SURVEY CONCLUSIONS

House Resolution Number 504 required the Auditor General to conduct a survey to determine the cost of providing selected health and human services, and to summarize how each State agency named in the Resolution sets, reviews, and updates reimbursement rates for programs selected. From among the over 100 health and human service programs identified by the State agencies surveyed, we selected 15 programs at 4 State agencies for review.

In the conduct of the survey, our collection and analysis of provider cost data was limited by several factors as discussed below. Due to these factors, comparisons between programs, and even among providers within some programs, may be limited. The survey data limitations include:

• Cost information was limited or not available for some programs surveyed. Some programs did not require cost reports and some cost reporting requirements were waived. We also found instances where agencies were not able to provide cost reports for all of the providers sampled in a particular program. In those cases, where feasible, we amended our sample to encompass those providers that had submitted cost reports, which may or may not be representative of the entire provider population.

• Providers did not report costs in the same way, either among programs or, in some instances, within the same program surveyed. We surveyed providers in two programs but had difficulty getting complete and comparable cost and revenue information. Also, some providers reported only their costs up to the grant amount received, while others reported all costs. Cost reporting forms also varied among programs.

• Some agency and provider data did not reconcile. We relied on the State agencies and providers to provide the relevant cost, reimbursement, and funding information for the survey. We found instances where agency data, provider cost reports, and provider financial statements did not reconcile; however, agencies reported that they have processes to address these differences. Since pursuant to House Resolution Number 504 this was not an audit, we cannot fully attest to the validity or accuracy of the information we received.

• Programs had different disbursement methods. Agencies provided funding to providers either through a grant process or a contractual fee-for-service arrangement. Some reimbursements were determined by a review of proposals submitted by providers, others were derived using a reimbursement methodology, while still others were simply a cost-of-living increase over a previously established rate. Some reimbursement rates were statewide, while others were based on specific provider and recipient characteristics.

• Providers had different characteristics. Providers differed in terms of their size and the types of services they provided. The types of providers ranged from large urban hospitals with multimillion dollar operating budgets to small rural providers with total operating budgets of a few thousand dollars. Some providers provided more than one type of service for the State, and some providers may have had contractual arrangements with more than one State agency.

• Providers had different funding sources. Some providers’ programs sampled were funded almost entirely by the State contract or grant program included in this survey. For example, the Department on Aging’s Homemaker program, the Department of Children and Family Services’ (DCFS’) Foster Care Purchase of Service Specialized program, and the Department of Human Services’ (DHS’) Delinquency Prevention program provided, on average, 97 percent of sampled providers’ total funding for these programs. Conversely, DHS’ Emergency Food and Shelter program provided an average of 24 percent of sampled providers’ total funds for the program. We also found that State programs paid varying portions of providers’ total program costs. In addition to funding from the State program surveyed, most providers also received funding from other sources, such as other local, federal, and State sources (including sources from within the same State agency), or from private and miscellaneous sources.

Agencies generally did not use cost reports to adjust rates. Most agencies used across-the-board cost-of-living increases during the period reviewed. We found that all of the 15 programs we surveyed received a funding increase in Fiscal Year 1997, 11 of 15 programs received an increase in Fiscal Year 1998, and 13 of 15 programs received an increase in Fiscal Year 1999. One program’s funds decreased in Fiscal Year 1998.

We compared cost and revenue information for programs surveyed, when available, from provider cost reports and financial statements. This analysis included revenues from all sources, including funds from State agencies, as well as other sources. For the 244 providers surveyed with available data, 90 (37%) reported total costs for the program surveyed which exceeded revenue received for the program, and 131 (54%) reported revenues for the program which exceeded costs for the program. The remaining 23 (9%) reported that their costs and revenue were equal. We also found that 21 (9%) of 242 providers with available data reported reimbursements from the State program we reviewed that exceeded their total costs for the program.

Certain programs had a relatively large percentage of providers sampled that, for the program surveyed, reported total costs greater than total revenue. For example, 16 of the 25 providers sampled in the Department on Aging’s Homemaker program reported costs which exceeded revenue for the program. Similarly, 8 of 15 DCFS Group Home providers reported costs which exceeded revenue for the program. The Aging Homemaker and DCFS Group Home program funding that we reviewed comprised a large portion of the sampled providers’ total funding for the program (Homemaker was 97 percent and DCFS Group Homes was 83 percent).

Conversely, the majority of providers for some other programs reported program revenues which exceeded total costs for the program surveyed. For example, 16 of 21 DHS Mental Health Outpatient providers and 14 of 24 DHS Domestic Violence providers reported, for this program, total revenue which exceeded total cost. On average, the Mental Health Outpatient program provided 52 percent of sampled providers’ total program funding, and the Domestic Violence program provided 43 percent of the sampled providers’ total program funding. This analysis looked at the costs and revenues only for the programs surveyed and is not intended to show entire profit or loss for the entity as a whole. DHS officials stated that there is a process to recover excess payments to providers.

HEALTH AND HUMAN SERVICE PROGRAMS SURVEYED

Digest Exhibit 1 summarizes Fiscal Year 1997 information about the 15 programs included in the survey. The Exhibit shows the number of providers and funding information for each program. (Report page 10)

FUNDING SOURCES

Digest Exhibit 2 shows that some sampled provider programs were funded almost entirely by the contract or grant program included in this survey, whereas others relied more on other types of financial support, which included funds from local, federal, private, or other State sources. For example, the Department on Aging’s Homemaker program, the Department of Children and Family Services’ (DCFS’) Foster Care Purchase of Service Specialized program, and the Department of Human Services’ (DHS’) Delinquency Prevention program provided, on average, 97 percent of sampled providers’ total funding for these programs. Conversely, DHS’ Emergency Food and Shelter program provided an average of 24 percent of sampled providers’ total funds for the program.

Digest Exhibit 2 also shows that the contract or grant program included in this survey covered varying amounts of providers’ total costs for the program. The percentages ranged from 96 percent for sampled providers from DCFS’ Foster Care Purchase of Service Specialized program to 36 percent for DHS’ Centers for Independent Living. (Report page 11)

RECENT RATE UPDATES

Digest Exhibit 3 summarizes the reimbursement rate changes that, according to the agencies surveyed, have occurred in recent years for the 15 programs we sampled. All of the 15 programs we sampled received a funding increase in Fiscal Year 1997, 11 of 15 programs received an increase in Fiscal Year 1998, and 13 of 15 programs received an increase in Fiscal Year 1999. One program’s funds decreased in Fiscal Year 1998. (Report pages 13-14)

COMPARISON OF PROGRAM COSTS AND REVENUE FOR PROVIDERS SURVEYED

Our sample showed that 90 (37%) of the 244 providers with available information reported total costs for the program surveyed that exceeded the total revenue for the program, 131 (54%) reported revenue for the program which exceeded costs, and 23 (9%) percent reported equal costs and revenue.

Digest Exhibit 4 compares sampled providers’ total costs and revenues for the programs we surveyed. For some programs, such as DHS’ Domestic Violence and Mental Health Outpatient programs, providers sampled generally had program revenues that exceeded costs for the program. For other programs, such as Aging Homemaker, the majority of providers sampled reported program costs that exceeded revenues for the program.

Providers in some programs reported costs only up to the amount of funding they received under the grant or contract, which accounts for the relatively large number of providers which reported the same amounts for costs and revenues. Therefore, any costs incurred beyond that amount would not be reflected on Digest Exhibit 4. Also, we did not audit individual providers’ reporting of costs. This Exhibit reports costs and revenues only for the programs surveyed and is not intended to show entire profit or loss for the entity as a whole.

We also found that in some instances, reimbursements from the State program we surveyed exceeded providers’ total costs for the program. A total of 21 (9%) of 242 providers with available data reported reimbursements from the State program we surveyed that exceeded their total costs for the program. Agencies reported that they attempt to recover excess payments to providers. (Report pages 17-21)

AGENCY RESPONSES

The survey report has no recommendations. However, the Department on Aging, the Department of Human Services, and the Department of Public Aid responded in writing to the report. Their entire responses are included in Appendix C of the survey report.                                                                                                    

                                ________________________________________

WILLIAM G. HOLLAND

Auditor General