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Read this is you are a director or manager at a Health and Human Services agency in charge of modernizing your state's Health and Human Services systems. 

When states start to look at outdated Health and Human Services systems like Eligibility Systems or Medicaid Enterprise Systems, they spend a lot of time on strategic planning efforts and addressing technology deficiencies that set the direction for their agencies. While they pay a lot of attention to the technology aspects of the work, they often overlook others. Here are three to pay attention to: 

1. Business process improvement
2. Organization development
3. Organizational change management

Including these important steps in strategic planning often improves the likelihood of an implementation of Health and Human Service systems that provide the fully intended value or benefit to the citizen they help serve. When planning major system improvements, agencies need to have the courage to ask other critical questions that, when answered, will help guarantee greater success upon implementation of modernized system.

Don’t forget, it’s not only about new technology—it’s about gaining efficiencies in your business processes, structuring your organization in a manner that supports business process improvements, and helping the people in your organization and external stakeholders accept change.  

Business process improvement 

When thinking about improving business processes, a major consideration is to identify what processes can be improved to save time and money, and deliver services to those in need faster. When organizations experience inefficiencies in their business processes, more often than not the underlying processes and systems are at fault, not the people. Determining which processes require improvement can be challenging. However, analyzing your business processes is a key factor in strategic planning, understanding the challenges in existing processes and their underlying causes, and developing solutions to eliminate or mitigate those causes are essential to business process improvement.

Once you pinpoint areas of process improvement, you can move forward with reviewing your organization, classifying needs for potential organization development, and begin developing requirements for the change your organization needs.

Organization development

An ideal organizational structure fully aligns with the mission, vision, values, goals, and strategy of an organization. One question to ask when considering the need for organization development is, “What does your organization need to look like to support your state’s to-be vision?” Answering this question can provide a roadmap that helps you achieve:

1. Improved outcomes for vulnerable populations, such as those receiving Medicaid, TANF, SNAP, or other Health and Human Services benefits 
2. Positive impacts on social determinants of health in the state
3. Significant cost savings through a more leveraged workforce and consolidated offices with related fixed expenses—and turning focus to organizational change management

Organization development does not stop at reviewing an organization’s structure. It should include reviewing job design, cultural changes, training systems, team design, and human resource systems. Organizational change is inherent in organization development, which involves integration of a change management strategy. When working through organization development, consideration of the need for organizational change should be included in both resource development and as part of the cultural shift.

Organizational change management

Diverging from the norm can be an intimidating prospect for many people. Within your organization, you likely have diverse team members who have different perspectives about change. Some team members will be willing to accept change easily, some will see the positive outcomes from change, but have reservations about learning a new way of approaching their jobs, and there will be others who are completely resistant to change. 

Successful organizational change management happens by allowing team members to understand why the organization needs to change. Leaders can help staff gain this understanding by explaining the urgency for change that might include:

• Aging technology: Outdated systems sometimes have difficulty transmitting data or completing simple automated tasks.
• Outdated processes: “Because we’ve always done it this way” is a red flag, and a good reason to examine processes and possibly help alleviate stressors created by day-to-day tasks. It might also allow your organization to take care of some vital projects that had been neglected because before there wasn’t time to address them as a result of outdated processes taking longer than necessary.
• Barriers to efficiency: Duplicative processes caused by lack of communication between departments within the organization, refusal to change, or lack of training can all lead to less efficiency.

To help remove stakeholder resistance to change and increase excitement (and adoption) around new initiatives, you must make constant communication and training an integral component of your strategic plan. 

Investing in business process improvement, organization development, and organizational change management will help your state obtain the intended value and benefits from technology investments and most importantly, better serve citizens in need. 

Does your organization have interest in learning more about how to help obtain the fully intended value and benefits from your technology investments? Contact our Health and Human Services consulting team to talk about how you can incorporate business process improvement, organization development, and organizational change management activities into your strategic planning efforts.

Read this if you have a responsibility for acquiring and implementing victim notifications for your jurisdiction.

In the first article of this three-part series we explored the challenges and risks associated with utilizing multiple victim notification systems across your state. In this article we will explore what the choices are to address these challenges. 

System elements to consider

Many jurisdictions are under the impression that there are only one or two choices for victim notification systems. Though there are certainly market leaders in this space, you should select a system model that best meets your jurisdiction’s profile. The profile may include some of these elements:

• Risk aversion (i.e., How risk averse is your organization regarding system implementations?)
• Budget (i.e., How will the initial project be funded? Does your jurisdiction prefer an annual subscription model, or a traditional perpetual license with annual maintenance and support fees?)
• Staff (Who do you need to implement and maintain the operational system?)
• Time (i.e., Are you already out of compliance with state statutes?)
• Hosting environment (i.e., Do you want to host in the cloud or on premise?)
• Victim notification reach (i.e., state-wide, single jurisdiction, multiple justice partners)
• Victim notification policy and statute complexity
• Data ownership (i.e., To what degree does your jurisdiction enable the selling of victim notification data outside of the jurisdiction?)

Victim notification solutions range from hosted commercial off the shelf (COTS) solutions, which are typically least expensive; to custom solutions developed to address jurisdiction-specific needs. The latter tend to be more expensive, riskier than turnkey solutions, and take longer to operationalize. However, if your jurisdiction has unique requirements for victim notification, this may be a viable option. Unless you plan to engage the development vendor in a long-term contract for maintenance of this type of system, you must consider the impact on your existing IT staff. “Platform” solutions are a hybrid of COTS and custom development. With these solutions, there is typically a platform (i.e., Customer Relationship Management or CRM) on which the victim notification system is developed. Using a platform de-risks the development of the application’s architecture, may be a slightly less costly approach, and may simplify the maintenance of a system that is addressing unique requirements.

You may also already have licenses for victim notification capabilities, and not even realize it. Some offender management systems (OMS), jail management systems (JMS), and even prosecution systems (that support victim advocacy functions) may have built-in victim notification functionality included for the licensing price you are currently paying, or may include the option to purchase an add-on module. 

Advantages of using victim notification capabilities packaged with an existing system may include:

• Lower acquisition and maintenance costs
• Tighter integration with the OMS, JMS, or prosecution system may result in more seamless utilization of offender and victim data
• You have a single contract, with a single vendor, reducing contract management overhead

A likely disadvantage, however, is the victim notification functionality may not be a robust as a point solution, or custom-built system. Additionally, if the “reach” of the JMS is a single county, then victim notification capabilities built into your JMS may not suffice for statewide use. However, if the built-in functionality meets your needs, then this is certainly a viable path to consider.

As mentioned in the first article, regardless of your approach the integration between your victim notification system and the JMS, OMS, prosecution system, and court system is critical to reducing redundancy and increasing the timeliness with which both offender and victim data is entered into the victim notification system―and used to trigger the notifications themselves.

Determining the best option for your victim notification system

So how do you determine which choice is best for your jurisdiction? The first step is to determine your jurisdiction’s risk profile versus the need to for jurisdiction-specific functionality. 

Mature market-based solutions are typically less risky to implement, since multiple jurisdictions are likely successfully using them to support their victim notification operations. However, these solutions may not be customizable or flexible enough to address your specific needs. 

“Build” models (using platform solutions or other application development models) tend to be a bit more risky (as many “from scratch” development projects can be); however these are more likely to address your specific needs. Here are a few questions that you should ask before making a determination between a COTS solution and a custom-build:

1. Do we really have jurisdiction-specific victim notification needs?
2. Can a COTS solution meet the statutes and policies in our jurisdiction?
3. How risk-averse is our jurisdiction?
4. Do we have time to develop a customized solution?
5. Do we have the talent and capacity to maintain a custom solution?

Budget considerations

The next step is to determine your budget. We recommend you assess a budget over a 10-year total cost of ownership. The cost of a traditional, perpetual license-based COTS solution, including initial acquisition and implementation, will be higher in the first few years of use, but the ongoing annual fees will be lower. The cost of a custom-build solution will be even higher in the first few years, but annual maintenance should drop off dramatically. The cost of a subscription-based COTS solution will be relative even year over year. However, if you model these costs over 10 years, you will have a reasonable sense for how these costs trend (i.e., the cost of a subscription-based model will likely be higher over 10 years than the perpetual license model). 

The other consideration is how you plan to fund the system. If there are capital funds in the budget for initial acquisition and implementation, this may benefit the perpetual license model more than the subscription-based model. Regardless of the funding approach, you will likely be using the selected victim notification method for a significant period of time, so don’t settle.

Finally, determine how to acquire the system (or systems integration vendor that will help you develop the system), which is the subject of the third article in our series.

If you have questions about your specific situation, please contact our Justice & Public Safety team. We’re here to help. To learn more about other choices in victim notification procedures and systems, stay tuned for our third article in this series where we explore the process (and pitfalls) of procuring a statewide victim notification system.

If you received PPP funds, read on.

The Treasury has released new information regarding Paycheck Program Protection forgiveness. 

Based on IRS guidance, if you intend to apply for forgiveness and have a reasonable expectation it will be granted, the expenses used to support forgiveness will not be permitted as a deduction in 2020. It is unclear whether this guidance would apply if a taxpayer is undecided with regard to their forgiveness application at year end. Here is what we know so far.

The CARES Act included provisions that stated PPP loan forgiveness would not be considered taxable income under the Internal Revenue Code (“IRC”). The CARES Act specifically provides the forgiveness is not taxable income under IRC Section 61.

However, the IRS has issued the following guidance on this matter, which relates to the expenses paid with the PPP loan funds.

• Notice 2020-32 , issued May 2, 2020
• Revenue Ruling 2020-27, issued November 18, 2020 
• Revenue Procedure 2020-51, issued November 18, 2020

Notice 2020-32, states IRC Section 265(a)(1) applies to disallow expenses that were included on and supported a taxpayer’s successful PPP loan forgiveness application. 

In general, this section states NO deductions are permitted for expenses that are directly attributable to tax exempt income. 

The IRS seems to have concluded, in this Notice, the PPP loan forgiveness is tax exempt income. Therefore, the salary and occupancy costs used to support forgiveness, under current IRS guidance, will not be tax deductible.

Unanswered questions

This notice, while somewhat informative, raises many unanswered questions. For example, what are the tax consequences if a PPP loan is forgiven in 2021 and the expenses supporting the forgiveness were incurred in 2020? Could the forgiveness be construed as something other than tax exempt income?

Revenue Ruling 2020-27 attempts to answer some of these questions and provides additional guidance with regard to IRS expectations. The Ruling seems to indicate there are two possible tax positions relative to expenses that qualify PPP loans for forgiveness:

• First, the loan forgiveness could be construed as tax exempt income and, pursuant to IRC Section 265 expenses directly attributable to the exempt income are not deductible.
• Second, loan forgiveness could be construed as the reimbursement of certain expenses, and not as tax exempt income. Under the reimbursement approach the IRS has stated if you intend to apply for forgiveness and reasonably expect to receive forgiveness the reimbursed expenses are not deductible, even if forgiveness is obtained in the following tax year. This position seems to be supported by several tax controversies which were litigated in favor of the IRS. 

Some taxpayers had anticipated using a rule known as the tax benefit rule to deduct expense in 2020 and report a recovery (income) in 2021 when the loan is forgiven. It appears the IRS is not willing to accept this filing position.

We are hoping Congress will revisit this issue and consider statutory changes which allow for the deduction of expenses. Some taxpayers are planning to extend their income tax returns, taking a wait and see approach, with the hopes Congress will amend the statutes and allow for a deduction.

Under current law, it appears the salary, interest, rent used to support a forgiveness application will not be permitted as a tax deduction on your 2020 tax returns. This could result in a significant change in your 2020 taxable income.

Final considerations

For estimated tax payment purposes, we believe it would be reasonable to attribute the lost deductions to the quarter in which you made your final determination to file for forgiveness. This could mitigate any underpayment of estimated income tax penalties. 

If you are making safe harbor quarter estimates and/or have sufficient withholdings any incremental tax would be due with your return on April 15, 2021. Generally, the IRS safe harbor is to pay 110% of prior year tax during the current year to be penalty proof.

If you have questions about your specific situation, please contact us. We’re here to help.

COVID-19 business support

We will continue to post updates as we uncover them. Let us know if you have questions. For more information regarding the Paycheck Protection Program, the CARES Act, or other COVID-19 resources, see our COVID-19 Resource Center.

Read this is you are a new renewable energy company looking for accounting solutions.

Setting up a new company in QuickBooks can be challenging enough, but if you are a renewable energy company there are a few additional items to think about. You face unique reporting and tracking requirements for a number of reasons, including tax reporting requirements, potential and existing investors, debt requirements, and grant requirements. Renewable energy companies should take special care in setting up their QuickBooks file. Below is a top 10 list of items to consider when setting up a new company file.

1. Equity—Have you recorded your initial equity activity?
   Do you have individual capital accounts setup by owner?
   Did some owners contribute items other than cash? Expertise or property? Have you accounted for those properly?
2. Debt—Do you have all debt financing recorded on the books?
   Debt financing needs to be recorded even if the bank pays some construction vendors directly as part of the agreement.
   Do you have an amortization or payment schedule to assist with recording loan payments properly?
   Does your debt have financial statement reporting requirements or covenant requirements that you must meet annually?
3. Accounting Basis—Generally Accept Accounting Principles (GAAP) or Tax basis how will you keep your books?
   More and more companies are being required by banks and investors to keep their books on GAAP basis, you should consider future planned investors or financing from the get go as there are some clear distinctions between the two and it may be easier to start with GAAP from the beginning.
   GAAP and tax basis call for some pretty drastic distinctions when it comes to treatment of grant income if they directly relate to a project under development so it’s good to get a handle on this up front.
4. Construction Costs—Are you capitalizing all construction costs related to your project?
   All costs related to your project must be capitalized on the balance sheet until the project is placed in service at which point you can begin depreciating the value of the project over a period of years.
   Generally, we recommend tracking site work in a separate account as tax and GAAP requirements can call for different treatment of these costs depending on their nature.
   Are you applying for any special grants related to your project? There are a number of federal and state grants available to renewable energy companies which may require breaking your project into cost categories to determine what costs qualify for the grant and what do not? Do you have a mechanism for tracking these costs?
5. Soft costs―Are you properly capitalizing or expensing soft costs related to your project?  Engineering fees, project management fees and consulting fees if directly related to the project are generally included as part of the capitalized project costs rather than expensed.
   Legal and accounting fees. even if directly related to the project accounting or structuring your project, are generally expensed.
6. Multiple projects―How are you keeping track of your multiple projects?
   With multiple projects underway at any given time, it is imperative to track these costs by project in QuickBooks and to work with vendors to specify on invoices to what projects costs are related. This is imperative to a lot of grant applications to be able to provide this sort of detail easily and on a consistent basis.
7. Project details/Contracts details―How are you keeping track of all those details?
   More detail is always good.  In our experience the more detail you have in your files as to cost breakdowns of EPC contracts, etc. the better. Investors and grant evaluators are going to request all this detail and it’s better to have on file than track it down months or even years later.  Vendors are much more cooperative when requesting this documentation up front.
8. Grant fine print―Have you read the fine print of the grants you’ve received?
   Pay close attention to these green energy grants fine print. Many of the grants have repayment requirements were the project taken out of service within a certain timeframe or have repayment requirements under other circumstances. These are items that may be required to be disclosed in financial statements and are just good business to be aware of.
9. Organizational costs―Do you know what these are and are you tracking?
   Organization costs are legal, accounting and any other costs related to the actual formation and entity structuring of a company.  In our experience, these costs can be significant with the complex equity structures of many renewable energy companies. Make sure you are tracking these costs as amounts in excess of $5,000 are required to be amortized over 15 years for tax purposes.

10. Project budgets and overall budgets―Do you have a realistic budget?
    Use QuickBooks budgeting features to track both project budgets as well as your Company’s overall budgets. Projects can go over budget quickly and it’s critical to keep on top of it to ensure the overall mission and sustainability of the company.

Once you have looked at these questions, you will be able to to create an effective budget and financials. If you have questions about your financial operations, QuickBooks, or setting up budgets, please contact the team. We’re here to help. 
 

Read this if you are a financial manager of an ESOP.

Employee Stock Ownership Plans (ESOPs) must generally buy back, or repurchase, participants’ shares when they leave the plan or want to diversify holdings. If the ESOP does not purchase the stock the company is required to purchase the shares from the participant under the “put option” described in Internal Revenue Code (IRS) Section 409(h).These rules require the company to either provide enough cash to the ESOP to fund stock repurchases, if adequate other assets are not available within the ESOP, or to fund the repurchase of shares outside of the ESOP. Anticipating the amount and timing of these repurchases requires a lot of number crunching and assumptions to arrive at an estimated “Repurchase Obligation” at a point in time. In most cases, ESOPs enlist the help of valuation specialists, actuaries, or outsider vendors to prepare a study.

All this is done as a component of ESOP cash flow planning but also begs the question, what do you need to record or disclose in your company’s financial statements related to this obligation?

The Financial Accounting Standards Board’s guidance on the subject is contained in Accounting Standards Codification (ASC) Topic 718, Compensation - Stock Compensation. More specifically, ASC Section 718-40-50 clearly outlines the terms, allocated share and fair value information, compensation and other related disclosure requirements for ESOPs in paragraphs 1a through g. One of these requirements—paragraph f—requires disclosure of “the existence and nature of any repurchase obligation...” While the existence of a potential repurchase obligation is undeniable due to the requirements of IRC Section 409(h), disclosure of the nature of the obligation may require judgement and a careful reread of the plan documents.

Existence of the obligation

What private companies record for redemptions is straightforward. They are required to accrue obligations related to redemption events initiated on or before the balance sheet date and disclose share and obligation balance information related to those transactions of material.

Disclosures must include the number of allocated shares and the fair value of those shares as of the balance sheet date. This sounds like a general disclosure of terms, but the intention is to communicate maximum repurchase obligation exposure. If redemptions subsequent to the balance sheet date require material and imminent use of cash, the company should consider whether it is required to disclose them as a subsequent event (including amounts) under ASC Topic 855, Subsequent Events.

Nature of the obligation

So, what do you need to disclose specific to the nature of your company’s ESOP shares repurchase obligation?

Put options against the ESOP trust (i.e., rights afforded under the ESOP requiring the trust to purchase outstanding stock at given prices within specific time horizons). Plan terms allowing redemption payments in excess of a certain threshold to be made over a defined period of time (e.g., retiring employees with vested balances greater than $5,000 may receive their payments in equal installments over a five-year period, while those with lower balances may receive their benefit in a lump sum).

If your company’s ownership has an ESOP component or you are considering an ESOP as part of your exit strategy, please reach out to Linda Roberts and Estera Ciparyte-McDonald. They can help you better understand the myriad considerations to be taken into account, and the required and potential financial statement impact and disclosures.

Read this if you are a member of a State Medicaid Agency’s leadership team.

Another National Association of Medicaid Directors (NAMD) fall conference is in the books. As usual, the sessions were excellent. And this year we had the luxury of being able to attend from the comfort of our homes. For BerryDunn’s consulting group, that enabled us to “send” a broader team to conference. On the flip side, it also meant we were not able to greet and meet our community in person. 

Matt Salo, the NAMD Executive Director, defined the underlying themes to the conference as Flexibility, Innovation, and Resilience. If one were to just look at the full agenda, it would be hard to tell that this was a virtual conference. The session schedule and opening reception looked very much like a traditional NAMD conference, although there were not the usual breaks with the ice cream jubilee and ballroom number assignments. Otherwise, it was business as usual. 

In checking in with State Medicaid Director attendees, Monday’s meetings went well and they appreciated coming together. State leadership across the country is working straight-out right now—seven days a week. It kind of reminds me of when I became a parent: I thought I knew how to handle sleep deprivation, and then I had a newborn, and realized the important work of parenting isn’t on a time clock, which is much like the work Medicaid agencies are dedicated to. The directors and their support staff’s commitment to serving members and tax payers in their respective states is inspiring, and we are privileged to work alongside them. 

I appreciated a subtle but deep reminder from Matt and the NAMD President Beth Kidder for us: remember our “true North.” Why are we here? What is our purpose as leaders and vendors in the Medicaid community? The work we do matters. We can improve lives. We can save lives. The members in Medicaid programs are the center of all we do. Here are some of the other highlights I absorbed during the conference. 

Plenary sessions

In Tuesday’s plenary, panelists shared their primary lessons and reflections on the year, including: 

• Pace―we need a balance because the pandemic does not have a clear beginning or end. Pandemics do not simply blow over like a hurricane; it’s hard to tell the beginning, middle, and end. 
• Steadiness in chaos: velocity and stability―leaders need to make timely decisions while also being an anchor for their teams. 
• Prioritization―not everything needs an immediate response. We need to be deliberate about what we do. 
• Roadmaps―we can still use the tools we created map out where we want to go. 

The panel also shared how telehealth, transparency, teamwork, focus, and reflecting on “whole lives” in policy making assisted them in navigating their teams and providing the best services possible. 

Keynote―health equity 

Dayna Bowen Matthew provided a solid argument on how Medicaid can be key to achieving true health equity in America. She discussed the four “Ps” that can make this possible: Population, Position, Payer, and Persuader. She used the COVID-19 pandemic as her example of how it hit the vulnerable population first, and how we could have learned from it. 

Instead, it is being unleashed on the broader population. The work must begin with us, expand to our teams, policies we can control, and then policies that need a collaborative approach to change and implement. If you attended the conference and have access but missed this talk, I highly recommend listening to it as she covered a lot of very pertinent material. 

Member perspectives 

Sprinkled through the entire conference were videos of Medicaid members’ perspectives. I appreciate the tradition of bringing the human element of Medicaid’s impact into the conference, as it reminds us of our purpose. The perspectives also underscore another important theme of Matt’s: “Medicaid is a program about people, not statistics.” Examples of stories we heard include how someone went from 28 years of incarceration due to an armed robbery conviction to graduating from a university and now working with people; a hockey coach’s accident that paralyzed him from the neck down; a homeless mother gaining security and stability; a foster parent with a son having a rare brittle bone disease and a Native American parent with health access issues. 

Economy 

There were a couple of sessions related the economy, and generally, the presenters thought the biggest impact to Medicaid is yet to come. They said that there is typically a lag between events and member enrollments and the surge is still coming. They also agreed there was strong federal support from outside of CMS that kept their enrollment down. Membership growth is likely coming as state budgets are constrained. There are hopes for additional federal assistance within Medicaid, including an extended FMAP, and a similar package from last spring. The lack of certainty in regards to consistent funding is causing the states to spend a lot of energy developing back up plans. 

The panelists think the biggest economic challenges are yet to come is based upon three main reasons: the high chance of a recession, the impending (third wave) virus impact, and the social unrest exacerbated by the pandemic and systemic racism. These are merging perfect storms causing directors to look for stability and relief. I think the best summary I heard of how to proceed was open the book of “good ideas for bad times” that were not well thought of during good times. 

Public health emergency―COVID-19 pandemic 

As would be expected, COVID was a recurring topic in almost every session. There was a very interesting panel discussion on how best to “unwind” the changes made once we arrive in the post-pandemic era. There will be lots of challenges, and it is worth discussing these now, while we are still in the midst of responding to the immediate needs to address the virus. We are aware there will be systemic and program reversals. However, it will not be as simple as just doing a rollback. States will need to develop their strategies for redeterminations of their member populations and the timing will need to be coordinated. CMS will need to prepare guidance on expectations for unwinding. Programs will need to be reviewed and decisions prioritized on what needs to be changed. 

Prior to getting to post-pandemic era, states know they will need to plan for managing vaccine distribution, which will be one tool to help bring the curve down. According to former senior officials from the Trump and Obama administrations, the worst pandemic phase is coming this winter. However, there is “light at the end of the tunnel” because of optimism on a vaccine and other tools. We know more in this upcoming wave than the first wave in March. According to these officials, the sciences cannot get us through without a human element. And the human element can save a lot of lives. 

As Scott Gottlieb, MD, former FDA Commissioner, said, “We just need to stop breathing on each other.” He was implying that we need to socially distance and wear masks, while we wait for the vaccine come around and be distributed. The challenge is, according to Andy Slavitt, Former Acting Administrator for CMS, that the vaccine will not be available to the majority of the population for two to three months, and by then, if humans do not continue to change behavior, the spread could go to 30-40% of the population. They predict the pandemic will be at its worst point when the vaccine is made available. 

Seema Verma, the CMS Administrator, said the PHE has shown that we have the ability to work faster. She wants to ensure we heed the lessons of the pandemic, and in particular the experiences with the spread and deaths in the nursing homes. She feels that the issues in the nursing facilities cannot be fixed at the federal level. She sees CMS’s role is to encourage innovation at the state level, while the federal government hold states accountable to costs and positive outcomes and quality. 

Other concerns panelists raised regarding the pandemic are the long-term and downstream ripple effects of responding to the pandemic. For example: 

• States know their members have delayed, deferred, and simply foregone healthcare over these past several months. This will create a surge in treatment at a later date, causing increased demand to an already fatigued provider community.
• The reduced health of the general population resulting from not receiving the right care now and delaying care will further harm the well-being of the population. 
• Our education system has gone mostly online, adversely impacting students’ ability to learn. 
• The overall mental health of our population is at risk—the pandemic has changed all of us, and we will learn to what extent it is harmed us over the next several years. 

Looking ahead―there is hope

Several of the panels spent time discussing what our future might look like. It was encouraging to hear how there is a vision for long-term care delivery changes, meeting behavioral health needs, emergency and pandemic preparedness approaches, and addressing workforce challenges and healthcare inequalities. When asked to name one or two words that will represent where we are in five years, the panelists said: 

• Lead and Succeed (#leadandsucceed) 
• Survive and Thrive (#surviveandthrive) 
• Even Better Together (#evenbettertogether)

We are in this today, and we are together, keeping the eye on our “true North”. Doing so will help us remain together and make us stronger in the future. The key is that we remain together. The conference showed that even though we could not be together in the same geographic place, our minds, attention, and spirit are aligned. We experienced the spirit of NAMD from our homes. 

We know that the future holds opportunities for us to be physically together in the future. We missed being in DC this year, and are very hopeful we will see you next year. That will be icing on the cake, which we will savor and not take for granted. Until then, I am confident we will maintain our integrity and focus on our purpose. 
 

Read this if you are in a management role at a state Medicaid agency.

States are facing unique pressure on resources and budgets due to the COVID-19 pandemic, coupled with potential uncertainty following an election year. Healthcare innovation and transformation is one route state Medicaid agencies (SMAs) may take to minimize operational costs and improve access to services. Here are some tactics, flexibilities, and practical steps to help realize innovation during this time.

US Supreme Court Justice Louis Brandeis is credited in 1932 with popularizing the phrase that states are the “laboratories of democracy”. In this case, Medicaid may be the ‘laboratory of health policy and innovation", in part as state Medicaid and Children’s Insurance Programs (CHIP) are collectively the largest US healthcare payer, covering 74 million individuals.

In 2020, states have faced the dual challenge of a public health emergency and corresponding state budget uncertainty, squeezing resources just as projected state revenues have dramatically shrunk. SMAs must be creative to meet competing priorities: administering their programs while responding to the public health emergency. Here are some tactics, flexibilities, and practical steps to help realize innovation during this time. 

Reimagining funding for state Medicaid agencies

Identifying a source of funding is often challenging. Three options to consider include:

1. Advance Planning Documents (APDs)
   While strictly for information systems, APDs can unlock 90/10 match for Development, Design, and Implementation (DDI) or a 75/25 match for operations. This funding is above most state Federal Medical Assistance Percentages (FMAPs). Realistically, program changes generally require system changes too. Consider reviewing whether you could tie the initiative to Medicaid Information Technology Architecture (MITA) business process maturity and/or outcomes-based system certification criteria. Linking personnel, training, project management, and any equipment for system needs into an APD can be an effective way to help fund the process and system changes.
2. Partnerships
   An SMA can look further afield if sister agencies have funds available. This is especially true if braiding federal payment streams is an option. For example, many developments that benefit Medicaid can also help CHIP. The federal matching rate for state CHIP programs is typically about 15 percentage points higher than the Medicaid matching rate.  
3. Certified Public Expenditures (CPE)
   Under 42 CFR § 433.51 and the Social Security Act, another governmental entity besides the SMA can contribute state matches allowing the state to draw Federal Financial Participation (FFP). One option can be another governmental entity using state dollars at the state, county, or even local level, to deliver health services (if covered under the Medicaid state plan) to Medicaid members.  

Interagency cooperation to generate savings in the health and human service (HHS) space will be the topic of a forthcoming article.

Getting help: Communications planning and the role of project management

As SMAs pursue more complex initiatives such as addressing Social Determinants of Health (SDoH)—collaborating not just with providers but with other public agencies, community organizations, vendors, federal partners, advocacy groups, and health systems—the need to coordinate such a diverse circle of stakeholders increases. Demonstration projects, system implementation efforts, and major healthcare initiatives in particular, require coordination of stakeholders throughout each project phase.

Health and human services (HHS) organizations sometimes underestimate the role of project management. For example, project management is often seen as simply “making sure things are complete” by the deadline, but there are other advantages such as establishing efficiency, improving the quality of service delivery, controlling costs, and better coordinating staff for the SMA. With stretched public workforces and more tasks in the current business environment, you want to get as much done—preferably faster, cheaper, and with less risk—and deliver the expected benefits. 

Guidance on priorities from senior leadership can help organizations establish clear and visible sponsorship to help establish success. Strategic change needs a strong champion within the SMA who has the ability to convene key stakeholders and keep projects on task.

Procuring the tools

After determining funding and before executing a project, you prepare by getting the tools you need—whether tools that involve systems, subject matter experts, or general project assistance.  If the Request for Proposal (RFP) process is not an option, consider whether a pre-qualified vendor list or cooperative contract vehicle would work for you. Cooperative contracts are increasingly popular at the federal, state, and local levels. A few cooperative options include:

• NASPO Procurement of Acquisition Support Services (PASS) contract
  Currently, 20 states participate. 
• Arizona Statewide contracts
  Arizona offers membership in its State Purchasing Cooperative to any government or non-profit entity in the US. SMAs might find the Healthcare Related Services contract particularly helpful. 
• Massachusetts Information Technology - Software & Services (ITS) contracts
  ITS contracts offer a broad range of IT services and are open for cooperative purchasing by any state government entity.
• Texas Department of Information Resources (DIR) contracts
  DIR contracts also offer a broad range of services and can be used by other states through an interstate cooperation agreement. 

The solution is strategy

Keeping Medicaid innovation moving forward requires strategic focus that combines funding, communications, project management, and procurement. The strategy you develop can help the outcome of the initiative to be greater than the sum of its parts. By using all available tools, including those discussed here, your SMA can prioritize innovation.

Next steps

• Evaluate your program and identify initiatives to prioritize in the coming year. Ask your CMS contact about the latest applicable guidance. 
• Develop APDs to help fund technology needs for initiatives, along with training your SMA team and providers. 
• Implement a communications management approach to engage stakeholders.
• Marshal project management resources and develop a realistic and achievable roadmap to success.   
• Explore agency contracting vehicles, cooperative contracts, and other procurements tools. 

We’re here to help. If you have more questions or want to have an in-depth conversation about your specific situation, please contact the Medicaid consulting team. 
 

CYSHCN programs have new care coordination standards―how does your agency measure up?

On October 15, 2020, the National Academy for State Health Policy (NASHP) released new care coordination standards for Children and Youth with Special Health Care Needs (CYSHCN) programs. The National Care Coordination Standards supplement the National Standards for Systems of Care, helping to ensure that children and youth with special health care needs receive the high-quality care coordination needed to address their specific health conditions.

The standards also set requirements for screening, identification, and assessment, a comprehensive shared plan of care, coordinated team-based communication, development of child and family empowerment skills, a well-trained care coordination workforce, and smooth care transitions. 

What do the standards mean for CYSHCN programs

The National Care Coordination Standards are more than guidelines for CYSHCN programs; aligning with the standards can lead to operational efficiencies, greater program capacity, and improved health outcomes. The standards can serve as a lens for continuous improvement, highlighting where programs can make changes that reduce the burden on care coordinators and program administrators.

However, striving to meet the standards can be challenging for many programs—as the standards develop and evolve over time, many programs struggle to keep up with the work required to update processes and retrain staff. Assessing a CYSHCN program’s processes and procedures takes time and resources that many state agencies do not have available. Despite the challenge, when state agencies are the most strapped is often when making change is the most needed. A shrinking public health workforce and growing population of CYSHCN means smooth processes are essential. To take steps towards National Care Coordination Standards alignment, BerryDunn recommends the following approach: 

A proven methodology for national standards alignment

There are many ways you can align with the standards. Here are three areas to focus on that can help you guide your agency to successful alignment. 

1. Know your program
   It can be easy for processes to deteriorate over time. Process mapping is an effective way to shed light on current work flows and begin to determine holes in the processes. Conducting fact-finding sessions to map out exactly how your program functions can help pinpoint areas of strength―and areas where there is room for improvement.
2. Compare to the national standards
   Identify the gaps with a cross-walk of your program’s current procedures with the National Care Coordination Standards. We assess your alignment through a gap analysis of the process, highlighting how your program lines up with the new standards.
3. Adopt the changes and reap the benefits
   Process redesign can help implement the standards, and even small adjustments to processes can lead to better outcomes. Additionally, you can deploy proven change management methodologies programs that ease staff into new processes to produce real results.

Meeting national standards doesn’t have to be complicated. Our team partners with state public health agencies, helping to meet best practices without adding additional burden to program staff. We can help you take the moving pieces and complex tasks and funnel them into a streamlined process that gives your state’s children and youth the best care coordination. 

Read this if you are a state Medicaid agency, state managed care office, or managed care organization (MCO).

The November 9, 2020 announcement by the Centers for Medicare & Medicaid Services (CMS) outlines updates to the 2016 Medicaid & Children's Insurance Program (CHIP) Managed Care Final Rule (Final Rule), which present new challenges to state Medicaid and CHIP managed care programs to interpret the latest CMS guidance that attempts to relieve current administrative burdens and federal regulatory barriers.

Although the latest guidance by CMS attempts to provide potential relief to states to administer their managed care programs, states will need to coordinate with federal and state partners to further understand the latest updates to federal regulations that are presented by the updated Final Rule.

By providing relief for current reporting requirements for program costs, provider rates, network adequacy, and encounter data, this latest change by the administration enables state managed care programs to reassess current operations to update and improve their current service delivery. The updated Final Rule continues CMS’ efforts to transition state managed care and CHIP programs from a fee-for-service delivery system, and to urge state Medicaid and CHIP agencies to continue to implement payment models to improve quality, control costs, and promote innovation.  

Impacts on Medicaid managed care operations 

Changes for states to consider that impact their Medicaid managed care operations based on the latest Final Rule include:

• Coordination of benefits agreements (COBA): States will have the option to leverage different methodologies for crossover claim distribution to managed care plans, and the updated Final Rule indicates that managed care plans do not have to enter into COBA directly with Medicare.
• Rate setting and ranges, and development practices: CMS provides the option for states to develop and certify a rate range and has provided clarification and different options for rate setting and development practices.
• Network adequacy: CMS will allow for states to set quantitative network standards, such as provider to enrollee ratios, to account for increases in telehealth providers and to provide flexibilities in rural areas.
• Provider directory updates: CMS will allow for less than monthly updates to provider directories due to the increased utilization of digital media by enrollees, emphasizing decreased administrative burden and the costs for state managed care plans. This update also indicates that completion of cultural competency training by providers will no longer be required.
• Provider termination notices: The latest update increases the length of provider termination notice requirements to 30 calendar days (previously 15 calendar days).
• Member information requirements: The latest update outlines flexibilities for enrollee materials as it relates to font size and formatting.
• Quality Rating System (QRS): CMS will be developing a QRS framework in which states must align with, but will be able to develop uniquely tailored approaches for their state.
• External quality review: States that exempt managed care plans from external quality review activities must post this information on their websites for public access on an annual basis.
• Grievance and appeal clarifications: The latest update provides clarification that the denial of non-clean claims does not require adverse benefit determination notices and procedures; adjustments and clarification to State Fair Hearing enrollee request timeframes to align with recent Medicaid fee-for-service requirements

CHIP to Medicaid regulatory cross-references

CMS clarifies several CHIP to Medicaid regulatory cross-references. These cross-references include the continuation of benefits during State Fair Hearings, changes to encounter data submission requirements, changes to Medicaid Care Advisory Council (MCAC) requirements, grievance and appeals requirements, and program integrity standards.

Changing demand on managed care programs

The November 9 announcement follows a series of efforts by CMS during the past few years to modify the Final Rule in an attempt to help states meet the changing demands on their managed care programs. For the 2016 Final Rule, CMS formed a working group with the National Association of Medicaid Directors (NAMD) and state Medicaid directors to review current managed care regulations. The recommendations from the group led to public comment in November 2018 with state Medicaid and CHIP agencies, advocacy groups, health care providers and associations, health insurers, managed care plans, health care associations, and the general public. As a result of this public comment effort, the latest Final Rule seeks to streamline current managed care regulations.

The new Final Rule announcement comes after a series of efforts by CMS to offer guidance and make changes to their provider payment models, including its recent September 15 letter to state Medicaid directors that further promotes a strategic shift towards value based payments to transform the alignment of quality and cost of care for Medicaid beneficiaries.

The effective date for the new regulations will be 30 days after publication of the new Final Rule in the Federal Register (target date November 13, 2020), except for additions §§ 438.4(c) and 438.6(d)(6) for Medicaid managed care rating setting periods, which are effective July 1, 2021.

If you would like more information or have questions about interpreting the Final Rule for changes to your managed care program, please contact us.