partnership healthplan of california finance committee...

Partnership HealthPlan of California Finance Committee Meeting Agenda

June 17, 2020 | 8:00 a.m. to 9:30 a.m.

Held at PHC’s Southeast Regional Office at 4665 Business Center Drive, Fairfield, CA 94534 (Board Room – 3rd Floor)

Video Conference Location PHC’s Southwest Regional Office at 495 Tesconi Circle, Santa Rosa, CA 95401,

PHC’s Northwest Regional Office at 1036 5th Street, Eureka, CA 95501, PHC’s Northeast Regional Office at 2525 Airpark, Redding, CA 96001

Per Governor Newsom Executive Order, N-25-20 that relates to social distancing measures being taken for COVID-19. The Executive Order authorizes public meetings with Brown Act requirements to be held via teleconference or telephone. It waives the Brown Act requirement for physical presence at the meeting for members, the clerk, and/ or other personnel of the body as a condition of participation for a quorum. However, the Executive Order requires at least one public location consistent with ADA requirements to be made available for members of the public to attend the meeting, so all PHC offices will be available for members of the public to attend the meeting in-person.

Finance Committee Members: Dave Jones, Chair, Dick Fogg, Randall Hempling, Karen Larsen, Viola Lujan, Kathryn Powell, Nancy Starck

I. Agenda Items Lead Page # Time 1. Agenda Dave Jones, Chair 1 8:00

2. Finance Committee Minutes – May 20, 2020 - Decision Dave Jones, Chair 2

3. Commissioner Comments At this time, committee members may provide comments and announcements.

Commissioners --

4. Public Comments At this time, members of the public may address the committee on any non-agenda item of interest to the public that is within the subject matter jurisdiction of the committee. There will also be an opportunity to address the committee on a scheduled agenda item during the committee's consideration of that item. Speakers will be limited to three (3) minutes.

Public --

II. New Business 1. CEO’s Health Plan Update – Information Liz Gibboney 132. Grant Program for 2019 Unearned PCP QIP Funds – Decision

This resolution approves the repurposing of unearned PCP QIP funds. Liz Gibboney

14

3. Approve April 2020 Metrics and Financials - Decision Patti McFarland 184. Amend The Health Plan’s FY 2019-20 Budget – Decision

This resolution approves the Health Plan’s modified FY 2019-20 budget to account for the DHCS mandated fiscal changes.

Patti McFarland 34

5. Final Budget for FY 2020-2021 – Decision This resolution approves PHC’s Final Budget for our core business.

Patti McFarland/ Jeff Ingram

36

III. Adjournment 9:30

Government Code §54957.5 requires that public records related to items on the open session agenda for a regular finance meeting be made available for public inspection. Records distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all members, or a majority of the members of the committee. The Finance Committee has designated the Administrative Assistant to the CFO as the contact for Partnership HealthPlan of California located at 4665 Business Center Drive, Fairfield, CA 94534, for the purpose of making those public records available for inspection. The Finance Committee Meeting Agenda and supporting documentation is available for review from 8:00 AM to 5:00 PM, Monday through Friday at all PHC regional offices (see locations above). It can also be found online at www.partnershiphp.org.

PHC meeting rooms are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation (including auxiliary aids or services) to participate in this meeting, or who have a disability and wish to request an alternative format for the agenda, meeting notice, agenda packet or other writings that may be distributed at the meeting, should contact the Administrative Assistant to the CFO at least two (2) working days before the meeting at (707) 863-4207 or by email at [email protected]. Notification in advance of the meeting will enable the Administrative Assistant to make reasonable arrangements to ensure accessibility to this meeting and to materials related to it.

This agenda contains a brief description of each item to be considered. Except as provided by law, no action shall be taken on any item not appearing on the agenda.

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PARTNERSHIP HEALTHPLAN OF CALIFORNIA MEETING MINUTES

Per Governor Newsom Executive Order, N-25-20 that relates to social distancing measures being taken for COVID-19. The Executive Order authorizes public meetings with Brown Act requirements to be held via teleconference or telephone. It waives the Brown Act requirement for physical presence at the meeting for members, the clerk, and/ or other personnel of the body as a condition of participation for a quorum. However, the Executive Order requires at least one public location consistent with ADA requirements to be made available for members of the public to attend the meeting, so all PHC offices will be available for members of the public to attend the meeting in-person.

Committee: Finance Committee Date/Time: May 20, 2020 / 8:00 – 9:30 AM Members Present: Dave Jones* –Chairperson, Richard Fogg*, Randall Hempling, Viola Lujan*, Kathryn Powell*, Nancy Starck* Members Absent: Karen Larsen Staff Present: Liz Gibboney, Patti McFarland, Sonja Bjork, Mary Kerlin, Wendell Coats*, Jeff Ingram, Amy Turnipseed*, Wendi West*, Danielle Ogren*,

Olevia E. O’Donovan, Jesse Kalkat*, Katrina Dupont*, Melanie Lam*, Marisa Dominguez*, Diane Walton* Staff Absent: Michelle Rollins, Kirt Kemp Guests: Matt Gal* (Adventist Health)

* Attendance via Video Conference

DECISION AGENDA ITEMS DISCUSSION / CONCLUSIONS RECOMMENDATIONS / ACTION TARGET DATE DATE

RESOLVED

Approval of April 15, 2020 Meeting Minutes

Mr. Dave Jones - Chairperson, confirmed a quorum and called the meeting to order at 8:02 AM. He stated there are no changes to the agenda. The April 15, 2020 meeting minutes were presented for approval.

Action: Decision Mr. Richard Fogg motioned to approve minutes; Mr. Randall Hempling seconded the motion.

Approval was unanimous. Motion carried.

5/20/20 5/20/20

AGENDA CHANGES AND DELETIONS

None

COMMISSIONER COMMENTS

None

PUBLIC COMMENTS

None

NEW BUSINESS

Finance Committee Packet, 061720: Page 2 of 52

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CEO’s Health Plan Update

Presenter: Liz Gibboney, CEO

Ms. Gibboney provided various PHC and Federal/State level updates, as follows:

COVID-19 Response: PHC is still in the midst of the On-Call Campaign in which we are reaching out to high-risk members. Up to 30K calls out of 60k have been made, as of yesterday (5.19.20). We have received a 30% response rate along with excellent feedback from members who appreciate the variety of assistance given. We continue to monitor the providers with their reduction or loss of hours due to the Stay-at Home order. There has been a significant increase in virtual health visits via phone and video appointments. PHC Staff have made accelerated payments to the hospitals.

PHC Budget: The Staff will be submitting the ratification of the repurposing of the QIP funds of $9.7M to the Board at the June Board meeting.

Annual Goal Development: PHC Staff will be retooling the team goals based on the May Revise.

Strategic Planning: Given the situation (COVID-19), PHC is postponing strategic planning until early September as we focus on the emergency response efforts.

NCQA Accreditation: There has been flexibility and accommodations for the Medicaid plans, offering extensions where needed. However, PHC will not be taking an extension or changing dates.

HEDIS Score Improvement: The Staff is retooling the PCP QIP for 2020, especially for those that have virtual care capabilities.

Wellness & Recovery Program: Program is still slated to start on July 1st. Six out of seven counties have approved the contracts and are submitting them to DHCS.

CalAIM Waiver: The State has placed these talks on hold, likely to be postponed for another year.

Action: Information only

Mr. Hempling commented that Staff should move ahead with the majority of the CalAim initiatives, despite the State putting it off.

5/20/20 5/20/20


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Ms. Gibboney agreed with Mr. Hempling and stated that the associations and health plans agree that the timetable is aggressive and additional time would be beneficial. PHC will advance to the best possible extent while discussing with DHCS to advance the waiver. The associations are also moving forward with the timetable.

In response, Ms. Gibboney stated that the key message is to point members with concerns back to their respective medical home. The counties will coordinate with PHC on their script.

Ms. Sonja Bjork added the importance of communicating to members about our 24-hour advice nurse line, how to sign-up for prescription delivery service, as well as member options with BEACON, whom is offering many online mental health services, including therapy, through telemedicine. If members are confused about anything relating to their providers, PHC is sending this feedback to our Providers Relations department, who will connect with the providers directly and explain the situation.

Ms. Gibboney stated that Margaret Kisliuk would reach out to Mr. Gal for a more detailed discussion on the subject.

CA State Budget:

Per Amy Turnipseed, the Legislature has until June 15th to approve the State Budget, with July 1st as the effective date.

May Revision 2020-2021: Medi-Cal Budget Adjustments

Managed Care Efficiency Adjustment– There have been significant cuts to all health plans. APR-DRG rates for private hospitals and district municipal hospitals have been made by establishing an inpatient maximum fee schedule. Health plans cannot afford to subsidize the APR-DRG rates as its own revenue is reduced. This provision does not apply to public hospitals or UCs.

Ms. Patti McFarland added that the State budget proposals would create hardships for the health plans. Although the

Mr. Matt Gal asked if there are any opportunities for providers to receive feedback or assist with the integration process.

Mr. Gal appreciated the explanations and showed an interest in learning more about the Wellness & Recovery Program.


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Statewide cuts seem low, they are significant enough to affect the health plans materially.

In response, Ms. McFarland stated that the cuts will be about 10% overall. The bigger the hospital, the bigger the cuts will be.

To continue with the Revised May Revision, Ms. Gibboney stated that the other acuity adjustments had less detail from the State. Ms. McFarland added that PHC has a dashboard of the efficiency adjustments; some will take place in January 2021. Unfortunately, for services like ED, it is hard to predict and project numbers.

Ms. McFarland replied that while drop rates have lowered thanks to the COVID pandemic and the subsequent hold on redeterminations, we are not seeing large member increases yet since many people are being furloughed and keeping their company benefits for a short time rather than losing their job and benefits like those that did during the last recession.

Ms. Gibboney continued with the May Revision presentation, noting that the next bucket is called Bridge Period Rate Reduction that is effective retro to July 2019, ending December 2020.

Ms. McFarland added that it is similar to MLR (where 85 cents out of $1 must be spent). There is a small reduction related to elective surgeries, but not enough to offset the extent of the increases. The LTC rate increase of 10% is applied retro to March 2020, which is 20% of the PHC budget. With this risk corridor in place, PHC may have to pay a percentage back, but combining all aid categories and categories of service, it will be a challenge accurately forecasting and budgeting the impacts. The initial rate decrease is expected to be about $30M, likely withheld from the August capitation.

Medi-Cal Rx is still moving forward with January 2021, with minor changes. The associations still feel that it is a bad idea.

Mr. Hempling asked how big the financial cuts to the hospitals would be.

Mr. Hempling asked if it is possible to increase member numbers with less utilization in order to receive more surplus and hold back on rewarding providers.


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340B Supplemental was supposed to help the offset of health centers and hospitals, but since they have withdrawn the proposal to provide payments to non-hospital clinics for 340B pharmacy services, this May Revision will negatively impact health centers.

Other Optional Benefits such as Adult Dental is considered a trigger cut that is contingent on federal funding. Partial dental will remain for adults at the 2014 level.

Prop 56 is a yearly allocation with over a billion dollars in funding every year. This year some programs will be eliminated and the Governor is proposing to utilize dedicated funds to offset the increased caseloads that came with the unemployment increases due to COVID-19. There are additional items considered to be trigger cuts, enacted unless additional federally stimulus is received.

CBAS and MSSP will be cut, which includes seniors services, transportation, medical health, and meals for folks who might end up in an LTC facility. The LTC count will increase as a result. These benefits are expected to be eliminated in the next six months.

FQHC will wrap PPS, senior mental health, dental and other services into one rate. Ms. Gibboney asked if there are any insights from the health centers/commissioners.

Ms. Kathie Powell replied that if wrapped into the rates, the county will not be able to afford it, especially the drug medical program. Dental and specialty health will also be a big loss.

Mr. Jones added that dental will be impacted significantly.

Ms. Viola Lujan stated that La Clinica has 35 sites and services are site-based, including dental. However, when the drug medical program is implemented, changes will be significant. Individual analysis must be done, especially when completing other services, and that is likely to be very expensive.

Ms. Powell asked Ms. Lujan if different Finance Committee Packet, 061720: Page 6 of 52

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Ms. Gibboney appreciated the commissioners for their responses. She continued that some of the items on the May Revision do not affect PHC.

CAL AIM Although the Governor has proposed to withdraw $600-$700M in funding for Cal AIM, the cuts in eligibility do not affect certain expanded Medi-Cal groups such as undocumented children and young adults.

SNF Rates Adjustments The Governor’s proposal assumes a 10% rate increase for 4 months simply because that is the end of the fiscal year. The actual date has yet to be determined and is based on the consistency of the Covid-19 pandemic. This 10% is a significant increase to the LTC program.

FMAP has a higher rate temporarily, but the increased rate is not enough to offset the deficit from the eliminated or reduced programs.

Legislature will begin to meet and hopefully one or more will come up with alternatives.

Ms. McFarland replied that it is not impacted, nor on the table for the May Revision. Mr. Jeff Ingram added that NEMT is a very small program on Prop 56. Ms. McFarland also added that GEMT ambulance companies pay into it.

In response, Ms. Gibboney stated that the health plan is awaiting guidance from DHCS.

La Clinica sites use blended rates.

Ms. Lujan replied that she is not certain and will inquire with management.

Ms. Lujan asked if there was any impact to the Medical transportation.

Mr. Gal asked how the NEMT funding is being implemented.

Mr. Jones asked if there are any questions to Ms. Gibboney and her report.

No other questions were asked.

Preliminary Health Care Budget for FY 2020-2021

Ms. McFarland stated that the budget process was started in January. The Staff talked with departments about their needs and where they need to be flexible and the team developed a great model internally. However, this model

Action: Decision 5/20/20 5/20/20


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Presented:

Patti McFarland, CFO

Jeff Ingram, Director of FP&A

was negatively impacted by COVID-19 and the uncertainties it caused. To-date the team will keep the current model in place and model COVID-19 impacts on the side. The first draft was finalized Wednesday, but the May Revision came out on Thursday. The Staff expected membership to increase, but that is not currently the case. What is being presented is what was done before the May Revision. The Staff will go back and re-work the model for the next 30 days before the budget approval in the June Board meeting, as more details develop. The membership data can change in the coming weeks causing a bigger gray area. COVID-19 is definitely affecting our budget landscape. However, PHC has put in some good efficiency moves within the past 18 months and has spent reserves wisely. We are confident that PHC will be able to weather this situation.

Per Ms. McFarland, the legislature has to approve the May Revision budget by June 15th. Ms. Amy Turnipseed confirmed that the legislature must approve by June 15th and the Governor must approve by July 1st.

In response, Ms. Gibboney stated that education is the big item, but the funding is based on the formula.

Ms. McFarland replied that most of the things affecting PHC are going to pass.

Ms. Gibboney stated that the health plan is asking for relief.

In response, Ms. Gibboney stated that communication will roll to the health plans and the Provider Relations team will notify the providers. Ms. McFarland added that we need to protect the organization. With contract terminations, there should be efficacy. APR-DRG changes every year and it’s hard to argue for hospitals and health

Mr. Hempling commented that there are two key things to look for: The May Revision to be approved by the legislature and when.

Mr. Hempling asked what big changes are to be expected.

Mr. Hempling commented that the health plan would not be affected much. He said that these cuts are to help the State, not to bail out the State. He also asked if the health plan would still share a list of things they want if the 10% cut is not to happen.

Mr. Hempling commented that if the health plan is getting some money back, we need to be flexible.

Mr. Hempling asked if the Governor will be sending out the letters (to providers).


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plans. NorCal doesn’t have the competition that SoCal has, that are receiving APR-DRG, making it difficult to agree to terms and ensure access remains adequate.

Mr. Ingram pointed out that pages 18 and 19 were the start of the Budget Assumptions. The Staff highlighted the high unemployment last month. The membership applications are down in May, but DHCS expected overall applications to increase by July. Actual experience is a 10-12k loss a month, but that line goes flat in May. There is a small increase mainly due to the pause on redeterminations. Claims experience has about 3-4 months of lag, which is why the plan hasn’t seen a material impact caused by the shelter-in-place and deferral of elective services. Claims and check runs are seasonably close with the April-May periods. May Revision will be used to model when the impacts happen, and we will continue to re-do the budget in the next 3-4 months. The expected 1.5% surplus will likely not happen.

Ms. McFarland commented that the organization needs to stay flexible by lowering the admin budget and looking at other areas to save money. By being very diligent with every cost saving aspect and not panicking, PHC is well-positioned to weather this situation, while other health plans are not doing so well. Looking at every position with contracts has helped.

In reply, Ms. Gibboney stated that the organization is holding a weekly Virtual Executive Briefing with the staff and keeping everyone up-to-date. The budget was also discussed at the last VEB and Ms. Amy Turnipseed presented the May Revision impacts on the health plan, along with the expected situation with the State budget deficit, which is on top of the list with the Staff.

Ms. McFarland stated that the commissioners will have the opportunity to review the final budget in June and fully expect to go to the Board, within the next fiscal year to augment the budget. She also added that by the time the budget is approved next month, there will be more changes.

Ms. Starck commented that the counties are struggling with the budget cuts and has asked if the organization communicated with the employees regarding the situation.

Ms. Starck commented that it is best to keep the communications open and not panic.

Mr. Jones asked if there were any more Finance Committee Packet, 061720: Page 9 of 52

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comments or questions.

No additional comments or questions.

Mr. Hempling moved to approve, and seconded by Ms. Powell.

All voted to approve.

Approve March 2020 Metrics and Financials

Presenter:

Patti McFarland, CFO

Ms. McFarland stated that the acuity rates from the State were finally received, except now with the May Revision, there will be a reduction, retro back to July 2019, of about $28M thru June 2020. It will be seen on the next reporting period.

The Healthcare Cost is $60M over budget due to higher than expected incurred claims and some reserve set aside for COVID-19 related expenses, despite not seeing the trends in our data. Elective surgeries are expected to increase soon. The health plan is being very conservative, with a healthy IBNR.

The administrative expenses continue to be lower than budget. The organization has stopped hiring related to CalAim and is showing a healthy balance sheet.

In response, Ms. McFarland state the August capitation will be reduced with the full amount. When the State gets the approval from CMS, there is an actuarial room of +/- 1.5%. However, the State needs the savings now to balance the budget and retro to health plans. The organization has coverage for some of the programs (risk corridors). If health plans are losing more money, the State will come in and share the cost. The Staff will start recording in early May-June.

Ms. Gibboney asked the commissioners what they are seeing in their respective offices.

Action: Decision

Ms. Starck asked if the $30M is a one-time take back.

Ms. Starck stated that for the Humboldt County, the Board of Supervisors are looking at the voluntary furlough, or early retirement. However, in doing so,

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Ms. Bjork asked if this situation will hinder the collaboration with the county.

Ms. Bjork commented that the Drug Medi-Cal is not getting big spot light at the moment.

Ms. Gibboney asked if the health center’s visit rates are back to normal.

Ms. Gibboney stated that she will reach out to the health center at a more opportune time.

they would lose talented employees. They started yesterday with a slow approach rather than a slash and burn approach. She believes that it is different with each county.

In response, Ms. Starck stated that anything that realigns the revenue will be looked at, including looking at in terms of staffing, being the biggest expense. Drug Medi-Cal is already budgeted, with very small staff in some services.

Ms. Starck replied that it is considered done, check and moving forward with it.

Ms. Powell stated that their health center is also doing more changes, including an interim transition period of bringing staff back in, and more guesstimating.

Mr. Jones added that with regards to Mountain Valleys Health Centers, their financial standing is looking good.

Per Mr. Jones, the visit rates were not discussed.

Mr. Jones asked if there were any questions or additional discussions.

No other questions were asked.

Mr. Hempling moved to approve; seconded by Mr. Fogg.


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Minutes Prepared and Submitted by: Olevia E. O’Donovan Minutes Reviewed and Edited by: Katrina Dupont Minutes Reviewed and Submitted by: Jeff Ingram

Chairman Signature of Approval_______________________ Date__________________

All voted yes to approve. Motion carried.

Adjournment Meeting adjourned at approximately 9:16 am.


Finance Committee

Report from the Chief Executive Officer

June, 2020

General Issues:

• COVID-19 Response• Health Equity and Protests• PHC Budget• Annual Goal Development• Wellness & Recovery Program• June Board Meeting

DHCS/State & Federal Issues:

• DHCS Leadership Changes• CA State Budget

o Retroactive Rate Reductionso Managed Care Efficiency Adjustmentso Optional Member Benefitso Proposition 56o CalAIM Waivero CalRx (Governor’s Executive Order on Pharmacy)

• “Long Term Care at Home” Program


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Partnership HealthPlan of California

Request to Repurpose 2019 PCP QIP Funds

Updated 6/9/20

Area of Focus Description Funding Amount

Status

Virtual Care

Lead: Karan Rafus/PMO

Incentive funds to convert and/or increase the number and type of PCP office visits conducted through video. Pay for threshold of switching from in‐person to video visits, when compared to pre‐COVID visit levels, and which are sustained for at least 90 consecutive days. Video visits should reach at least 20% of all virtual visits held. Submit basic workflows on how video visits are organized, providers and patients supported.

This grant could pay for related and retroactive expenses (retroactive to March 1st) associated with:

Developing workflows for each PCP site that supportsvirtual care

Providing basic medical or phone equipment to membersfor telehealth

Pay for software that allows members to complete healthassessments electronically & remotely for well‐baby,developmental, autism screens, etc.

Can pay for telehealth hardware and software, softwarelicensing, etc.

General operations to support this transition

$5M To be allocated by eligible PCP site patient assignment, with a simple application. Unused funds can revert to another initiative if the PCP does not choose to utilize the funds or does not meet deliverables.

Promotion of Behavioral Health

Funding for PCP sites w/ a behavioral health focus to further the integration of behavioral health and physical health care assuming a mostly virtual environment.

$1.2M A basic application has been prepared and will be released upon approval. We can repurpose these funds if the


2

Lead: Margaret Kisliuk, with PMO

Clinics selected: Integrated clinics (those that already have behavioral health capacity) that applied for the Proposition 56 Behavioral Health Integration grants or select PCP sites that have shown demonstrated leadership in BHI and cover PHC counties that otherwise would not be included.

Eligible expenses are those that can be shown to improve integration, ranging from staff training to equipping computers with cameras so behavioral health staff can attend PCP appointments.

State does fund Prop 56 BHI grants in the near term.

Provider Workforce Development Initiatives

Lead: Wendi West and Andrew Torge

Expand existing provider recruitment program by expanding provider types who can get recruitment support to include BH providers.

Additional Workforce Initiatives to be reviewed and finalized, with applications made available to providers and organizations in good standing with PHC.

$3M Mixture of short and longer‐term projects.

Quality Metrics/Outside New PCP QIP

Lead: QI Staff

For those measures that do NOT remain in the revised PCP QIP structure itself, such as HEDIS measures for: kids > 2 yrs, mammography, cervical cancer screens.

Submit proposal to receive up to $25,000 to start a drive‐through vaccine clinic, or other campaigns to provide listed preventive care measures above.

$500,000 Eligible entities are independent RHCs and smaller, private PCP sites not affiliated with health systems.

By invitation. (A 47 eligible PCP sites in our 14 counties.


FINANCIAL HIGHLIGHTS Of The Partnership HealthPlan Of California For the Period Ending April 30, 2020

Financial Analysis for the Current Period

Total (Deficit) Surplus For the month ending April 30, 2020, PHC reported a net deficit of $25.4 million resulting in a net deficit of $19.2 million for the year-to-date. Significant variances are explained below.

Revenue Total Revenue is less than budget by $21.0 million for the month of April and greater than budget by $49.2 million for the year-to-date. The month-to-date variance is primarily driven by a $24.8 million year-to-date true-up related to the 1.5% rate decrease stemming from the May Revise. There is additional unfavorable revenue variance driven by the decision to waive the administrative fee associated with the IGT program for the 2018-19 cycle. The remainder of the fiscal year is expected to have an overall favorable revenue variance with the expanded Proposition 56 funding, the acuity adjustment to the base rates, and supplemental payments tied to Behavioral Health and American Indian Health Services, both of which have an offsetting healthcare cost component. Other revenue and interest income is lower than expected due to leasing vacancies and an overall decrease in interest rates, respectively.

Healthcare Costs Total Healthcare Costs are greater than budget by $70.0 million for the year-to-date. Total Inpatient Hospital has an unfavorable year-to-date variance of roughly $43.0 million, or 8.3%. The year-to-date unfavorable variance has been driven by higher incurred expenses than anticipated partially due to high dollar whole child model (WCM) claims, timing of assumed impacts for hospital contract changes that took place in the prior year, and a $10.0 million liability for potential COVID-19 related costs. PHC continues to closely monitor the paid claims on a weekly basis, analyzing the development against revenue and budget expectations. Long Term Care has an unfavorable year-to-date variance of $14.1 million mainly driven by an accrual for the annual long term care rate increases by DHCS effective August each year along with the 10% increase granted as part of the May Revise. Pharmacy expenses are favorable $19.3 million year-to-date primarily due to budget assumptions that were based on limited WCM information and the transition of prior year brand drugs to generics. Favorability of pharmacy may be reduced in future months as quarterly AWP increases are realized along with increased utilization of specialty drugs and new high cost treatments.

Administrative Costs Total administrative costs are over budget by $394,807 for the month, reducing the positive variance to $7.5 million for the year-to-date. The positive variances continue to be in employee costs as well as computer and data costs. As vacant positions are filled and projects in IT are completed, the positive variance should gradually decrease for these administrative cost categories.

Balance Sheet

Total Cash & Cash Equivalents increased by $7.5 million for the month. $483.1 million in State Capitation


FINANCIAL HIGHLIGHTS Of The Partnership HealthPlan Of California For the Period Ending April 30, 2020

Payments received included $130.4 million in IGT Payments which were subsequently distributed during the month. In addition to the IGT distributions, $83.5 million in directed payments and $10.7 million in administrative and capital costs were made during the month. Additionally, $249.4 million in healthcare payments were made which include $29.1 million in QIP Payments and $12.1 million in outpatient supplemental reimbursements. The remaining difference can be attributed to interest, other revenues, and transfers.

Following the latest Routine Examination by the DMHC, medical-related liabilities that were previously recorded in Accounts Payable were reclassified to the Accrued Healthcare Costs account.

General Statistics

Membership Membership had an increase of 3,300 members for the month. Medi-Cal Rate Region 1 had a membership increase of 2,217 members while Medi-Cal Rate Region 2 had a membership increase of 1,083 members.

Utilization Metrics and High Dollar Case For the fiscal year 2019/20 through April 30, 2020, 258 members reached the $250,000 threshold with an average cost of $453,639. For fiscal year 2018/19, the number of members reached 430, and the average cost per case was $459,079. For fiscal year 2017/18, 460 members reached the $250,000 threshold with an average claims cost of $421,286.

Current Ratio/Required Reserves (Excluding Capital Assets) Current Ratio Including Required Reserves 1.88 Current Ratio Excluding Required Reserves: 1.20 Required Reserves: $476,538,737 Total Fund Balance: $585,150,533

Days of Cash on Hand Including Required Reserves: 85.32 Excluding Required Reserves: 45.23


Member Months by County:

County Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20Solano 107,333 107,442 106,084 106,461 106,294 106,010 105,954 104,966 104,320 103,705 103,837 104,382 105,160 Napa 27,460 27,750 27,597 27,681 27,663 27,592 27,694 27,775 27,717 27,400 27,461 27,602 27,704 Yolo 51,672 51,798 50,905 50,909 50,690 50,117 50,432 50,217 49,882 49,385 49,291 49,486 49,829 Sonoma 104,764 105,420 104,766 104,559 104,234 103,702 103,285 102,775 102,023 101,505 101,091 101,320 101,427 Marin 37,177 37,403 37,251 37,294 37,295 37,353 37,123 36,840 36,660 36,439 37,028 37,095 37,390 Mendocino 38,232 38,007 37,228 36,820 36,899 36,172 36,032 35,496 34,983 34,735 34,659 34,710 34,658 Lake 29,917 30,082 29,772 30,040 29,994 29,985 29,939 29,681 29,387 29,242 29,276 29,423 29,411 Del Norte 11,133 11,130 11,124 11,120 11,107 11,113 11,200 11,090 11,070 11,126 11,085 11,132 11,146 Humboldt 52,460 52,762 51,856 52,179 52,016 52,035 52,103 52,086 52,009 51,646 51,353 51,707 51,648 Lassen 6,989 7,095 7,011 7,062 7,097 7,051 7,147 7,101 7,127 7,069 7,100 7,188 7,172 Modoc 3,163 3,193 3,177 3,158 3,202 3,218 3,200 3,212 3,268 3,228 3,234 3,288 3,279 Shasta 59,075 59,057 58,622 58,572 58,629 58,710 58,867 58,575 58,353 57,967 57,731 57,744 57,626 Siskiyou 17,280 17,254 16,978 17,065 16,994 17,011 17,126 16,917 16,819 16,616 16,695 16,780 16,718 Trinity 4,218 4,200 4,234 4,128 4,104 4,139 4,127 4,134 4,157 4,168 4,150 4,238 4,318 All Counties Total 550,873 552,593 546,605 547,048 546,218 544,208 544,229 540,865 537,775 534,231 533,991 536,095 537,486

Medi-Cal Region 1: Solano, Napa, Yolo & Marin; Medi-Cal Region 2: Sonoma, Mendocino & Rural 8 Counties

541,661

539,357 537,071

549,804 549,079 548,358 547,639 546,924 546,211 545,502 544,795 544,092 543,391

550,873

552,593

546,605

547,048 546,218

544,208 544,229

540,865 537,775

534,231 533,991 536,095

537,486

530,000

535,000

540,000

545,000

550,000

555,000

560,000

565,000

570,000

575,000

580,000

APR ‐19 MAY ‐19 J UN ‐19 J U L ‐19 AUG ‐19 SEP ‐19 OCT ‐19 NOV ‐19 DEC ‐19 J AN ‐20 FEB ‐20 MAR ‐20 APR ‐20

PARTNERSHIP HEALTHPLAN OF CALIFORNIAACTUAL V. PROJECTED MEDI‐CAL ENROLLMENT

APR 2019 ‐ APR 2020

Projected (Budgeted) Actual


Avg / Month43,708 As of

FINANCIAL INDICATORS Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 YTD Apr-20

Total Enrollment 543,170 542,248 540,608 540,739 537,716 533,109 529,498 529,996 529,967 533,267 5,360,318 536,032

Total Revenue 232,220,019 233,979,321 225,758,449 230,938,231 229,446,952 224,684,937 228,161,239 262,181,867 243,017,331 215,347,436 2,325,735,781 232,573,578

Total Health Care Costs 221,560,592 223,257,443 217,724,528 221,071,036 220,349,586 213,467,348 217,778,911 249,977,860 229,442,696 229,554,206 2,244,184,206 224,418,421

Total Administrative Costs 9,697,468 9,586,960 10,254,919 10,262,335 9,240,143 10,220,597 10,838,094 9,708,553 9,716,836 11,220,586 100,746,492 10,074,649

Total Current Year Surplus (Deficit) 961,959 1,134,918 (2,220,998) (395,140) (142,777) 996,992 (455,766) 2,495,454 3,857,799 (25,427,356) (19,194,917) (1,919,492)

Total Claims Payable 309,950,812 333,658,113 318,826,076 337,397,003 359,352,408 356,763,714 343,462,447 386,117,714 361,702,417 370,832,533 370,832,533 347,806,324

Total Fund Balance 605,307,407 606,442,325 604,221,326 603,826,187 603,683,410 604,680,402 604,224,636 606,720,090 610,577,890 585,150,533 585,150,533 603,483,421

Reserve Fund - Required Reserves 364,887,643 362,362,468 361,460,827 362,216,840 361,706,326 360,992,575 360,861,118 366,433,312 368,054,608 370,295,182 370,295,182 363,927,090

Reserve Fund - Capital Assets 105,166,231 108,043,421 108,574,111 107,960,113 108,326,115 107,925,149 107,752,145 106,982,789 106,790,050 106,243,555 106,243,555 107,376,368

Reserve Fund - Strategic Use of Reserves 59,756,800 59,651,513 59,380,941 57,548,808 56,942,396 91,126,990 89,751,571 89,450,038 88,442,860 87,252,581 87,252,581 73,930,450

Unrestricted Fund Balance 75,496,733 76,384,923 74,805,447 76,100,426 76,708,573 44,635,688 45,859,802 43,853,951 47,290,372 21,359,215 21,359,215 58,249,513

Fund Balance as % of Reserved Funds 114.25% 114.41% 114.13% 114.42% 114.56% 107.97% 108.21% 107.79% 108.40% 103.79% 103.79% 110.68%

Current Ratio 1.29:1 1.28:1 1.23:1 1.27:1 1.25:1 1.26:1 1.26:1 1.18:1 1.21:1 1.20:1 1.20:1 1.24:1

Medical Loss Ratio 95.41% 95.42% 96.44% 95.73% 96.04% 95.01% 95.45% 95.35% 94.41% 106.60% 96.49% 96.49%

Admin Ratio 4.18% 4.10% 4.54% 4.44% 4.03% 4.55% 4.75% 3.70% 4.00% 5.21% 4.33% 4.33%

Profit Margin Ratio 0.41% 0.49% -0.98% -0.17% -0.06% 0.44% -0.20% 0.95% 1.59% -11.81% -0.83% -0.83%

Avg / Month

As of

FINANCIAL INDICATORS Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 YTD Jun-19

Total Enrollment 558,229 555,694 554,259 553,722 554,344 551,393 550,184 549,293 548,517 547,283 547,276 544,864 6,615,058 551,255

Total Revenue 223,622,396 224,627,038 223,011,248 221,839,053 238,320,688 225,145,110 229,293,826 234,635,800 237,354,464 240,583,405 248,302,311 235,490,761 2,782,226,099 231,852,175

Total Health Care Costs 215,098,111 213,849,684 210,084,055 209,799,985 223,764,851 211,650,497 216,013,007 226,612,352 225,474,410 219,531,756 218,022,242 205,309,098 2,595,210,049 216,267,504

Total Administrative Costs 7,937,564 8,576,255 7,892,305 8,992,573 8,487,438 9,080,268 9,079,667 8,720,456 9,568,053 8,989,395 10,037,320 9,906,862 107,268,157 8,939,013

Medi-Cal Hospital & Managed Care Taxes 11,196,958 11,196,958 11,196,958 11,196,958 11,196,958 11,196,958 11,196,958 11,196,958 11,196,958 11,196,958 11,196,958 11,196,958 134,363,496 11,196,958

Total Current Year Surplus (Deficit) (10,610,237) (8,995,859) (6,162,070) (8,150,463) (5,128,559) (6,782,613) (6,995,806) (11,893,966) (8,884,957) 865,296 9,045,791 9,077,843 (54,615,603) (4,551,300)

Total Claims Payable 238,728,946 242,503,297 266,069,388 251,011,405 298,803,635 294,871,571 309,072,419 331,116,229 334,992,569 318,215,062 330,437,589 342,352,414 342,352,414 296,514,544

Total Fund Balance 648,231,184 639,235,325 633,073,254 624,922,791 619,794,231 613,011,618 606,015,812 594,121,845 585,236,888 586,102,184 595,147,976 604,225,819 604,225,819 612,426,578

Reserve Fund - Required Reserves 468,852,166 470,106,280 470,618,797 375,187,068 374,339,552 371,639,122 373,138,099 376,969,141 381,309,416 383,837,629 376,627,068 376,097,730 376,097,730 399,893,506

Reserve Fund - Capital Assets 84,135,058 85,929,106 88,073,284 89,834,151 93,533,892 97,192,597 97,351,505 96,896,491 95,866,835 95,577,773 104,951,344 105,532,414 105,532,414 94,572,871

Reserve Fund - Strategic Use of Reserves 66,188,548 63,204,100 73,804,101 72,586,265 71,540,381 68,267,962 66,495,382 66,082,314 65,094,988 63,538,939 61,259,598 60,646,102 60,646,102 66,559,057

Unrestricted Fund Balance 29,055,412 19,995,839 577,072 87,315,307 80,380,406 75,911,937 69,030,826 54,173,899 42,965,649 43,147,843 52,309,966 61,949,573 61,949,573 51,401,144

Fund Balance as % of Reserved Funds 104.69% 103.23% 100.09% 116.24% 114.90% 114.13% 112.86% 110.03% 107.92% 107.95% 109.64% 111.42% 111.42% 109.16%

Current Ratio 1.13:1 1.11:1 1.09:1 1.38:1 1.31:1 1.30:1 1.29:1 1.24:1 1.13:1 1.12:1 1.23:1 1.24:1 1.24:1 1.19:1

Medical Loss Ratio w/o Tax 101.26% 100.20% 99.18% 99.60% 98.52% 98.93% 99.04% 101.42% 99.70% 95.70% 91.95% 91.54% 98.01% 98.01%

Admin Ratio w/o Tax 3.74% 4.02% 3.73% 4.27% 3.74% 4.24% 4.16% 3.90% 4.23% 3.92% 4.23% 4.42% 4.05% 4.05%

Profit Margin Ratio w/o Tax -4.99% -4.21% -2.91% -3.87% -2.26% -3.17% -3.21% -5.32% -3.93% 0.38% 3.82% 4.05% -2.06% -2.06%

Partnership HealthPlan of CaliforniaComparative Financial Indicators Monthly ReportFiscal Year 2019 - 2020 & Fiscal Year 2018 - 2019


$105.0 $105.5 $105.2 $108.0 $108.6 $108.0 $108.3 $107.9 $107.8 $107.0 $106.8 $106.2

$376.6 $376.1 $364.9 $362.4 $361.5 $362.2 $361.7 $361.0 $360.9 $366.4 $368.1 $370.3

$61.3 $60.6 $59.8 $59.7 $59.4 $57.5 $56.9

$91.1 $89.8 $89.5 $88.4

$87.3

$52.3 $62.1 $75.5$76.4 $74.8 $76.1 $76.7 $44.6 $45.9 $43.9 $47.3

$21.4

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

May 2019 Jun 2019 Jul 2019 Aug 2019 Sep 2019 Oct 2019 Nov 2019 Dec 2019 Jan 2020 Feb 2020 Mar 2020 Apr 2020

Partnership HealthPlan of CaliforniaFund Balance Comparison

(in Millions of Dollars)

Required Reserves - Capital Required Reserves - Other Strategic Use of Reserves Unrestricted Funds

For the Past 12 Months Ending April 30, 2020


CURRENT MONTH

PRIORMONTH INC / DEC MEMBERSHIP SUMMARY

CURRENT YTD AVG

PRIOR YTD AVG VARIANCE

218,237 216,020 2,217 Medi-Cal Region 1 218,011 224,068 (6,058) 315,030 313,947 1,083 Medi-Cal Region 2 318,021 328,224 (10,202) 533,267 529,967 3,300 TOTAL 536,032 552,292 (16,260)

ACTUALMONTH

BUDGETMONTH

$ VARIANCE MONTH FINANCIAL SUMMARY

ACTUAL YTD

BUDGET YTD

$ VARIANCE YTD

215,347,436 236,395,736 (21,048,300) Total Revenue 2,325,735,781 2,276,558,702 49,177,079 229,554,206 219,552,948 (10,001,258) Total Healthcare Costs 2,244,184,206 2,174,145,282 (70,038,924)

11,220,586 10,825,779 (394,807) Total Administrative Costs 100,746,492 108,271,480 7,524,988 (25,427,356) 6,017,009 (31,444,365) Total Current Year Surplus (Deficit) (19,194,917) (5,858,060) (13,336,857)

106.60% 92.88%Medical Loss Ratio (HC Costs as a % of

Rev) 96.49% 95.50%

5.21% 4.58%Admin Ratio (Admin Costs as a % of

Rev) 4.33% 4.76%

PARTNERSHIP HEALTHPLAN OF CALIFORNIAMembership and Financial SummaryFor The Period Ending April 30, 2020


April 2020 March 2020

A S S E T SCurrent Assets

Cash &Cash Equivalents 417,818,994 410,288,975

ReceivablesAccrued Interest 157,700 504,200 State DHS - Cap Rec 221,311,568 339,713,234 Funds Receivable - Prov Risk 4,531,891 4,531,891 Miscellaneous Receivable 1,117,228 1,044,652

Total Receivables 227,118,387 345,793,977

Other Current AssetsPayroll Clearing (3,622) (1,196)Prepaid Expenses 5,185,976 4,049,783

Total Other Current Assets 5,182,354 4,048,587

Total Current Assets 650,119,735 760,131,539

Non-Current AssetsFixed Assets

Motor Vehicles 140,518 140,518 Furniture & Fixtures 7,518,859 7,518,859 Computer Equipment - HP 541,886 541,886 Computer Equipment 19,508,032 19,487,765 Computer Software 18,604,265 18,604,265 Leasehold Improvements 962,374 962,374 Land 6,767,292 6,767,292 Building 55,932,088 55,932,088 Building Improvements 27,454,868 27,454,868 Accum Depr - Motor Vehicles (113,419) (112,109)Accum Depr - Furniture (6,184,245) (6,139,372) Accum Depr - Comp Equip - HP (541,886) (541,886)Accum Depr - Comp Equipment (11,027,927) (10,633,049) Accum Depr - Comp Software (14,822,001) (14,612,772) Accum Depr - Leasehold Improvements (950,169) (948,098)Accum Depr - Building (6,066,774) (5,947,261) Accum Depr - Bldg Improvements (5,331,868) (5,181,074) Construction Work-In-Progress 13,851,662 13,495,757

Total Fixed Assets 106,243,555 106,790,051

Other Non-Current AssetsDeposits 38,674 47,174 Board-Designated Reserves 369,995,182 367,754,608 Knox-Keene Reserves 300,000 300,000 Net Pension Asset 1,350,224 1,350,224 Deferred Outflows Of Resources 927,581 927,581

Total Other Non-Current Assets 372,611,661 370,379,587

Total Non-Current Assets 478,855,216 477,169,638

Total Assets 1,128,974,951 1,237,301,177

PARTNERSHIP HEALTHPLAN OF CALIFORNIABalance Sheet

As Of April 30, 2020

Page 1 of 2Finance Committee Packet, 061720: Page 24 of 52

April 2020 March 2020

PARTNERSHIP HEALTHPLAN OF CALIFORNIABalance Sheet

As Of April 30, 2020

L I A B I L I T I E S & F U N D B A L A N C E Liabilities

Current LiabilitiesAccounts Payable 66,689,766 165,393,075 Unearned Income 164,445 151,888 Suspense Account 235,781 498,984 Capitation Payable 10,153,118 8,864,327 State DHS - Cap Payable 25,857,223 6,562,106 Accrued Healthcare Costs 9,109,765 - Claims Payable 81,919,688 39,185,129 Incurred But Not Reported-IBNR 288,912,845 322,517,288 Quality Improvement Programs 60,259,918 83,028,621

Total Current Liabilities 543,302,549 626,201,418

Non-Current LiabilitiesDeferred Inflows Of Resources 521,869 521,869

Total Non-Current Liabilities 521,869 521,869

Total Liabilities 543,824,418 626,723,287

Fund BalanceUnrestricted Fund Balance 21,359,215 47,290,372

Reserved FundsReserve Fund-Board Designated 354,995,182 352,754,608 Reserve Fund-Board Designated-Infrastructure 15,000,000 15,000,000 Reserve Fund-Board Designated-Capital Assets 106,243,555 106,790,050 Reserve Fund-Strategic Use Of Reserve 87,252,581 88,442,860 Reserve For Restricted Fund-Knox-Keene 300,000 300,000

Total Reserved Funds 563,791,318 563,287,518

Total Fund Balance 585,150,533 610,577,890

Total Liabilities And Fund Balance 1,128,974,951 1,237,301,177

Page 2 of 2Finance Committee Packet, 061720: Page 25 of 52

Current Month Activity Year-To-Date Activity

CASH FLOWS FROM OPERATING ACTIVITIES:Cash Received From:Capitation from California Department of Health Care Service 483,093,738 2,839,522,984 Other Revenues 3,998 157,261Cash Payments to Providers for Medi-Cal Members

Capitation Payments (34,362,641) (344,250,561) Medical Claims Payments (215,019,739) (1,836,054,220)

Cash Payments to Vendors (215,753,144) (546,087,520) Cash Payments to Employees (8,144,639) (81,066,209) Net Cash (Used) Provided by Operating Activities 9,817,573 32,221,735

CASH FLOWS FROM CAPITAL FINANCING & RELATED ACTIVITIES:Purchases of Capital Assets (696,611) (9,760,515) Net Cash Used by Capital Financial & Related Activities (696,611) (9,760,515)

CASH FLOWS FROM INVESTING ACTIVITIES:Board-Designated Reserve Transfers (2,240,574) 5,802,548Interest and Dividends on Investments 649,632 5,026,609Net Cash (Used) Provided by Investing Activities (1,590,942) 10,829,157

NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS 7,530,020 33,290,377

CASH & CASH EQUIVALENTS, BEGINNING 410,288,975 384,528,617

CASH & CASH EQUIVALENTS, ENDING 417,818,994 417,818,994

RECONCILIATION OF OPERATING (LOSS) INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:

TOTAL OPERATING (LOSS) INCOME (25,730,488) (23,916,325) DEPRECIATION 922,667 9,167,765CHANGES IN ASSETS AND LIABILITIES:Other Receivables (72,576) (862,752) California Department of Health Services Receivable 118,401,666 16,687,121Other Assets (804,829) (301,317) Accounts Payable and Accrued Expenses (69,260,282) (2,458,880) Accrued Claims Payable 9,130,117 28,480,120Quality Improvement Programs (22,768,703) 5,426,003Net Cash Provided (Used) by Operating Activities 9,817,572 32,221,735

PARTNERSHIP HEALTHPLAN OF CALIFORNIAStatement of Cash Flow

For The Period Ending April 30, 2020


-

ACTUALMONTH

BUDGETMONTH

$ VARIANCE MONTH

ACTUAL MONTH PMPM

BUDGET MONTH PMPM

ACTUAL YTD

BUDGET YTD

$ VARIANCE

YTD

ACTUAL YTD

PMPM

BUDGET YTD

PMPM

533,267 533,267 - TOTAL MEMBERSHIP 5,360,318 5,360,318 -

REVENUE214,934,549 225,698,046 (10,763,497) 403.05 423.24 State Capitation Revenue 2,319,755,998 2,259,581,802 60,174,196 432.76 421.54

303,132 513,350 (210,218) 0.57 0.96 Interest Income 4,721,409 5,133,500 (412,091) 0.88 0.96 109,755 10,184,340 (10,074,585) 0.21 19.10 Other Revenue 1,258,375 11,843,400 (10,585,025) 0.23 2.21

215,347,436 236,395,736 (21,048,300) 403.83 443.30 TOTAL REVENUE 2,325,735,781 2,276,558,702 49,177,079 433.87 424.71

HEALTHCARE COSTS15,459,251 14,846,402 (612,849) 28.99 27.84 Global Subcapitation 146,240,197 147,053,570 813,373 27.28 27.43

1,902,849 2,146,910 244,061 3.57 4.03 Capitated Medical Groups 20,231,419 21,215,869 984,450 3.77 3.96

Physician Services5,139,650 5,249,871 110,221 9.64 9.84 PCP Capitation 51,790,947 52,301,833 510,886 9.66 9.76

177,620 381,239 203,619 0.33 0.71 Specialty Capitation 2,761,273 3,786,482 1,025,209 0.52 0.71 30,734,297 27,210,139 (3,524,158) 57.63 51.03 Non-Capitated Physician Services 306,632,243 272,167,734 (34,464,509) 57.20 50.77

36,051,567 32,841,249 (3,210,318) 67.60 61.58 Total Physician Services 361,184,463 328,256,049 (32,928,414) 67.38 61.24

Inpatient Hospital15,672,033 16,230,688 558,655 29.39 30.44 Hospital Capitation 157,740,944 160,767,370 3,026,426 29.43 29.99 50,095,303 47,381,842 (2,713,461) 93.94 88.85 Inpatient Hospital - FFS 511,485,888 468,975,670 (42,510,218) 95.42 87.49 1,727,040 1,727,040 - 3.24 3.24 Hospital Stoploss 20,731,847 17,231,847 (3,500,000) 3.87 3.21

67,494,376 65,339,570 (2,154,806) 126.57 122.53 Total Inpatient Hospital 689,958,679 646,974,887 (42,983,792) 128.72 120.69

33,927,537 27,929,060 (5,998,477) 63.62 52.37 Long Term Care 293,507,806 279,414,363 (14,093,443) 54.76 52.13

25,285,362 27,160,385 1,875,023 47.42 50.93 Pharmacy 245,562,306 264,890,913 19,328,607 45.81 49.42

Ancillary Services827,093 972,643 145,550 1.55 1.82 Ancillary Services - Capitated 9,007,611 9,688,108 680,497 1.68 1.81

34,213,044 36,096,040 1,882,996 64.16 67.69 Ancillary Services - Non-Capitated 350,492,723 354,787,770 4,295,047 65.39 66.19 35,040,137 37,068,683 2,028,546 65.71 69.51 Total Ancillary Services 359,500,334 364,475,878 4,975,544 67.07 68.00

Other Medical2,744,321 2,193,321 (551,000) 5.15 4.11 Quality Assurance 20,913,031 21,936,600 1,023,569 3.90 4.09 1,177,598 459,870 (717,728) 2.21 0.86 Healthcare Investment Funds 8,187,774 4,598,700 (3,589,074) 1.53 0.86

75,700 96,350 20,650 0.14 0.18 Advice Nurse 765,864 963,500 197,636 0.14 0.18 6,825 18,170 11,345 0.01 0.03 HIPP Payments 66,602 181,700 115,098 0.01 0.03

4,063,692 3,127,989 (935,703) 7.62 5.87 Transportation 34,815,822 30,933,363 (3,882,459) 6.50 5.77 8,068,136 5,895,700 (2,172,436) 15.13 11.05 Total Other Medical 64,749,092 58,613,863 (6,135,229) 12.08 10.93

6,324,991 6,324,989 (2) 11.86 11.86 Quality Improvement Programs 63,249,910 63,249,890 (20) 11.80 11.80

229,554,206 219,552,948 (10,001,258) 430.47 411.70 TOTAL HEALTHCARE COSTS 2,244,184,206 2,174,145,282 (70,038,924) 418.67 405.60

ADMINISTRATIVE COSTS6,777,607 6,659,946 (117,661) 12.71 12.49 Employee 65,147,725 66,613,090 1,465,365 12.15 12.43

23,784 89,644 65,860 0.04 0.17 Travel And Meals 484,568 896,500 411,932 0.09 0.17 1,305,947 1,192,916 (113,031) 2.45 2.24 Occupancy 12,059,269 11,929,160 (130,109) 2.25 2.23

456,551 465,739 9,188 0.86 0.87 Operational 3,118,536 4,657,390 1,538,854 0.58 0.87 1,417,410 1,396,044 (21,366) 2.66 2.62 Professional Services 13,662,748 13,960,440 297,692 2.55 2.60 1,239,287 1,021,490 (217,797) 2.32 1.92 Computer And Data 6,273,646 10,214,900 3,941,254 1.17 1.91

11,220,586 10,825,779 (394,807) 21.04 20.31 TOTAL ADMINISTRATIVE COSTS 100,746,492 108,271,480 7,524,988 18.79 20.21

(25,427,356) 6,017,009 (31,444,365) (47.68) 11.29 TOTAL CURRENT YEAR SURPLUS

(DEFICIT) (19,194,917) (5,858,060) (13,336,857) (3.59) (1.10)

PARTNERSHIP HEALTHPLAN OF CALIFORNIA

For The Period Ending April 30, 2020Statement of Revenues and Expenses

**The Notes to the Financial Statement are an Integral Part of this Statement



NOTES TO FINANCIAL STATEMENTS

April 30, 2020

Page 1 of 3

1. ORGANIZATION

The Partnership HealthPlan of California (PHC) was formed as a health insurance organization,

and is legally a subdivision of the State of California, but is not part of any city, county or state

government system. PHC has quasi-independent political jurisdiction to contract with the State

for managing Medi-Cal beneficiaries who reside in various Northern California Counties. PHC is

a combined public and private effort engaged principally in providing a more cost-effective

method of health care. PHC began serving Medi-Cal eligible persons in Solano in May 1994. That

was followed by Napa in March of 1998, Yolo in March of 2001, Sonoma in October 2009, Marin

and Mendocino in July 2011, and eight Northern Counties in September 2013. Beginning July

2018 and in accordance with direction from the Department of Health Care Services (DHCS), PHC

has consolidated its reporting from these fourteen counties into two regions; these are in alignment

with the two DHCS rating regions.

As a public agency, the HealthPlan is exempt from state and federal income tax.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING POLICIES:

The accounting and reporting policies of PHC conform to generally-accepted accounting

principles and general practices within the healthcare industry.

PROPERTY AND EQUIPMENT:

Effective July 2015, property and equipment totaling $10,000 or more are recorded at cost; this

includes assets acquired through capital leases and improvements that significantly add to the

productive capacity or extend the useful life of the asset. Costs of maintenance and repairs are

expensed as incurred. Depreciation for financial reporting purposes is provided on a straight-line

method over the estimated useful life of the asset. The costs of major remodeling and

improvements are capitalized as building or leasehold improvements. Leasehold improvements

are amortized using the straight-line method over the shorter of the remaining term of the

applicable lease or their estimated useful life. Building improvements are depreciated over their

estimated useful life. Buildings purchased are recorded at cost and are depreciated on the straight-

line basis over their estimated useful lives.

INVESTMENTS:

PHC investments can consist of U.S. Treasury Securities, Agency Notes, Repurchase Agreements,

Shares of Beneficial Interest and Commercial Paper and are carried at fair value.




April 30, 2020

Page 2 of 3

BOARD-DESIGNATED & KNOX KEENE RESERVES:

In April 2004, PHC’s Board established a policy to set aside in a reserve account a designated

amount that represents the Knox-Keene Tangible Net Equity (TNE) requirement. This policy was

subsequently revised in May 2012 and beginning July 2012, the new methodology has been

reflected on the balance sheet. Based on this policy and as of April 2020, PHC has Board-

Designated and Knox-Keene Reserves of $476.2 million and $0.3 million respectively. To account

for the Board approved Strategic Use of Reserves (SUR) initiatives, which includes funding for

the Wellness & Recovery program, $87.3 million has been set aside as a “Reserve Fund-Strategic

Use of Reserve.” The amount represents the net amount remaining of all of the SUR projects that

have been approved to date; this balance is periodically adjusted as projects are completed.

3. STATE CAPITATION REVENUE

Medi-Cal capitation revenue is based on the monthly capitation rates, as provided for in the State

contract, and the actual number of Medi-Cal eligible members. Capitation revenues are paid by

the State on a monthly basis in arrears based on estimated membership. Prior to January 2010,

enrollment was subject to retrospective adjustments by the State upon completion of the 6th and

12th months following the month of service. Effective January 2010, the retrospective adjustments

have been replaced with monthly reconciliations with the State. As such, capitation revenue

includes an estimate for amounts receivable from or refundable to State for these retrospective

adjustments. These estimates are continually monitored and adjusted, as necessary, as experience

develops or new information becomes known.

4. HEALTH CARE COST

PHC continues to develop completion factors to calculate estimated liability for claims incurred

but not reported. These factors are reviewed and adjusted as more historical data become available.

Budgeted capitation revenues and health care costs are adjusted each month to reflect changes in

enrollee counts.

5. QUALITY IMPROVEMENT PROGRAM

PHC maintains quality incentive contracts with acute care hospitals and primary care physicians.

As of April 2020, PHC has accrued a Quality Incentive Program payout for of $60.3 million.




April 30, 2020

Page 3 of 3

6. ESTIMATES

Due to the nature of the operations of the Partnership HealthPlan, it is necessary to estimate

amounts for financial statement presentation. Substantial overstatement or understatement of these

estimates would have a significant impact on the statements. The items estimated through various

methodologies are:

- Value of Claims Incurred But Not Received

- Quality Incentive Payouts

- Earned Capitation Revenues

- Total Number of Members

- Retro Capitation Expense for Certain Providers

7. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the HealthPlan is party to claims and legal actions by enrollees,

providers, and others. After consulting with legal counsel, HealthPlan management is of the

opinion any liability that may ultimately be incurred as a result of claims or legal actions will not

have a material effect on the financial position or results of the operations of the HealthPlan.

8. UNUSUAL OR INFREQUENT ITEMS REPORTED IN CURRENT MONTH’S

FINANCIAL STATEMENTS

Budget for Other Revenue during the month includes $10 million of IGT administrative fee

revenue, which was approved by the Board during the annual budgeting process and was expected

to be received for the fiscal year; PHC, however, has made the decision to waive this administrative

fee.

State Capitation Revenue rates were revised resulting in a reduction of $22.3 million retroactive

to July 2019 through March 2020. This is offset by the recording of an additional $3.0 million

following the finalization of the MLR calculation for fiscal year 2016/17 completed by the DHCS.

Both of These amounts are reflected in the State DHS Capitation Payable account.

Following the latest Routine Examination by the DMHC, medical-related liabilities that were

previously recorded in Accounts Payable were reclassified to the Accrued Healthcare Costs

account.


Partnership HealthPlan of CaliforniaInvestment ScheduleApril 30, 2020

Name of Investment Investment Type Yield to Maturity

Trade Date Maturity Date

Call Date Face Value Market Value Credit Rating Agency

Credit Rating

FUNDS HELD FOR INVESTMENT:

Highmark Money Market Cash & Cash Equiv NA Various NA NA NA 1,532,446$ NA NRCertificate of Deposit for Knox Keene Cash & Cash Equiv 0.00015 9/12/2015 1/3/2021 NA NA 300,000$ NA NR

FUNDS HELD FOR OPERATIONS:

Merrill Lynch Institutional Cash for Operations NA NA NA NA NA 68,299,133$ Merrill Lynch MMA - Checking Cash for Operations NA NA NA NA NA 216,324$UBOC - General/MMA and Checking Cash for Operations NA NA NA NA NA 600,241,543$ Government Investment Pools (LAIF) Cash for Operations NA NA NA NA NA 74,999,805$ Government Investment Pools (County) Cash for Operations NA NA NA NA NA 40,006,989$ West America Payroll Cash for Operations NA NA NA NA NA 2,514,637$ Petty Cash Cash for Operations NA NA NA NA NA 3,300$

GRAND TOTAL: 788,114,176$

Required Reserves (Liquid)Board Designated Assets 369,995,182$ Knox Keene Reserves 300,000$Total Required Reserves (Liquid) 370,295,182$

Cash on Hand / Cash Days Available:Including Required Reserves 788,114,176$ Excluding Required Reserves 417,818,994$

Cash Days Available incl. Required Reserves 85.32

Cash Days Available excl. Required Reserves 45.23


Partnership HealthPlan of CaliforniaInvestment Yield Trends

11 10 9 8 7 6 5 4 3 2 1 1

FISCAL YEAR 19/20 JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN YTD

Interest Income 539,906 498,345 494,906 466,588 476,303 467,858 479,686 483,937 510,749 303,132 4,721,410Cash & Investments at Historical Cost (1) 340,928,511 360,668,380 450,471,374 358,134,538 382,162,687 373,861,975 357,469,528 536,443,228 410,288,975 417,818,994 398,824,819

Computed Yield (2) 1.79% 1.70% 1.46% 1.38% 1.54% 1.49% 1.57% 1.30% 1.29% 0.88%Total Rate of Return (3) 1.90% 1.78% 1.60% 1.59% 1.57% 1.56% 1.57% 1.48% 1.48% 1.42%CA Pooled Money Investment Account (PMIA) (4) 2.38% 2.34% 2.28% 2.19% 2.10% 2.04% 1.97% 1.91% 1.79% 1.65%

FISCAL YEAR 18/19 JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN YTD

Interest Income 372,994 530,984 384,540 500,869 404,948 415,805 646,883 454,679 538,970 921,112 535,643 598,435 6,305,862Cash & Investments at Historical Cost (1) 360,595,665 563,240,721 578,907,713 291,918,698 318,206,676 280,512,593 234,334,438 229,386,771 682,241,507 750,226,571 355,195,367 384,528,617

Computed Yield (2) 0.52% 0.29% 0.28% 0.51% 0.32% 0.33% 0.77% 0.49% 0.52% 0.88% 0.59% 0.68%Total Rate of Return (3) 1.24% 1.17% 1.03% 1.20% 1.25% 1.31% 1.49% 1.56% 1.44% 1.45% 1.47% 1.50%CA Pooled Money Investment Account (PMIA) (4) 1.05% 1.08% 1.11% 1.14% 1.17% 1.24% 1.35% 1.41% 1.52% 1.66% 1.76% 1.85%

NOTES:

(1) Investment balances include Restricted Cash and Board Designated ReservesYTD for Cash & Investments is average year-to-date

(2) Computed yield is calculated by annualizing the current month's interest divided by the current month's average balance.

(3) Total Rate of Return is computed based on year-to-date interest income annualized divided by an average of the fiscal year's portfolio's market value at month-end.

(4) LAIF limits the amount a single government entity can deposit into LAIF; currently that amount is set at $65 million.


0.010%0.110%0.210%0.310%0.410%0.510%0.610%0.710%0.810%0.910%1.010%1.110%1.210%1.310%1.410%1.510%1.610%1.710%1.810%1.910%2.010%2.110%2.210%2.310%2.410%2.510%

JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN

Per

cen

tage

Yie

ld

Periods

Partnership HealthPlan of California Investment Yield Trends

FISCAL YEAR 19/20

PMIA 19/20

FISCAL YEAR 18/19

PMIA 18/19


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REGULAR AGENDA REQUEST for


Board / Finance Committee (when applicable) Agenda Item Number: Meeting Date: June 17, 2020 4.1 Board Meeting Date: June 24, 2020

Resolution Sponsor: Liz Gibboney, CEO, Partnership HealthPlan of CA

Recommendation by: PHC Staff

Topic Description: On April 15, 2020, the Board approved Budget Assumptions for FY 2020-2021 and directed staff to prepare a full operational budget. On May 20, 2020, the Finance Committee approved the Preliminary Health Care Budget for FY 2020-2021, so a final Budget could be prepared.

Reason for Resolution: To give the Board the opportunity to review and approve the final Budget for FY 2020-2021 that includes our core business: administration, health care, capital, and updated assumptions for review and approval.

Financial Impact: The impact to the HealthPlan is implicit in the budget.

Requested Action of the Board: Based on the recommendation of PHC staff, the Board is asked to approve the final Budget for FY 2020-2021.


REGULAR AGENDA REQUEST for


Board / Finance Committee (when applicable) Agenda Item Number: Meeting Date: June 17, 2020 4.1 Board Meeting Date: June 24, 2020

Resolution Number: 20-

IN THE MATTER OF: APPROVING THE FINAL BUDGET FOR FY 2020-2021

Recital: Whereas,

A. The Board has responsibility for establishing budget policy and specific budgetapproval;

B. In prior meetings, PHC staff, the Finance Committee, and Board provided direction andinput; and

C. The final Budget conforms to general assumptions established.

Now, Therefore, It Is Hereby Resolved As Follows:

1. To obtain approval for the final Budget for FY 2020-2021.

PASSED, APPROVED, AND ADOPTED by the Partnership HealthPlan of California this 24th day of June 2020 by motion of Commissioner, seconded by Commissioner, and by the following votes:

AYES: Commissioners:

NOES:

ABSTAINED: Commissioners:

ABSENT: Commissioners:

EXCUSED: Commissioners:

Nancy Starck, Chair

Date ATTEST:

BY: Colleen Valenti, Assistant Clerk


1

FY 2020‐21

Annual Operating & Capital Budget

June 2020


2

Table of Contents Introduction ............................................................................................. 3Outlook for 2020‐21 ................................................................................. 3Membership ............................................................................................. 3Revenue .................................................................................................... 4Medi‐Cal Base Capitation .......................................................................................................................... 4

Interest Income ......................................................................................................................................... 4

Other Income ............................................................................................................................................ 5

Healthcare Expense .................................................................................. 5Global Sub‐Capitation & Capitated Medical Groups ................................................................................ 5

Inpatient Hospital ..................................................................................................................................... 5

Physician Services ..................................................................................................................................... 6

Long Term Care ......................................................................................................................................... 6

Pharmacy .................................................................................................................................................. 6

Ancillary Services ...................................................................................................................................... 6

Other Medical ........................................................................................................................................... 7

Quality Improvement Programs (Incentives) ............................................................................................ 7

Administrative Expense ............................................................................ 7Workforce ................................................................................................................................................. 7

Employee .................................................................................................................................................. 8

Occupancy ................................................................................................................................................. 8

Operating .................................................................................................................................................. 8

Professional Services ................................................................................................................................. 8

Computer & Data ...................................................................................................................................... 8

Profit & Loss Statement ........................................................................... 9Fund Balance .......................................................................................... 10Capital Projects ...................................................................................... 12Version History ....................................................................................... 15


3

Introduction The next phase of the PHC budget process is to present the 2020‐21 Operating & Capital Budget to the Finance Committee and Board of Directors for final approval. PHC Staff has consolidated the prior components of the budget into one comprehensive summary. A version history has been provided at the conclusion of this report to walk between the healthcare assumptions presented in May 2020 and the final healthcare costs presented below.

Outlook for 2020‐21 As the Plan prepares for the upcoming 2020‐21 fiscal year, PHC, along with the rest of the world, is still facing many unknowns due to the COVID‐19 pandemic. The developing situation will inevitably impact the Plan in many aspects which covers membership, rate development, non‐operating income, healthcare trends, and administrative loads.

Prior to the pandemic, the sustained strong economy and low unemployment continued to drive State‐wide reductions in Medi‐Cal enrollment. Membership and base program revenues may increase if an economic fallout eventually materializes. Base capitation rates are subject to change depending on the outcome of the State budget process and potential Federal stimulus. PHC continues to monitor and implement changes to managed care rules and regulations, new benefits required by DHCS, and also continue to pursue NCQA accreditation.

PHC plans to sustain a $70.1 million deficit for the twelve months ending June 30, 2021. As mentioned in the prior presentations, the unknowns surrounding the 2020‐21 fiscal year will likely lead to a re‐budgeting exercise mid‐year.

Membership The Plan experienced membership losses, excluding retro eligibility, thru January 2020, consistent with statewide trends, due to a number of factors, including a generally strong economy. February 2020 showed a slight increase due to the expanded benefits to include the undocumented adults ages 19 to 26. As part of the COVID‐19 response, the State froze redeterminations beginning March 2020. This resulted in four consecutive months of increased membership despite the absence of increased Medi‐Cal applications. The unemployment claims across California has not yet translated to the volume of increased caseloads the Staff expected. Initial evidence points to coverage remaining for furloughed workers and increased utilization of COBRA. Additionally, some anecdotal evidence assumes the newly uninsured will not enroll to Covered California or Medi‐Cal because they view this period as only temporary and expect to secure employment within the next few months. Due to the overall uncertainty, PHC has decided to model a few flat months of enrollment followed by a resumed, though softened, negative trend. This relatively flat trend approach attempts to mitigate any actual volatile enrollment trends and aims to more accurately forecast the full year’s average, or total member months.


4

Revenue PHC budgeted overall revenues at $2.7 billion for a year‐to‐year decrease of $80.0 million. The budget utilized draft rates for the 18 month bridge period provided by DHCS, estimated revenue cuts as part of the May Revise, up‐to‐date market analysis, and existing ancillary revenue streams. DHCS will provide the Plan with the final 2019‐20 18 month bridge period rates and draft CY 2020 rates sometime during the fiscal year. Variances caused by rate differences can be provided as part of the monthly financial performance reporting once the rate changes have been recorded.

Medi‐Cal Base Capitation 2020‐21: $2.7 billion 2019‐20 : decrease of $70.7 million or 2.6% The Medi‐Cal Base Capitation includes offsetting variances driven by base revenue, membership trends, proposition 56 (prop 56), and other supplemental revenues. As part of the May Revise, DHCS reduced the 2019‐20 18 month bridge period rates by 1.5 percent for Adult, Child, SPD, and MCE aid categories. Additionally, the CY 2021 rate period is expected to have a 0.5 percent reduction to the underwriting gain component of the base rates for all aid categories. These two cuts combined represent roughly $45.0 million of reduced base capitation. The removal of the pharmacy component, beginning January 2021, represents an additional $155.0 million of decreased capitation. The continuance of prop 56 programs has been openly debated at the State level, but as of early June, the programs are slated to be in place for the 2020‐21 FY. Prop 56 represents an increase of roughly $29.8 million in base capitation. Supplemental revenues increased from prior year’s budget by $36.1 million, primarily driven by increased utilization. The remaining offsetting variance of $63.4 million is driven by the increase in average membership from prior year’s expectations.

Interest Income 2020‐21: $1.4 million 2019‐20 : decrease of $4.8 million or 77.8% In the wake of the COVID‐19 outbreak and its disruption to the economic market, the Federal Open Market Committee (FOMC) on March 15, 2020 voted to reduce the federal funds target rate to a range of 0.0 to 0.25 percent, a drop of 100 basis points. This was in addition to the 50 basis point drop that occurred on March 4, 2020. The Committee met again on June 10, 2020, projecting no plans to raise interest rates through 2022. While there is not a direct correlation between the federal funds rate and the interest rate earned on deposits or investments held, the overall yield tends to follow a similar


5

direction. The Plan will assume an annual rate of return of 0.5 percent. PHC will revise the rate accordingly based on any future actions taken from the Federal Reserve.

Other Income 2020‐21: $7.7 million 2019‐20 : decrease of $4.5 million or 37.2% Currently, PHC leases space to 11 tenants in Fairfield and one tenant in Redding. Tenants are being sought for previously leased vacant space and for the newly available space on the third floor of 4605 in Fairfield. Rental income is estimated based on existing and anticipated lease agreements. For anticipated leases, rental income was projected using lease rates that are approximately 90 percent of current market rates. Building maintenance costs associated with the leased space will be included in administrative costs. Tenant improvements, greater than $10,000, for the leased space will be included in capital expenditures. Other income also includes the fee collected by the Plan to administer the Intergovernmental Transfer Program (IGT), which has been budgeted at 3 percent for 2020‐21 which is a decrease of ($3.7) million from the prior year.

Healthcare Expense PHC Staff believes the best approach to the healthcare expense budget is to base assumptions on the known impacts the Plan has experienced thus far and exclude, though continue to track, the variables tied to COVID‐19 and the economic outlook.

Healthcare cost projections for fiscal year 2020‐21 were based on the Plan’s historical claims experience for all counties. Cost experience from January 2019 through May 2020 served as the base data for budget development. COVID impacts realized in April and May 2020 are modeled to alter the timing of healthcare costs, deferring varying percentages within cost categories to later in the year. Information surfacing after June 2020, will be evaluated and material impacts not covered as part of the flex budget process will need to be incorporated in a full budget refresh.

The final budget assumes an overall expense of $2.6 billion, which is $30.7 million, or 1.2 percent, less than the 2019‐20 annual budget. Considerations and estimates by cost category are presented in more detail, below.

Global Sub‐Capitation & Capitated Medical Groups 2020‐21: $195.4 million 2019‐20 : decrease of $8.1 million or 4.0%

The budget assumes no year‐to‐year change for provider capitation rates. Membership decreases have reduced the global sub‐capitation expense and since the provider is not accepting new members, the potential increase to PHC membership will not have a material impact. Capitated medical groups, however, should have variability tied to overall plan enrollment. Variances tied to membership will be accounted for as part of the flex budget process. Similar to prior years, contract negotiations pose a risk of increased cost pressures if PHC is unable to keep rates at their current levels.

Inpatient Hospital 2020‐21: $836.7 million 2019‐20 : increase of $51.5 million or 6.6%

The Inpatient Hospital line item includes inpatient fee‐for‐service, hospital capitation, and stop loss expenses. PHC experienced an increase in average cost for high dollar cases throughout 2019‐20 fiscal year, driving a material increase to the forecasted stop loss expenses for the upcoming budget. PHC will


6

continue to evaluate the thresholds for the stop loss provision as higher inpatient trends drastically increase the number of qualifying cases. Hospital capitation has a relatively small decrease, with minimal rate increases and moderate membership decreases. The remainder of the increase is tied to inpatient fee‐for‐service. Substantial Whole Child Model (WCM or CCS) claims and increased UCSF utilization has more than offset the savings related to the updated hospital contracts that eliminated the artificially high MCE rate. Staff will continue to evaluate hospital contracts relative to revenue. If DHCS continues to reimburse at levels lower than cost, PHC will need to continue to push the reductions downstream.

Physician Services 2020‐21: $428.0 million 2019‐20 : increase of $29.2 million or 7.3%

The Physician Services line item includes prop 56, specialty capitation, primary capitation, and physician fee‐for‐service expenses. The increase is primarily driven by prop 56, as the 2019‐20 fiscal year and beyond includes a collection of new sub‐programs to be administered by the Plan. These programs are currently recorded with an MLR of 100 percent and do not have an impact to the bottom line. Future updates will reflect changes made to the programs or their base funding as a result of the final State budget.

Long Term Care 2020‐21: $378.4 million 2019‐20 : increase of $44.1 million or 13.2%

Early in each calendar year, DHCS releases rate adjustments for long term care facilities effective retroactively to the prior August. PHC Claims Department staff subsequently adjust all prior paid claims for the effective period, ensuring payment accuracy. This delayed process inherently increases the budgeting risk for this line item, as the total amount paid by date of service is unknown for a large part of the year. The LTC increase is primarily driven by the routine, annual DHCS rate increases as well as the temporary 10 percent rate bump in effect for the duration of the public health crisis. There could be additional COVID‐19 impacts on utilization and cost due to behavioral changes as members will likely be hesitant to enter congregate living settings.

Pharmacy 2020‐21: $167.7 million 2019‐20 : decrease of $155.7 million or 48.1%

The large reduction of $155.7 million is directly tied to the State’s pharmacy carve‐out from managed care plans. Effective January 1, 2021, PHC will no longer be responsible for the pharmacy benefit. For the first half of the fiscal year, Staff estimated expenses using prior period trending. The utilization trend analysis considered membership, generic vs brand, non‐drug, and specialty drugs.

Ancillary Services 2020‐21: $426.8 million 2019‐20 : decrease of $17.1 million or 3.8%

Ancillary Services is comprised of fee‐for‐service and capitated ancillary services. The budget assumes a modest decrease of $14.8 million tied to fee‐for‐service experience. The fee‐for‐service base data used for this budget cycle more accurately captures configuration changes that were made in prior years. This expense category has carried a minimal year‐to‐date variance of 1.2 percent for the 2019‐20 FY.


7

Other Medical 2020‐21: $96.3 million 2019‐20 : increase of $25.4 million or 35.8%

The Other Medical category includes transportation, quality assurance, healthcare investment fund (HCIF), nurse advice line, and Health Insurance Premium Payments (HIPP). The majority of the increase can be attributed to transportation expenses, which will continue to increase due to increasing utilization and contracting pressures. Staff also expects the quality assurance, or the medical administrative expenses, to increase from the 2019‐20 levels due to the timing of Health Services staff hiring. Over the past few years, PHC has flagged the housing SURs as a non‐budget variance due to the timing of grant accounting. This upcoming budget will continue to carry the timing caveat as there are still unspent housing funds.

Quality Improvement Programs (Incentives) 2020‐21: $75.9 million 2019‐20 : no change

PHC anticipates maintaining the same overall levels of funding for the incentive programs, subject to final revenue projections when rates from DHCS are received. There is some budgetary risk involved in estimating the exact overall payment level, which is dependent on the actual performance of participating providers. COVID‐19 introduces its own level of complexity with major disruptions to normal day‐to‐day activities for measurement year 2020. Staff will continue to use historical performance along with more recent leading indicators to predict the estimated payout of all programs. Budget funding may shift between programs as each QIP has its own set of participants, guidelines, and performance.

Administrative Expense Historically, the Plan has been able to operate at or below an administrative expense ratio of 5.0 percent. Due to the reduction in revenue related to the pharmacy carve‐out and capitation rate cuts, the administrative ratio will increase to roughly 5.3 percent in fiscal year 2020‐21.

Overall administrative spend is estimated to be $141.2 million, or an increase to the prior year’s budget of 8.9 percent. The year‐over‐year increase in total administrative expense is primarily related to the timing of filling vacant positions. This includes positions that were filled near the end of fiscal year 2019‐20, whose salaries will be recognized for a full year in fiscal year 2020‐21 along with positions that will be newly filled in 2020‐21. General operational costs increased year‐over‐year due to the depreciation expense for capital projects completed in the later part of fiscal year 2019‐20, for the anticipated capital projects in 2020‐21, and for increased computer and data costs related to technology infrastructure.

This budget includes a $12.0 million savings target, which for presentation purposes has not been assigned to any specific administrative cost category. This allows Leadership the ability to more effectively implement cost saving initiatives as new information becomes available. The largest factors being the State Budget negotiations and the looming economic impact of the pandemic.

Workforce During the fiscal year 2019‐20 budget development, staffing was maintained at prior year’s levels; however, many of the vacant positions were reassigned to departments where resources were needed due to regulatory driven program changes or the implementation of the new core system. As of today, a number of positions throughout the company remain open with a higher percentage of vacancies


8

concentrated in the Health Services Departments. For fiscal year 2020‐21, staffing changes will be focused on the effects of the pharmacy carve‐out, the State waiver, regulatory requirements, population health, and technology infrastructure needs.

Employee 2020‐21: $95.5 million 2019‐20 : increase of $14.8 million or 18.4% Prior to the onset of COVID‐19, the U.S. economy and labor market remained strong. However, in light of recent developments the economic outlook is dependent on the continued spread of COVID‐19 and timing of the resumption of normal economic activity. Despite those unknowns, the April 2020 Economic News Release from the U.S. Bureau of Labor Statistics stated that the Bay Area employment cost index (ECI) for the 12 months ending March 2020 rose from 3.2 percent at the end of December 2019 to 4.4 percent. Further research of Bay Area unemployment rates revealed the overall change in employment for those in the insurance industry is less than 2 percent. Given the ECI and industry unemployment rates, PHC will assume an average 4.0 percent merit increase which is slightly less than the current ECI number. PHC does not separately adjust salaries for COLA and merit. A 10 percent increase was applied to employee medical, dental, and vision benefits. No new benefits are projected for fiscal year 2020‐21. Travel and non‐travel related expenses are also included within this component, with a modest increase primarily due to staff vacancies being filled and additional travel not only between offices but to State meetings as well.

Occupancy 2020‐21: $20.4 million 2019‐20 : increase of $6.0 million or 42.2% The year‐over‐year increase in occupancy cost is driven by depreciation expense and building maintenance costs. A number of capital projects were not completed until mid to second‐half of fiscal year 2019‐20. Depreciation expense for these items are only for part of the year whereas in fiscal year 2020‐21 a full year of depreciation expense will be recognized. Depreciation expense will also increase based on new capital projects that are expected to be purchased and completed in fiscal year 2020‐21. The remainder of the increase is related to building occupancy costs associated with increased staff and general maintenance for all buildings.

Operating 2020‐21: $5.6 million 2019‐20 : increase of $27,666 or 0.5% Operating costs are comprised of general office supplies, printing, and postage. Overall cost is expected to remain comparable to the prior year.

Professional Services 2020‐21: $17.9 million 2019‐20 : increase of $1.2 million or 7.0% Professional Services primarily includes outside services such as consultants, contracted claims processing, and other third party processing vendors. Although pharmacy processing costs will be eliminated in the 2020‐21 budget due to the Pharmacy carve‐out, offsetting increases are expected for telehealth support fees, behavior health, and non‐capitalizable consulting costs related to the core system implementation.

Computer & Data 2020‐21: $13.7 million 2019‐20 : increase of $1.5 million or 12.0%


9

The computer and data increase is related to expected hardware and software purchases for new staff in addition to the replacement of hardware for existing staff and additional network needs.

Profit & Loss Statement


10

Fund Balance Board designated reserves are calculated according to policy: 60 days of operating expenses, $15.0 million for infrastructure, and an additional amount set aside for the Strategic use of Reserves (SUR), approved but not yet incurred. PHC, through Board approval, created the SUR initiatives and over the years was able to utilize a substantial amount of reserves in a manner that increased member access, increased provider reimbursement, and improved overall operational efficiency. PHC will continue to utilize the funds as approved. The remaining SUR balance is comprised of the Housing Program, Provider Recruitment and the Drug Medi‐Cal Program. The total fund balance, including the final SUR amount and the projected Board designated amount for the year ending June 30, 2021 is estimated at $508.6 million.


11


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R>B;S�VW<TX;A@�:>ABFinance Committee Packet, 061720: Page 49 of 52

13

DEPARTMENT REGION Carryover BUDGET ITEM DESCRIPTION

ESTIMATED PURCHASE

DATE

TOTAL PURCHASE

COSTFacilities Southern ** 4820-Exterior Window Framing 7/1/2020 18,200$

** 495-Ceiling Tile Replacement 7/1/2020 52,000 Building Signage 7/15/2020 28,400 Ceiling Tile 7/1/2020 157,000 Circuit Reallocation 7/1/2020 725,000 Copy Room Cabinetry 7/1/2020 35,100

** Exterior Entry Cover 7/1/2020 68,200 ** Exterior Glass 4465 7/1/2020 42,460 ** New Roof 4820 7/1/2020 108,130

Onsite Storage 7/15/2020 13,200 Paint Exterior of 4820 Building 9/1/2020 58,700

** Restroom Flooring 7/1/2020 23,670 Touch Up Paint-Building Exterior 11/1/2020 16,400 UPS Batteries 2/15/2021 21,000 Fire Panel - Replacement 5/15/2021 234,000

** Safety Measure: Replace Deteriorated Lobby Flooring 2/1/2021 124,000 Cost Saving Measure: Landscaping Changes to Drought Tolerant Plants 7/1/2020 150,000

Cost Saving Measure: Landscaping Changes to Drought Tolerant Plants and Water Saving Irrigation System to Building 4820 7/1/2020 150,000 EV Chargers - Santa Rosa Office 3/15/2021 63,800

** 4665 Ceiling Tile Replacement 7/1/2020 78,500 2,167,760 (534,376)

1,633,384

3,167,030(1,061,513)2,105,517$

Total Purchase CostCarryover Cost From FY 2019-20 **Total Southern Faclities Purchase Cost for FY 2020-21

Total Faclities Purchase CostCarryover Cost From FY 2019-20 **Total Facilities Purchase Cost FY 2020-21

DETAIL FACILITIES CAPITAL BUDGET (CONTINUED)


ESTIMATED PURCHASE

DATE

TOTAL PURCHASE

COSTNorthern Eureka Infrastructure Enhancements 8/1/2020 30,000$

Redding Infrastructure Enhancements 100,000130,000

- 130,000$

DETAIL INFORMATION TECHNOLGY CAPITAL BUDGET

Information Technology

Total Northern RegionCarryover Cost From FY 2019-20 **Total Northern Information Technology Purchase Cost FY 2020-21


14


ESTIMATED PURCHASE

DATE

TOTAL PURCHASE

COSTSouthern 4665 Datacenter Refurbishment 8/1/2020 60,000$

Backup System Expansion 12/1/2020 500,000Call Center Rewrite 10/1/2020 400,000

** Claims Editor 7/1/2020 2,000,000CPT Add on Codes 10/2/2020 121,000Cyber Security Tools & Expansion 8/1/2020 350,000

** Data Masking Solution/Tools 110,000Data Warehouse, PQD, and HEDIS development 7/1/2020 300,000Edifecs 8/1/2020 250,000Edifecs Support for configuration 7/1/2020 150,000Electronic Document Management System 200,000Enterprise A/V Enhancements / Upgrades 8/1/2020 175,000Enterprise IT Inventory & Asset Management System 7/1/2020 100,000Enterprise Network Upgrades & Expansion 8/1/2020 550,000Enterprise Server Infrastructure Expansion 8/1/2020 400,000Enterprise Storage Array Expansion (Primary & DR Sites) 7/1/2020 650,000Enterprise VDI Infrastructure Expansion 8/1/2020 450,000Enterprise VoIP Enhancements 7/1/2020 250,000Fairfield Infrastructure Enhancements 150,000

** HRP Project Management Resources 7/1/2020 652,000Interoperability 7/1/2020 500,000Master Data Management 250,000Misc Code Sets 10/1/2020 15,000MS Office 365 Implementation 7/1/2020 500,000ODS Development 563,000Organize and Manage Data from/to Web 1/1/2021 100,000PHOENIX Production Infrastructure Expansion 7/1/2020 350,000PR Contract Management (ECMS) 250,000Santa Rosa Infrastructure Enhancements 8/1/2020 38,000Smartcomm setup, development and support 8/1/2020 75,000UI Automation tool for Web apps 3/1/2021 75,000Web Applications Rewrite 8/1/2020 400,000Web Services Development 8/1/2020 60,000Population Health Solution 7/1/2020 90,000Grievance and Appeals Solution 9/1/2020 500,000

** Endpoint Management Solution 7/1/2020 246,000Application Performance Monitoring 8/1/2020 120,000

** EDIE Emergency Department Information Exchange Solution 12/31/2020 350,000** Member Facing Texting Technology System 7/1/2020 400,000

Core System Implementation Support 10/1/2020 100,000** Language Translation Solution for PHC Websites (Member Portal) 220,875

13,020,875 (4,026,875) 8,994,000

13,150,875(4,026,875)9,124,000$

Carryover Cost From FY 2019-20 **Total Southern Information Technologys Purchase Cost FY 2020-21Total Purchase CostCarryover Cost From FY 2019-20 **Total Information Technology Purchase Cost FY 2020-21

DETAIL INFORMATION TECHNOLGY CAPITAL BUDGET (CONTINUED)

Information Technology

Total Southern Region


15

Version History This table was created for Committee Members to quickly review changes between the preliminary healthcare budget presented in May ‘20 and the final budget presented above.

Table updated as of June 10, 2020


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