The 2019 Legislative Session delivered many changes which impact Home and Community-Based Service (HCBS) rate setting, including key provisions targeting the workforce shortage issue. These changes will benefit HCBS providers’ financial stability and ability to invest in the Direct Support Professional (DSP) workforce both in the short- and long-term. It will also require organizations to adjust the way they forecast revenue and the data they need to collect and report to the Minnesota Department of Human Services (DHS).
Competitive Workforce Factor
As previously reported in “What You Need To Know About Competitive Workforce Factor” (05/28/2019), a new Competitive Workforce Factor (CWF) of 4.7 percent has been added to the Disability Waiver Rate Setting system (DWRS). This policy, a key priority of ARRM and the Best Life Alliance, was crafted and passed by legislators with the explicit intention of supporting wage increases for DSPs. It’s important to keep this in mind as we walk through how CWF will work.
Calculation
System wide, the CWF will add an estimated $64.2 million to HCBS waiver revenue over the next four years, or an average 4 percent increase to service rates.
But wait…we said the CWF is 4.7 percent; why the difference? Because CWF is a component factor of the DWRS formula which applies only to direct staffing costs and not a flat rate increase.
Therefore, it will generate a different increase for each individual’s rate based on the specific direct staffing costs associated with that service agreement and the other factors which compose the overall rate. We won’t know all the specifics until DHS releases their guidance and updated frameworks, but providers should begin to evaluate the impact of the new factor to their bottom line, To estimate how much new revenue will be generated by the CWF, providers should:
- Look at the direct staffing part of the appropriate DWRS framework worksheet for each individual client
- Apply a 4.7% adjustment to the amounts for on-site and remote awake staff, excluding supervision, RN and LPN
- Add the 4.7% adjustment amount (the CWF) to the framework daily rate
- Multiply the CWF by the employee related expenses amount (currently 23.6 percent) and add this amount to the framework daily rate for the total estimated daily rate
Encumbrance, or lack thereof
Beyond understanding the business impact, why is it important for providers to start calculating this?
Remember how we said earlier that the intent of this provision was to support DSP wage increases?
- While the new legislation DOES NOT REQUIRE an encumbrance of any new revenue for DSP wages and benefits…
- It DOES REQUIRE providers to identify the additional revenues generated from the CWF and prepare a written distribution plan for them, which must then be available and accessible to all direct care staff for at least a year
DHS is also directed to provide an analysis of the CWF to the legislature every two years, and the department will certainly be tracking the comparison of revenue increases from CWF to changes in wages during that time (as will ARRM). The legislature will have to take further action to authorize future adjustments to the CWF.
To ensure your organization stays ahead of questions from legislators, DHS, and your staff, it will be important to complete these internal analyses. ARRM is developing a webinar for additional guidance this issue which will be free for members and tentatively scheduled for July 19. Watch for more details.
Timing
The CWF will not change any rates until at least January 1, 2020. After that date, two milestones must have occurred for the CWF to begin delivering increases to a service rate:
- The federal Centers for Medicaid and Medicare Services must have approved the new DWRS changes, including the CWF
- Individual clients must be off banded rates. For clients that were previously banded, this will occur their first service renewal after January 1, 2020
Because the timing of these two factors will vary, again we cannot say exactly when providers will begin to see revenue increases but still encourage all providers to begin analyzing what the impact will be once CWF goes into full effect.
Download the accompanying fact sheet on CWF
***Have more questions about CWF? Ask them below -- others might have the same question.