Cost Analysis Background, Results to Date, and Setting Fees

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Cost AnalysisBackground, Results to Date,and
Setting Fees

• George H.W. Gerry Christie
• Health Policy Analysts
• 114 Dewberry Lane
• Syracuse, NY 13219
• ghchristie_at_worldnet.att.net

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OBJECTIVES

• Describe the results of the second round of CA.
• Discuss the Third Round of CA.
• Using the Cost Analysis to Set Fees

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Why Are We Doing The CA?

• The Federal Guidelines require it.
• Individual programs need to know the cost of
  providing services.
• To assist in negotiating rates with various rate
  payers (including Medicaid).
• It is GOOD business!

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Why Are We Doing The CA?

• The goal of Title X is to insure that individuals
  from low income families have access to
  affordable family planning care.
• Title X encourages programs to insure those at
  the lower end of the income scale are able to
  receive services.

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Each Program Is Expected to Develop Realistic
Fees That

• Reflect the cost of operation
• Are competitive to the local market
• Are based on a Cost Analysis.

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Knowing The Cost of Providing Services Is an
Important Business Practice

• Provides the knowledge to develop, implement and
  analyze efficiencies
• Helps control costs.

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The Cost Analysis

• Knowing The Cost of Providing Services Is an
  Important Business Practice
• Provides the knowledge to develop, and implement
  efficiencies in the program
• Helps control costs.

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The Cost Analysis

• The cost in each program is driven by the
  expenditures and the client utilization for the
  year.

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The Cost Analysis

• There were a number of slight revisions for 2006
• Combined Counseling with the Medical cost center
• Established a Global Fee for Tubal Ligation
• Added ECPs.

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The Cost Analysis

• The Cost Center Report was developed to assist
  agencies in distributing costs (expenses)
  associated with the provision of the various
  types of services provide in the Texas Family
  Planning Program.

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The Cost Center Report

• The information required to determine costs are
  available from your accounting system and reports
  from your Patient Management/ Clinic Visit Record
  (CVR) system.

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The Cost Centers Chosen for the DSHS Family
Planning Program.

• Medical (including Counseling/Patient Education)
• Laboratory
• Pharmacy
• Community Outreach
• Administration (allocated later)
• Facilities (allocated later)

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The Cost Centers Chosen for the DSHS Family
Planning Program.

• Medical, laboratory, and pharmacy costs are
  determined separately to provide a comprehensive
  picture of costs to the agency and to "unbundle"
  fees.

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The Cost Analysis

• The agency must define their Title X and Title XX
  Family Planning Program. (This also includes
  Title XIX.)
• The same services may be provided to both Title X
  and Non-Title X clients.
• Need to be able to allocate services to the
  appropriate program.

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What Happened This Year?

• Revised the cost analysis by combining the
  Medical and Counseling forms into a single sheet
• Identified agencies in selected health districts
  to be trained in the methodology.

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What Happened This Year?

• Programs were asked to complete the Cost
  Analysis for a time frame ending in 2006.
• Provided on-site TA for selected agencies needing
  extended help
• Returned comments/questions to each agency after
  the first draft.

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What Happened This Year?

• We used the average cost per unit of service
  from the participating contractors as indicators
  of the average costs for providing services in
  the TX family planning program.
• Please see the handouts.
• This allows the state to have a baseline Cost
  Analysis that programs could use.

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The Cost Analysis

• Medical Sheet (including Counseling/Patient
  Education)
• Provides the average cost per unit of service for
  all clinical/counseling services.
• 2006 0.73 Target 0.85 1.25

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The Cost Analysis

• Laboratory Sheet
• Provides cost for both in-house lab work and that
  sent to reference labs.
• 2006 0.54 (Same as last year).
• Target 0.25 0.35 (Varies due to different
  prices at reference labs.)

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The Cost Analysis

• Pharmacy Sheet
• Still a high cost per unit of service (1.48).
• May need to encourage programs to report amounts
  based on utilization rather than purchases.

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Establishing Fees
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The Cost Analysis

• Based on the Cost Analysis, your program should
  establish the unbundled cost for providing all
  program services.
• This is the basis for establishing the fee
  schedule for the coming year.

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Establishing Fees

• The last column on each form can be used in two
  ways. First
• Once the costs have been determined for the past
  year, they can be compared to the fee schedule
  that is currently in place.
• This is done before adding any Cola/margin and
  can indicate whether you have covered the cost of
  services using the fee schedule.

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Looking At Fees

• The last column on each form can be used in two
  ways. Second
• After input of the COLA/Margin, fees can be set
  for the coming year to capture the anticipate
  cost of providing each service.

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Looking At Costs

• The cost per procedure information is useful for
  managers in establishing charges and for
  analyzing the benefit of continuing to provide
  specific services.
• This has also been used to develop preliminary
  state wide costs.

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Establishing Fees

• charges to persons from families whose annual
  income exceeds 250 percent of the (poverty level)
  will be made in accordance with a schedule of
  fees designed to recover the reasonable cost of
  providing services.

42 CFR Part 59.5(8)
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Establishing Fees

• Agencies must, Provide that charges will be made
  for services to persons other than those from
  low-income families in accordance with a schedule
  of discounts (SOD) based on ability to pay

42 CFR Part 59.5(8)
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Establishing Fees

• The fees established through the cost analysis
  represent the amount to be charged clients with
  incomes greater than 250 of the current poverty
  level.

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Establishing Fees

• These fees should
• Reflect the cost of operation
• Be competitive in the local market.
• Represent the reasonable cost for providing the
  service.

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Establishing Fees

• The fee schedule should list EVERY item that will
  result in a charge to the client or third party
  payer.
• Generally, you should not have charges for
  services that do not exist in the CPT/HCPCS
  manuals.
• (charges that, potentially, will not be covered
  by third party payers.)

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Establishing Fees

• Every fee that is on your fee schedule must be
• Established based on the cost analysis
• Have the schedule of discounts applied if it is
  part of your Title X family planning program.

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Establishing Fees

• What happens if the fees that are established by
  the cost analysis are not affordable for the
  program clients?
• (That is, the costs are substantially higher than
  the fees you have been charging.)

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Establishing Fees

• You need to examine why it is costing so much to
  provide the service.
• This is a time to review efficiencies that can be
  implemented in the program.
• Are you using appropriate staff to provide the
  services?

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Establishing Fees

• Do you have sufficient utilization?
• Can you / should you continue to provide the same
  services?
• Can you / should you continue in the Title X
  program?
• Can you afford to stay in business?

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Establishing Fees

• What is the cost of comparable services in your
  area?
• Are you competitive?
• Do you offer more than, the same, or fewer
  services as other providers?
• Can you afford to continue offering all these
  services?

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Establishing Fees

• If your current fees are too low, you do not have
  to increase fees all at once.
• By increasing fees by some amount and increasing
  efficiencies, your costs may not be as high on
  the next cost analysis.
• It is important to remember, fees need to be
  competitive to the local market.

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Schedule of Discounts and the Sliding Fee Scale

• Programs must realize that the Schedule of
  Discounts does not exist in isolation from the
  Fee Schedule.

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Schedule of Discounts and the Sliding Fee Scale

• The percentage breaks established on the schedule
  of discounts are to be applied to the fees on the
  fee schedule.

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Schedule of Discounts and the Sliding Fee Scale

• This means a schedule of discounts with 20
  breaks will have fee reductions of 20 from the
  full fee level representing the reasonable cost
  of providing services.
• (The first step at 250 of poverty.)

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Schedule of Discounts and the Sliding Fee Scale

• The same percentages must be applied to supplies
  and lab services.
• It is NOT permissible to have a different sliding
  fee scale applied to supplies or laboratory
  services.

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Schedule of Discounts and the Sliding Fee Scale

• This does not mean that every amount is exactly
  the percentage discount from the reasonable cost.
• You do not have to add cents to the amounts (you
  can round up or down).
• However, the charges should retain the sense of
  proportionality.

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Schedule of Discounts and the Sliding Fee Scale

• If the fee scale has a category (or more than
  one) above the 250 level, the percentage breaks
  on the schedule of discounts must be applied to
  the fees at the level representing 250.

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Discounts are calculated from here!
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Schedule of Discounts and the Sliding Fee Scale

• Fees must be waived for
• individuals with family incomes above this amount
  (250) who, as determined by the service site
  project director, are unable, for good cause, to
  pay for family planning services.

Guidelines 6.3
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Schedule of Discounts and the Sliding Fee Scale

• On your Sliding fee scale you should have a note
  at the bottom that says downward adjustments
  may be made based on individual circumstances.

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Schedule of Discounts and the Sliding Fee Scale

• These adjustments are made by the Project
  Director or designee functioning on behalf of the
  Director.
• The Director should do an audit to determine if
  the policy is being appropriately implemented.

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Schedule of Discounts and the Sliding Fee Scale

• You DO NOT recalculate the income and the family
  size to make the adjustment.
• Generally, the scale position is reduced by one
  level and the client is told that the scale
  position will be re-evaluated at the next visit.

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Elements of the Family Planning Visit

• Those items that are part of your family planning
  program must be placed on the sliding fee scale.
• These are specified in the guidelines as required
  services, in your proposal as part of your work
  plan, and the Notice of Grant Award.

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Elements of the Family Planning Visit

• All physical examination and laboratory test
  requirements stipulated in the prescribing
  information for specific methods of contraception
  must be followed.
• These must be provided on the sliding fee scale.

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Elements of the Family Planning Visit

• Projects offering services not required by Title
  X should seek other funding for such services.
• Projects are not required to apply the SOD to
  services not specified as required Title X
  services.

Guidelines 6.3
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Elements of the Family Planning Visit

• However, If you provide services that are not
  Title X supported, you must be able to show how
  you are paying for these services.
• This includes staff, facilities, supplies, and
  all other related costs.

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Elements of the Family Planning Visit

• There are some services that are required in
  certain circumstances and not required in others.
• Several lab tests fall into this situation.

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Elements of the Family Planning Visit

• It is often easier to provide a universal
  discount for those lab tests that have to slide
  in some circumstances rather than to slide lab
  tests for some patients and not for others
  depending on their method.

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Discussion