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Session 5 - Resource Management
1. DoD Resource Management
Walt W. Tinling, FACHE, CDFM-A
Assistant Vice President for Resource Management
Assistant Professor, Preventive Medicine and Biometrics,
Uniformed Services University
wtinling@usuhs.mil
5-1
2. Learning Objectives
• Describe the Military Health System, Services, and
Medical Treatment Facility budget process
• Identify the incentives inside the financial model for
the TRICARE contracts and how they interact with
the direct care system
• Describe the Prospective Payment System (PPS)
and its implications for resource management
5-2
6. DoD Priorities for 2012
• Prevail in today’s wars
• Prevent and deter conflict
• Prepare for a wide range of
contingencies
• Preserve and enhance the All-
Volunteer Force
5-6
7. DoD Resource Planning
• Planning, Programming, and Budgeting
System (PPBS)
• Created under the Kennedy Administration
• Robert McNamara and the “Whiz Kids”
• Sometimes called PPBES
• E for Execution
• Robert Hale OSD Comptroller “lets put the
big E back into PPBES”
5-7
8. DoD PPBES
• A rigorous process to:
• Allocate resources -- among competing
programs -- while considering perceived threats
• Apparently cumbersome process
ensures due process
• Direct logic path from war plans to execution of
programs in the field
• Multiple forums and hearings prior to final
decision
• Requirements Driven
5-8
9. PPBES
FY
BUDGET
MTF/
DTF
PLANNING PROGRAMMING BUDGETING
NATIONAL E
ASSESSMENTS BUDGET PRESIDENT’S
SECURITY STRATEGY DHP MPG
PREPARATION/ BUDGET X
REVIEW
CINCs JOINT DECISIONS
E
AGENCIES
SERVICES
STRATEGY
REVIEW C
PROGRAM
OBJECTIVES
OSD/OMB
BUDGET
CONGRESS U
NATIONAL
WORLD
SITUATION MILITARY MEMORANDUM
(POM)
SUBMIT
T
STRATEGY
E
OSD/OMB
OSD REVIEW
REVIEW
OSD
PLANNING APPROPRIATION
DEFENSE PROGRAM RESOURCE
PLANNING DECISION MANAGEMENT
JOINT STAFF MEMORANDUM DECISION
GUIDANCE (DPG)
ASSESSMENTS & (PDM) (RMD)
FISCAL
GUIDANCE
Future Strategy $ 2-7 yrs in $ 2-3 yrs in future Today
future
5-9
10. PPBES Timeline
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Execution
POM 13
Budget Programming years
Future Years Defense Plan (FYDP)
5-10
12. POM Wisdom
• “Most educated people know that the
worst potential competition for any
young organisms can come from its
own kind.”
• “They have the same requirements.”
• Frank Herbert Dune
5-12
13. POM Wisdom (cont)
You can’t win and you can’t not play
You can’t consult enough
If you aren’t dressed and on the bench
the coach can’t put you in
And “get a helmet on and get in the
game”
5-13
14. POM Consequences
To many the glass is half
empty…to others it is half
full
To a POM mechanic you
have twice as much glass
as you need
5-14
15. Creating the President’s
Budget
• Administration provides guidelines
(targets, limits) to federal agencies
• Agencies prepare budget requests
• OMB review and consolidation
5-15
18. Congressional Committees
of Interest
• Budget
• Revenue
• Ways and Means (House)
• Finance (Senate)
• Appropriations
• Armed services (Authorizations)
• VA
• Health
5-18
19. Congressional Legislative
Framework
U.S. Constitution - Article 1
• Section 8: The Congress shall have power
to…provide for the common defense and
general welfare...
• Section 9: ...No money shall be drawn
from the treasury, but in consequence of
appropriations made by law...
5-19
21. Defense Related Appropriations and
Authorizations
• HAC • HASC
• Defense
• Milcon
• SASC
• VA
• SAC • Health
• Defense
• Energy and Water
• HHS
• VA
5-21
26. Appropriations
• Operations and Maintenance (O&M)
• Research Development Test and
Evaluation (RDT&E)
• Procurement
• Military Construction
• Military Pay
5-26
27. Budget Activity Groups
(BAGs)
• Bag 1: Direct Care
• Bag 2: Private Sector Care
• Bag 3: Consolidated Health
• Bag 4: IM/IT
• Bag 5: Management Headquarters
• Bag 6: Education and Training
• Bag 7: Base Operations/Communications
5-27
28. Commodities
• Personnel
• Travel
• Transportation
• Communication/Utilities/Rent
• Printing
• Other Services (Contracts)
• Supplies and Material
• Equipment
• Stipends/Grants
5-28
29. Status
• Commitment
• Plan to spend
• Obligation
• Contract, Purchase Order, Civilian Hire
• Expense
• Goods received – services rendered, valid invoice
and purchase order (three way match)
• Available
• Funds that are not committed, obligated, or
expensed
5-29
30. FY10 DHP by Appropriation
FY12 $52.5B
$31.5B
Not included in the $31.5B,
Medical MILCON, MILPERS,
or BRAC
5-30
31. Defense Health Program
FY10 $31.5B
As Secretary Gates stated in his May 2010
speech on defense spending,
“Health care costs are eating the Defense
Department alive.” 5-31
34. TRICARE Contracts
• National Quality Monitoring
• Global Remote
• Health Care and Support Services
(HCSS)
• Retail Pharmacy
5-34
35. TRICARE Contracts (cont)
• Mail Order Pharmacy
• TRICARE Dual Eligible Fiscal
Intermediary
• Marketing and Education
• TRICARE Retiree Dental
• Puerto Rico
5-35
36. Financial Objectives of T-Now
• ASD HA charged design group to:
• Promote quality and customer satisfaction
• Better align incentives
• Improve operating efficiencies and cost
predictability
• Build on TRICARE successes
5-36
37. Financing Overview
• Administrative costs • Health care costs
• Claims processing • MTF Enrollee care in the
network (underwritten)
• Disease • Non-MTF Enrollee care
management (underwritten)
programs • Underwriting Fee/Risk
• Administrative Sharing payment
Services • Some reimbursable
healthcare costs (not
• Award Fee underwritten)
5-37
39. Award Fee
• Customer Satisfaction Award Fee
• Subjective, based on surveys of:
• Beneficiaries
• Regional Directors
• MTF providers
• Network providers
• Amount available equal to amount bid for
Performance Guarantee
• Minimum of 3% of the administrative price to a
• Maximum of 10% of the administrative price
5-39
40. Underwriting Fee
• Government and Contractor will share
the risk for underwritten healthcare
costs
• The risk sharing arrangement is fixed
• 80% for the Government
• 20% for the contractor
5-40
41. Performance Guarantee
• Funded by the Contractor
• Minimum of 3% of the Administrative
Price per Period of Performance
• Objective measurable standards set at
industry benchmarks e.g.,
• Phone response standards
• Claims processing standards
5-41
42. Intended Benefits of
Underwriting
• Shared risk promotes Government/contractor
partnership to control purchased care costs
• Annual determination of target cost minimizes
contractor’s long term risk
• Reduces “risk premium” and potential for disputes
• Lack of adjustment for MTF usage creates strong
incentive to maximize use of the MTF
• More MTF care means less purchased care, more realized
fee for the contractor and less cost for the Government
• Paying healthcare costs in real time improves budget
execution and predictability
5-42
43. Underwriting Fee Continuum
Assuming $800M Target Cost and $25M Underwriting
Fee
10% Max
$85
$65
$45
Underwriting Fee ($25M)
$25
$5
-$15
-4% Min
-$35
$525 (Max Fee) $800 (Target Cost) $1,085 (Min Fee)
Actual Costs (Millions)
5-43
44. Points of Emphasis
• Financial structure • Financing mechanisms
promotes joint are much simpler than
management and under the current
control of underwritten contracts and should
health care costs provide more budget
• Both parties have predictability
strong incentives to • Government retains the
maximize the use of lion’s share of the risk
MTFs and minimize the
use/costs of purchased
care
5-44
45. Status of T-3
• T-3 currently under multiple protest
• T-4 Working groups meeting now led by
Dr. Clifton (USU IPA)
5-45
46. PPS Value of Care
• Value of MTF Workload
• Fee for Service rate for workload produced
• Rates based on price at which care can be
purchased discounted for Military Labor
• TMAC rates
• Not MTF costs
• Computed at MTF level but allocated to the
Services
5-46
47. Prospective Payment
System
• Prospective Payment System (PPS)
• PPS is a main resource allocation
mechanism in the MHS
• Redistributes funds between the Services
by comparing actual work to planned work
• PPS is retrospective not prospective
5-47
48. Current PPS Workload
• Inpatient – MEPRS A Work centers
• Non-Mental Health - Relative Weighted Products (RWPs)
• Mental Health - Bed Days
• Outpatient – MEPRS B Work centers
• Simple (Work) Relative Value Units (RVUs)
• In the Direct Care System ~70 cents of
every dollar goes to labor; Military,
civilian, and contract
5-48
49. Valuing Business Plans
• Value per RWP
• Average amount allowed
• Including institutional and professional fees
• Excluding MH/SA
• Adjusted for local Wage index
• Value per Mental Health Beddays
• Average amount allowed
• Including institutional and professional fees
• Adjusted for local Wage index
• Value per RVU
• Average amount allowed
• Segmented by Specialty
• Excluding Ancillary, Home Health, Facility Charges (except ER)
• Adjusted for local Wage index
5-49
50. MHS Mantra
or Why Recapture?
“The incremental cost of the next thing in
the MHS is always less than the
average cost of that same thing in the
network”
5-50
51. MENBA Pilot Project
• QDR: “Capture the quantity, value, and expense of
readiness and military-unique services provided by MHS
activities”
• Identify and List all Mission Essential/Non-Benefit Activities
(MENBA) performed in the MHS
• On-site visits
• 6 MTFs (1 small & 1 Large from each Service)
• MTF Participation:
• Coordinate Schedule
• Provide limited Documents (e.g., Committees List, Additional Duties
Rosters, etc.)
• Be Part of the Team, Part of the Project!
• Work with MENBA WG to “sort out”, classify & develop
Taxonomy for activities
5-51
52. Next Steps
• Ancillary
• Pharmacy
• Utilization Management/Capitation
• Industry Standard Workload
• Dental
• Mission Essential Non-Benefit Activities
• Paying for Quality
5-52
53. PPS Roadmap
Institutional
Inpatient Satisfaction
ORYX
Professional
HEDIS
Outpatient Institutional
Professional
Data Workload Capitation Performance
Weights
Ancillary
Rates
Data Pharmacy Risk
Rates Adjusters
Other
Data Reinsurance
Benefit
Weights Plan
(HCPCs)
Rates
Minimum
Dental Enrollment
Data
Weights
Rates
Mission
Essential
Data Weights Rates
5-53
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery
Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery January 2010June 2008 Critical Decision Making for Medical Executives: Keys to Improving Healthcare Delivery