Cost Analysis – Hendrickson Development

Cost analysis establishes what the cost of an activity is or will be. There are three main types of cost analysis:

• Trend studies where past cost history is used to project future costs or price legislative and other changes. The logic of trend analysis is straightforward, taking cost per person, utilization per person, and the number of persons to project future trends;

• Rate setting where provider costs are aggregated and regulations are applied to them to arrive at a rate to pay the provider or provider class, and

• Cost effectiveness studies which are infrequently done and are the most difficult to do. More cost effectiveness studies are flawed than any other type of cost analysis. Difficulties arise because:

Typically, different cost pools and cost structures are used in the comparison such as state mental health costs and community mental health center costs;

Persons or companies cannot be randomized into control and experimental groups and selecting groups to compare may resort to matching which must be done carefully;

There are no national standards, guidebooks or academic classes in how to do cost effectiveness, and

Cost effectiveness studies are often done for litigation or budget decision making and counterattacks by persons with opposing views can involve nasty mischaracterizations.

Payment principles and the analysis of costs are well defined for many medical and health-related provider types, for example, hospital and nursing facility reimbursement where national standards have emerged. However, studying costs, setting payment levels and cost effectiveness for waiver fee codes, home and community programs, and Older Americans Act services is not standardized nationally.

Dr. Hendrickson began his Medicaid financial experience as the Senior Budget Analyst in the Oregon Medicaid program and has prepared hundreds of fiscal impacts.

Examples of cost-related work include:

In 2017-2023 examined state and managed care behavioral health claims databases for a federal agency and prepared assessments of damages due to behavioral health programs because of actions by governmental entities;
In 2016, prepared multi-year cost reporting of Washington state mental health hospital operations;
In 2016, prepared cost analysis of implementing a new Medicaid assessment tool for nursing facility level of care eligibility;
In 2015, reviewed fiscal impacts of Community First Choice expansion for Colorado Medicaid;
In 2013-14, worked on setting behavioral health rates for Arkansas Medicaid;
In 2013, prepared five-year cost and revenue analysis for substance abuse treatment program in Maryland as part of litigation settlement with a county zoning board;
In 2013, worked on the analysis of Medicaid expansion options for Utah under the Affordable Care Act (ACA);
In 2012, prepared 5-year cost and utilization analyses of all Texas behavioral health services including Northstar managed care program;
In 2012, worked on review of 175 cost reports of substance abuse providers for Florida Department of Children and Families to establish uniform administrative cost definitions;
In 2010, 2011 and 2012, conducted audits of nursing homes as part of Colorado’s pay for performance reimbursement program;
In 2010 prepared cost-effectiveness analysis of Nevada’s nursing home transition program;
In 2010 prepared quantitative models of the fiscal impact of different proposed early intervention contracts in Texas;
In 2010, worked on estimation of savings due to privatization of forensics units at the Utah State Hospital and the Utah State Developmental Center;
In 2009, worked on cost models of community providers for the Florida Division of Blind Services;
In 2009, for the Florida Division of the Blind, created cost-based reimbursement rate for the Conklin Center for the Blind in Daytona Beach. The Center was one of only two programs in country that provide services to blind persons with developmental disabilities;
In 2008, compared 3,100 reimbursement codes used by the Texas Department of Assistive and Rehabilitative Services to Medicare physician, durable medical equipment and laboratory and x-ray fee codes;
In 2008, worked on reimbursement methodologies for 36 procedure codes in Ohio’s PASSPORT program;
In 2008, analyzed the nursing home reimbursement methods of California, Indiana, and Pennsylvania modeling the impact of declining occupancy on the rates paid nursing homes;
In 2007, analyzed incentive payments to Area Agencies on Aging and Centers for Independent Living to participate in Pennsylvania’s nursing home transition program.
In 2006, prepared report on methods used by states to calculate the cost effectiveness of nursing home Money Follows the Person programs;
In 2006, worked with the Department of Health and Human Resources in West Virginia and its accounts on a study of community mental health, substance abuse and MR/DD expenditures;
In 2006, calculated the reduction in expenditures due to the 2004 Home and Community-Based Services (HCBS) administrative regulation changes for Alaska;
In 2005, assisted New Jersey to set 2005 school-based Medicaid rehabilitation rates using Department of Education accounts and regulations;
In 2004, helped the Department of Human Services in Maine with both its 2003 and 2004 Indirect Cost Allocation Plans (CAP) and its 2004 Direct Cost Allocation plan;
In 2004, obtained $300,000 for Nevada in a review of its state mental health hospital cost reports;
In 2004, prepared TEFRA cost appeals for Missouri mental health hospitals;
In 2004, obtained for Indiana $12 million a year by changing ICF/MR reimbursement;
In 2003, helped Florida capture unreported depreciation from state MR/DD developmental centers;
In 2003 worked with Wisconsin state mental health hospitals and reviewed both Medicaid reimbursement and Medicare hospital cost reporting;
In 2003, assisted Maryland to rewrite its ICF/MR and nursing facility reimbursement rules to eliminate occupancy penalties and other practices limiting reimbursement to state facilities;
In 2003, assisted the state of Indiana to set mental health rehabilitation rates for persons in juvenile mental health institutions.