Disability Support Services Development of nationally consistent pricing mechanisms and models Introduction Pricing Principles

Disability Support Services

Development of nationally consistent pricing mechanisms and models

IntroductionPricing Principles



Agenda Project objectives and scope

3© 2013 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in New Zealand.

Agenda

10:00 Welcome and Introductions

10:15 Ministry of Health – Project Background and Scope

10:30 Project Outline, Methodology, Scope and Timelines

10:50 Background to the development of Pricing Principles

11:10 Questions

11:20 Break

11:40 Workshop Instructions – Presentation of ‘Strawman’

11:50 Workshop / Table Discussions

12:20 Group Feedback

12:40 Summary and Reflections

12:50 Next Steps and Close


Project objectives

Project objectivesTo develop nationally consistent pricing methodologies and pricing models for selected Disability Support Services

■To result in:

•Service delivery equity and clarity for service users

•Price equity and clarity for providers

•Sustainable and efficient high quality disability support services, and

•Transparency for DSS regarding value for money.


Project Scope

Pricing mechanisms and models will be developed for the following suite of services:

■Child Development Services

■ Assessment, Treatment & Rehabilitation

■Home and Community Support Services

■Respite

■Carer Support

■Supported Independent Living

■Community Residential Living (includes High and Complex)


Purpose of today

■ Project introduction and background

■ Outline the approach to pricing

■ Discuss the project methodology and timeframes

■ Provide an indication of the level of sector involvement and consultation required

■ Seek input into the fundamental principles that will underpin the pricing methodologies and models (Pricing Principles)



Approach to pricing


Approach to Pricing


Approach to Pricing

Pricing Principles

■Develop a set of principles with input from the service sector and Reference Network

■Establish the ‘market rules’ that define the scope of pricing and what it is intended to cover

■Help to define the relationship between the purchaser and the recipient of funds (service providers) in relation to the use of prices

■Ensure that the values and expectations of DSS providers are recognised, which will ultimately influence the design of the pricing approach

These will be addressed further in today’s workshop


Approach to Pricing

Service Descriptions

■Service Activity

•Review service specifications

•Collect information on how services are delivered, measured and counted

•Review service activity and performance reports

•Consider variations between regions and providers

•Consider variations resulting from nature of disability, complexity and individual preferences

•Develop an understanding of service outputs and outcomes

•Review Ministry targets / expectations as part of contracts or service agreements

■Cost Drivers

•Identify cost drivers during discussions with a mix of different providers

•Discuss the historical impact of these drivers

•Consider how these may be assessed during the analysis of costing information


Approach to Pricing

Service Descriptions

■Financials

•Assess the availability of financial data from a sample of organisations and the Ministry

•Review financial reporting systems and identify commonalities and differences between providers

•Form a view as to the depth, availability and quality of financial data likely to be provided

•Consider ways to identify and capture the impact of known (and unknown) cost drivers

•Consider the implications for the development of an approach to pricing

■Management

•Discuss financial management practices (e.g. accounting practices)

•Understand how organisations treat overheads or capital

•Identify any specific or one-off expenses

•Review policies with respect to staff management and / or utilisation


Approach to Pricing

Develop data collection tool and data collection

■Data collection tools

•Develop a costing framework, informed by provider consultations

•Construct excel-based modelling tools to derive the cost of service delivery and review the impact of identified cost drivers:

Organisational size

Geography

Client disability, complexity and choice

Travel costs

Capital costs

Innovation and quality

■Pilot survey

•Conduct a pilot survey with a selected sample of organisations

•Refine the data collection tools on the basis of data received and participant feedback


Approach to Pricing

Current costing information and data collection

■Sector wide data collection exercise

•Survey all service providers using the refined excel-based data collection tool

•Support survey completion with a dedicated toll-free number and email address

•Utilise Reference Network participants to disseminate information to the sector

■Data validation

•Review information provided by individual organisations

•Consult with organisations as required to understand and ensure data accuracy

•Present costing data to the sector in a second round of regional forums

■Data analysis

•Construct detailed cost models using the completed and verified data set

•Finalise cost models for each service type


Approach to Pricing

Approach to pricing

■Literature review of pricing approaches

•Conduct a contemporary review of approaches to pricing disability services locally and internationally

•Consider pricing approaches across a variety of human services

•Consider the pros and cons of various methods with respect to ‘in-scope’ Disability Support Services

•Canvas sector views (Ministry, Reference Group and regional forums) with respect to a mechanism that best aligns with the Pricing Principles and the requirements of the sector and service users

•Identify a preferred pricing mechanism

■Develop the pricing approach for DSS

•Consider the data required to develop a suitable model

•Assess the availability and suitability of existing data as well as the reporting and management systems required to support implementation and management of the preferred model

•Develop output / outcome based pricing model/s by available data and reporting systems


Approach to Pricing

Set prices and implementation planning

■Develop a range of prices for the range of Disability Support Services in scope

■Consider and model the implications to the Ministry and individual organisations

■Consider individual price variations based on the costing framework and the impact of cost drivers

■Set and publish prices

■Develop individual transition paths for organisations, where required

■Ensure continuity of services for clients and their families



Project methodology and timeframes


Consultation phase IJuly

Consultation phase IIINovember

Consultation phase IIOctober


Project initiationJune

Development of nationally consistent pricing methodologies and pricing models for selected Disability Support Services

Pricing PrinciplesJune - July

Data collection and cost modelingJuly - October

Develop pricing mechanismsAugust - October

Present models and implementation plan October - November

Data collectionAugust





Pricing Principles


What are pricing principles?

Pricing principles are agreed statements by all stakeholders relating to how disability services should be purchased and the wider objectives that stakeholders are trying to achieve

Whilst not party to the pricing principles, the ultimate beneficiaries of services, i.e. people with a disability, are recognised

They cover more than just pricing:

■ They define what is important in the relationship between the purchaser of a service and the provider from whom the service is purchased

■ They influence the selection and design of a pricing model

■ They influence how the purchase of a service is undertaken and subsequently managed


Content of Pricing Principles

A Preamble

A short simple introduction that describes the purpose and scope of the pricing principles and the general relationship between purchaser and providers

The Principles

A range of simple statements that describe the purchaser’s and providers’ views on what is important

The entire pricing principles document should be:

■ In simple, jargon free, English

■ Deal with only one or two closely related ideas at a time

■ Use inclusive language

■ Be sufficiently short that users do not have to continually check it for what it says


Pricing principles

There are four distinct types of pricing principles:

■ General values

• These describe the key values that participants expect a pricing model’s design to express. These typically cover areas such as: equity, simplicity, clarity, and efficiency

■ Specific objectives

• These describe wider sector objectives such as: choice, innovation, and service quality. These typically reference areas where other sector reforms are also occurring

■ Pricing issues

• These describe the more financial management aspects such as: risk sharing, incentives, the role of profit, and response to provider diversity. These also typically focus on the areas of greatest risk for both the purchaser of services and the organisation delivering the services

■ Management issues

• These describe how participants will approach the management of pricing / prices. These cover who is responsible for what, such as: oversight, accountability, and sharing information


General Values – some examples

Principle The pricing system will…

Equity… treat everyone equally and fairly but where important differences occur those differences will be recognised

Consistency… operate in the same way, irrespective of organisational type, size, or location, and between different times

Clarity… not be overly complex so that the purpose of a purchase is clear to everyone

Transparency… be apparent to all stakeholders so that as a sector everyone understands and is aware of how services are priced

Sustainability... recognise that financial sustainability is at the heart of an effective DSS sector

Responsiveness … encourage the DSS sector to respond to variations in demand / need

Relevance … reflect the focus, costs, structures, and service models of DSS providers


Pricing issues – some examples

Pricing issues are frequently interlinked. For example, the role of profit or surplus is closely related to an organisation’s capacity to invest in innovation or infrastructure and to manage risk


Efficiency … have a focus on efficiency of resource usage

Risk sharing … recognise financial risk and where it sits

Profit … have a view on the role of profit

Incentives … have a view on the provision of incentives

Capital … have a position on how capital should be funded

Investment … have a position on how providers invest in new services


Management issues – some examples


Accountability… have a clear view on who is responsible for what and how that responsibility is discharged

Information sharing… describe what information needs to be shared from purchaser to provider, and vice versa

Quality… recognise and encourage the role of quality in delivering quality services at efficient prices

Workforce… recognise that the provision of services is predicated on a well trained and stable work force

Relationships… recognise that a highly functioning relationship between purchaser and provider is the guarantor of good services for people with a disability


Pricing principles – Specific Objectives

The specific objectives included in the pricing principles recognise the most crucial aspects of the service delivery now and in the future. As such, in DSS, they may cover:

■ The central role of people with a disability in why pricing is developed

• Ultimately the outcomes to be achieved by a pricing model are quality services at an efficient price for people with a disability. The pricing principles can describe what ‘quality services’ means

■ The increasing role of choice

• The pricing principles may describe how the pricing and services environment has to respond to enable choice

■ Individual funding

• The role of individualised funding inserts a third person into the traditional relationship between purchaser and provider of services. The pricing principles may comment on that new relationship and the implications for other pricing principles, for example: transparency

■ Other system reforms…


Pricing principles - examples

The balance struck between the four areas can significantly impact on the role of pricing principles

■ Where a predominant focus is placed on pricing issues the pricing principles are typically rules based

• These type of pricing principles most frequently occur in regulated industries such as utilities and airlines and describe how particular items will be treated (for example: return on capital, and risk adjusted interest rates)

■ Where a predominant focus is placed on general values and management issues less prescriptive pricing principles result

• These types of pricing principles are more frequent in health and human services sectors and areas where open (i.e. non-regulated) commercial markets occur – where flexibility and nuance in service delivery play a greater role

• (Note: hospital services and health services have increasingly moved towards a more price based approach to pricing principles)


Exercise : Principles and Strawman

Strawman pricing principles

Score each example principle on a scale of 1 (Should be included) to 5 (Should be excluded)

Write additional brief pricing principles in the spaces provided for other principles that should be included. And score them per the above.

The additional pricing principles may include items on sector reforms or other items not previously covered. They should be those items you think are important that pricing should recognise and respond to

Redraft the three most important pricing principles (in paragraphs of approximately 50 words)

The redrafted paragraph may combine pricing principles, for example they may talk about the relationship between equity and responsiveness and the need to maintain a DSS sector of both small and large providers.

Sector directions What are the most important reforms and changes to the sector over the next five years that will impact on pricing of services?

Where do you see their greatest impact on system costs?Marker pen exercise


Next steps

■ Finalise and publish the Pricing Principles

■ Provider Consultations (this week)

■ Construct costing analysis tool

■ Identify cost types and drivers

■ Pilot data collection / survey tools

Thank you

© 2013 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.All rights reserved. Printed in New Zealand.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).

Documents

Disability Support Services Development of nationally consistent pricing mechanisms and models Introduction Pricing Principles