Starting Financial Management Services
in CLP & VD-HCBS:
Strategic Considerations
National Resource Center for Participant-Directed Services
6/3/10
Mollie Murphy
Today
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FMS: What is it? Why have it?
Models of FMS: Which is right for you?
Providing FMS: Approaches
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Piggybacking on an existing in-state program
Procuring services from a qualified provider
“In-house” at the AAA or SUA
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Pure Do-it-yourself
A hybrid model
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FMS: What is it?
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FMS is Financial Management Services
FMS is a participant-directed support; FMS supplements a
participant-directed program
Successful FMS ensures the following:
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Participants act as employers or co-employers in compliance with
federal, state and local laws
Employment taxes, workers’ compensation and other insurances
are managed and paid in compliance with relevant laws
Payments are made in accordance with program rules and
participant budgets
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FMS: Why have it?
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Directing and controlling one’s service and individual
budget requires more than selecting workers/vendors and
choosing how funds will be spent
Early research in the Cash & Counseling program showed
that, given the option, participants much prefer that
someone other than them ensure taxes are paid, insurance is
correct, workers are paid in compliance with regulations
and spending is in accordance with the budget
Robust FMS allows participants to focus on directing and
controlling their service, while administrative duties are
handled by professionals with a particular expertise
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Primary FMS Duties
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Enrollment
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Employer enrollment
Worker enrollment
Vendor enrollment
Budget Management
Payments
Taxes and Insurance
Reporting
Communication
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Models of FMS
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Fiscal/Employer Agent
 Government Fiscal/Employer Agent
 Vendor Fiscal/Employer Agent
Agency with Choice
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Fiscal/Employer Agent
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Participant (or his/her representative) is common law
employer
Participant/representative employer designates the FMS
entity to be the agent = Fiscal/Employer Agent (F/EA)
As agent, the F/EA has joint tax liability and manages all
administrative functions of being an employer (payments,
taxes, insurances, reporting, enrolling participants as
employers, providing paperwork and support to hire
employees and contract with vendors)
IRS has specific procedures outlining the relationship
between the employer and agent, the tax liability, and the
methods for filing and paying federal taxes
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Government & Vendor Fiscal/Employer Agent
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The duties of these models of Fiscal/Employer Agent are the same
(aside from how IRS Form 2678 is filed on behalf of each employer)
The difference is what kind of entity acts as the F/EA
Government Fiscal/Employer Agent: government entity is agent and
takes on joint tax liability with the employer
 Government entity is responsible for performing F/EA duties OR
 Government entity can contract with a sub-agent
 Sub-agent can be a vendor and the sub-agent ALSO takes on
joint liability for federal taxes
Vendor Fiscal/Employer Agent: a non-government entity (vendor) is
agent and takes on joint tax liability with the employer
 Non-government entity is responsible for performing F/EA duties
 Government entity contracts with vendor; government entity takes
on no liability
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Agency with Choice
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Agency (not participant) is common law employer
Participant or representative may act as coemployer
Participant or representative can identify workers
and refer them to the agency for hire
In general, Agency with Choice is considered a less
participant-directed model of FMS, but one that can
be easier to get going than F/EA
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Comparing FMS Models
Agency with
Choice
Fiscal/Employer
Agent
Who is the employer?
The agency, but participants
can refer workers to the
agency
The participant
Who pays workers and
manages taxes and
insurance?
The Agency with Choice
The F/EA
Who has liability for
taxes?
The Agency with Choice
The F/EA has joint liability
with the participant
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Comparing FMS Models
Agency with
Choice
Fiscal/Employer
Agent
Who trains workers?
The agency has ultimate
responsibility for this, but
significant input can come
from the participant
The participant, but a
counselor can help
Who makes decisions
about hiring workers?
The participant refers
workers to the agency, but
the agency makes the final
decision about hiring
workers
The participant, but the
program may have rules
about worker qualifications
In whose name is the
workers’ compensation
policy?
The Agency with Choice
The participant, but the
F/EA procures and
manages the policy
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Comparing FMS Models
Who sets the rate of pay
for workers?
Agency with
Choice
Fiscal/Employer
Agent
The agency has ultimate
responsibility for this, but
significant input can come
from the participant; the
agency must maintain equity
across employees per state
& federal law
The participant, but a
program may have a set rate
range
Who determines whether a The Agency with Choice
worker’s criminal
background disqualifies the
worker from being hired?
The participant, but the
program can set parameters
What is the cost of these
services?
Usually between $65 and
$125 per participant, per
month
Usually between $65 and
$125 per participant, per
month
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Decide what model is right for your
program
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F/EA supports “pure” participant direction: the
participant maintains full control, but has support
from the F/EA
Agency with Choice can be easier to establish
because traditional agencies can provide it
See the handout: FMS Model Quiz
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How will you provide FMS?:
Piggybacking
Identify other, established participant direction programs in
your state and “piggyback” by using the same FMS provider
Pros
 The cost of FMS is influenced heavily by economies of
scale (more participants served means a lower FMS cost per
participant). By using the same FMS provider as another
program in the state and therefore increasing the number of
participants served by the provider, you may be able to
secure lower costs
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How will you provide FMS?:
Piggybacking (Pros, continued)
Pros
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The performance of the FMS provider will be known by the
program you are piggybacking on
An RFP may not be necessary since the FMS provider is already
operational in the state
The FMS provider may be able to launch services very rapidly
since it is already operational in the state
The FMS provider should already be familiar with participant
direction and the culture of your state
FMS providers may be apprehensive about investing in serving a
program that can only commit to 1-2 years of operation; by
piggybacking, you may be able to get a competitive rate because
the provider has another long-term contract in the state
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How will you provide FMS?:
Piggybacking, Other Considerations
Other Considerations
 All participant-directed programs are not alike and
therefore all FMS is not alike
 The VD-HCBS program is a pure “Cash and Counseling”
model; many participant direction programs are not
 This means that the duties of the FMS provider in an
existing program could vary greatly from what your
program needs the FMS provider to do
 Therefore, the FMS provider’s capabilities may not fit what
your program needs or the costs may be different
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How will you provide FMS?:
Piggybacking, Recommendations
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Get in-depth information from other programs in your state that use the
FMS provider about the provider’s performance
Develop a comprehensive list of what you need the FMS provider to do
in your CLP/VD-HCBS program (contact NRCPDS for help developing
this list; there are many different ways to structure what the AAA/SUA
does and what the FMS provider does)
Get complete information from other programs in your state and/or the
FMS provider on the duties and responsibilities of the FMS provider in
the existing program
Find out from the FMS provider if they have the capability to perform the
duties your program requires
Find out what the FMS provider’s fees would be to serve your program
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Is there a standard monthly or transaction fee? What is it?
Are there any “start-up” or other fees?
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Piggybacking: Example 1
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VD HCBS & CLP program used an F/EA provider already
serving a Medicaid program with 8000 participants
The existing Medicaid program did not have budget
authority, did not allow participants to purchase nonemployee goods or services; participants could not set rate
of pay for workers and only three service codes are allowed
The VD HCBS program planned full budget authority,
purchase of goods and services, participant rate-setting and
other flexible options
The AAA and F/EA had to develop many aspects of the
VD HCBS program separately from the Medicaid program,
with the VD HCBS program requiring a broader range of
services from the F/EA than the Medicaid program
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Piggybacking: Example 2
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VD HCBS & CLP program used an F/EA provider already serving
a Medicaid Cash and Counseling program serving 3500 participants
The AAA and SUA were able to use almost an exact program
structure as was being used for the Cash and Counseling program
Because the programs were so similar, Policy and Procedure
manuals, forms, and processes could be shared and re-used across
the programs
The F/EA provider was able to launch operations for the VD
HCBS program very quickly because very few changes had to be
made to existing operations
By increasing the number of participants served by the F/EA
provider, a very competitive per participant fee was negotiated
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How will you provide FMS?:
Procure services from a qualified provider
Go through a procurement process to select the
FMS provider of your choice and contract with that
provider. This will likely involve issuing a Request
for Proposal, depending on your preferences or
state requirements.
Pros
 Go through a competitive process to get
information on provider qualifications, capabilities
and prices so you get the provider that is the best fit
for your program
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How will you provide FMS?:
Procuring Qualified Provider, Other
Considerations
Other Considerations
 An RFP process can be labor-intensive and slow going
 Providers may be apprehensive about investing in a
program with few participants and/or a less than 2 year
contract commitment
 If you are considering this option, contact NRCPDS to get
help developing an RFP/provider qualifications
 Review the handout called Pre-procurement Tip Sheet
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How will you provide FMS?:
“In-House” FMS
AAA or SUA performs all functions as the Financial Management
Services provider (either Agency with Choice or F/EA)
Pros
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Counseling, administrative oversight and FMS can all be tightly
integrated at the AAA/SUA
AAA/SUA can develop expertise in FMS; can serve as FMS
provider in future and for other programs in the state
AAA/SUA can maintain more of the VD HCBS oversight fee
“in-house”; can be a way to utilize existing AAA/SUA staff
AAA/SUA staff have expertise in working with participants and
this can be very beneficial in supporting participants to navigate
the financial aspect of their programs
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How will you provide FMS?:
“In-House” FMS, Other Considerations
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FMS is complex and the learning curve is steep; taking on
this service will be a major investment for the AAA or SUA
FMS can require a significant upfront investment in tools
and training; recouping this investment could take some
time, depending on the number of participants served
When the AAA or SUA is an FMS provider, they take on a
range of new liability
Performing FMS in-house can take away from areas where
the AAA or SUA has long-standing expertise
FMS is still a relatively young industry, so tools and
expertise are not prevalent (however, NRCPDS is always
available to help)
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How will you provide FMS?:
“In-House” FMS, Recommendations
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Consider a hybrid approach
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Carve out the tasks that the AAA or SUA is well-positioned to perform
(e.g. enrolling participants as employers, managing individual budgets,
verifying timesheets)
Contract with a reporting agent that is experienced with participant
direction programs and payroll to manage payments, taxes, and insurance
A reporting agent is a specific type of agent, per IRS rules. Unlike a
Fiscal/Employer Agent, a reporting agent does not take on joint liability
with an employer. Therefore, in this hybrid approach, the AAA/SUA
would have the joint liability with the employer.
If the AAA/SUA does not want joint liability, then a contract should be
executed with an experienced F/EA. The AAA/SUA can still carve out
certain tasks and will likely therefore pay a lower rate to the F/EA than if
the F/EA performed all tasks.
Review handout called In-house AAA FMS
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Contact NRCPDS
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The National Resource Center for Participant-Directed
Services is here to help
We recognize that programs are unique and face unique
challenges
We are available to provide one-on-one help or direct you
to applicable resources
There is only so much that can fit into a large webinar; but
there is a lot of information that can be provided directly to
you based on your situation
Please contact us as you consider implementing FMS
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Questions, Comments, Suggestions?
Mollie Murphy
617-953-3914
[email protected]
or
[email protected]
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