21 their sons and daughters will need an around-the-clock,
22 year-round residential program. And I think that the cost to
23 take care of those folks we detailed at about $9.8 million.
24 And we also recommended in some of our discussions with the
25 department and Kevin here in particular to look at the 200 of 74
1 the 300 folks on the waiting list who have been determined to
2 need life sharing or family living or shared living, however
3 you want, whatever terminology you want. So for another about
4 $2 million, you could get those programs started this year.
5 So we've detailed, I think, the major needs that are
6 here today, not all of the 16,000 people on the waiting list
7 but the people who have the greatest needs, and for $15 million
8 in State funds in this year's budget, we could resolve those
9 needs.
10 REPRESENTATIVE DEAN: Thank you for that.
11 REPRESENTATIVE MURT: One more question.
12 Representative DeLissio.
13 REPRESENTATIVE DeLISSIO: Thank you.
14 Linda mentioned that at some point during dialogue,
15 there was a way to pull down additional Federal funds?
16 MS. DRUMMOND: Yes. In the waiver programs,
17 actually it's a combination of Federal and State dollars. The
18 formula is called an FMAP, Federal Medical Assistance
19 Percentage, match which changes each year. But right now, it's
20 basically about 55 percent Federal to 45 percent of State
21 dollars that are spent.
22 So with Medical Assistance, when we're talking about
23 the vacancy factor and people billing when people are not there
24 and we use a correct vacancy factor, provider-specific, then
25 that can be matched with Federal dollars when we're billing for 75
1 those services.
2 REPRESENTATIVE DeLISSIO: Thank you.
3 REPRESENTATIVE MURT: Any other questions for our
4 panelists?
5 Linda, Gabrielle, Gene, Mr. Baxter, thank you very
6 much for your testimony.
7 MR. BIANCO: Thank you very much.
8 REPRESENTATIVE MURT: We have one more testifier.
9 Thank you very much, Mr. Murphy, for hanging in there. Is Mark
10 here?
11 Mark Murphy is the CEO of the Disability Rights
12 Network of Pennsylvania. Thank you, Mark, for testifying
13 today.
14 MR. MURPHY: Thank you. I appreciate the
15 opportunity to testify.
16 I've submitted written testimony, and given the
17 hour, I will abbreviate and just hit some highlights of some of
18 the issues that I want to make sure this committee is aware of.
19 As many of you know, DRN is a statewide nonprofit
20 organization that advocates on behalf of people with
21 disabilities and their families. We don't provide direct
22 services, and none of the payment policy issues which are being
23 discussed here will affect us directly as an organization.
24 However, we believe those policies will have a profound and
25 negative impact on people with intellectual disabilities, and 76
1 my purpose today is to make the committee aware of some of the
2 significant negative implications that these payment policies
3 will have on people for whom DRN advocates.
4 People with intellectual disabilities need lifelong
5 supports and services. Many people with intellectual
6 disabilities have other medical conditions or disabilities --
7 blindness, mobility impairment, seizure disorders. And in many
8 cases, individuals live with their families through much of
9 their lives, but then at some point, as I think you all know,
10 it becomes very difficult, if not impossible, for families to
11 provide all of the support their sons or daughters need.
12 There's only one place where families can go for
13 help. The only support available is under the Commonwealth's
14 Medical Assistance Program through one of two
15 federally-supported waivers. Intellectual disability services
16 are not covered by private insurance and there isn't a
17 private-pay element, so the Commonwealth's Medical Assistance
18 Program, the use of the waivers, and also the programs that are
19 funded by State dollars are how these services are funded.
20 There are no other options.
21 And as you know, these services are provided by
22 providers with funding from ODP. But if, as a result of
23 changes in these ODP payment policies, there's a decrease in
24 the amount of funds available, costs can't be shifted
25 elsewhere. The providers have to absorb the effects of 77
1 decreased funding, which in turn directly affects the people
2 who rely on these crucial services.
3 We've recently seen at least two trends that are
4 directly related to the changes in provider funding. First, it
5 has been increasingly difficult to find services for people
6 with medical and behavioral complexities; and second, we see
7 more and more critical situations where people in need are
8 going without services. These failures to ensure access to
9 necessary waiver services not only hurt people and their
10 families, they ultimately end up costing State and Federal
11 taxpayers more money.
12 You've heard from others about the various problems
13 that they see regarding the rate policies that ODP has
14 implemented. I want to focus on just a couple of issues about
15 how the policies negatively affect people who rely on these
16 services.
17 We at DRN are frequently contacted concerning
18 individuals who can no longer live at home but for whom no
19 provider is willing to develop services. There's no question
20 that these people can live in the community, most of them are
21 in the waiver already, but providers are unwilling to provide
22 the services necessary, oftentimes residential services, so
23 people would be able to leave their family home and get the
24 services that they need.
25 We're being told repeatedly that the changes in 78
1 payment policies have resulted in no provider being willing to
2 serve these individuals. And as I've said on many occasions,
3 the people don't disappear, their needs don't disappear, and
4 what happens is, if they're not served by qualified providers
5 in properly funded programs, they end up in more costly
6 emergency rooms, psychiatric hospitals, or State-operated
7 institutions.
8 We've heard on a number of occasions already the
9 cost differential for the $250,000 figure. We've worked on
10 behalf of numerous clients who are entitled to waiver services,
11 have been in waiver services, and the provider simply says
12 "We're not able to serve them anymore," and they have in fact
13 ended up institutionalized in one of the State centers at a
14 cost, an annualized cost, in excess of $250,000. So that not
15 only causes harm and injustice to people with intellectual
16 disabilities who are forced to leave their community, but
17 taxpayers also pay far more than is necessary.
18 You also have, in some sense, the reverse problem.
19 You have people in hospitals, and particularly State centers,
20 who don't want to be there and who want to leave. They can't
21 leave, however, because providers are not willing to develop
22 programs for them given the current ODP policies. Again, this
23 is a problem because you end up providing services to people in
24 an institution that they neither need nor want, all at
25 significantly greater expense. 79
1 This continues to be a problem, particularly for
2 people with more significant needs -- behavioral needs, medical
3 needs. These are really the people on whom these policies are
4 falling hardest. People who are, for lack of a better term,
5 easier to serve do not have as many issues that need to be
6 addressed by providers. They're less impacted, though they're
7 impacted somewhat. But people who have significant
8 intellectual disabilities, medical issues, behavioral problems
9 that are attached to their disabilities, they're the ones who
10 really suffer under these policies.
11 One fallout that we've heard frequently and that
12 many providers have told us as they face decreased funding,
13 they reduce their clinical staff. Those are psych nurses,
14 psychologists. Those are the people who help develop programs
15 and help ensure that the quality of those programs is better.
16 So obviously if providers have to cut and they cut there,
17 that's going to have a direct impact on the quality of the
18 service that people get.
19 In addition, fewer providers are willing to develop
20 new services. As that happens, that cuts down on people's
21 ability to choose. Under the Medical Assistance law, people
22 are supposed to have a choice of qualified providers. As fewer
23 providers are willing to provide these services and expand the
24 services that they have, people end up not getting a choice of
25 providers and oftentimes end up in services that they really 80
1 don't need or want, and I give several examples of that in my
2 testimony.
3 And then finally, what we've started to see, which
4 is really in many ways most alarming, is that you have people
5 in service, who have been in service for some period of time,
6 and providers are making decisions to terminate their services.
7 So this is not an issue of people who are either out of service
8 trying to get in or people who have some degree of service,
9 some level of service, and want more; we've now started to see
10 people in service, who have been in service for years, and
11 providers are saying "We're not going to serve these people
12 anymore" and they begin termination proceedings to get them out
13 of their programs.
14 And as I mentioned before, people with intellectual
15 disabilities have nowhere else to go, and if these providers do
16 in fact try to terminate them and are successful in terminating
17 because of these payment policies, because they feel they're
18 not getting paid sufficient amounts to serve people who are
19 harder to serve, people end up in institutions at higher costs.
20 Costs, as I say in my testimony, will simply go up in these
21 situations.
22 And, you know, it's important to note, Pennsylvania
23 has a long and proud history of providing services to people in
24 the community. The providers and the advocates and DPW have
25 worked over the years to get this system to where it is, where 81
1 thousands of people are receiving community services, and we're
2 starting to see this disturbing trend where more people are
3 being institutionalized; people are unable to get into the
4 system. So that's obviously extremely problematic from the
5 point of view of the individuals with disabilities and their
6 families.
7 And, you know, I think it's important to say and
8 what I hope people already know is that, with all due respect
9 to the people who came before me -- this is not about DPW; this
10 is not about the providers -- this is about people with
11 intellectual disabilities and their families who for so long
12 have borne the burden of dealing with their loved ones.
13 Obviously DPW and the providers play, you know,
14 obviously, a crucial role in the system and we're all in this
15 together, but at the end of the day, all of these policies have
16 to work for people with intellectual disabilities or their
17 families, and if it doesn't lead to higher-quality services, if
18 it doesn't lead to more services given the number of people on
19 the waiting list, as Representative Murt eloquently said
20 earlier, where we have hundreds of people on the waiting list
21 whose family members are over 60; we have about 150 people on
22 the waiting list who are themselves over the age of 60, the
23 individuals, not their families, that's how long they've been
24 waiting for service; we have 700 or so, every year, graduates
25 who come out of high school and may end up with no service 82
1 because there has not been a waiting-list initiative. So this
2 issue is not going to get any better unless there are people
3 working on it more intently, and obviously we need the funding.
4 So I think with that I will just end my remarks, and
5 if there are any other questions, I'd be happy to answer them.
6 REPRESENTATIVE MURT: Just one, Mark, if you don't
7 mind.
8 I would like to know your opinion of the Governor's
9 block grant proposal for services.
10 MR. MURPHY: Well, I could talk for 2 hours just
11 about that. But I think the block grant proposal is -- I think
12 Representative DiGirolamo had it right -- it's going to be a
13 disaster if it's implemented on July 1. It runs the risk of I
14 think gutting certainly the mental health system, which, as you
15 may know, is about 73 percent of the funds going into the block
16 grant. Intellectual disabilities is about 18 percent of that.
17 So, you know, just as a mathematical concept, if
18 90 percent of a block grant funds people with mental illness
19 and intellectual disabilities -- both services, as we know,
20 don't have enough money. There are waiting lists in every
21 county in the Commonwealth for both of those services. The
22 idea that 90 percent of the money may be used for other
23 services, whatever the merits of those other services, it's
24 hard to see how people with intellectual disabilities and how
25 people with mental illness are not going to suffer greatly 83
1 under a block grant when they're 90 percent of the block grant.
2 It's not like it's an even, you know, distribution of funds.
3 And then I would also add one other point. This
4 goes to the issue that several of the Representatives have
5 raised about the ability of family members, people with
6 disabilities, to be part of the process. This is the most
7 significant if not radical change to how services to people
8 with intellectual disabilities and mental health issues will be
9 served since the passage of the MHID Act, and yet not a single
10 person that I'm aware of with mental illness, intellectual
11 disabilities, their family, their advocates, has been a part of
12 the process.
13 DPW has been locked in a room with CCAP, and they're
14 making all the decisions, and all the decisions are being made
15 and all the issues are being worked out without any input
16 whatsoever, as far as I'm aware, of providers, the people who
17 will be directly impacted, advocates. It's just DPW and CCAP,
18 and they're apparently just going to present a final product to
19 the rest of the world. And I just think it's extremely
20 problematic that the people most directly affected have been
21 completely shut out of that process.
22 REPRESENTATIVE MURT: Would you feel more
23 comfortable if the block grant approach was pilot programmed?
24 MR. MURPHY: Yeah. I believe a block grant is not a
25 good idea, but we certainly would be -- if people think that it 84
1 might be a good idea, the way to do it is to test it first
2 through a pilot. You take a bigger county, a smaller county,
3 maybe a more rural county -- there are ways to do it that will
4 actually have actual data and lead to some empirical evidence
5 about whether it will work or not.
6 And so while my general inclination is to not be --
7 I think a block grant is, given the services that are involved
8 and the chronic underfunding of those systems, the block grant
9 is not the way to go. At a minimum, let's not start with, you
10 know, a block grant when we don't know what's going to happen
11 as opposed to a pilot to see -- again, get some empirical
12 evidence about whether it will work or not.
13 I don't think anyone knows whether it will work.
14 And you can talk all you want about flexibility, but there's
15 just not enough flexibility in the world to make up for that
16 kind of money. You know, there is only so much paperwork, only
17 so many audits. I mean, you can eliminate those requirements.
18 But again, when 90 percent is going to come from people with
19 intellectual disabilities and the mental health, and they're
20 talking about adding children's services in there, I mean,
21 these are tremendously costly systems, and it's very difficult
22 to see how the people with the most skin in the game, which is
23 people with intellectual disabilities and particularly people
24 with mental illness, are not going to lose out under these
25 block grant proposals. 85
1 REPRESENTATIVE MURT: Thank you, Mark, for your
2 testimony.
3 MR. MURPHY: Thank you very much.
4 REPRESENTATIVE MURT: That will conclude our
5 hearing.
6 I do want to thank some of the individuals that
7 helped put together today's hearing. Liz Yarnell and Pam Huss
8 on our staff, thank you very much. I also want to thank
9 Gabrielle Sedor and Alyssa Goodin for their contributions in
10 putting together today's hearing.
11 Okay; thank you very much. Secretary Friel has
12 agreed to stay for a few minutes, if anyone wants to ask him
13 any questions.
14 Thank you again. And just one last comment.
15 Secretary Friel, you have our collective resolve to work with
16 you. We know that we're going to get to the finish line
17 together. And, you know, I know that we have disagreements
18 about different things, but, you know, rest assured that we
19 will work together with you and the administration to try and
20 provide the funding that's required to care for this special
21 population. So thank you.
22 Thank you for attending today. Thank you to our
23 testifiers.
24
25 (The hearing concluded at 12:25 p.m.) 86
1 I hereby certify that the foregoing proceedings are
2 a true and accurate transcription produced from audio on the
3 said proceedings and that this is a correct transcript of the
4 same.
5
6 Debra B. Miller
7 Committee Hearing Coordinator/
8 Legislative Reporter
9 Notary Public
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11 Erin E. Miller
12 Transcriptionist
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