AASD eList announcement

Date: Oct. 31, 2023
To: Service providers and other interested parties
From: DHS Aging and Adult Services Division
Purpose: To announce policy guidance for Elderly Waiver (EW), Alternative Care (AC) and Essential Community Supports (ECS) provider spending requirements
Effective: Jan. 1, 2024
Contact: dhs.aasd.hcbs@state.mn.us

Provider spending requirements for inflationary rate adjustment distribution plans

The 2023 Minnesota Legislature passed rate increases for select EW, AC and ECS service rates effective Jan. 1, 2024. DHS announced these increases in the Sept. 12, 2023, eList announcement.

Minnesota law (Minn. Stat. §256S.211 subd. 4) requires each EW, AC or ECS provider that receives a Jan. 1, 2024, rate increase to use 80% of the marginal increase in revenue to increase compensation-related costs for employees directly employed by the provider (refer to Minn. Laws 2023, chapter 61, article 2, section 17).

By Jan. 1, 2024, providers must prepare and post a distribution plan for new funds. Providers must make the distribution plan available for at least six months to all employees. The distribution plan must include employee instructions to contact DHS if they do not receive the compensation-related increase described in the plan.

Providers also must make their distribution plan available to DHS upon request. The Aging and Adult Services Division (AASD) will contact providers directly if it selects their distribution plan for review. DHS may recoup funds from providers who do not comply with this requirement.

Which providers must create distribution plans?

All EW, AC and ECS providers that receive a Jan. 1, 2024, rate increase must create distribution plans. This includes providers who deliver the following services:

· Adult companion.

· Adult day services.

· Caregiver counseling.

· Caregiver training.

· Chore services.

· Customized living (CL), including 24-hour CL.

· Homemaker.

· Individual community living supports.

· Respite.

The requirement does not apply to:

· CL services through Brain Injury (BI) and Community Access for Disability Inclusion (CADI) waivers under Minn. Stat. §256B.49.

· Home-delivered meals.

· Designated disproportionate share facilities under Minn. Stat. §256S.205.

How can providers use additional revenue to comply with this requirement?

Providers that receive a Jan. 1, 2024, rate increase must use 80% of the marginal increase to increase compensation-related costs for employees directly employed by the provider. These costs may include the annual, marginal increases for:

· Wages and salaries.

· Employer’s share of FICA taxes, Medicare taxes, state and federal unemployment taxes, workers’ compensation and mileage reimbursement.

· Employer’s share of health/dental insurance, life insurance, disability insurance, long-term care insurance, uniform allowances, pensions and contributions to employee retirement accounts.

· Other benefits that address the needs of the direct support professional workforce beyond what they were offered before Jan. 1, 2024, including concurrent or subsequent adjustments to the base wage indices.

Costs cannot count toward this requirement if they support compensation for people who are:

· Employed in an organization’s central office and have an ownership interest or exercise control over the organization.

· Paid by the organization under a management contract.

Can providers increase compensation before Jan. 1, 2024, to meet this requirement?

Yes, providers may count increased compensation changes that occurred after Jan. 1, 2023, to meet the 80% revenue requirement. However, providers may not seek additional rate changes before Jan. 1, 2024, to cover these increased costs.

Note: For increased compensation costs that occurred before Jan. 1, 2024, the staff must be employed by the organization on or after Jan. 1, 2024.

What must providers include in their distribution plan?

Each plan must include these three elements:

1. Reason for distribution plan

Each distribution plan must describe the intent of the requirement to their direct care staff. Providers may include their own language, or they may use DHS’ suggested language:

· “This distribution report is intended to communicate the amount and use of revenues received from the rate adjustments effective Jan. 1, 2024, to fulfill Minn. Stat. §256S.211, subd. 4. Eighty percent of revenue associated with this rate change must be used to support compensation-related costs for workers that provide EW, AC and/or ECS services.”

2. Identification of additional revenues the provider received from the rate change

Each distribution plan must identify an estimated dollar amount for revenue received from the rate adjustments for services delivered on and after Jan. 1, 2024. Revenue estimates should:

· Include only revenue from EW, AC and/or ECS services.

· Not include private pay or other Medical Assistance (MA) services.

3. Description of how the provider will use additional revenues

Each distribution plan must describe:

· How the provider will use the revenue from the rate increases (e.g., to increase or maintain wages for direct care workers, enhance or maintain health and non-health benefits for direct care workers).

· Who employees should contact if they do not receive the compensation-related increase described in the plan.

Employees may contact DHS with questions or concerns:

· Email questions or concerns to dhs.aasd.hcbs@state.mn.us.

· Mail questions or concerns to:
Minnesota Department of Human Services
Aging and Adult Services Division  
2024 Provider Spending Requirement
540 Cedar St.
St. Paul, MN, 55101

How should residential providers estimate 80% of the marginal increase in revenue?

To estimate 80% of the marginal increase in revenue, residential providers can:

1. Use their 2023 revenue or historical costs to estimate their 2024 expected annual revenue, which would likely include days of non-payment.

2. Use the annual estimated revenue (step 1) to determine their monthly estimated revenue.

3. Multiply their monthly estimated revenue (step 2) by the applicable percentage rate increase to calculate their monthly estimated revenue increase. For the percentage rate increases, refer to the Sept. 12, 2023, eList announcement.

4. Estimate that they will reach their total monthly revenue increase (step 3) at the end of 2024. Rate increases will occur on a rolling basis as lead agencies renew service plans throughout the year.

5. Expect one-twelfth of their monthly estimated revenue increase to occur each month on a cumulative basis throughout the year. December 2024 will reflect the total monthly revenue increase once lead agencies renew all service plans. Refer to the example below.

6. Multiply their estimated 2024 annual or monthly revenue increase by 80% to determine the amount they must spend on compensation-related increases for eligible employees.

Example

To calculate their marginal revenue increase, a residential 24-CL provider estimates:

1. Annual revenue based on 2023 trends: $1,200,000.

2. Monthly revenue: $100,000 ($1,200,000 divided by 12).

3. Monthly revenue increase (44.68% for 24-hour CL): $44,680 ($100,000 multiplied by 0.4468).

4. $44,680 of additional monthly revenue by the end of 2024 when the lead agency has renewed all service plans.

5. Additional revenue each month of 2024: $3,723 ($44,680 divided by 12). This revenue increases monthly:

· January: $3,723 ($3,723 multiplied by 1).

· February: $7,447 ($3,723 multiplied by 2).

· March: $11,170 ($3,723 multiplied by 3).

· April: $14,893 ($3,723 multiplied by 4).

· May: $18,617 ($3,723 multiplied by 5).

· June: $22,340 ($3,723 multiplied by 6).

· July: $26,063 ($3,723 multiplied by 7).

· August: $29,787 ($3,723 multiplied by 8).

· September: $33,510 ($3,723 multiplied by 9).

· October: $37,233 ($3,723 multiplied by 10).

· November: $40,957 ($3,723 multiplied by 11).

· December: $44,680 ($3,723 multiplied by 12).

· Annual additional revenue (total for all months): $290,420.

6. Amount they must use for compensation-related costs for eligible employees by multiplying each monthly revenue listed in step 5 by 80%. For example, January revenue $3,723 multiplied by 0.80 is $2,978.

Are providers required to distribute funds received from a managed care organization (MCO) the same way they distribute funds from DHS (i.e., 80% compensation-related costs)?

Yes. All providers that receive a rate increase must use 80% of the additional revenues to increase compensation-related costs for eligible employees on the effective date of the rate increase. Funds received from an MCO for EW services must meet the same distribution requirements as funding from DHS.

Can providers use the additional revenue to increase staffing hours or hire additional staff?

Providers must use the additional revenue to increase compensation-related costs for employees. Increasing staffing hours or hiring additional staff would increase the provider’s overall compensation costs. If providers take this approach, they should include their intent in their distribution plan to ensure their employees are aware of how the provider is meeting the requirements. Providers may also wish to contact their own legal counsel to discuss potential risks with this approach.

Can providers with multiple settings pool together the estimated revenue increase from each setting to determine their marginal increase?

Yes, providers with multiple settings may pool together estimated revenue from each setting to determine their marginal increase in revenue. In this case, the provider’s distribution plan must describe how they will use the increased revenue for compensation-related costs in all of their settings.

Previous eList announcements

AASD LEAD AGENCY ARCHIVE