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PRICEWATERHOUSE COOPERS
Price Waterhouse Coopers LLP
1900 K Street, NW
Suite 900
Washington, D.C. 20006
Telephone (202) 822 4041
Facsimile (202) 822 5636
April 25, 2001
Mr. Francis A. Smith
Executive Director
Financial Responsibility and Management Assistance Authority
One Judiciary Square
441 4th Street, Room 570
Washington, DC 20001
Dear Mr. Smith:
At your request, this report
contains an executive summary of certain information gathered and prepared
by Pricewaterhouse Coopers ("PwC") on behalf of the Financial
Responsibility and Management Assistance Authority ("Authority")
in your evaluation of the proposed plan to provide healthcare to the
uninsured population of the District of Columbia currently being served by
DC General. Hospital and its related PBC clinics. Our review of the plan,
referred to as the DC Healthcare Alliance (the "Program"),
included review of the proposed contractor, Greater Southeast Community
Hospital ("Greater Southeast" or "Contractor"), and
two key subcontractors (collectively referred to as the
"Subcontractors"), including D.C. Chartered Health Plan
("Chattered") and Unity Health Care ("Unity").
More specifically, we have
prepared in Exhibit 1 a summary of critical issues and related
recommendations that require the Authority's consideration to effectively
safeguard the interests of the District of Columbia and preserve the
overall intent of the Program. The summary also includes our understanding
of the Authority's intended action in response to our recommendations.
Critical issues and related recommendations were
developed after completing an analysis of the proposed Program, including,
but not to the following:
-
Review of the proposed Program Agreements (the "Agreements");
- Discussions with key personnel at the Authority, Contractor, and
Subcontractors;
- Review of Contractor and Subcontractor financial and operating data;
- Review of the proposed payment system and funds flow set forth in the
Agreements;
-
Review of the necessary monitoring required by the District, Contractor and
Subcontractors;
- Consideration of the material financial and operational readiness risks
that are inherent in the proposed Program;
- Review of financial information pertaining to the Program as prepared by
the Contractor and Subcontractors; and
- Review of other external factors that may influence performance of the
Program.
It is important to note that the nature of our services, and this report, is
consultative only. We have not examined, reviewed, nor performed any other type
of attest service with respect to the information contained in this
report. Accordingly, we are unable to and do not express any opinion or other
from of assurance regarding this information within the meaning of the
rules of the American Institute of Certified Accountants.
We make no representation regarding the sufficiency of our work either for purposes
for which this report has been requested or for any other purpose. The sufficiency
of the work we performed is solely the responsibility of the District of
Columbia Financial Responsibility and Management Assistance Authority, as are
any decisions with respect to the proposed Program and Agreements. Had we
been requested to perform additional work, additional matters might have come to
our attention that would have been reported to you.
The sole purpose of this report is to assist the Authority in its evaluation of
the proposed Program and related Agreements. This report may be
used only in its entirety for the intended purpose and is not to be cited
without proper attribution.
Very truly yours,
Pricewaterhouse Coopers LLP
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Critical Issues |
Recommendations
|
Authority Actions
|
Definition of the required Program
equity contributed by Greater Southeast Community Hospital
|
Redefine the cash equity
requirement to stipulate reinvestment in property and equipment at
Greater Southeast Community Hospital. |
Recommendation implemented |
The Health Services Account has the
potential to accumulate large balances. |
To enhance protection of District
assets, establish an escrow relationship for Health Services
funds, including bonding requirements and complete investment
policies |
Recommendation to be implemented |
The proper functioning of the Program
requires seamless coordination between the Contractor and
Subcontractors, including full agreement on roles and
responsibilities. |
The Authority should review and approve
all subcontracts and require their execution simultaneous to
signing of the Agreement with the Contractor. |
Recommendation to be implemented. |
Detailed transition implementation
planning is critical to the success of the Program. |
Require the Contractor and
Subcontractor to submit detailed transition implementation plans
at the operational level. Such plans should identify
interdependencies, both among and between the required Contractor
and Subcontractor activities. |
Recommendation to be implemented. |
Key components of the program must be
resolved and properly communicated to the uninsured population to
ensure ongoing access to care, including plans for trauma
services, pharmacy, and transportation. |
Consider a public education campaign
complete with common questions and answers. Also, require
implementation plans, complete with examples and transition
timelines, for these key Program components. |
Recommendations to be implemented. |
While the proposed Program design
contains incentives for management of inpatient costs by the
Contractor, additional care management incentives for Chartered,
as the administrative services provider, would be appropriate. |
Consider Program design modifications,
either through the Agreement with the Contractor or by way of the
subcontracts, that align the incentives for care management on the
part of Chartered with those of the Contractor. |
Recommendation implemented |
Numerous elements of the Agreement
require strict monitoring and reporting. |
The contractor and subcontractors
should agree to stringent monitoring requirements by the Authority
and its advisors, and cooperate fully in allowing free and open
access to transition and implementation plans, including execution
thereof, to ensure a smooth transition and achievement of the
goals and objectives of the Program. |
Recommendations to be implemented |
The financial reconciliation process is
complex and will require significant ongoing attention,
particularly in the first year of the Program. |
Create specific examples that will
illustrate the reconciliation calculation(s) and engage
appropriate individuals from the Department of Health who will
have ongoing responsibility for review of the reconciliation
process. Consider hiring an independent third party to apply
agreed upon procedures to the reconciliation process to enhance
controls. |
Recommendation to be implemented |
Unity requires adequate funding to
operate the PBC clinics so as to maintain patient care levels and
fiscal stability. Careful consideration should be given to
protecting the patient volume and related reimbursement of the PBC
clinics in the Program design. |
To enhance the financial stability of
Unity during the transition or start-up phase, consider minimizing
the risk to Unity by directing the revenue earned for clinic
visits to the proposed Unity-run PBC clinics exclusively. |
Recommendation to be implemented |
The proposed Program administrative fee
is at the low end of the expected range, and varies with volume
whereas much of the anticipated administrative cost is fixed. |
Consider a fixed administrative fee or
a guarantee of the lesser of a fixed administrative fee or actual
costs thereby maximizing the probability for success in the
critical area of Program administration. |
Recommendation implemented |
The proper design, and accounting
controls, surrounding the fund flows of the Program is absolutely
essential to the long-term financial visibility of the Program, as
well as to the proper measurement of Program success and the need
for ongoing Program redesign or enhancement. |
We recommend that detailed funds flows
policies and procedures be established immediately. Such policies
and procedures should be agreed to by all parties involved and
include:
- Description of overall funds flows design, including roles
and responsibilities of each entity involved
- Information to be captured for Program measurement and
consideration in ongoing Program redesign or enhancement
- Detailed accounting policies and procedures for each entity
involved in the program
- Detailed description of internal control features built into
the process
- Investment policies and guidelines
- Dispute resolution procedures
|
Recommendation to be implemented |
|