Big changes are coming to the human services industry, is your IDD group home ready for them? Some Pennsylvanians have expressed frustration while others choose to see this shift as an opportunity. The reality is that those who choose to view these inevitable changes as an opportunity are the businesses more likely to rise to the occasion and outperform their competition.

Starting the 1st of January 2025, Pennsylvania’s Office of Developmental Programs (ODP) will begin their implementation plan for performance-based contracting. Keep reading to learn what this change entails and how it will affect your human services business.

What is Performance-Based Contracting?

Performance-based contracting, formerly known as selective contracting, is a way for governments and organizations under Medicare and Medicaid Services to pay human services providers based on how well they perform. Unlike traditional contracts where providers get paid for the amount of work they do, performance-based contracting focuses on the quality and results of the services provided.

How is it Different from Traditional Contracting Models?

In traditional contracting, providers are paid a set amount for each service they deliver, no matter how effective or efficient they are. These payments are called FFS or fee-for-service (FFS) unit rates. For example, a healthcare provider might get paid for every patient they see, regardless of whether the patients get better or not.

Performance-based contracting, on the other hand, ties payments to specific goals and outcomes. These payments are known as Pay-for-Performance (P4P) payments. Healthcare providers have to meet certain standards and show that their services are effective to get paid. The goal is to encourage providers to focus on delivering higher-quality care and achieving excellent results.

How Does Performance-Based Contracting Work?

Here’s an important timeline of how these new changes will roll out in 2024 and beyond according to the ODP’s Implementation Plan.

June 30, 2024: Deadline for healthcare businesses to sign and submit the new Residential Provider Agreement to the ODP.

July 1, 2024 – July 31, 2024: Providers who have submitted the agreement can start submitting data and documentation to support their tier determination.

November 2024: ODP will review the submitted documentation, notify providers, and publish tier assignments.

January 1, 2025: Enforcement actions will begin for providers who have not submitted a signed Residential Provider Agreement. The first 18-month contract period will start, running from January 1, 2025, to June 30, 2026. New agreements with ODP, including the new standards, will be effective.

July 1, 2026: Contracting will transition to a state fiscal year (FY) basis, with tier evaluations occurring in April and May each year.

Examples of Performance Metrics:

Here are just a few of the metrics that human services businesses will be measured on.

• Risk Management: Enhanced standards for reporting risk fidelity and timely finalization.
• Data Management Collection: The accuracy and consistency of data reports through adopted technology.
• Employment: The percentage of working individuals receiving Career Assessments and Job Finding Services through the ODP.

Who Does This Change Affect?

There are 4 main groups that will be affected by this change: the service providers, residents and their families, government agencies, and your direct care staff. Here’s a closer look at who and how they will be affected.

Service Providers: First and foremost, performance-based contracting will primarily impact service providers in the healthcare and human services sectors. These kinds of service providers include:

• Healthcare Providers: Hospitals, clinics, and individual healthcare practitioners who provide medical care.
• Residential Care Facilities: Homes and communities that offer residential support for people with disabilities or chronic health conditions.
• Support Coordination Organizations: Groups that help clients navigate and access various services and supports.

These service providers as well as small and medium-sized healthcare businesses such as independent clinics and local residential care homes need to prepare for performance-based contracting. They might face more challenges than larger organizations because they have fewer resources and less staff to handle new requirements.

IDD Residents and Families: IDD Residents are the people being serviced in group homes, foster care, and hospitals. Often their families are involved in their care and also directly benefit from higher quality services and better outcomes.

Government Agencies: These organizations fund and oversee services like state Medicaid agencies. They set the performance standards, monitor the results, and pay providers based on their performance.

Direct Care Staff: Lastly, your own direct care staff including the workers within the service provider organizations, like doctors, nurses, caregivers, and administrative staff, will be affected. Their roles might change as they adapt to new performance expectations and reporting requirements.

Why is the ODP Implementing This Shift?

Why the ODP is choosing now to implement performance-based contracting is a looming question over the minds of many businesses and individuals. There are several main reasons that we’ll explore.

Staffing Shortages and More Patients

One of the major concerns involves sustainability of the behavioral health industry. The ODP describes a 23% vacancy rate of DSPs and a list of over 13,000 IDD residents awaiting direct care services. Nearly all direct care businesses sympathize with the industry-wide staffing shortage that makes it difficult to provide consistent, high-quality care.

 

Two goals emerge from this stat; the first being to reduce vacancy rates, and the second, to serve more IDD patients. Performance-based contracting is the solution designed to make the service delivery model more efficient and cost-effective while creating an attractive and stable environment that encourages more direct care professionals to join and stay in the field.

Everyday Lives Values

Providing more employment opportunities is just one of the values from Everyday Lives, a set of guiding principles that leads the ODP in their decision-making. Their other values include choice, control, health, wellness, improving quality, increasing community participation, developing and supporting qualified staff, and safety. Some of these core values are the exact standards that residential services will be held accountable to. These values and standards ultimately point back to the ODP’s vision which is to “Continuously improve an effective system of accessible services and supports that are flexible, innovative, and person-centered.”

Cost-Effectiveness

By incentivizing businesses to adopt efficient systems and push for higher-quality care, performance-based contracting helps to reduce unnecessary costs while ensuring that individuals receive the care they need. This is particularly important in a climate of limited funding and increasing demand for behavioral health services.

 

The last reason is that this kind of contract holds providers accountable for the outcomes they achieve. This accountability guarantees that public funds are used effectively and that providers who deliver high-quality care are rewarded. Ultimately, raising the bar in the healthcare industry.

What Are the Long-Term Benefits of Performance-Based Contracting?

Performance-based contracting has been used in different industries like manufacturing, landscaping, aerospace, transportation, waste management, and construction to produce successful results.

Here are some of the long-term benefits which will help improve the healthcare system.

Enhanced Quality of Care

• Improved Patient Outcomes: By linking payment to specific performance metrics, performance-based contracting ensures that providers focus on delivering high-quality care that results in better health outcomes for patients. This can lead to fewer hospital readmissions, better management of chronic conditions, and overall improved patient health.
• Personalized Care Plans: Providers may be incentivized to develop better personalized care plans that address the unique needs of each patient.
• Standardization of Care: With clear and objective performance metrics established, variability in care quality will be reduced and IDD residents can trust their needs are better fulfilled.
• Preventive Care Focus: With a focus on outcomes, performance-based contracting encourages providers to emphasize preventive care and early intervention, which can reduce the incidence of serious health issues and lower overall healthcare costs.

Alignment with Industry Trends

• Future-Proofing: As the healthcare industry increasingly moves toward value-based care models, businesses that embrace performance-based contracting will be better positioned to thrive in the future landscape.
• Regulatory Compliance: Adopting performance-based contracting helps businesses stay ahead of regulatory changes and align with government and payer priorities, reducing the risk of non-compliance and associated penalties.

How Does This Change Affect Human and Residential Services?

Instead of resisting change, it’s better to get ahead and prepare for it. Here’s a breakdown of the 4 tiers your business will be placed in:

• Conditional Tier: For providers who do not meet standards and function under provisional or revoked licenses.
• Primary Tier: For providers who meet current standards and are eligible for Pay-for-Performance (P4P) payments.
• Select Tier: Providers who deliver at least two of the three residential services in the performance-based contracting model and meet additional measures.
• Clinically Enhanced Tier: For providers that offer clinically enhanced medical or behavioral support. Organizations prescribed to this tier receive the highest level of enhanced payments for meeting the enhanced standards.

This shift towards performance-based contracting requires businesses to excel in resource allocation. Providers demonstrating high performance will be favored, as they can show their ability to use limited funds where it will have the greatest impact.

For small and medium-sized businesses, there may be more pressure and more challenges to adapt to the new requirements. They might need to invest significantly in technology, staff training, and quality improvement programs to meet the performance standards. Plus, they risk being excluded which could impact their financial viability and capacity to serve their communities.

As one of the new standards suggest, there will be a greater emphasis on the implementation and utilization of technology. For small and medium-sized businesses, especially those who still rely on pen-and-paper, having a dependable EHR system is critical for unlocking P4P opportunities.

PUPS Software has been servicing over 30+ HSOs for decades. Their on-call trainers and customer support are ideal for businesses looking to transition to a digital model. Click the button below to learn more!

 

Conclusion

Businesses can view this shift in a positive or negative light. It may feel daunting, but ultimately, it invites opportunity. By focusing on high-quality care and positive outcomes, your human services business can thrive while contributing staffing shortages and shortening waiting lists.

Adapting to these new standards will require investments in technology and training. But for those who work with PUPS Software’s trusted tech advisors, we’ll always be there to ensure a smooth transition and position your business for long-term success.

As we circle back to our opening question, we hope to see the industry revolutionized for the better and your healthcare business thriving.

Is your IDD group home ready for performance-based contracting?