Technology Considerations for Moving from Fee for Service to a Managed Care Payment Model

Transcription

1 In collaboration with the states of Texas, North Carolina, Delaware, Florida, Mississippi, South Carolina, Arizona, and the State Technology Advisory Group (S-TAG) Technology Considerations for Moving from Fee for Service to a Managed Care Payment Model v3.0, July 25, 2014

2 Table of Contents 1. Abstract Current Environment Federal Challenges and Recommendations Navigating the Procurement Process Advanced Planning Document (APD) Request for Proposals/System Requirements Current Technology and Speed to Market Summary of Federal Recommendations State Challenges and Recommendations Identifying State Needs Streamlining for an Effective Procurement Process State Procurement Rules Advanced Planning Documents Crafting the Request for Proposals (RFPs) Contracts Understand Available Technology & Improve Speed to Market Available Technology Improve Speed to Market (Schedule to Implement) Summary of State Recommendations Conclusion Appendix 1: Glossary of Acronyms Appendix 2: Major Medicaid Managed Care Legislative Milestones and Key Provisions Contributors PSTG Innovations Committee Page 2

3 1. Abstract To balance the pressures of health care access, quality and costs, Medicaid agencies have been accelerating the shift in their health care delivery and payment models from Fee-for- Services (FFS) to managed care for the last 15 years. 1 Seventeen states in FY 2011 and 24 states in FY 2012 reported expanding their managed care programs, primarily by expanding the areas and populations covered. Two-thirds of the nation s 54 million Medicaid beneficiaries in October 2010 were enrolled in some form of managed care. 2 All states except Alaska, New Hampshire, and Wyoming reported Figure 1 Comprehensive Medicaid Managed Care Models operating comprehensive Medicaid Operating in the States, 2010 Managed Care programs as of October Given these facts, State Medicaid agencies, the Centers for Medicare and Medicaid Services (CMS) and the taxpaying public all have a key interest in insuring future investments in a state s Medicaid Management Information System (MMIS) or Medicaid Enterprise System, are sound, are consistent with Federal regulations for enhance Federal Financial Participation (FFP) and advance technology to achieve the purpose to provide more efficient, economical, and effective administration of the State Managed Care In Medicaid, managed care encompasses varied approaches to delivering and financing care, including risk-based arrangements with HMOs, but also contracts with other health plans for a non-comprehensive set of services, as well as non-risk or partial risk arrangements through stateadministered primary care case management programs. plan. 4 As any additional 16 million individuals are estimated to become eligible for Medicaid under health care reform, and health care regulations as well as delivery and payment models continue to rapidly change, it is imperative that Medicaid s core health information technology products and solutions keep pace with this change. Therefore the purpose of this paper is to provide industry promising practices for planning and procuring technology solutions that are more agile and capable of supporting a range of Medicaid managed care models. 1 Medicaid and CHIP Payment Access Commission, Report to the Congress: The Evolution of Managed Care in Medicaid. UPDATED on July 25, 2011: 2 The Kaiser Commission on Medicaid and the Uninsured, STATES FOCUS ON COST CONTAINMENT AS A LOSS OF FEDERAL STIMULUS FUNDS MEANS STATE COSTS FOR MEDICAID WILL JUMP IN FY 2012, October 27, 2011: 3 A Profile of Medicaid Managed Care Programs in 2010: Findings from a 50-State Survey, Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, September CFR Part 433 Page 3

4 Together, CMS, the Private Sector Technology Group (PSTG), and the State Technology Advisory Group (S-TAG) explore opportunities to improve state and federal processes, improve the procurement process, reduce project costs, and increase speed to market by addressing the following questions: v Are there better ways of doing procurements? v Are there better ways to implement solutions on time and on budget, while at the same time improving the time to market for new/innovative solutions? v What are the components or modules (available in the market) that need to be considered by the state to support a move to managed care? What is essential functionality that states need to support MCO/ACO programs to manage them effectively? v What are the lessons learned what are the gotcha s; from the perspectives of CMS, PSTG, and States that have implemented Managed Care Programs? v How can CMS modernize the procurement process to align with current technology initiatives, improve speed to market, and control project costs? In addition to providing an analysis of the current environment and making recommendations for CMS and states to consider, this paper is accompanied by a Medicaid Managed Care Program and Technology Toolkit designed to assist states in the planning and procurement of a technology solution that supports managed care models (in addition or in place of the traditional fee-for-service payment model). Page 4

5 2. Current Environment In the past two years, the government health care sector has experienced unprecedented change in Medicaid Health Information Technology (HIT). Since the passing of the Patient Protection and Affordable Care Act of 2010, the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) has issued guidance and support for several HIT initiatives aimed to improve the efficiency and effectiveness of health care technology: Figure 2 Medicaid Health IT Guidance Timeline To realize the benefits of this guidance in new Medicaid technology projects, we must examine the discrete steps in the technology planning phase, recognizing where we are today, and what additional changes are necessary, at both the federal level (Section 3) and state level (Section 4). Although we have evaluated the current environment and make recommendations for the scenario in which Medicaid is changing reimbursement from a FFS model to a managed care model, many of these challenges and recommendations have broader applications. Page 5

6 3. Federal Challenges and Recommendations One of the most impactful pieces of guidance to inform the modernization of Health Information Technology is the Enhanced Funding Requirements: Seven Conditions and Standards published by CMS in April This guidance modernized the standards that state IT projects need to achieve in order to receive enhanced federal funding. The objectives of this standards and conditions-based approach for funding approval for large IT projects was to improve collaboration with states, reduce paperwork by eliminating unnecessary steps, and articulate critical elements important to modernizing systems development and deployment. It is with this lens that we look at aspects of the traditional MMIS procurement processes to identify challenges in the current environment; challenges that must be overcome in order to implement lasting change and fully realize the benefits of these objectives. These challenges have been categorized as Federal Challenges because although some of these affect states, the control to overcome these challenges is at the federal level (CMS/HHS). We also provide recommendations to improve the procurement process to align with the technology objectives, improve speed to market, and leverage technology advancements in the marketplace to reduce project costs Navigating the Procurement Process Although states control many aspects of the procurement process, CMS controls access to funding through the Advanced Planning Document (APD), as well as defining basic system requirements that are required for system certifications. This section explores challenges and identifies recommendations that CMS can implement to improve and modernize the procurement process Advanced Planning Document (APD) We recognize that the APD requirements, budget approval, and ongoing project reporting requirements were modified to streamline the APD process in October Still, there is opportunity to improve this process to support Modularity, Leverage, and MITA Conditions. The following challenges have been identified that affect procurements in general, and impact them more acutely when Medicaid agencies are looking at modernizing systems to support focused program changes/functionality, such as a new payment model: v Challenge Alternatives Analysis: States have significant history when it comes to MMIS projects as it relates to implementation schedules and costs. When procuring specific functionality to migrate from FFS to Managed Care, the analysis is less clear and is exponentially difficult. Recommendation #F-1: In order to address the dearth of data surrounding the options to support the procurement of IT components/solutions needed to administer a managed care payment model, CMS should consider establishing a central database of implemented tools and solutions (used in other states) to assist States in identifying potential alternatives. 5 Enhanced Funding Requirements: Seven Conditions and Standards, Medicaid IT Supplement (MITS v1.0), April 2011, Centers for Medicare & Medicaid Services. Page 6

7 Armed with this information, States beginning their procurement process would be better positioned to leverage either the actual solutions through a State to State partnership or, at a minimum, to leverage the lessons learned. v Challenge Cost/Benefit Analysis: Little information is available centrally for states to reference that assists them in outlining the long-term cost/benefits of technical improvements. This results in each state defining their own metrics for the Cost/Benefit analysis without accountability for accuracy of estimates. Recommendation #F-2: Given that many of the solutions and functions supporting the shift to managed care will be new or have limited completed implementations, it would be beneficial to have CMS Revised State Attestations for develop educational tools to assist states in conducting Software Ownership cost benefit analysis. Not only would this analysis With the Seven Standards and demonstrate the long term costs and benefits of systems Conditions, and the migration and solutions, but by establishing a consistent to commercial off the shelf framework, there would be an improved ability to software and software as a compare solutions and costs across states. service models, CMS needs to v Challenge State Attestations: The APD requires states reevaluate system ownership to attest to the fact that the state/cms owns the rights attestations. to software. As states procure COTS and Software-as-a- Service (SaaS) solutions, Intellectual Property/ Ownership of source code needs to be examined and consideration given to specific language that further defines software ownership. Recommendation #F-3: In recognition of the desire to shift to more COTS and SaaS solutions, we recommend revising the State Attestation on system ownership. Modifying the definition of ownership to recognize vendor Intellectual Property/Ownership permits greater latitude for State selection of COTS and hybrid solutions. v Challenge Timeframes for Funding Approval: The timeframes for CMS review and enhanced funding approval of a state s APD has typically required 60-days. This timeframe may be extended if additional information is requested. This combined with a state s procurement process results in a lengthy procurement process (see State Challenges below) which can seriously delay a state s ability to move to managed care, which in turn has serious program expenditure implications. Additionally, an extended procurement process may result in outdated requirements by the time funding and the Request for Proposals (RFP) is finalized. Recommendation #F-4: In order to reduce the required timeframe for funding approval, we recommend CMS consider implementing a step-approval process or develop a menu approach to APDs where States are able to select from pre-approved options only requiring review of deviations or special requests. This is further supported by the RFP/System Requirements considerations outlined below. v Challenge Enhanced Funding: Enhanced funding for Medicaid IT projects provides 90% enhanced match for custom-developed systems and 75% enhanced match for Software which Page 7

8 conflicts with the Seven Conditions and Standards Leverage Condition. The Leverage Condition promotes the use of commercial off-the-shelf (COTS) software to reduce overall project implementation costs, yet the enhanced match has not aligned with this. Consider this simplified example of historical approach to MMIS system implementation and funding (Project 1) and a revised approach with a full COTS solution: Project 1: State A procures a large integrated system that requires customization for claims processing and reporting solution costs include: Total DDI Budget - Project 1 Total Fed Share State Share Contractor DDI Cost (90%) $60,000,000 $54,000,000 $6,000,000 IV&V Contractor (90%) $5,000,000 $4,500,000 $500,000 PMO Contractor (90%) $11,000,000 $9,900,000 $1,100,000 Staff Training (75%) $90,000 $67,500 $22,500 Equipment for Project Staff (90%) $50,000 $45,000 $5,000 State Staff Time for MES (90%) $11,000,000 $9,900,000 $1,100,000 DDI Cost for Replacement $87,140,000 $78,412,500 $8,727,500 * Estimated costs in this example are for illustrative purposes only. Project 2: State A procures a COTS solution, with the following costs: Total DDI Budget - Project 2 Total Fed Share State Share Contractor DDI Cost (90%) - Config./Labor $20,000,000 $18,000,000 $2,000,000 Contractor DDI Cost (75%) - Sftwre. $20,000,000 $15,000,000 $5,000,000 IV&V Contractor (90%) $5,000,000 $4,500,000 $500,000 PMO Contractor (90%) $11,000,000 $9,900,000 $1,100,000 Staff Training (75%) $90,000 $67,500 $22,500 Equipment for Project Staff (90%) $50,000 $45,000 $5,000 State Staff Time for MES (90%) $11,000,000 $9,900,000 $1,100,000 DDI Cost for Replacement $67,140,000 $57,412,500 $9,727,500 * Estimated costs in this example are for illustrative purposes only. In this scenario, by implementing commercial software, although CMS will experience substantial savings, the state will actually need to pay more. Recommendation #F-5: We recommend that CMS explore ways to align enhanced funding of Medicaid Health IT projects with the goals outlined in the Seven Standards and Conditions. This begins with a fundamental shift in approach to the procurement of components (from the procurement of complete systems). Potential areas for consideration include: a. Solution agnostic enhanced funding. For example, as outlined above, while the Leverage Condition promotes the use of COTS products, from a State funding perspective, there is an economic disincentive to encourage vendors to provide more Page 8

9 COTS based components and solutions. By increasing enhanced match to 90% for all solution components, CMS would incentivize alignment with the Conditions as well as reducing total costs across the portfolio of Federally-funded Medicaid projects. b. Multi-State Incentives and Support. As currently structured, there are limited economic incentives for States to consider shared systems across a multi-state or regional consortium. Incentives could take the form of providing further enhanced funding for the State effort involved in developing joint RFPs or provision of contracting expertise to work through the inter-governmental agreements (IGA) and/or resulting vendor contract Request for Proposals/System Requirements There are a common set of systems requirements that need to be considered when moving from an FFS reimbursement model to a managed care model, understanding that this list may vary slightly based on state-specific needs. The following challenges have been identified that affect RFPs and system requirements in general, as well as when Medicaid agencies are seeking to implement a new payment model: v Challenge System Certification Requirements: The CMS Certification Toolkit includes checklists by Business Area and functionality that provide a core set of requirements that can be used by states as a starting point. This toolkit is now five years old and is outdated from a technology perspective. Additionally and related to the following recommendation, MITA 3.0 guidance remains incomplete until CMS releases guidance for the Eligibility and Enrollment Business Area, which is critical to accurately enrolling members into managed care. Recommendation #F-6 Publish the MITA 3.0 Eligibility and Enrollment Management guidance and update the Medicaid Enterprise Certification Toolkit (MECT) Checklists to align with the MITA Framework 3.0. The current MECT provides a base set of requirements for use in APD and RFP development that are valuable to states as a baseline. As more States are looking to base their RFPs on MITA 3.0, updating the checklists to reflect MITA 3.0 would bring the APD, RFP and certification requirements into alignment. (Note: that we recommend revising the certification process with Recommendations #10 and #11, but as stated here the baseline set of requirements in the MECT are valuable). Recommendation #F-7 Expand the Collaborative Application Lifecycle Management Tool (CALT) Medicaid Community to include MMIS/MES projects. While we are starting to see more consistency in state RFPs, further sharing of procurement information between States would allow them to leverage lessons learned and share and reuse material. To that end, it would be helpful if CALT could be expanded to include broader Medicaid program information and forums. In addition, CMS-provided templates and core checklists would facilitate procurements and could be distributed through an expanded CALT or similar tool. Recommendation #F-8 Standardize terminology across state Medicaid programs. As simple as it may sound, there is a significant amount of cost tied to updating documentation and system components to reflect different terminology across states (e.g., Member, Page 9

10 Beneficiary, Recipient, Client or Consumer). With standardized terminology established by CMS across States, RFPs could be better leveraged and overall costs to procure and implement reduced Current Technology and Speed to Market CMS can provide a valuable role in expanding State s access to information regarding availability technology as well as with improving the speed to market/implementation. v Challenge Current Technology and Project Information: Currently, the only information made available by CMS about the status of state MMIS is the CMS MMIS Fiscal Agent Contract Status Report. This report is not updated regularly; the latest posted version is dated February 11, 2011, does not utilize standardized definitions and does not include complete information on technology capabilities, products, solutions and vendors. This report provides basic information, but no detail business functions supported by the technology or fiscal agent operations, software/system versions, or sub-contractors. Certify Software Modules Prior to Procurement and Implementation Certification of versions of modules or components, similar to the certification of EHR modules, provides States with assurance and can expedite State procurements and implementation. By also certifying the system documentation, this can reduce overall project costs by only requiring documentation updates for state specific configuration changes. Recommendation #F-9: Since HHS has created the Office of Information Products and Data Analytics to oversee the agency s portfolio of data and information; we recommend that CMS develop a national map that provides data on each state s MITA Roadmap, business functions, feasibility studies, and details on technical capabilities, product and solution by vendor and business process. Expanding the information CMS currently tracks to include a richer data set would provide States with additional information on potential solutions and price points as they assess alternatives. Additional data points for inclusion include: Dashboards for performance measurement Version of system/base code implemented (can also be used to facilitate State collaboration) As we move to modular systems, provide details not just of the system as a whole but also based on component functionality by MITA business areas v Challenge Certification Process: The traditional MMIS certification process evaluates the system/technology at least six months (sometimes much later) post-production. Even if a vendor has a certified solution in production, the system is completely certified again for each implementation. As the industry complies with the Seven Conditions and Standards Modularity and Leverage Conditions, and COTS products and SaaS solutions are more commonplace, a revised certification approach is needed to improve speed to market and reduced implementation timeframes. Recommendation #F-10: CMS could certify versions of modules, components and products through a testing process prior to implementation. CMS could collaborate with State Page 10

11 Medicaid agencies through a Software Development Life Cycle (SDLC) Gate Review to ensure timely implementation, similar to the approach being used for implementing Health Insurance Exchanges and Integrated Eligibility Systems. Through this process States are assured that they are procuring a certified version of a module or component, and CMS and States can establish a learning environment of reviews to both ensure timely implementation and agree to modifications that may be necessary through the implementation process. Recommendation #F-11: Certify system software versions for COTS products. Once a COTS version is certified, it should be made available on a list of certified products that states can select from without having to go through the certification process again; assuming state changes are configuration only. Only state customization of the product would need to be certified. v Challenge Project Documentation/Artifacts and Evidence Traditional project documentation required for Health IT projects is geared towards custom/new systems development. This is another area to focus on as the industry aligns with the Seven Conditions and Standards Modularity and Leverage Conditions, and COTS products and SaaS solutions are leveraged. Recommendation #F-12: As the industry aligns with the Seven Conditions and Standards Modularity and Leverage Conditions, and COTS products and SaaS solutions are leveraged, CMS should consider certifying standard system documentation (software user guides, system specifications, etc.) from vendors with certified implementations. Additionally, documentation required for SDLC Gate Reviews need to differentiate what is required for a COTS solution vs. a developed solution. This would reduce the cost and time involved in developing and delivering paper and keeps the focus on what is unique to a specific implementation Summary of Federal Recommendations The following table summarizes the recommendations for CMS to improve Medicaid Health IT procurement and implementation processes that are controlled and/or influenced at the federal level. Topic/Category ID# Federal Recommendations Procurement Process APD: Alternatives Analysis F-1 Establish a central database of implemented tools and solutions (used in other states) to assist States in identifying potential alternatives. Cost Benefit Analysis F-2 Develop educational tools to assist states in conducting cost benefit analysis. State Attestations F-3 Revise the State Attestation on system ownership to align with COTS and SaaS solutions. Modify the definition of ownership to recognize vendor Intellectual Property/Ownership. APD Preapproved Menu Options for Managed Care F-4 Implement a step-approval process or develop a menu approach to APDs where States are able to select from pre-approved options only requiring review of deviations or special requests. Page 11

12 Topic/Category ID# Federal Recommendations Components Enhanced Funding F-5 Align enhanced funding of Medicaid Health IT projects with the goals outlined in the Seven Standards and Conditions. a. Solution agnostic enhanced funding. Increase funding for COTS/SaaS solutions (increase from 75% to 90%). b. Multi-state agency incentives for joint procurements/shared systems. Incent states to jointly procure technology/shared solutions by providing further enhanced funding that support the effort involved in developing joint RFPs or provision of contracting expertise to work through the inter-governmental agreements (IGA) and/or resulting vendor contract. Procurement Process RFPs/System Requirements: System Certification Requirements Current Technology and Speed to Market: Current Technology and Project Information F-6 Publish the MITA 3.0 Framework section for the Eligibility and Enrollment Management Business Area and update the Medicaid Enterprise Certification Toolkit to align with MITA 3.0. F-7 Expand the Collaborative Application Lifecycle Management Tool (CALT) Medicaid Community to include MMIS/MES projects. F-8 Standardize terminology across state Medicaid programs. As simple as it may sound, there is a significant amount of cost tied to updating documentation and system components to reflect different terminology across states (e.g., Member, Beneficiary, Recipient, Client or Consumer). F-9 Expanding the information CMS currently tracks to include a richer data set would provide States with additional information on potential solutions and price points as they assess alternatives. Certification Process F-10 Certify versions of modules, components and products through a testing process prior to implementation through an SDLC Gate Review certification process for MMIS systems and/or functional components. F-11 Pre-certify COTS software component products by version (similar to approach taken for EHR Incentive Payment solutions.) F-12 Certify standard system documentation (software user guides, system specifications, etc.) from vendors with certified solutions. Additionally, documentation required for SDLC Gate Reviews need to differentiate what is required for a COTS solution vs. a developed solution. Page 12

13 4. State Challenges and Recommendations As Medicaid agencies move from traditional fee for service reimbursement structures to managed care models; there are several challenges that are also common at the state level. In this section, we provide an overview of the major areas for State consideration in assessing the current and future needs of their Medicaid program and the resultant system needs; ways to improve not only the procurement process but also to better use that process to set up project and operational success and finally a look at some of ways to leverage the technology and tools in the marketplace Identifying State Needs State policy and business needs necessitate technology improvements. Ideally, as policy is being developed, it is important to engage state technology experts to complete a holistic approach to technology planning. It is just as critical that the technology experts understand the strategic vision and business objectives to ensure the right technology solution is acquired. This begins with identifying state technology needs. In order to help State s work through the challenging process of identifying their high-level Medicaid program needs and goals, we have developed a Medicaid Managed Care Program and Technology Toolkit comprised of a combination decision tree and series of checklists. This is not intended to be a prescriptive process but rather to provide State s with a framework to assess their true needs as well as to avoid some of the pitfalls that can strike throughout the process. Although the focus of this white paper is on technology procurements for state Medicaid agencies, it is important to ensure that when procuring Managed Care Organization (MCO) services, that adequate consideration is given to integration and reporting requirements. A state s Managed Care Program office should ensure the Information Technology staff is included early in the procurement and planning process. Also, as Medicaid moves towards the Seven Conditions and Standards, the state may want to consider shared services to maximize cost efficiencies across MCOs, such as centralizing provider enrollment or member enrollment services Streamlining for an Effective Procurement Process The single most critical success factor in the procurement process is entering the game with the end in mind ensuring that the APD, RFP, and contract are aligned not only with each other but also with the State s needs and objectives State Procurement Rules v Challenge Understanding State Procurement Rules and Process: A common pitfall of procuring IT solutions is that the state Purchasing/Procurement process is either unknown or the Procurement Officer is not engaged. Page 13

14 Recommendation #S-1: Training the senior staff involved in the procurement on the State s procurement rules and processes to ensures that this information is used to shape the procurement documents. The more knowledgeable the staff is, the more they will be able to ensure compliance with procurement rules but also to assess how best to use those rules and all available options to achieve the programmatic goals. v Challenge Applicability of Procurement Rules: Often state procurement rules do not recognize the difference between procuring goods vs. procuring services. This is of particular importance when procuring SaaS solutions. Recommendation #S-2: States should considering meeting with their procurement staff to assess the existing programmatic rules and their applicability to the desired procurement approach (e.g., the difference between procuring goods vs. procuring services). In the event the existing guidelines do not permit the desired framework, explore alternatives or waivers to work to align the procurement structure with the business goals. v Challenge Minimum Experience Requirements: Understanding that states need to ensure that a company is qualified to perform the services being procured, restrictive requirements for minimum qualifications (similar projects) create barriers that may exclude viable vendors from bidding or prevent Innovator companies from entering the market. Additionally, some State staffing requirements are so stringent that they cannot reasonably be met by more than a small handful of firms, which prohibits smaller, newer and often more innovative firms. However, we understand that innovation and a competitive market, needs to be balanced with minimizing state and federal risks of project failure. The need to reduce restrictions is even more critical as states move to modular solutions and componentbased procurements. Recommendation #S-3: Again acknowledging that states need to ensure that a company is qualified to perform the services being procured, States should work to align the experience requirements with the state s envisioned goals. By establishing reasonable minimum requirements and qualifications, States will encourage competitive bidding and avoid eliminating viable solutions and alternatives. We recognize that relaxing minimum qualifications to promote new and innovative component-based solutions must be balanced with strong, enforceable performance standards through SDLC gate reviews. v Challenge Barriers to Multi-state Procurements: State procurement rules may be restrictive to the point that the rules prohibit multi-state procurements, which may limit the ability of a state to explore more cost-effective solutions. Recommendation #S-4: Consider regional or multi-state procurements to maximize purchasing power and control costs. There are examples both of states and vendors working in a multi-state collaboration to reduce costs (i.e. EBT implementation for food stamps). In the Health Insurance Exchange area, the states have the example of NESCSO. This consortium was awarded a planning grant and shared that funding collaboratively. Vendors can also identify opportunities to organize collaboration among their client states. This was done when multiple states worked with one vendor to develop their EHR Provider Incentive Payment module. As States seek to collaborate with each other, look for ways to increase Page 14

15 understanding and expertise in developing effective interstate Memorandums of Understanding (MOUs) and Intergovernmental Agreements (IGAs). v Challenge Timeframes: As mentioned under the Federal Challenges (Section 2.1), the time lag between when states are going through their requirements analysis for their APDs and actual project work starts creates real challenges for both vendors and the State. Between that and the rapid changes in both Healthcare policy and HIT, states may want/need to consider alternative procurement strategies. Recommendation #S-5: As discussed above, States should begin the procurement process by spending time to understand their procurement rules (state statutes and regulations) and engage procurement officers/staff from the start. States can work both with their own procurement folks as well as other State agencies and other States that have procured similar types of services/solutions to identify procurement templates, seek guidance, and identify best practice approaches to address standard template language and requirements in a manner that will ensure a competitive and successful procurement of Medicaid systems and services Advanced Planning Documents v Challenge State Vision: If a clear vision is not defined, this can delay the procurement process. Understanding the overall state s vision for healthcare and where a managed care payment model fits (including what programs will benefit from this reimbursement model) in meeting this vision is important. To this end, as States move to a predominately managed care mode of operations, the claims adjudication process will represent an increasingly diminished quantity of the work performed by the MMIS. Claims processing can be complex, involve multiple resources to execute a comprehensive set of edits and audits, and comprise a significant component of MMIS costs. Consideration is needed of new alternatives for claims processing that leverages shared services, lowers costs, and maintains flexibility for States' specific needs. Recommendation #S-6: Look for opportunities to work collaboratively with CMS throughout the APD development process. By requesting in process reviews, and working through potential challenges in advance, States will be better able to accommodate any needed changes in the resultant RFP as well as reducing the time needed for APD approval Crafting the Request for Proposals (RFPs) v Challenge Customization and Complexity: Each state is varied in the level of customization and complexity of proposals. Admittedly a part of this complexity corresponds to a State s procurement rules, but this is also controlled by the Medicaid agency. Overly complex RFPs increase the risk of the proposal responses not meeting the procurement objectives and decrease the probability of vendors responding. Carefully consider both the State s need and the bidder s regarding allotting sufficient time for preparation, questions, proposal creation, assessment, and contract negotiation. Be realistic and conservative, shortchanging the quality or clarity of the RFP due to time constraints can Page 15

16 lead to more difficulty in assessing the responses, the same is true in regards to providing sufficient time for the market to respond. There is a relationship between the complexity of the RFP to the time it takes to prepare a response, and the time to negotiate a contract. Remember that if you short change the time, you could get an inadequate response and find that having to go out again for a rebid cost you much more in time than you thought you gained. The following are several recommendations to assist States in streamlining and structuring RFPs: Recommendation #S-7: Clearly articulate the procurement goals and objectives. The more states know about their own business processes, the more effective the RFP will be. Focus requirements more on outcomes than specific system requirements. Establish objectives and describe the vision of the operations of the MMIS for the vendor community. The vendors then conduct requirements elicitation during DDI. Another benefit is the avoidance of frustrations faced by the state staff in having to participate twice in the same process, namely, during requirements gathering by the vendor helping to write the RFP, and then during the requirements analysis/validation by the vendor building the MMIS. Recommendation #S-8: Modernize the implementation model. As MMIS technology evolves to align with the Seven Conditions and Standards, and CMS encourages States to move to component-based system replacement/enhancements; States may want to consider a system integrator model where a single vendor is tasked with the integration aspects of separately procured components. Recommendation #S-9: Maintain a forward looking focus. States should consider reengineering their program processes and policies first and then capturing the requirements. This allows states to write requirements which address their future state, and don t merely replicate the current business practices. Recommendation #S-10: Identify desired results not processes. With the movement to component-based, COTS, and SaaS solutions, focus requirements on what business objectives, processes, and outcomes the system functionality must support, allowing vendors to define how the system will been the State s business requirements. States can then focus on SLAs and measurements of success to ensure vendor performance. Furthermore consider allowing vendors to bid their own SDLC and set of deliverables to define how best to implement the solution. This ensures that required documentation moves the project forward and focuses on system outcomes. Recommendation #S-11: Invite competition by developing minimum experience requirements and evaluation criteria that recognize COTS products and software solutions that are implemented and in production in the broader health industry (commercial environment), as well as systems implemented in the public sector. v Challenge Consistency in Vendor Responses: RFPs present challenges to both States and vendors alike. In addition to the challenges in drafting RFPs, States face a further challenge in assessing the responses they receive from the vendor community. The vendor community struggles with how best to respond to the response requirements in RFPs. Page 16

17 Recommendation #S-12: Establish a uniform RFP Template to be used across all States for procurement of MMIS Systems and system components. We recognize that the template sections can be standardized, with approximately 80% of the core content the same or similar, understanding that unique state procurement rules may require customization (resulting in 20% customization). v Challenge Evaluating cost vs. value: Evaluating proposals to get the most value for the cost of a contract is a common struggle among states. Recommendation #S-13: Minimize the weighting primarily on procurement costs, since many states then neglect to identify the total cost of allocation. A high concentration of points on cost can result in vendors artificially reducing costs and then trying to skimp on delivery or narrowly interpret requirements to use change orders to mark up costs postaward. Further, if there are requirements that the state feels are optional or nice to have, identify them as such and allow vendors to provide separate optional pricing for those items. By following a disciplined process through the RFP development, States can avoid ending up with gold plated requirements which may be large cost drivers for vendors without a commensurate value to the State Contracts v Challenge Outdated contract terms: Equitable contract terms are the key to a successful project. To achieve this goal, States should develop contract terms that protect both parties. The following paragraph outlines a number of areas including procurement processes, contractual considerations, and recommendations on contract terms themselves. Recommendation #S-14: Define new contract terms to incent performance and recognize technology advancements and explore alternative contract types. Consider breaking the procurement into at least two phases: phase 1 - requirements and design and phase 2 development and implementation. The time and materials (T&M) contract type can be used for phase 1 and, upon the completion of phase 1 negotiate a Firm Fixed Price (FFP) for phase 2 based on the results on phase 1. It should be noted that it is assumed that the same vendor is recommended to complete both the phases as the context of requirements is bound to be lost in transition if a different vendor is brought in for phase 2. If continuing with a single FFP procurement, make sure state staff is trained in how to effectively manage that type of contract. Recommendation #S-15: Review managed care vendor market to determine what technical functions the state must conduct, that the state can share with managed care entities, or that the state could contract with an MCO to conduct on behalf of the state. Based on this review, define a process for States to follow when procuring appropriate technical services from managed care vendors that levels the playing field for participation. The process will need to address the segregation of compensation or any subsequent action or award, for the performance of these technical services by managed care vendors that mitigates any appearance of preferential treatment. Page 17

18 Recommendation #S-16: Consider multiple vendor arrangements. As we are moving to more modular, componentized procurements, States should explore what contract language needs to be included in each contract to ensure cooperation and successful delivery. Merely designating one vendor as the system integrator will not accomplish that goal as vendors work to protect both their territory while attempting to minimize their scope. The contracts of all involved parties should include specific scope and obligations related to that multiple vendor arrangement. a. Review Vendor Liability Clauses. When developing a price proposal, a vendor must weigh many variables, including the scope of work, as well as the financial risks associated with penalty and liability provisions. Contract terms that increase a vendor s financial risk will inherently increase the vendor s price. Like the other liability provisions, contract provisions that provide adequate protection for both parties and present an opportunity for significant cost reduction for the state are recommended. b. Location Flexibility to Leverage Existing or Share Administrative Services. Contract provisions may disallow leveraged offerings available to similar entities within the Federal and private sectors. To capitalize on these leveraged offerings and reduced fee schedules, we recommend the RFP provisions that do not place geographical restrictions on the location of the data center; call center, and other clerical supported services. Geographic flexibility expands the base of resources available to support the contract and allows vendors to propose the most cost effective and efficient solutions. Sharing services across states increases operational efficiencies and reduces costs. Performance metrics can be used to manage customer service levels and ensure that there is no degradation in vendor performance. Recommendation #S-17: Consider Value-based pricing models. The incentive aspects of value based pricing offer States with an effective tool that rewards vendor creativity, innovation, and extra effort. The most rewarding concepts for value based pricing include pricing models offering additional revenue-generating opportunities or the potential for costsavings or cost avoidance. To realize the financial rewards associated with a value based model, the contract terms must include performance metrics as well as the measurements used to warrant an incentive payment. When employing this model, it is also important to develop an incentive payment structure that aligns with pre-defined levels or performance tiers. When contracts include performance tiers, the contractor must harvest more than just the low hanging fruit and explore innovative solutions to reap the financial rewards associated with this model Understand Available Technology & Improve Speed to Market A successful procurement and project starts with the analysis of the State s needs, understanding of the procurement guidelines and process and an understanding of the technology available in the market. We have outlined our recommendation for consideration of Page 18

19 the first two elements in the preceding sections and will explore the third component in this section Available Technology It will be worth the investment in time for States to explore the technology options available to meet the identified business needs. While there may not be an exact fit readily available in the marketplace, by better understanding the options early in the procurement process, States will be able to refine their RFPs and project expectations to start the procurement and project off on a path to success. Some specific tools and technologies, currently available include: MCO software applications such as self-managed health/wellness web tool to promote health wellness and ownership of health status. Provide a mobile app. through cell phones for access to benefits Auto-assignment tools for assigning members to MCO/ACO when no election is made. GIS tools to manage capacity. National quality standards which allow states to perform benchmarking regionally and nationally compared to other Medicaid programs and against general population health Improve Speed to Market (Schedule to Implement) Once the needs are analyzed, the APD approved, RFP released, and contract signed, there needs to be a joint commitment to achieving the project goals and timeline in execution. Vendor and state staff alike need to understand the key drivers in project success and keep their eyes on the prize on time, on budget project delivery. A couple of key factors in ensuring that are: Recommendation #S-18: Consider deploying modules and mobile applications. While CMS regulations stress the need for States to deploy more modern technology that is modular, reusable and to explore the use of cloud-based services, new ACA regulations and the National Quality Strategy emphasis the need for consumers and their families to become active in improving their health and members of their health care team. Health information technology mobile applications offer great potential for engaging consumers and families and should be a considered a vital part of a State s, Blue Button+, Text4Baby, as well as other interactive and personal education tools. Recommendation #S-19: Commit dedicated resources to the Project Team. Early identification of key State staff resources whose knowledge will be critical to the success of the project and then the commitment of those resources is critical to the success of the project. Recommendation #S-20: Learn from Others. Reach out to other states to leverage any lessons learned from previous, recent implementations. Even if the vendor or products/solution being implemented are not the same there are consistent elements across most projects of this size and nature which can be leveraged. Page 19

20 4.4. Summary of State Recommendations The following table summarizes the recommendations for State Medicaid Agencies to improve Medicaid Health IT procurement and implementation processes that are controlled and/or influenced at the federal level. Topic/Category ID# State Recommendations Identifying State Needs: **Utilize Medicaid Managed Care Program and Technology Toolkit to define State Needs** Procurement Process State Procurement Rules: S-1 Train the senior staff involved in the procurement on the State s procurement rules and processes. S-2 Meet with procurement staff to assess the State s existing programmatic rules and applicability to the desired procurement approach (e.g., the difference between procuring goods vs. procuring services). Educate procurement staff if rules are not applicable and/or need to be modified. S-3 Align the experience requirements with the state s envisioned goals. By establishing reasonable minimum requirements and qualifications, States will encourage competitive bidding and avoid eliminating viable solutions and alternatives. S-4 Consider regional or multi-state procurements to maximize purchasing power and control costs. S-5 Engage procurement officers and staff from the start. Work across state agencies and with other states that have procured similar types of services/solutions to identify procurement templates, seek guidance, and identify best practice approaches to address standard template language and requirements in a manner that will ensure a competitive and successful procurement of Medicaid systems and services. Procurement Process APD: S-6 Look for opportunities to work collaboratively with CMS throughout the APD development process. By requesting in process reviews, and working through potential challenges in advance, States will be better able to accommodate any needed changes in the resultant RFP as well as reducing the time needed for APD approval. Procurement Process RFPs: Customization and Complexity S-7 Clearly articulate the procurement goals and objectives. The more states know about their own business processes, the more effective the RFP will be. Focus requirements more on outcomes than specific system requirements. Establish objectives and describe the vision of the operations of the MMIS for the vendor community. The vendors then conduct requirements elicitation during DDI. S-8 Modernize the implementation model. As MMIS technology evolves to align with the Seven Conditions and Standards, and CMS encourages States to move to component-based system replacement/enhancements; States may want to consider a system Page 20