Starting Financial Management Services in CLP & VD-HCBS:

Strategic ConsiderationsNational Resource Center for Participant-Directed Services

6/3/10Mollie Murphy

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Today

FMS: What is it? Why have it? Models of FMS: Which is right for you? Providing FMS: Approaches Piggybacking on an existing in-state program Procuring services from a qualified provider “In-house” at the AAA or SUA

Pure Do-it-yourself A hybrid model

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FMS: What is it?

FMS is Financial Management Services FMS is a participant-directed support; FMS supplements a

participant-directed program Successful FMS ensures the following:

Participants act as employers or co-employers in compliance with federal, state and local laws

Employment taxes, workers’ compensation and other insurances are managed and paid in compliance with relevant laws

Payments are made in accordance with program rules and participant budgets

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FMS: Why have it? Directing and controlling one’s service and individual

budget requires more than selecting workers/vendors and choosing how funds will be spent

Early research in the Cash & Counseling program showed that, given the option, participants much prefer that someone other than them ensure taxes are paid, insurance is correct, workers are paid in compliance with regulations and spending is in accordance with the budget

Robust FMS allows participants to focus on directing and controlling their service, while administrative duties are handled by professionals with a particular expertise

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Primary FMS Duties

Enrollment Employer enrollment Worker enrollment Vendor enrollment

Budget Management Payments Taxes and Insurance Reporting Communication

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Models of FMS

Fiscal/Employer Agent Government Fiscal/Employer Agent Vendor Fiscal/Employer Agent

Agency with Choice

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Fiscal/Employer Agent Participant (or his/her representative) is common law

employer Participant/representative employer designates the FMS

entity to be the agent = Fiscal/Employer Agent (F/EA) As agent, the F/EA has joint tax liability and manages all

administrative functions of being an employer (payments, taxes, insurances, reporting, enrolling participants as employers, providing paperwork and support to hire employees and contract with vendors)

IRS has specific procedures outlining the relationship between the employer and agent, the tax liability, and the methods for filing and paying federal taxes

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Government & Vendor Fiscal/Employer Agent

The duties of these models of Fiscal/Employer Agent are the same (aside from how IRS Form 2678 is filed on behalf of each employer)

The difference is what kind of entity acts as the F/EA Government Fiscal/Employer Agent: government entity is agent and

takes on joint tax liability with the employer Government entity is responsible for performing F/EA duties OR Government entity can contract with a sub-agent

Sub-agent can be a vendor and the sub-agent ALSO takes on joint liability for federal taxes

Vendor Fiscal/Employer Agent: a non-government entity (vendor) is agent and takes on joint tax liability with the employer Non-government entity is responsible for performing F/EA duties Government entity contracts with vendor; government entity takes

on no liability

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Agency with Choice Agency (not participant) is common law employer Participant or representative may act as co-

employer Participant or representative can identify workers

and refer them to the agency for hire In general, Agency with Choice is considered a less

participant-directed model of FMS, but one that can be easier to get going than F/EA

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Comparing FMS Models

Agency with Choice

Fiscal/Employer Agent

Who is the employer? The agency, but participants can refer workers to the agency

The participant

Who pays workers and manages taxes and insurance?

The Agency with Choice The F/EA

Who has liability for taxes?

The Agency with Choice The F/EA has joint liability with the participant

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Comparing FMS Models

Agency with Choice

Fiscal/Employer Agent

Who trains workers? The agency has ultimate responsibility for this, but significant input can come from the participant

The participant, but a counselor can help

Who makes decisions about hiring workers?

The participant refers workers to the agency, but the agency makes the final decision about hiring workers

The participant, but the program may have rules about worker qualifications

In whose name is the workers’ compensation policy?

The Agency with Choice The participant, but the F/EA procures and manages the policy

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Comparing FMS ModelsAgency with Choice

Fiscal/Employer Agent

Who sets the rate of pay for workers?

The agency has ultimate responsibility for this, but significant input can come from the participant; the agency must maintain equity across employees per state & federal law

The participant, but a program may have a set rate range

Who determines whether a worker’s criminal background disqualifies the worker from being hired?

The Agency with Choice The participant, but the program can set parameters

What is the cost of these services?

Usually between $65 and $125 per participant, per month

Usually between $65 and $125 per participant, per month

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Decide what model is right for your program

F/EA supports “pure” participant direction: the participant maintains full control, but has support from the F/EA

Agency with Choice can be easier to establish because traditional agencies can provide it

See the handout: FMS Model Quiz

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How will you provide FMS?: Piggybacking Identify other, established participant direction programs in

your state and “piggyback” by using the same FMS providerPros The cost of FMS is influenced heavily by economies of

scale (more participants served means a lower FMS cost per participant). By using the same FMS provider as another program in the state and therefore increasing the number of participants served by the provider, you may be able to secure lower costs

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How will you provide FMS?: Piggybacking (Pros, continued)Pros The performance of the FMS provider will be known by the

program you are piggybacking on An RFP may not be necessary since the FMS provider is already

operational in the state The FMS provider may be able to launch services very rapidly

since it is already operational in the state The FMS provider should already be familiar with participant

direction and the culture of your state FMS providers may be apprehensive about investing in serving a

program that can only commit to 1-2 years of operation; by piggybacking, you may be able to get a competitive rate because the provider has another long-term contract in the state

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How will you provide FMS?: Piggybacking, Other ConsiderationsOther Considerations All participant-directed programs are not alike and

therefore all FMS is not alike The VD-HCBS program is a pure “Cash and Counseling”

model; many participant direction programs are not This means that the duties of the FMS provider in an

existing program could vary greatly from what your program needs the FMS provider to do

Therefore, the FMS provider’s capabilities may not fit what your program needs or the costs may be different

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How will you provide FMS?: Piggybacking, Recommendations Get in-depth information from other programs in your state that use the

FMS provider about the provider’s performance Develop a comprehensive list of what you need the FMS provider to do

in your CLP/VD-HCBS program (contact NRCPDS for help developing this list; there are many different ways to structure what the AAA/SUA does and what the FMS provider does)

Get complete information from other programs in your state and/or the FMS provider on the duties and responsibilities of the FMS provider in the existing program

Find out from the FMS provider if they have the capability to perform the duties your program requires

Find out what the FMS provider’s fees would be to serve your program Is there a standard monthly or transaction fee? What is it? Are there any “start-up” or other fees?

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Piggybacking: Example 1 VD HCBS & CLP program used an F/EA provider already

serving a Medicaid program with 8000 participants The existing Medicaid program did not have budget

authority, did not allow participants to purchase non-employee goods or services; participants could not set rate of pay for workers and only three service codes are allowed

The VD HCBS program planned full budget authority, purchase of goods and services, participant rate-setting and other flexible options

The AAA and F/EA had to develop many aspects of the VD HCBS program separately from the Medicaid program, with the VD HCBS program requiring a broader range of services from the F/EA than the Medicaid program

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Piggybacking: Example 2 VD HCBS & CLP program used an F/EA provider already serving

a Medicaid Cash and Counseling program serving 3500 participants The AAA and SUA were able to use almost an exact program

structure as was being used for the Cash and Counseling program Because the programs were so similar, Policy and Procedure

manuals, forms, and processes could be shared and re-used across the programs

The F/EA provider was able to launch operations for the VD HCBS program very quickly because very few changes had to be made to existing operations

By increasing the number of participants served by the F/EA provider, a very competitive per participant fee was negotiated

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How will you provide FMS?: Procure services from a qualified provider Go through a procurement process to select the

FMS provider of your choice and contract with that provider. This will likely involve issuing a Request for Proposal, depending on your preferences or state requirements.

Pros Go through a competitive process to get

information on provider qualifications, capabilities and prices so you get the provider that is the best fit for your program

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How will you provide FMS?: Procuring Qualified Provider, Other Considerations

Other Considerations An RFP process can be labor-intensive and slow going Providers may be apprehensive about investing in a

program with few participants and/or a less than 2 year contract commitment

If you are considering this option, contact NRCPDS to get help developing an RFP/provider qualifications

Review the handout called Pre-procurement Tip Sheet

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How will you provide FMS?: “In-House” FMS AAA or SUA performs all functions as the Financial Management

Services provider (either Agency with Choice or F/EA)Pros Counseling, administrative oversight and FMS can all be tightly

integrated at the AAA/SUA AAA/SUA can develop expertise in FMS; can serve as FMS

provider in future and for other programs in the state AAA/SUA can maintain more of the VD HCBS oversight fee

“in-house”; can be a way to utilize existing AAA/SUA staff AAA/SUA staff have expertise in working with participants and

this can be very beneficial in supporting participants to navigate the financial aspect of their programs

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How will you provide FMS?: “In-House” FMS, Other Considerations FMS is complex and the learning curve is steep; taking on

this service will be a major investment for the AAA or SUA FMS can require a significant upfront investment in tools

and training; recouping this investment could take some time, depending on the number of participants served

When the AAA or SUA is an FMS provider, they take on a range of new liability

Performing FMS in-house can take away from areas where the AAA or SUA has long-standing expertise

FMS is still a relatively young industry, so tools and expertise are not prevalent (however, NRCPDS is always available to help)

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How will you provide FMS?: “In-House” FMS, Recommendations Consider a hybrid approach

Carve out the tasks that the AAA or SUA is well-positioned to perform (e.g. enrolling participants as employers, managing individual budgets, verifying timesheets)

Contract with a reporting agent that is experienced with participant direction programs and payroll to manage payments, taxes, and insurance

A reporting agent is a specific type of agent, per IRS rules. Unlike a Fiscal/Employer Agent, a reporting agent does not take on joint liability with an employer. Therefore, in this hybrid approach, the AAA/SUA would have the joint liability with the employer.

If the AAA/SUA does not want joint liability, then a contract should be executed with an experienced F/EA. The AAA/SUA can still carve out certain tasks and will likely therefore pay a lower rate to the F/EA than if the F/EA performed all tasks.

Review handout called In-house AAA FMS

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Contact NRCPDS

The National Resource Center for Participant-Directed Services is here to help

We recognize that programs are unique and face unique challenges

We are available to provide one-on-one help or direct you to applicable resources

There is only so much that can fit into a large webinar; but there is a lot of information that can be provided directly to you based on your situation

Please contact us as you consider implementing FMS

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Questions, Comments, Suggestions?

Mollie Murphy617-953-3914

mollie.grotpeter@bc.eduor

mollie.murphy@annkissam.com