Milestone Payment System

1. Milestone Payment System Conceptual Basis

2. “A person with a new idea is a crank until the idea succeeds.” Mark Twain

3. Funding Methods • Where we had been— • Grants – programmatic accountability at risk • Hourly payments - process focused; high maintenance monitoring; inverse relationship to achieving consumer independence; outcomes uncertain & costly • And where we wanted to go— • Performance Based or Outcome Contracting • Single Outcome Payment - Creaming • Milestones – Structure + Standardization + Flexibility and Accountability

4. The Problem • Peter Frumkin, Assistant Professor of Public Policy at the Kennedy School of Government, Harvard University (now Professor of Public Affairs at University of Texas) • How can government and nonprofit organizations work together to deliver quality services in a way that respects nonprofits’ need for freedom in defining and pursuing their missions while responding to the public sector’s need for accountability?

5. The Problem

6. Performance Based Contracting • Approaches to Performance-Based Contracting (PBC) for Social Services by Lawrence L. Martin • PBC downplays considerations of what goes into government funded programs and services (inputs) and how they operate (process) and instead emphasizes considerations of: • Outputs—Amount of service provided • Quality—Quality of the service provided • Outcomes—Results, impacts or accomplishments

7. Performance Based Contracting • The Expanded System Model & Performance in Government Funded Programs & Services

8. The Problem • Problem: to create a reimbursement system with the right incentives

9. The Design • Cross-functional teams - Agency +Vendors +Stakeholders plan the incentive structure • All planning partners agreed to create a system which met customer, vendor & agency needs • The agency yielded power to teams • Committed to collaboration & negotiation

10. The Design • KEY - collaborative team design • realistic operational definitions of outcomes • sub-divided into incremental observable steps • payment percentages tied to each milestone • objective quality standards incorporated • Resulted in less resistance to change • Realistic implementation of best practices

11. The Design • A system based on incentive payments for outcomes • Win/Win/Win • Consumers receive quick, quality service • Providers receive adequate compensation, less regulation and greater flexibility • Funding Agency purchases outcomes not process, achieving better results at lower cost with greater accountability

12. The Design • The payment percentages don’t necessarily reflect the level of effort at each milestone. • Biggest payment at the end to push towards closure. • Total payment is based on the average cost per customer outcome. • Excludes payment of a milestone more than once.

13. The Design • Customer focused - Service Satisfaction = $ • Less time on waiting lists • Self Regulating • Follow a Business Model & Market Principles • Include Incentives for “exemplary” service

14. The Design • Placement planning includes consumer & family • Provider is only paid for a job which meets the job goal in placement plan • Job placement quicker and better match • Reduce documentation to essentials

15. The Design • Uses familiar Management Concepts • TQM - team approach, quality circles • Reinventing Government • Managing incentives rather than regulating process • Lean Production/Lean Supply - Re-thinking system’s incentive structure & logic to eliminate waste & increase productivity

16. The Design • Sets up natural consequences for poor performance • Results in faster correction of failing performance - Micro-audits before payment • Corrects the tendency of outcome payments to “cream” the best prospects • higher payment for higher level of difficulty • allows for the cost of dropouts

17. Milestone Example • Example of Six Milestone Supported Employment Prep-Place-Train structure representing best practice for Mental Health • Determination of Needs - 10% of Bid • Vocational Preparation - 10% of Bid • Job Placement - 10% of Bid • 4 Weeks Job Retention - 20% of Bid • Stabilization on the Job - 20% of Bid • Consumer Rehabilitated - 30% of Bid

18. Milestone Example • Example of Six Milestone Supported Employment Place-Train structure, Best Practice for Developmental Disabilities • Determination of Needs - 10% of Bid • Job Placement - 15% of Bid • 4 Weeks Job Retention - 15% of Bid • 10 Weeks Job Retention - 15% of Bid • Stabilization on the Job - 20% of Bid • Consumer Rehabilitated - 25% of Bid

19. PBC Analysis (Lamkin) • Milestone Case Rate • 1. Determination of Need (process) 10% • 2. Vocational Preparation (process) 10% • 3. Job Placement (output) 10% • 4. Job Training (process) 10% • 5. Job Retention (quality/outcome) 15% • 6. Job Stabilization (outcome) 20% • 7. Case Closure (outcome) 25%

20. PBC Analysis • Milestone Case Rate • 1. Determination of Need (process) 10% • 2. Vocational Preparation (process) 10% • 3. Job Placement (quality/output) 10% • 4. Job Retention (quality/outcome) 10% • 5. Job Retention (quality/outcome) 15% • 6. Job Stabilization (quality/outcome) 20% • 7. Case Closure (outcome) 25%

21. Initial Milestone Contracts • The Bidding Process • Vendors develop program budget • Estimate the numbers who can be served • Estimate the number who will complete each Milestone (project the number of dropouts) • Plug the above figures into the weighting formula to arrive at a bid per consumer

22. Bidding Formula BID COMPUTATION $___225,000______ (divided by) __440___________ = __$511_______ Total Costs from A Total Units from B Cost/Unit $___511 ______ X 20 = __10,220_____ per Client Cost/Unit of 5% Bid Amount B. PROJECTED ANNUAL CLIENT MILESTONES

23. Contracts After Rates Set • Rates for Services: Place/Train Model Regular Rate: $9,000 paid in 6 milestones: • Milestone 1: Determination of Need/Career Planning: $500 • Milestone 2: Job Placement: $1,350 • Milestone 3: 4 Weeks Job Retention: $1,800 • Milestone 4: 8 Weeks Job Retention: $1,350 • Milestone 5: 12 Weeks Job Retention (Stabilization): $1,700 • Milestone 6: Successful Rehabilitation: $2,300

24. Contracts After Rates Set • Highly Challenged Rate: $11,000 paid in 6 milestones: • Milestone 1: Determination of Need/Career Planning $500 • Milestone 2: Job Placement: $2,500 • Milestone 3: 4 Weeks Job Retention: $1,500 • Milestone 4: 8 Weeks Job Retention: $1,500 • Milestone 5: 17 Weeks Job Retention (Stabilization): $1,700 • Milestone 6: Successful Rehabilitation: $3,300

25. Contract Structure • Each Milestone is described in three segments: • Outcome expected • Service description • Documentation required

26. Contract Structure • Example: Job Placement Milestone • Outcome: The consumer has been placed in a job of his/her choice as defined in the Job Success Plan which meets the requirements of supported employment guidelines and the objective in the Individualized Plan for Employment. Job placement is complete when the individual has started the third day of work.

27. Contract Structure • Service Description: With the consultation of the Counselor, the provider will develop the consumer’s chosen job with the employer and perform a job analysis and a discrepancy analysis identifying the specific supports the consumer will require to perform the job tasks. A Training Plan will be developed to address how supports will be provided. The provider will notify the Counselor of the job title, the employer, the start date, work hours, hourly wages, and acceptance of the job by the consumer. In addition, the provider will identify and negotiate necessary job accommodations with the employer and discuss any need for assistance with the Counselor.

28. Contract Structure • Required Documentation (All Provided to the Counselor): • Job Analysis; • Discrepancy analysis; • Description of job accommodations to be implemented; • Training Plan completed before the first day of work; • Employment verification from employer; and • Computerized progress report with summary note.

29. Contract Structure • High Challenge Criteria • Based on information provided by the provider, the DRS counselor will designate whether the individual meets the criteria for the highly challenged rate. In order to be considered highly challenged, an individual must meet 2 of the following criteria: • Requires a personal care attendant at the job site; • Has exhibited an ongoing, documented pattern of explosive behavior, physical aggression, self abuse or destruction of property which would jeopardize himself/herself or others at the worksite; • During the last 2 years has experienced 3 or more events (e.g. hospitalization, incarceration or other institutionalization, recurring health or mental health issues) which interrupted work or ability to live independently; • Etc.

30. Contract Structure • Minimum Contract Standards: • Average Cost Per Closure (maximum set) • Average Work Hours for Consumers (state average) • Staff Qualifications (Training; Minimum salaries) • Required Reporting (Participation in electronic reporting)

31. Contract Structure • Contract Sanctions (correction plan) • Contract Incentives • Providers may be paid a one time lump sum incentive at the end of the contract year in the form of a 5% incentive (.05 x amount of funds earned for successfully closed cases in contract year) for meeting a minimum of 4 incentive standards: The provider’s average cost per closure for the contract year is below the required average cost per closure for each of the applicable services; The average tenure for Employment Training Specialists working under the contract is 2 years or more; Etc.

32. Implementation • Milestones implemented in series of pilots. • Began 1st pilot of system Oct. 1, 1992. • Several iterations of contracts as a part of the “experiment.” • Began conversion process 7/94. • 23 SE contracts converted by January 1997. • Remaining contracts converted in 1997.