Next Generation Contracting 2.0

Fiscal Policy Studies Institute

Based on Next Generation Contracting and Virtual Funding Pool Principles developed by FPSI

Draft 2 June 2011

An Approach to Flexible Funding and Integrated, Outcome-Based Contracting

Next Generation ContractingQuantity

Effe

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3. What we purchase in the lower quadrants are not deliverables, but rather a RELATIONSHIP where funder and grantees work together to maximize customer results.

WHICH MEANS

BUT2. They break down inthe Is anyone better off?quadrants (because of case mix

differences and perverse incentives).

1. Traditional purchasing methods work fine in the upper quadrants.

Quality

Next Generation ContractingContract Provisions

Provision 1. Specify the 3 to 5 most important performance measures (from the How well did we do it? and Is anyone better off? categories).

Provision 2. Specify that the contractor will use a continuous improvement process (the RBA 7 Questions).

Provision 3. Specify how the funder and contractor will work in partnership to maximize customer results (quarterly meetings using the 7 questions as the agenda).

Provision 4. Specify that the funder will work with the funding community to simplify and standardize contracting and performance reporting.

Provision 5: : Clear articulation of role in population/community well-being. Language of contribution not attribution.

Provision 6: 10% for quality management and administration.

Provision 7: Multi-year funding using 3 year rolling contracts

Provision 8: Use of targets that are fair and useful.

Provision 9: Fund flexibility and virtual funding pool: transfer of up to 10% across line items and program lines.

Next Generation ContractingContract Provisions

Next Generation Contracting 2.0

Fiscal Policy Studies Institute

An Approach based on Next Generation Contracting and Virtual Funding Pool Principles developed by FPSI

KEY FEATURES:1. Allows fine tuning of the balance between control and fund flexibility.

Draft 2 June 2011

2. Provides the benefits of "traditional" fund pools for mainstream funding, without the loss of fund identity, and with less accounting and administrative complexity. 3. Promotes partnership/alliance working on both population quality of life and service system performance improvement. Defines funder/contractor partnership for maximizing customer outcomes.4. Makes use of simplified reporting on contract performance using RBA formats and the three RBA measurement categories: How much did we do? How well did we do it? and Is anyone better off? 5. Establishes 3 year rolling contracting (with safeguards) that prevents annual destabilization of service providers.6. Institutionalizes contractor continuous improvement processes.7. Provides funding for contractor management infrastructure.

Service Line Specifications

1. What is the role of the service in population quality of life?

2. Definition of the service

3. Service quality requirements

5. How many people will be served? (and relevant targets)

6. How much of what activities will be provided? (and relevant targets)

7. How well did we do it? and Is anyone better off? measures (3-5)

4. Key partners, alliance relationships

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General Contract Provisions

1. The contractor will use a continuous improvement process.

4. The funder and contractor will work as partners to maximize customer outcomes.

5. The funder will work with the funding community to simplify and standardize contracting and reporting requirements.

3. Targets, where used, will be set in relation to a baseline and will be negotiated so as to be fair and useful.

6. General provisions concerning management, due diligence, dispute resolution, termination, and other matters required by law.

2. The contractor will report on progress quarterly using a simplified format: Numbers, Accomplishments & Stories.

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Financial Contract Provisions

1. Standard provisions for accounting, financial reporting, audit and general fiduciary responsibility.

4. Provide for rolling 3 year contract with new 3rd year amendment to be negotiated by the end of each contract year.

5. Allow contractor to move funds of less than 10% of budget between service lines in the interest of more effective services.

3. Provide 10% for management and infrastructure, adjusted for economies of scale.

6. Allow contractor to retain (across contract years) savings in medium/high intensive services to expand prevention services.

2. Specify budget by service line.

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Virtual Funding PoolManaging "as if" funds were pooled: Accountability and flexibility without loss of fund line identity

Programs(using health examples)

1a. Health promotion

1b. Immunizations

1c. GP well visits

2a. GP sick visits

2b. Diagnostic testing

2d. Emergency room

3a. Hospital care

3b. Long term care

3c. Hospice care

4. Mgmt Infrastructure

PreventionLow cost

InterventionMed -High cost

Intervention

$ 1,000,000

3,000,000

4,000,000

2,000,000

1,000,000

1,000,000

10,000,000

4,000,000

5,000,000

2,000,000

10,000,000

25,000,000

50,000,000

60,000,000

5,000,000

10,000,000

11,000,000 22,000,000 160,000,000

Tran

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Transfer savings from deep end to preventionFiscal Policy Studies Institute