Performance audit, Department of Economic Security, Division of Developmental Disabilities Report No. 05-07

              Performance Audit
Department of
Economic Security–
Division of Developmental
Disabilities
Performance Audit Division
Debra K. Davenport
Auditor General
SEPTEMBER • 2005
REPORT NO. 05 – 07
A REPORT
TO THE
ARIZONA LEGISLATURE
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting services
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Senator Robert Blendu, Chair Representative Laura Knaperek, Vice Chair
Senator Carolyn Allen Representative Tom Boone
Senator Gabrielle Giffords Representative Ted Downing
Senator John Huppenthal Representative Pete Rios
Senator Harry Mitchell Representative Steve Yarbrough
Senator Ken Bennett (ex-officio) Representative Jim Weiers (ex-officio)
Audit Staff
Melanie Chesney, Director
Shan Hays, Manager and Contact Person
Mark Haldane
Aaron Hollingshead
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
September 8, 2005
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. David A. Berns, Director
Department of Economic Security
Transmitted herewith is a report of the Auditor General, a Performance Audit of the Department of
Economic Security–Division of Developmental Disabilities. This report is in response to a November
20, 2002, resolution of the Joint Legislative Audit Committee. The performance audit was conducted as
part of the sunset review process prescribed in Arizona Revised Statutes §41-2951 et seq. I am also
transmitting with this report a copy of the Report Highlights for this audit to provide a quick summary for
your convenience.
As outlined in its response, the Department of Economic Security agrees with all of the findings and
plans to implement all of the recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on September 9, 2005.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
DD:Acm
Services:
The Arizona Department of Economic Security, Division of
Developmental Disabilities (Division) provides services and
programs to individuals with developmental disabilities and
their families. The Division provides services to help individu-als
attain and maintain maximum functioning. The Division
also provides assistance with daily living, medical, and resi-dential
services. Most services are provided through con-tracts
with independent and agency providers. Individuals
are determined eligible for services by Arizona Health Care
Cost Containment Services (AHCCCS), Arizona’s designat-ed
Medicaid agency.
Facilities and equipment:
The Division owns or leases office space at 1 central office, 6
district offices, and 47 local offices throughout the State. The
Division also operates one Immediate Care Facility for the
Mentally Retarded (ICF/MR) in Coolidge, Arizona.
Mission:
The Division’s mission is to “support the choices of individu-als
with developmental disabilities and their families by pro-moting
and providing, within communities, flexible, quality,
consumer-driven services and supports.”
Division goals:
The Division has the following goals that apply to all division
programs:
1. To increase communication with and provision of
information for individuals, families, and communities
PROGRAM FACT SHEET
Arizona Department of Economic Security
Division of Developmental Disabilities
Pre-admission Screening and
Annual Resident Review—2
Medical Services—36.7
Institutional
Services—77.7
Home and Community
Based Services—147.6
Arizona Training Program
at Coolidge—429.4
Administration—349.7
Case
Management—771.1
Program revenue:
$661 million (fiscal year 2005, estimated)
Program staffing:
1,814.2 FTEs for fiscal year 2005 (181.5 vacancies as of June 30, 2005)
Office of the Auditor General
State General Fund
ALTCS $233,475,100
$398,059,449
Interest—$1,613,261
Other—$1,701,236
Government Grants and
Contracts—$25,959,941
by providing information through various means about Division of Developmental
Disabilities programs and related systems and services.
2. To increase opportunities for individuals and their families to have control over deci-sions
and resources.
3. To enhance the supports and services available to consumers.
4. To provide quality supports and services to families of children from birth to 3 years of
age.
5. To effectively and efficiently manage Arizona Long-Term Care System fiscal resources.
Adequacy of performance measures:
The Division’s goals and performance measures appear to be generally aligned with its mission.
In addition to the five goals that apply to the entire Division, it has six additional goals that apply
to the various division programs. The Division has all five types of performance measures—input,
output, quality, efficiency, and outcome.
Source: Auditor General staff compilation of unaudited information obtained from the State of Arizona Master List of Government Programs; the
Division’s strategic plan; staffing information from the Division’s business operations office; lease information from the Division of
Business and Finance; equipment inventory, and other information provided by the Department and the Division of Developmental
Disabilities.
State of Arizona
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Economic Security, Division of Developmental Disabilities (Division)
pursuant to a November 20, 2002, resolution of the Joint Legislative Audit
Committee. This audit was conducted as part of the sunset review process
prescribed in Arizona Revised Statutes (A.R.S.) §41-2951 et seq and is the fifth in a
series of six reports on the Department of Economic Security (Department). This
audit addresses services and programs for individuals with developmental
disabilities and their families.
As of May 31, 2005, approximately 24,700 people with developmental disabilities
were receiving services through the Division. Three-fourths of these individuals had a
primary disability of mental retardation or were at risk of having a developmental
disability if supports and services were not provided, and nearly 60 percent were
under 18 years of age. Most receive care at home or in a group care setting. The
services they receive depend on their particular needs, state and/or federal
guidelines, and available funding. Services range from assistance with daily living to
medical treatment and therapies for maximizing their abilities. The Division provides
some services directly, but it also contracts with a network of more than 800 agencies
and approximately 2,500 individuals. The number of people receiving services has
risen by about one-third since 2000, which is more than double the rate of Arizona’s
population increase of about 15 percent during the same time. The program, which
had revenues of $661 million in fiscal year 2005, is supported by a combination of
state and federal funds. A substantial portion of its funding is administered through
the Arizona Health Care Cost Containment System (AHCCCS), Arizona’s designated
Medicaid agency.
Division developed appropriate model for setting provider
rates (see pages 13 through 17)
The Division appears to have developed an appropriate model to prepare a uniform
rate schedule for several services, pursuant to 1994 legislation that added A.R.S.
§36-557(K) requiring the Division to establish a system of equitable rates. Although
the Division has developed rates for most types of services, the rates for therapy
Office of the Auditor General
SUMMARY
page i
services discussed in Finding 1 are not yet a part of this system. In order to meet the
statutory requirement, the Division hired an independent consulting firm in March
2000 to collect data and develop a model. The consultant developed a schedule for
several division services, and the Division published the rates in July 2003. The
Division adjusted the benchmark rates by 4.25 percent for fiscal year 2005 to allow
for inflation. Because of funding constraints, each year the Division has adopted
lower rates than the benchmark rates recommended by the model. However,
legislative appropriations for fiscal year 2006 will allow it to pay 97.61 percent of the
2005 benchmark rates. As required by statute, the Division continues to monitor the
rates to determine if changes are necessary. In addition, to comply with A.R.S. §36-
2959, the Division must conduct a complete study of the rates at least every 5 years.
During 2004, the Division reviewed and adjusted a disputed rate. Providers had
expressed concern about the rate for day treatment and training services because at
the same time as it published the new rate, the Division stopped paying for client
absences. Previously, the Division allowed providers to bill for scheduled services,
even if the individual did not attend. The Division adjusted the disputed rate to include
a 20 percent absence factor and a 15 percent transitional staff adjustment factor.
Division can improve availability of therapy services (see
pages 19 through 28)
The Division should take steps to help ensure individuals with developmental
disabilities can receive needed speech, occupational, and physical therapy services.
Of all the services provided to the developmentally disabled, these services are the
most difficult to obtain. Providers and division staff identified several issues that affect
the Division’s ability to provide these services. The Division can take steps to help
address these issues:
􀁺􇩐 Payment rates for therapies were last studied in the mid-1990s. Division
management, providers, and other stakeholders all agree the rates need to be
updated. The Division needs to complete a payment rate study for therapies and
take needed steps to ensure it can pay appropriate rates.
􀁺􇩉 In some areas of the State and some specialties, the problem may be a
shortage of providers. To address this issue, the Division has hired a specialist
to help update and carry out its plan for improving its network of available
providers.
􀁺􇩐 Providers cited administrative requirements and the requirement, based on
federal law, to provide services in the person’s natural environment as
State of Arizona
page ii
impediments to offering services to individuals referred by the Division. The
natural environment is most often considered the person’s home. The Division
can take steps to aid providers in complying with these requirements.
Division should improve billing practices (see pages 29
through 33)
The Division should adopt more systematic methods for identifying individuals who
should be billed for services. Although more than 80 percent of individuals who
receive division services do not have to pay for services, state and federal laws and
regulations require certain individuals to pay for all or part of the cost of their services.
For example, under federal rules, persons who live in institutions and receive Social
Security or certain other benefits must contribute part of their benefits to pay for the
cost of their services. Altogether, in fiscal year 2005, the Division had billings totaling
nearly $15 million.
Auditors found that the Division did not always identify these individuals, or identified
them late. To make more monies available to provide services, the Division should
match its information on individuals and services with other information available
from Department and AHCCCS records.
Other pertinent information (see pages 35 through 40)
During the audit, auditors developed information about the Division’s fiscal
intermediary program and the Arizona Training Program at Coolidge.
􀁺􇩆 Fiscal Intermediary Program—The Division has begun to implement a fiscal
intermediary program in order to simplify the process of paying providers,
facilitate individual choice, and ensure proper payment of employment taxes for
individual service providers. Fiscal intermediaries act as agents for individuals
receiving services who choose to employ individuals, rather than agencies, as
service providers. The fiscal intermediary performs the accounting functions
required of employers, including payroll, payroll taxes, workers’ compensation,
and unemployment insurance. The Division entered into an agreement with a
vendor in June 2004, and is currently in the process of implementing the
program state-wide. As of June 2005, four districts have implemented the fiscal
intermediary program.
􀁺􇩁 Arizona Training Program at Coolidge (ATP-C)—The number of individuals
residing at ATP-C has been decreasing for three decades, but the Division has
Office of the Auditor General
page iii
no plans to close the institution. The State’s other two institutions in Phoenix and
Tucson were closed in the 1980s and 1990s, respectively. Although a 2002 cost-benefit
study found that closure could save as much as $2.7 million annually in
General Fund monies, families of ATP-C residents prefer to have the institution
as a residential option, and A.R.S. §36-554 requires the Division to reduce the
number of residents to those for whom the community lacks an appropriate
setting or whose parents or guardians want them to stay there. Currently, 137
individuals reside at ATP-C at an average cost of about $108,500 per resident
for fiscal year 2004.
State of Arizona
page iv
Office of the Auditor General
TABLE OF CONTENTS
continued
page v
1
13
13
14
16
17
19
19
20
22
25
28
29
29
30
33
Introduction & Background
Finding 1: Division developed appropriate
model for setting provider rates
Division’s consultant developed a rate schedule
Division adopted lower rates based on funding
Division reviewed and adjusted disputed rate
Recommendation
Finding 2: Division can improve availability of
therapy services
Division provides therapy services
Therapy services greatest unmet need
Rates and other issues affect ability to obtain services
Division can do more to ensure viable provider network
Recommendations
Finding 3: Division should improve billing practices
Statutes mandate billing some individuals for services
Division should more systematically identify individuals needing
referral to OARC for billing
Recommendations
State of Arizona
TABLE OF CONTENTS
concluded
page vi
35
35
37
6
15
21
3
3
7
36
Other Pertinent Information
Fiscal intermediary program
Arizona Training Program at Coolidge
Agency Response
Tables:
1 Schedule of Revenues and Expenditures, in Thousands
Years Ended June 30, 2003, 2004, and 2005
(Unaudited)
2 Benchmark and Actual Rates
for Fiscal Year 2005
3 Sample of Individuals on Waiting List
As of April 2005
Figures:
1 Individuals with Disabilities by Age
As of May 2005
2 Individuals with Disabilities by
Primary Area of Disability
As of May 2005
3 Six Regional Districts with Number of Individuals
with Disabilities Served
As of May 2005
4 Implementation of Fiscal Intermediary Program
by District in 2005
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Economic Security, Division of Developmental Disabilities (Division)
pursuant to a November 20, 2002, resolution of the Joint Legislative Audit
Committee. This audit was conducted as part of the sunset review process
prescribed in Arizona Revised Statutes (A.R.S.) §41-2951 et seq and is the fifth in a
series of six reports on the Department of Economic Security (Department). This
audit addresses services and programs for individuals with developmental
disabilities and their families.
Division serves over 24,000 individuals with
developmental disabilities
The Arizona Department of Economic Security,
Division of Developmental Disabilities provides
services and programs to individuals with
developmental disabilities and their families.
As of May 31, 2005, approximately 24,700
people with developmental disabilities were
receiving division services.
To be eligible for division services, applicants
over the age of 3 must meet the statutory
definition of developmental disability through
assessments of mental and physical
impairments and functional limitations (see text
box). In addition, applicants must apply to the
Arizona Health Care Cost Containment System
(AHCCCS), Arizona’s designated Medicaid
agency, for determination of eligibility for the
Arizona Long Term Care System (ALTCS). If an
applicant does not meet the requirements for
ALTCS eligibility, he or she can still receive
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
Developmental Disability
􀁺􇩁 A strongly demonstrated potential that a child under the age of
6 years is developmentally disabled or will become
developmentally disabled, as determined by a test prescribed
by law, or
􀁺􇩁 A severe, chronic disability which:
􀂍􈵉 Is attributable to mental retardation, cerebral palsy,
epilepsy, or autism;
􀂍􈵉 Is manifest before age 18;
􀂍􈵉 Is likely to continue indefinitely;
􀂍􈵒 Results in substantial functional limitations in three or
more of the following major life areas: self-care, receptive
and expressive language, learning, mobility, self-direction,
capacity for independent living, and economic self-sufficiency;
and
􀂍􈵒 Reflects the need for services that are lifelong or extended
in duration.
Source: A.R.S. §36-551.
state-funded services from the Division. Children age birth through 36 months may
be eligible for division services under the Arizona Early Intervention Program (AzEIP),
which is funded by a combination of state and federal monies. (See text box below
for additional information on eligibility requirements.) As shown in Figure 1 (see page
3), over half of the individuals receiving services from the Division are under 18 years
old, and as shown in Figure 2 (see page 3), the most common primary areas of
disability are mental retardation and at-risk, meaning the child is at risk of having a
developmental disability if supports and services are not provided.
The Division is AHCCCS’ contractor for ALTCS services, and as such, the Division
provides both acute (medical) and medically necessary home- and community-based
services to ALTCS-eligible individuals. AHCCCS administers the ALTCS
program with a combination of state and federal monies. As of May 31, 2005,
approximately 16,800 (68 percent) of the 24,700 individuals receiving services from
the Division were enrolled in ALTCS, and approximately 7,900 individuals received
only state-funded services. The 3,025 children in AzEIP receive services through
either ALTCS or the state-only program.
The number of individuals with developmental disabilities who are eligible for services
is expanding. The Division receives between 1,500 and 2,400 applicants per year, of
which 67 percent to 73 percent are determined to be eligible for services. Overall, the
The Division is
AHCCCS’ contractor for
ALTCS services.
State of Arizona
page 2
Eligibility Categories
􀁺􇩁 Arizona Long Term Care System (ALTCS)—Individual must be at risk of
institutionalization, and meet income, asset, and medical qualifications in addition to
meeting the statutory definition of developmental disability. Entitles individual to acute
(medical) services in addition to medically necessary home- and community-based
services.
􀁺􇩁 Arizona Early Intervention Program (AzEIP)—Child must be age birth to 36 months and
developmentally delayed, or have an established condition that has a high probability of
resulting in a developmental delay. Entitles child to services planned to support their
growth, development, and learning, which can include vision and hearing services, home
visits, nutrition services, therapies, and family counseling. AzEIP receives funding from
AHCCCS for AHCCCS enrollees, including ALTCS members, with additional funding from
state appropriations.
􀁺􇩓 State-only—Individual must meet the statutory definition of developmental disability.
There are no income requirements for state-only services. Entitles individual to division
services only to the extent that funding is available.
Source: Auditor analysis of Arizona Revised Statutes, Arizona Administrative Code, and division policy and procedures.
number of individuals served has increased by
approximately one-third since 2000, when the
Division served about 18,000 individuals with
disabilities. This is about double the growth rate
for the State’s total population, which increased
by approximately 15 percent between July 1,
2000 and July 1, 2004, according to estimates
prepared by the Department’s Research
Administration.
Division provides diverse services
to individuals in varied settings
To accomplish its mission, the Division provides
case management, institutional care, and group
home care. However, it provides most services
through contracts with individual and agency
service providers. As of January 2005, the
Division reports that it had a network of service
providers that included 827 agencies and
approximately 2,500 individuals with contracts to
provide services to people with developmental
disabilities.
The Division’s support coordinators work with
individuals to develop an Individual Support Plan
that reflects authorized services. Family
members and service providers may also
participate in developing the plan. Depending on
the individual’s needs, the plan may include
such services as attendant care, day treatment
and training, habilitation, respite, therapies, and
transportation (see text box, page 4). Individuals
receive these services in a variety of settings,
including their own homes, group homes, day
programs, and—for a small number of
individuals—institutions and skilled nursing
facilities. As of May 31, 2005, only about 1
percent of individuals receiving division services
resided in institutions.
Office of the Auditor General
page 3
Figure 1: Individuals with Disabilities by Age
As of May 2005
Ages 55 and
Over—995
Ages 18 to 21—1,406
Ages 0 to 3—3,025
Ages 3 to 6—4,047
Ages 6 to 18—7,471
Ages 21 to 55—7,723
Source: Auditor General staff analysis of division management report for May 31, 2005.
Epilepsy—1,390
Autism—1,852
Cerebral Palsy—2,610
At risk of having a
developmental
disability—8,159
Mental Retardation—10,654
Figure 2: Individuals with Disabilities by
Primary Area of Disability
As of May 2005
Source: Auditor General staff analysis of division management report for May 31, 2005.
Two major lawsuits affect the Division. First, the Division must comply with a 1999
United States Supreme Court decision that requires states to provide community-based
services for individuals with disabilities, as opposed to services in an
institution, when appropriate and reasonable.1 Second, as the AHCCCS contractor
for individuals with developmental disabilities, the Division must comply with a 2004
United States District Court decision that ordered AHCCCS to provide elderly and
disabled persons with those services for which they qualify, without gaps in service.2
Among other requirements, the court ordered AHCCCS to offer a sufficient pay rate
1 Olmstead v. L.C., 119 S.Ct. 2176 (1999).
2 Ball v. Biedess, 2004 WL 2566262, (D.Ariz., 2004), No. CIV 00-0067-TUC-EHC. Not Reported in F.Supp.2d.
State of Arizona
page 4
Division Services
Services to help individuals attain and maintain maximum functioning
􀁺􇩄 Day treatment and training—Promotes skill development in independent living, self-care,
communication, and social relationships; typically offered in a day program setting.
􀁺􇩈 Habilitation—Services to maximize a person’s abilities; typically provided in the person’s
home.
􀁺􇩔 Therapies—Occupational, physical, and speech.
Assistance with daily living
􀁺􇩁 Attendant care—Assists the person with activities of daily living, including maintaining safe
and sanitary living conditions and personal cleanliness.
􀁺􇩈 Housekeeping.
􀁺􇩒 Respite—Provides a certified caregiver to supervise and care for a person to relieve caregivers.
􀁺􇩔 Transportation—Nonemergency transportation; for example, to therapy appointments or day
programs.
Medical services
􀁺􇨠 Medical services—Including doctor visits, hospitalization, medications, and for children only,
hearing aids and dental services.
􀁺􇩒 Respiratory therapy.
􀁺􇩈 Home health aide.
􀁺􇩓 Skilled nursing facility.
Residential
􀁺􇩉 Intermediate Care Facilities for the Mentally Retarded (ICF/MR)—Health and habilitative
services provided in facilities in Maricopa County and at the Arizona Training Program at
Coolidge.
􀁺􇩇 Group home and adult developmental home.
􀁺􇩉 Individually designed living arrangements—Regular support in individual’s own home.
􀁺􇩈 Home modifications—Under certain circumstances, ALTCS individuals may receive
modifications to existing structures to assist them to live as independently as possible.
Source: Department of Economic Security, Division of Developmental Disabilities Navigating the System Division Guidebook, Winter 2002.
to healthcare workers, monitor its program for service gaps, and eliminate service
gaps in less than 2 hours. The Division will need to work with AHCCCS to implement
the court-ordered requirements.
Person-centered planning
The Division has been working toward giving individuals and their families more
choices and more control over their services for at least 10 years, with a view to
reducing costs as well as improving individuals’ satisfaction with division services. In
1995, the Division formed a design team composed of individuals receiving services,
families, division staff, providers, and other stakeholders, and developed a self-determination
model including choice of support coordinator, ease of changing
services and providers, and individual choice over spending and services. In late
2005, the Division plans to begin implementing a new member-directed supports
program. The program will test the effects of providing a monthly budget for services
and allowing the individual or family to decide which services to purchase.
According to the Division, it is working with AHCCCS to obtain approval to implement
the trial program. The Division proposes to implement the program in two year-long
phases and evaluate outcomes of each phase. The initial phase of the program will
include 200 ALTCS-eligible adults with developmental disabilities who live
independently and are willing to participate in the program. The individuals will be
randomly assigned to either a participant group or a control group for 1 year. In the
second phase, the control group from the first phase plus an additional group of 50
individuals who have a strong support network will be assigned to the participant
group, with another 50 families serving as a control group. The second phase of the
program will begin in 2006 and conclude in 2007. The Division intends to contract
with an outside consultant to complete an evaluation of the program upon
completion of each phase to determine whether the program saved money,
promoted satisfaction for individuals receiving services, or increased their quality of
life.
Budget
The Division is funded through state appropriations, federal Medicaid Title XIX
monies from the ALTCS program, charges to individuals for services, and other
revenues. The Division’s total estimated revenues for fiscal year 2005 were
approximately $661 million, as shown in Table 1 (see page 6). Of the total, about $233
million came from State General Fund appropriations, and another $398 million came
from ALTCS, which provides federal funding through the Division’s contract with
AHCCCS. In addition, the Division received nearly $20 million from the Long-Term
Care Fund, which includes monies collected from third-party payers and payments
The Division plans to
begin the new member-directed
supports trial
program in late 2005.
Office of the Auditor General
page 5
from individuals receiving services (see Finding 3, pages 29 through 33). Most of the
remaining funding came from federal sources.
Most division monies go to providers to pay for services to individuals with
developmental disabilities. In addition, the Division spent approximately $31 million
in fiscal year 2005 on case management services it provides directly, and
approximately $17 million on the Arizona Training Program at Coolidge.
State of Arizona
page 6
Table 1: Schedule of Revenues and Expenditures, in Thousands
Years Ended June 30, 2003, 2004, and 2005
(Unaudited)
2003 2004 2005
(Actual) (Actual) (Estimated)
Revenues:
ALTCS Contract:
Capitation2 $291,094,489 $348,917,697 $388,679,671
Enrollees 6,306,488 7,726,205 8,079,077
Ventilator dependent 1,532,016 1,026,177 1,300,701
Fee for service and reinsurance claims
State General Fund Appropriations:
Developmental disabilities 39,792,600 44,530,619 42,503,400
Long-term care state match 145,796,500 151,276,800 190,971,700
Long-Term Care System Fund 3 17,542,108 15,701,239 19,718,531
Government grants and contracts 5,899,761 1,466,159 6,241,410
Interest 1,116,203 624,931 1,613,261
Other 346,010 427,941 1,701,236
Total revenues 509,426,175 571,697,768 660,808,987
Expenditures:
Administration 4 29,858,148 30,715,275 41,145,541
Case management 24,986,800 26,090,028 30,737,038
Home- and community-based services 349,166,423 383,209,275 438,033,286
Institutional care services 13,496,305 12,483,656 14,323,800
Medical services (acute care) 61,883,166 68,663,061 87,686,900
Arizona training program at Coolidge 15,625,162 15,281,234 16,795,026
State-funded, long-term care services 5 19,537,927 18,214,061 20,138,174
Total expenditures 514,553,931 554,656,590 648,859,765
Reversions to the State General Fund 2,058,880 3,949,853 6
Total expenditures and reversions 516,612,811 558,606,443 648,859,765
Excess (Deficiency) of revenues over expenditures and reversions $ (7,186,636) $ 13,091,325 $ 11,949,222
1 This schedule is presented on a budgetary basis in which expenditures are reported in the budget year incurred.
2 Capitation revenues consist of the contract payments from the Arizona Health Care Cost Containment System (AHCCCS)
for providing healthcare services to eligible enrollees of the AHCCCS Arizona Long-Term Care System (ALTCS) program
for the developmentally disabled. State matching monies are reported separately.
3 Consists of client billings and various other revenue sources from the Long-Term Care System Fund that are used to pay
for services not reimbursable through AHCCCS.
4 Includes approximately $7.8 million each year of support service costs allocated to the Division.
5 The State pays for long-term care program client services that are not reimbursable through AHCCCS.
6 Includes division-estimated amounts because lapsing appropriations are not closed until 2 years after the end of the fiscal
year.
Source: Auditor General staff analysis of financial information provided by the Arizona Department of Economic Security
for the years ended June 30, 2003, 2004, and 2005, from its Financial Management Control System as of July 6,
2005. (Actual 2005 amounts were not available at the time of this report.)
Organization and staffing
The Division coordinates services and resources through the central administrative
office, 6 district offices, and 47 local offices state-wide (see Figure 3). Each regional
district has a district program administrator or manager, area program managers
(except in District 2), support coordinators (case
managers), and various other program and operations
staff. The central office provides for administration,
business operations, program functions, and managed
care operations. For fiscal year 2005, the Department
reports that the Division had 1,814.2 total FTE positions
with 181.5 vacancies as of June 30, 2005, organized into
six groups:
􀁺􇩁 Administration (349.7 FTE)—Administration is
responsible for overseeing the Division’s programs,
staff, and business operations, both at the central
office and in the six regional districts. Administrative
staff are responsible for contracts, budgets,
information technology, accounts payable and
receivable, personnel, quality management, and
auditing. In addition, administrative staff are
responsible for overseeing health and safety for
individuals receiving division services. The central
office has about half of the administrative positions,
with the remainder distributed among the six districts.
􀁺􇩃 Case Management (771.1 FTE)—Support
coordinators help individuals and their families
assess their needs, develop an individual support
plan, and obtain services and supports. Support
coordinators are also responsible for placing
individuals on the Division’s waiting list for services.
Nearly all support coordinators work in the districts,
with over half allocated to District I, covering Maricopa County.
􀁺􇩈 Home and Community Based Services (147.6 FTE)—Home and Community
Based Services staff help children and adults receive services that promote and
enhance their ability to live alone, with their family, or with others. The Division
provides these services directly in state-operated day programs and group
homes. All of these employees work in the districts, with over half allocated to
District 2, which serves Pima County and has a state-operated day program and
higher staffing ratios for the individuals who live in its state-operated group
homes.
Office of the Auditor General
page 7
Figure 3: Six Regional Districts with Number of
Individuals with Disabilities Served
As of May 2005
Source: Auditor General staff analysis of division policies
and procedures manual, management report for
May 31, 2005, and other information provided by
division officials.
3
2,462
4
1,087
1
14,019 5
1,483 6
2 961
4,655
􀁺􇩍 Medical Services (36.7 FTE)—Medical services are provided to ALTCS-eligible
children and adults to help them maintain their health through contracted health
plans. All of these employees work in the central office and are primarily nurses
with duties such as overseeing health plan contracts, coordinating ventilator-dependent
individual services, consulting with district personnel on
assessments and service authorizations, and conducting nursing home
evaluations for Medicaid.
􀁺􇩉 Institutional Services (77.7 FTE)—The Institutional Services program consists of
state- and vendor-operated Intermediate Care Facilities for the Mentally
Retarded (ICF/MR), large group-living facilities, nursing facilities, and residential
treatment facilities. The program provides services to eligible individuals to
maximize functional capabilities and to pursue home- and community-based
placement where appropriate. All these employees work in District 1 (Maricopa
County) where all of the State’s ICF/MRs are located, except for those at the
Arizona Training Program at Coolidge. The Division coordinates and monitors
contractor services as well as providing direct services in state-operated
facilities.
􀁺􇩁 Arizona Training Program at Coolidge (429.4 FTE)—The Arizona Training
Program at Coolidge (ATP-C) is a state-operated facility that includes both
ICF/MRs and group homes. It has 137 residents for whom it provides health and
rehabilitative services. ATP-C is the State’s only remaining institution for
individuals with developmental disabilities, since its other institutions in Phoenix
and Tucson were closed in the 1980s and 1990s, respectively. ATP-C is
discussed in more detail in the Other Pertinent Information section (see pages
35 through 40).
In addition, the Division has 2 FTE for the Pre-Admission Screening/Annual Resident
Review process that determines individuals’ need for nursing facility and specialty
services.
Scope and methodology
This audit of the Division focused on methods used to determine rates paid to
providers for services, availability of services, practices related to billing individuals
for services, the status of implementing a new fiscal intermediaries program, and
issues related to the Arizona Training Program at Coolidge. It includes three findings
and associated recommendations:
􀁺􇩔 The Division developed an appropriate model for establishing payment rates for
providers and should continue its efforts to establish rates for therapies and
employment-related services, which were not included in the original rate-setting
efforts.
State of Arizona
page 8
􀁺􇨠 To help ensure that individuals can obtain needed services for speech, physical,
and occupational therapy, the Division should—in addition to determining if
payment rates for these services need to be changed—take other steps to
enhance their delivery.
􀁺􇩔 The Division should adopt more systematic methods of identifying individuals
who should be billed for services.
In addition, the report contains Other Pertinent Information (see pages 35 through 40)
regarding the new fiscal intermediaries program that began implementation in
February 2005 and the Arizona Training Program at Coolidge.
Auditors used a variety of methods to review and study the issues addressed in this
audit. Audit methods include interviews with division management and staff, review
of literature regarding developmental disabilities and other states’ practices in
providing services to individuals with disabilities, and review of applicable state and
federal laws and regulations. To perform more specific audit steps, auditors used the
following methods:
􀁺􇩔 To review the Division’s methods for establishing provider rates, auditors
examined documents prepared by the Division’s consultant in determining the
rate for day treatment and training, interviewed a representative of the consulting
firm that developed the rate, examined documents related to a rate protest
including a second consultant’s review of the rate, and interviewed a
representative of the second consulting firm. In addition, auditors reviewed
records of the Division’s rate-setting panel, interviewed representatives of the
provider association that protested the day treatment and training rate, analyzed
the Division’s comparison of its rates with those paid by the Department of
Health Services and AHCCCS, and reviewed documentation regarding the
process for procuring consulting services for establishing provider rates.
Auditors also reviewed documents showing the Division’s practices for
negotiating capitation rates for Title XIX services, and interviewed AHCCCS
representatives regarding rate-setting and capitation rate practices.
􀁺􇩔 To examine issues related to service availability, auditors developed an
approach for a systematic assessment of whether services are available and,
when the assessment showed the greatest problem to be with therapy services,
followed up to ascertain the reasons. Auditors determined that the Department’s
waiting list was not reliable enough to be used for extensive analysis. Auditors
used the waiting list to assess generally what services consumers were waiting
for and to select a stratified random sample of 30 ALTCS-enrolled individuals
representing all six districts for reliability testing of the waiting list and more in-depth
analysis.1 The size of this sample was not large enough to produce
Office of the Auditor General
page 9
1 The sample was limited to ALTCS-enrolled individuals waiting for therapy services because these individuals appeared
in greater frequency on the Department’s waiting list and are entitled to needed services. The ALTCS cases yield more
information about service availability since the majority of non-ALTCS individuals waiting for services are waiting in large
part because of funding availability.
statistical projections to all ALTCS recipients, but it was large enough to
demonstrate generally which services were less available than others. The 30
cases auditors examined were managed by 27 support coordinators. Auditors
interviewed these coordinators to determine whether these recipients were
waiting for services, how long they had waited, and why they were waiting, and
they also gathered additional information from these coordinators about the
availability of services for the rest of the ALTCS-eligible individuals in the
coordinators’ caseloads.
To further assess the reasons why individuals were waiting for therapy services,
auditors interviewed ten service providers, including five owners/operators of
agencies from three districts (Maricopa County, Pima County, and Mohave/La
Paz/Yuma County) that provide therapy services, including two of the State’s
largest providers of therapy services, and five individual therapists from
Maricopa County and Mohave/La Paz/Yuma County. One of the agency owners
was also a therapist. In addition, auditors interviewed representatives of the
three Arizona agencies that license therapists and reviewed documents
published by the U.S. Bureau of Labor Statistics to assess overall availability of
therapists. Finally, auditors interviewed the Division’s newly appointed Director
of Program Development and Policy to ascertain her responsibilities and plans
related to expanding the Division’s provider network and improving availability of
therapist services.
􀁺􇩔 To review the Division’s practices for identifying individuals who should be billed
for services, auditors matched division records with records maintained by the
Department’s Office of Accounts Receivable and Collections (OARC) for the
period July 2004 through March 2005, selected unbilled individuals from each
of three groups, and researched the individual cases to determine if they should
have been billed.
• First, to review division practices for billing individuals for room and board,
auditors matched records of individuals in residential settings against
OARC records, then matched unbilled individuals against division and
AHCCCS records to identify those shown as having income subject to
billing, and finally reviewed records and interviewed division staff regarding
a random sample of 24 individuals from that group to determine whether
they should have been billed.
• Second, to review division practices for billing individuals in institutions for
a share of their costs, auditors matched records of individuals in institutions
against OARC records, identified 100 unbilled individuals, and looked them
up in AHCCCS records, which is the official source for determining share of
cost for such individuals, to determine whether they should have been
billed.
State of Arizona
page 10
• Third, to review division practices for billing individuals on a sliding fee
basis, auditors evaluated the Division’s overall practices for determining
which individuals should be sent letters requesting information about their
income, and then selected a random sample of 30 individuals who had
been sent letters in 2004, and examined division records to determine
whether the Division appropriately followed up to obtain responses and
referred cases for billing when required.
Additionally, to determine whether these individuals were billed for the
correct amounts, auditors matched the division records of 41 individuals
identified by the Division as having a sliding fee greater than zero percent
against the OARC records, and then researched 5 unbilled individuals who
received billable services during fiscal year 2005 to determine the amounts
that should have been billed.
􀁺􇩔 To develop Other Pertinent Information regarding the fiscal intermediary
program, auditors collected information from division administration regarding
the process for contracting with an outside company to administer the program
and information on program status. Auditors also interviewed administrators at
the central office, as well as three district managers who had recently
implemented the fiscal intermediary program, to determine the central office’s
role and the local administrators’ experience.
􀁺􇩔 To develop Other Pertinent Information regarding the Arizona Training Program
of Coolidge, auditors reviewed applicable state statutes and federal laws,
reviewed previous studies regarding various aspects of the facility, interviewed
division officials regarding previously closed facilities in Tucson and Phoenix,
and interviewed four advocates, two of whom are also family members of
individuals with developmental disabilities, regarding their views on the
advantages and disadvantages of closing the facility.
􀁺􇩔 To develop the Introduction and Background section, auditors compiled
unaudited information from state and federal laws and regulations, court orders,
division reports, and other information the Division provided.
The audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the director of the Department
of Economic Security, the assistant director of the Division of Developmental
Disabilities, and their staff for their cooperation and assistance throughout the audit.
Office of the Auditor General
page 11
State of Arizona
page 12
Division developed appropriate model for setting
provider rates
The Division appears to have developed an appropriate model to prepare an
equitable rate schedule for the division services that were included in the rate-setting
study, pursuant to 1994 legislation requiring it to establish a system of equitable
rates. In 2000, an Auditor General performance audit found that the Division was
working to establish a rate schedule for services provided to the individuals with
disabilities pursuant to statutory requirements. In order to meet the statutory
requirement, the Division hired an independent consulting firm to collect data and
develop an appropriate rate model. Also, the Division monitored the rates and
received public comments to adjust the rates accordingly. However, because therapy
and employment services were not included in the rate model, the Division should
continue its current efforts to establish appropriate rates for those services.
Division’s consultant developed a rate schedule
In response to statute, the Division has developed an equitable rate schedule for
many of its services. In 1994, Arizona’s Legislature added A.R.S. §36-557(K), which
required the Division to create an equitable rate schedule for paying the private
nonprofit and for-profit agencies that provide its services. Though the legislation was
passed in 1994, the Division was unable to develop an equitable rate schedule until
July 2003.1 To develop its rate schedule, the Division selected a consultant in March
of 2000 that had experience in establishing rates for the Arizona Health Care Cost
Containment System (AHCCCS) and the Department of Health Services (DHS), as
well as in other states. According to division management, throughout the process
of developing the rates, the Division worked closely with the consultant. In addition,
the Division established a rate-setting panel composed of several individuals and
groups with an interest in the provider rates. The rate panel exists to allow providers
and the Division to openly discuss the published rate schedule. For example, it
A 1994 law requires a
uniform rate schedule.
1 Laws 2002, Chapter 329, §33, added a new time frame for implementing the rate schedule. The 2002 law requires the
Department of Economic Security—subject to availability of funds—to implement a published rate system, phasing it in
over a 3-year period, and fully implement the system by fiscal year 2005.
Office of the Auditor General
FINDING 1
page 13
allows providers and others to discuss the methodology used to determine the rates,
and gives them a forum to identify the need for an additional rate or a modifier to an
existing rate.
In order to set an equitable rate schedule, the Division’s contracted consultant
developed a rate model for selected services. The rate model applies to home-based
services such as habilitation and respite, residential services such as group home
habilitation, professional services such as nursing, and day treatment and training,
transportation, support coordination, and specialized habilitation with music. The
consultant used a zero basis for building the model. In other words, the model built
new rates from scratch, without considering previous rates. The model used direct
care personnel costs, employee-related expenses, and other data obtained from the
Division and other sources. The consultant also used results of a provider cost survey
the Division conducted in 2001. The consultant applied various modifiers to some
services to reflect specific circumstances where costs may be higher or lower. The
model then produced rates to pay providers.
Once the rates were produced, the consultant tested components of the model. The
consultant examined the model for differentials with national and local information.
For example, the consultants assumed a 30 percent employee-related expense rate
for agency providers, which is equivalent to the percentage used by AHCCCS and
DHS’ Division of Behavioral Health Services, according to the consultant, although
the Division’s providers had reported in the survey that their employee-related
expenses were on average less than 20 percent. The Division decided to use the 30
percent rate in the model, and the consultant suggested educating division providers
on the value of providing higher benefits to employees.
The rate model does not apply to speech, physical, or occupational therapy or
employment-related services. Division management explained that therapy rates
were excluded because the Division was already paying uniform published rates for
those services, and the Division wanted to use its resources to address rates that had
not yet been established. According to the Division, the consultant who developed
the other rates is currently working to build a rate model for therapy services. The
Division also contracted with a second consultant to develop and adjust the rates for
employment services. Like the first consultant, the second consultant also has
extensive experience in developing rate-setting models in Arizona and other states.
According to the Division, rates for employment services should be published by
November 2005 and therapy rates by January 2006.
Division adopted lower rates based on funding
Once the consultant established benchmark rates using the rate-setting model, the
Division determined actual payment rates. Because the Division did not have
sufficient funding to pay the benchmark rate for all services, it adopted lower rates
The rate model does not
yet include therapies or
employment services.
State of Arizona
page 14
based upon the funding available. In fiscal year 2004, the Division paid approximately
93 percent of the published rates. The Division adjusted the benchmark rates for
fiscal year 2005 by 4.25 percent to allow for inflation. In addition, the Legislature
provided a funding increase in fiscal year 2005 that allowed the Division to pay 95.75
percent of the benchmark rate. As shown in Table 2, in fiscal year 2005, most
services were funded at close to the benchmark rate. In the case of the day treatment
Office of the Auditor General
page 15
Table 2: Benchmark and Actual Rates1,2
for Fiscal Year 2005
Type of service
Benchmark
Rate
Adopted
Rate
Day treatment services
Adults $ 8.20 $ 8.60
Children 8.39 8.30
Rural 9.11 9.60
Home-based services
Attendant care 14.75 14.12
Habilitation—community protection 19.78 18.94
Habilitation—individually designed living 19.03 18.22
Habilitation—support 18.83 18.03
Housekeeping 13.59 13.01
Respite—short-term 14.46 13.84
Other services
Specialized habilitation with music 36.78 35.28
Professional services
Home health aide 17.43 16.69
Nursing—short-term 37.21 35.63
Residential services
Habilitation—group home 17.79 17.73
Habilitation—developmental home 98.89 109.75
Room and board3 (daily)
Support coordination services
Support coordination/case management (monthly) 87.30 87.30
Transportation services4
1 Except as noted in the table, all services are billed at an hourly rate.
2 Rates shown are examples for each service type. For example, the Division publishes different rates
for home-based services provided to multiple clients, and the rates for day treatment and training
vary based on staff-to-client ratio and whether a children’s program is after school or summer.
3 The room-and-board rate is based upon the group home’s contracted capacity, actual capacity, and
district location.
4 The transportation rate is based upon the rural or urban environment, the distance traveled, the type
of vehicle used, and whether the travel is for regularly scheduled daily transportation.
Source: Division of Developmental Disabilities, Independent Rate Models—Agency Providers and
Schedule 5.2, January 2005.
for adults service, the Division was paying approximately 105 percent of the
benchmark to transition providers to the published rate schedule. In the 2005
session, the Legislature appropriated additional monies for fiscal year 2006 to bring
the adopted rate to 97.61 percent of the fiscal year 2005 benchmark rate. The
Division is working with AHCCCS and the Joint Legislative Budget Committee to
develop rates for fiscal year 2006.1
Division reviewed and adjusted disputed rate
When rates were published, providers expressed concerns for the day treatment and
training rate. In response, the Division and the consultant examined and adjusted the
rate model. To gain assurance that the rate model was appropriate, the Division
contracted with a second consulting firm to assess the model’s soundness. After
reviewing the rate model, the second consultant confirmed in November 2004 that it
was appropriate. The Division continues to review the provider rates as required by
statute.
Providers had expressed concern over the treatment of client absences in the new
rates. Prior to fiscal year 2004, if an individual did not attend a scheduled day
treatment program, providers could still bill the Division for the service. In May 2003,
the Division issued an amendment to its qualified vendor agreement that eliminated
compensation for absences. According to division officials, the Division had paid for
absences in the past using state monies because Medicaid monies cannot be used
to pay for them, and as part of its new system of published rates the Division decided
to make adjustments to allow it to maximize its use of federal Medicaid funding
through AHCCCS. After meeting with providers regarding service rates, the Division
and its consultant examined the day treatment and training rate. Based on a review
of the rate model, the Division developed new rates with modifications, including a
20 percent absence rate and a 15 percent transitional staff adjustment factor. The
Division planned to eliminate the transitional staff adjustment factor after 2 years.
According to division documents, an increase in available funding in fiscal year 2005
allowed the Division to include these additions to its rates.
To gain assurance that its rate model was appropriate, the Division also contracted
with a second consulting firm to assess the technical soundness of the model. This
consultant concluded that the model was a viable system for developing rates, and
that shortfalls in the model were compensated by more generous factors in other
areas, such as the base wage, the 30 percent employee-related expense, and the
transitional staff adjustment factor. The consultant also compared the Division’s rates
with those in three other states and concluded that Arizona’s rates were reasonable.
The Division published
modified rates that
adjust for absences.
State of Arizona
page 16
1 The 2005 budget bill (Laws 2005, Ch. 286, §29) requires the Division to implement the fiscal year 2006 adjusted rates
beginning with payments for services performed in August 2005, and to pay retroactive reimbursement for July services
no later than September 15, 2005.
The consultant recommended maintaining the published rates, including the
transitional staff adjustment factor, and working to validate quality and outcomes
resulting from the rate system.
Statute requires the Division to conduct an annual study of the provider rate schedule
to ensure adequacy and appropriateness. A more extensive and complete study
must be conducted every 5 years. Both studies must be conducted by an
independent consultant, and study results are to be submitted to the Joint Legislative
Budget Committee (JLBC) on October 1 of each year. Both the 2003 and 2004
consultant reports to JLBC state that the provider rate schedule is adequate and
appropriate. The Division plans to continue to review all of the rates annually to fulfill
the statutory requirements and to determine if changes in demographics or rising
economic costs need to be reflected in a rate adjustment.
Recommendation:
1. The Division should continue its efforts to establish benchmark rates for therapy
and employment-related services.
Office of the Auditor General
page 17
State of Arizona
page 18
Division can improve availability of therapy
services
The Division should take steps to help ensure individuals with developmental
disabilities can receive needed speech, occupational, and physical therapy services.
Reviews of individual cases and discussions with their support coordinators indicate
that, of all the services provided to individuals with developmental disabilities, these
services are the most difficult to obtain. Providers and division staff identified low
payment rates and therapist shortages as primary reasons individuals may not
receive these services. Although the Division has begun to take steps to address
unmet needs for therapy services, including contracting for a therapy rate study, it
should take additional steps to both help individuals schedule services and to help
providers resolve administrative obstacles to providing services.
Division provides therapy services
Together with other services, the Division offers three types of
therapy services to individuals with developmental disabilities:
speech, physical, and occupational. The individual’s treatment
team, including the division support coordinator, service
providers, the individual, and family members, develops an
individual support plan that sets out the nature and amount of
services needed, which may include any or all of these therapies.
The Division has contracts with individual therapists and
agencies that provide therapy services. The needs for division-provided
therapies vary by age and are particularly important for
infants and children:
Office of the Auditor General
FINDING 2
page 19
Speech therapy is evaluation and
treatment in receptive and expressive
language, voice, articulation, fluency, and
aural habilitation and rehabilitation.
Physical therapy is the treatment of a
bodily or mental condition through
necessary physical measures, activities,
and devices.
Occupational therapy is treatment to
improve development of fine motor and
adaptive skills, achieve optimal functional
performance, and maximize
independence.
􀁺􇨠 Infants and toddlers (age birth to 3 years)—Any child from birth to 36 months
who is developmentally delayed or who has a physical or mental condition that
has a high probability of resulting in a developmental delay is eligible for division
services through the Arizona Early Intervention Program (AzEIP), which is funded
with a combination of federal and state monies. Research indicates that the first
3 years of a child’s life are critical for learning and have a long-lasting effect on
how children develop.
􀁺􇩓 School-age children (3 to 21 years)—Because federal law guarantees a free,
appropriate, public education to all children with disabilities, school-age children
receive services identified in their individual education plans though their school
districts.1 The Division provides other necessary services identified in the child’s
individual support plan. For example, one support coordinator reported that
schools may only provide limited speech therapy in a group setting and a child
may also need one-on-one articulation therapy.
􀁺􇩁 Adults (21 years and older)—According to some professionals, therapy services
to adults over 21 are less likely to improve the individual’s functionality, but may
be important to maintain existing functionality and avoid regression.
Therapy services greatest unmet need
Many people who have developmental disabilities and are eligible for services are
waiting for therapy services. Auditors were unable to quantify the extent of service
gaps because the Division does not have reliable waiting list data. However, auditors
interviewed support coordinators, providers, and division management to determine
the services for which there is the greatest unmet need. These interviews consistently
identified therapies as the most common services that individuals are waiting for.
Division cannot measure unmet need—To keep track of services individuals
need but have not received, the Division directs its support coordinators to enter
information into a waiting list contained in its main client tracking and bill payment
system, called ASSISTS. In a 2000 performance audit (Auditor General Report No.
00-19), auditors found that the waiting list was incomplete and unreliable, and
recommended that division management should instruct support coordinators to
promptly enter unmet service needs into the waiting list, work with stakeholders and
others to define waiting list priorities, and update its policies.
Although the Division has updated its policies related to managing and maintaining
the waiting list, the current audit found the waiting list remains incomplete and
unreliable. The waiting list still does not capture all individuals waiting for services and
does not always reflect individuals’ unmet service needs. Auditors interviewed
1 20 U.S.C. §1400, et seq. Individuals with Disabilities Education Act.
State of Arizona
page 20
Individual Support Plan
(ISP) shows needed
services and goals for a
person with developmental
disabilities to achieve full
social inclusion,
independence, and
personal and economic
well-being.
Individual Education Plan
(IEP) describes detailed
educational goals and
shows supports and
services the school district
will provide to help
achieve the goals.
support coordinators regarding 30 individuals on the waiting list to determine whether
the list could be used to measure unmet needs for services. Most support
coordinators said they did not use the waiting list information to conduct their daily
business and therefore did not keep it up to date. Several support coordinators
indicated that they irregularly manage the waiting list but that information is often not
entered into the system or removed from it in a timely manner.
The Division uses the waiting list for both internal purposes, such as ensuring that
people receive services in a timely manner, and external purposes, such as
developing its budget requests. Division management regards the list primarily as a
queuing list for ALTCS-enrolled individuals, who are entitled to receive services within
defined time frames based on urgency of the need. According to division
management, information from the list is combined with other information from the
districts in preparing budget requests. However, raw data regarding the list is also
provided to the Joint Legislative Budget Committee. To ensure the waiting list can be
used to determine how much money would be required to meet service needs, the
Division should regularly audit the list for accuracy and take appropriate steps to
ensure support coordinators add and remove individuals from the list in a timely
manner.
Most individuals in auditors’ sample were waiting to receive therapy
services—Auditors selected a random sample of 30 ALTCS-enrolled individuals
on the Division’s waiting list, and interviewed their support coordinators.1 In 19 of the
30 cases, the individual was waiting to receive one or more therapy
services. As Table 3 shows, these therapies were by far the most
prevalent need among individuals in the auditors’ sample. Only 5 of
the 30 individuals were waiting for some other type of service.
Some of the individuals in the sample had been waiting for therapy
services for longer than 6 months. For example, a support
coordinator in north Phoenix reported that a school-age boy had
been waiting 228 days for physical therapy services. According to
the support coordinator, it is difficult to get therapists to agree to
travel to north Maricopa County. Similarly, a support coordinator in
Tucson had a school-age boy who had been waiting 182 days for a
University of Arizona speech therapy program. As shown in Table 3,
speech therapy is the most prevalent need among individuals in the
auditors’ sample.
In addition to the individuals in the sample, others were also waiting
for therapy services.
1 This review was limited to ALTCS-enrolled individuals because, according to division management, ALTCS individuals
most often wait for services because a provider is not available. In contrast to ALTCS, which entitles individuals to the
services they need regardless of funding, state-only services are available only to the extent that the Legislature has
appropriated funds. In all, auditors interviewed 27 support coordinators, at least 3 of whom were from each of the six state
districts.
Office of the Auditor General
page 21
Nineteen out of 30
individuals in the sample
were waiting for therapy
services.
Table 3: Sample of Individuals
on Waiting List
As of April 2005
Individuals in sample 30
Waiting for services1
Speech therapy 12
Occupational therapy 11
Physical therapy 3
Other (not therapy) 5
Not waiting for services 6
1 Some individuals are waiting for multiple services.
Source: Auditor General staff interviews of 27
support coordinators responsible for 30
ALTCS-enrolled individuals listed on the
Division’s waiting list as of April 1, 2005, and
selected in a stratified sample.
1 According to division management, therapy rates were left out of recent efforts because the Division had established
rates for therapies, but not other rates. Therefore, the Division focused its resources on the other rates before reviewing
therapy rates.
􀁺􇩓 Support coordinators reported that other individuals in their caseload besides
those in the auditors’ sample were also waiting for therapy services. Over three-fourths
(21 of 27) of the support coordinators reported that they had ALTCS-enrolled
individuals waiting for therapy services. They also reported that
individuals were waiting for such other services as summer programs and
transportation.
􀁺􇩄 Division management confirmed the problems with availability of therapy
services. The Division’s Statewide Network Development and Management Plan
for 2005 shows that management identified speech, occupational, and physical
therapies as unmet needs common to most districts.
Rates and other issues affect ability to obtain services
Providers and division staff identified several factors that contribute to difficulty
obtaining therapy services. Although low payment rates was one of the main reasons
they identified, they also cited a shortage of therapists, difficulties associated with
providing services in the individual’s home rather than in a clinic, and administrative
issues, such as difficulties with third-party reimbursement paperwork. Additionally,
they cited reasons associated with coordinating services with parents. Specifically:
􀁺􇩌 Low payment rates—The Division has not completed a therapy rate assessment
since approximately 1996. Providers and division officials report that the current
rates are inadequate. According to providers interviewed during the audit, the
Division’s rates for therapy services are lower than the rates they receive from
other payers. For example, the Division pays $57.20 for a 1-hour, in-home
session with fewer than 30 travel miles (see text box). In contrast, providers
told auditors that they may receive between $70 and $120 per hour from
private payers for similar services. Some providers stated that the low rates
contributed to their decision to limit the number of division individuals with
disabilities they will accept or even refuse to contract with the Division.
Others reported that they are committed to providing services to division
consumers, but they said it was not profitable for them to do so.
Division officials also identified below-market rates as an important factor
affecting its ability to obtain therapy services for consumers. These rates
were not part of recent efforts to develop an equitable rate system.1 The
Division needs to complete a study of therapy rates and determine
appropriate rates for these services. If the study determines higher rates
would be appropriate, the Division will need to identify funding for the
increased rates. In 2003, when the Division determined benchmark rates
for other services, it did not have sufficient funding to pay the benchmark
rates, and as a result, adopted actual payment rates at approximately 93
State of Arizona
page 22
Speech, Physical, and
Occupational Therapy Rates
As of June 2005
In therapist’s office $52.80
Other location within 30 miles 57.20
At ATP-Coolidge 71.50
Other locations Variable a
a The Division pays a higher rate for the first hour of
service at other locations, based on the distance
traveled. The maximum rate for the first hour is $143
for locations more than 150 miles, round-trip, from the
therapist’s office. Second and third hours range from
$26.40 to $89.38, depending on the distance the
therapist travels.
Source: Auditor General staff analysis of the Division’s
2005 rate schedule.
percent of the benchmark rates for fiscal year 2004 (see Finding 1, pages 13
through 17). The Division subsequently obtained additional funding from
legislative appropriations for fiscal years 2005 and 2006 to bring the rates for
those services closer to the benchmark rates. The Division should determine if
it can accommodate any increase in therapy rates within the same appropriation
or what actions, if any, to take to pay the increased rates. In addition, it should
examine the capitation rate it receives from AHCCCS and determine if it needs
to request an adjustment to accommodate the new therapy rates.
􀁺􇩉 Insufficient providers—In some areas of the State and in some specialties, the
problem is even more basic: there is a shortage of service providers. Shortages
in therapy services were reported by support coordinators across the State,
especially in speech therapy. For example, four support coordinators and one
provider reported that there are no speech therapists in Yuma. Although in June
2005 a provider in Tempe began traveling to Yuma once a month to offer speech
therapy evaluations, support coordinators report that speech therapy services
are still unavailable. An official at the Department of Health Services, which
licenses speech therapists, stated that there is a shortage of speech therapists
in Arizona and across the country. In addition, an official at the Arizona Board of
Physical Therapists stated that there appears to be a shortage of physical
therapists in the State, particularly in rural areas, based on comments from
employers and requests for the Board’s directories.
Additionally, according to support coordinators who provide services to
Spanish-speaking individuals with disabilities and their families, those
individuals have more difficulty procuring services than their English-speaking
counterparts. Two support coordinators reported that they accompany
therapists to individuals’ sessions to act as a translator.
􀁺􇩔 Travel and safety—In part because of a federal law, therapists must often
provide services in an individual’s home instead of in their own offices. The
federal Individuals with Disabilities Improvement Act of 2004 requires early
intervention services to be provided in the child’s natural environment.1 Division
officials explained that providing services in the home or a community center
instead of in a clinic, where the individual may be taken to a separate room for
treatment while family members stay in a waiting room, enables family members
to learn to carry out the therapies between visits. However, some support
coordinators reported that individuals who live outside urban areas or on the
outskirts of Tucson and Phoenix have a more difficult time obtaining services
because providers are unwilling to travel distances to the person’s home. Some
providers confirmed that travel was an issue that inhibited the ability of some
individuals to obtain therapy services. For example, one provider reported that
therapists could see only about five individuals in a day if they had to travel to
the person’s home, as opposed to seeing eight or more individuals in her clinic.
Office of the Auditor General
page 23
Spanish-speaking
individuals have more
difficulty obtaining
services.
1 The Education for All Handicapped Children Act, which is now known as the Individuals with Disabilities Education Act
(IDEA), was first enacted in 1975 (Public Law 94–142). The Individuals with Disabilities Education Improvement Act of
2004 reauthorizes and amends IDEA, 20 U.S.C. §1400 et seq.
By federal law, early
intervention services
must be provided in the
child’s natural
environment.
An owner of a therapist provider agency, an independent therapist, and one
support coordinator reported that another reason for rejecting offers of in-home
service is personal safety. One provider stated that in-home services can be
unpredictable and potentially dangerous. That provider reported that she has
been in homes that she has asked not to return to because of safety concerns.
Conversely, some families may be reluctant to allow therapists to provide in-home
services. One support coordinator reported that a child was on the waiting
list for several services in part because his mother was uncomfortable having
someone in her home. Division officials stated that therapists could also provide
services in community centers, which could alleviate these concerns.
􀁺􇨠 Administrative requirements—Some providers cited third-party liability
requirements as a barrier to adding individuals receiving division services to
their caseload. Under these requirements, providers must first submit a
payment claim to the individual’s insurance company, if any, before they may
submit a payment claim to the Department. Because Medicaid is the payer of
last resort, the Division’s contract with Arizona’s Medicaid agency, AHCCCS,
requires that providers agree to identify third-party coverage and seek third-party
liability payment before submitting claims to the Division. According to
some providers, this process delays payments for services rendered by them for
60 to 90 days or longer. Further, some complained about the requirement to
submit a third-party claim for every service, even if previous claims for the same
individual had been rejected by the insurance company. Division officials
explained that providers can obtain a 1-year waiver in these circumstances.
Some service providers stated that the Division requires more paperwork than
other payers and sometimes provides inaccurate information, such as which
payment codes a provider should use or what information he or she must
submit to receive payments. One provider reported that his agency no longer
contracts with the Division because of the combination of low rates, payment
delays, and difficulties in receiving accurate information from division billing staff
about how to file payment claims. Another provider reported having to call
multiple division offices in different communities to receive information related to
her reimbursement claim. A large agency provider estimated that the third-party
liability paperwork for individuals whose services are paid for by the Division is
many times more than for the agency’s other clients.
􀁺􇩓 Service scheduling—Some therapists and support coordinators reported that
services may be difficult to obtain because of scheduling problems. For
example, school-aged children often require after-school services. Some
support coordinators explained that providing services between 4 p.m. and 8
p.m. is sometimes required to coordinate the schedules of the therapist, the
individual receiving services, and the family. They stated that some therapists will
not accept evening appointments. For example, one support coordinator
reported that a therapist in her area was no longer serving school-aged children
State of Arizona
page 24
Providers must submit
a claim to the insurance
company first.
because she could serve younger children, birth to 3 years old, during day
hours. Additionally, some families are waiting for a specific provider because of
location, expertise, or scheduling convenience. Two providers stated that they
limit the number of individuals they accept from the Division to after-school hours
because they work for a school district. Another reported that she limits the
number of division clients she accepts and that she rarely has openings for
these individuals.
Division can do more to ensure viable provider network
The Division can take some action to help address most if not all of these factors—
and in several instances, it is already doing so. For example, it is examining current
rates and taking several steps to enhance the network of available providers.
Additional steps it can take include ensuring that providers receive accurate
information about administrative requirements and using the Division’s automated
vendor agreement system to help overcome scheduling problems.
Actions already under way to address payments and find more
providers—To address its outdated payment rates, the Division recently hired a
consultant to conduct a therapy rate study as part of a process to establish new
therapist rates by January 2006. As part of this process, the Division should ensure
that the study considers factors, such as travel and administrative requirements, that
were cited as contributing to service availability problems.
The Division is also taking steps toward addressing the insufficient number of
available therapy providers. In its 2005 Network Development and Management
Plan—a report it provides annually to AHCCCS to show how it will ensure it can
provide adequate services to ALTCS-enrolled individuals—the Division reported
plans to:
􀁺􇩉 Implement new service specifications based on a consultative model. Under this
model, therapists train family members to work with individuals between therapy
appointments, reducing the need for frequent visits to the therapist.
􀁺􇩃 Continue using a procurement code exemption and the Division’s automated
system for adding new service providers in order to more quickly add newly
recruited therapists to the network of available providers.
􀁺􇩈 Hire or contract with at least one therapist per discipline (speech, occupational,
and physical) to provide increased oversight and education of therapy
providers.
Office of the Auditor General
page 25
􀁺􇩈 Hold focus groups with therapy providers to identify items that can be
addressed to reduce barriers to working for the Division.
Outside the management plan itself, the Division has taken other actions. For
example, its quarterly update to AHCCCS in April 2005 indicated that in District 2
(Pima County), the Division was working with local education agencies to develop a
joint recruitment plan for therapists, share therapists, and work with colleges and
universities to increase the number of students in their programs. In May 2005, the
Division also hired a Director of Program Development and Policy to spearhead the
Division’s network development efforts, particularly as they relate to therapy services.
The director has over 30 years’ experience as an occupational therapist, 19 in the
developmental disabilities field.
Additional steps could help address administrative and related
problems—The Division should also take additional steps that could alleviate
issues contributing to availability problems. Specifically:
􀁺􇨠 To resolve administrative issues, the Division should examine its own practices
and also consider developing ways to better explain its requirements to
providers. Because several providers indicated they received conflicting
information from division staff, the Division should review its practices for
responding to provider questions and take steps to help ensure that providers
receive accurate information. For example, the Division could review its training
materials, policies, and procedures to ensure that staff in district offices as well
as in the central office understand the provider payment process. Alternatively,
the Division could designate specified individuals to answer such questions and
take steps to ensure that questions are referred to them.
Because some providers appear to have incorrect information about some
division requirements, the Division should assess ways to provide them with
better information. For example, some providers appear to be unaware of
waivers available for services previously denied by insurers. The Division could
prepare written guidance for providers to assist with administrative issues. For
example, stakeholders have praised the Division’s publication, Navigating the
System, as a useful tool that helps individuals with developmental disabilities,
their families, and others understand how various developmental disability
systems and processes work. The Division should consider providing a similar
type of publication that would help providers understand the systems and
processes that affect them. In addition, the Division should consider assessing
provider interest in a training program, and if appropriate, develop a program to
train providers in the most efficient and effective ways to comply with third-party
liability requirements.
The Division could
prepare written
guidance for providers
to help with
administrative issues.
State of Arizona
page 26
The Division plans to
hold focus groups with
therapy providers.
􀁺􇩔 To alleviate service scheduling problems, the Division could use its Web site and
its qualified vendor agreement system, which was designed to expedite the
Division’s provider contract process. Currently, individuals and families must
wait for support coordinators to identify a therapist and provide a referral. To
enable families to resolve their own scheduling problems, the Division’s Web site
could have a provider directory showing providers’ name and address, services
provided, and days or times during which they provide services. In addition, the
Division’s qualified vendor agreement system was designed to automatically
assign a provider if an individual does not select one within a certain time frame.
Finally, to address some providers’ and family members’ concerns about in-home
services, the Division may wish to consider assisting therapists with making
arrangements to provide services in community centers. If it develops an
informational publication and/or a training program for providers, it should include
information about how therapists can meet the IDEA requirement that services must
be provided in a person’s natural environment.
Office of the Auditor General
page 27
Recommendations:
1. To ensure its waiting list accurately measures service needs, the Division should:
a. Regularly audit the list for accuracy; and
b. Take appropriate steps to ensure support coordinators add and remove
individuals from the list in a timely manner.
2. To address outdated rates paid to therapists, the Division should:
a. Include in its study of therapy rates the costs of providing services,
including administrative costs associated with complying with third-party
liability and other requirements;
b. Adopt appropriate rates based on its study; and
c. If necessary, identify funding to pay increased rates.
3. To help alleviate problems related to administrative requirements, the Division
should:
a. Assess provider interest in a training program related to complying with
administrative requirements, such as third-party liability;
b. Based on the results of that assessment, determine whether to develop and
provide a training program for providers;
c. Consider publishing a document for providers with information on division
requirements, systems, and processes, and where they can obtain
additional information. This might include administrative information such
as billing requirements, third-party liability issues, and service-related
issues such as the availability of community centers or other venues
outside the home where services might be provided.
4. To reduce confusion and the possible dissemination of misinformation, the
Division should examine its practices for responding to provider questions, and
consider providing additional training and guidance to staff regarding common
provider issues such as third-party billing, or designating specific,
knowledgeable staff members to respond to providers’ questions.
5. To help alleviate service scheduling problems, the Division should complete
system improvements to the qualified vendor system that would allow
individuals with disabilities, their families, and support coordinators to more
readily access available providers and providers to indicate through the Internet
the days and times when they provide services.
State of Arizona
page 28
Office of the Auditor General
page 29
Division should improve billing practices
The Division should adopt more systematic ways to identify individuals who should
be billed for some or all of the services they receive. Although state and federal laws
require certain individuals to pay all or part of the cost of their services, auditors found
that some individuals were not identified for billing, or were discovered and billed late,
which reduced monies available to pay for other services. The Division should match
its information on individuals and their services with other information possessed by
the Department and AHCCCS to help identify individuals who should be billed.
Statutes mandate billing some individuals for services
Although over 80 percent of individuals who receive division services do not have to
pay for services, Arizona statutes, regulations, and federal law identify four situations
in which the Division bills individuals for services they receive. For example, the
Division bills individuals in residential service who receive social security and other
benefits for a portion of their benefits toward their room and board (see the text box
on page 31 for more information). The Division does not bill or collect these monies
directly, but prepares referrals to the Department’s Office of Accounts Receivable
and Collections (OARC). Altogether, for fiscal year 2005, the Division had billings
totaling nearly $15 million.1
Some individuals must
pay for all or part of the
services they receive.
1 Billing for one group is much lower than previously estimated. In fiscal year 1997, the Division expanded implementation
of the sliding fee schedule beyond room and board charges, according to the Appropriations Report for that year, and
the Division’s budget was reduced accordingly. At the time, collections for services provided to individuals less than 18
years of age were estimated at approximately $1.5 million annually. The estimate used state-wide family income data to
calculate a weighted average billing percentage based on the proposed sliding scale. According to division officials,
actual collections are much lower, mainly because most individuals receiving its services—or their parents if they are
minors—do not have sufficient income to require payment, or are exempt from billing because the person receiving
services is a child up to 3 years old or does not receive any services other than case management.
FINDING 3
The Division had billings
totaling nearly $15 million
for fiscal year 2005.
Division should more systematically identify individuals
needing referral to OARC for billing
The Division should improve its billing practices to better ensure it identifies
appropriate billings. Most cases auditors reviewed were treated appropriately by the
Division, but in some cases individuals were not billed, which reduces monies that
could be available to provide other services and can create hardship for the
individual when the error is discovered. To help avoid errors, the Division should
match its data against data maintained by OARC and AHCCCS.
Division’s practices result in missing some billings—Auditors reviewed
samples of cases related to three of the four billing categories (residential services,
ALTCS cost-sharing, and fee-for-service billings) and found instances in which
individuals either should have been billed but were not, or were billed for less than
the amount they should have paid.
􀁺􇩒 Residential services—The group receiving residential services had the largest
percentage of individuals not being billed. Auditors sampled 24 individuals who
were not being billed for services and found 16 of them should have been billed.
These individuals should have been billed a total of over $26,000, and several
owed more than $2,000 each. Although the Division requires support
coordinators to determine if individuals entering residential services are required
to pay and then prepare a billing referral if required, this did not occur or another
error occurred for these 16 individuals.
􀁺􇩓 Share of ALTCS costs—Auditors identified only 1 individual who should have
been billed in a review of all 100 unbilled individuals in institutions. This person
owed a total of nearly $6,500 for the period December 2003 through May 2005.
The Division relies on support coordinators to identify individuals entering
institutions who should be billed for a share of ALTCS costs, and it appears that
this generally occurs.
􀁺􇩆 Fee-for-service—Auditors did not identify any unbilled individuals who should
have received fee-for-service billings in a random sample of 30 individuals.
However, in examining the accuracy of the billing amounts, auditors determined
that of the 41 individuals the Division had identified as potentially subject to
billing for fiscal year 2005 based on their income, 4 who should have been billed
a total of approximately $1,900 had not been billed. The Division was successful
in identifying most individuals who should be billed because it uses a systematic
approach. Specifically, each year it sends letters requesting financial information
for all individuals who meet other criteria for fee-for-service billing. The under-billing
occurs because the Division’s process for determining billing amounts
State of Arizona
page 30
Sixteen individuals
should have been
billed a total of over
$26,000.
Office of the Auditor General
page 31
Division Billing Requirements
Residential services
􀁺􇩐 Purpose: Contribute to room and board costs.
􀁺􇩁 Applies to: All individuals in residential services who receive Social Security or certain other benefits,
including individuals enrolled in Title XIX or ALTCS, because Medicaid does not pay for room and board,
except in a hospital or skilled nursing facility.
􀁺􇩁 Amount: Total benefit received from Social Security or other payer minus amount retained by the individual
who keeps the greater of $50 per month or 30 percent of the benefit.
􀁺􇩆 Fiscal year 2005 billings:
• $13,377,183.
• 2,673 individuals.
􀁺􇩅 Established by: A.R.S. §36-562(M) and Arizona Administrative Code (A.A.C.) R6-6-1204.
Share of ALTCS cost
􀁺􇩐 Purpose: Pay a portion of cost of care.
􀁺􇩁 Applies to: Individuals enrolled in ALTCS who are in skilled nursing facilities and ICF/MRs.
􀁺􇩁 Amount: Depends on individual’s income and monetary needs. AHCCCS determines the amount to be
billed.
􀁺􇩆 Fiscal year 2005 billings through March 2005:
• $1,008,590.
• 175 individuals.
􀁺􇩅 Established by: Federal law (CFR 435.725).
Estate, trust, and annuity billing
􀁺􇩐 Purpose: Pay entire cost of care.
􀁺􇩁 Applies to: All individuals who have an estate, trust, or annuity valued at more than $2,000. Division may
issue waiver to enable individual to save for an expense such as a medical or dental service.
􀁺􇩁 Amount: 100 percent of the cost of division services.
􀁺􇩆 Fiscal year 2005 billings:
• $503,939.
• 174 individuals.
􀁺􇩅 Established by: A.R.S. §36-562(D).
Fee for service (sliding fee scale)
􀁺􇩐 Purpose: Pay a portion of cost of care.
􀁺􇩁 Applies to: Non-ALTCS individuals over 3 years of age who have income—or parents’ income for minors—over
200 percent of the federal poverty level.
􀁺􇩁 Amount: Depends on individual’s income. The Division determines the amount by applying a sliding scale to
individual’s income from an estate or trust or to the parents’ taxable income if the individual is a minor.
􀁺􇩆 Fiscal year 2005 billings:
• $13,651.
• 24 individuals.
􀁺􇩅 Established by: A.R.S. §36-562(G) and A.A.C. R6-6-1201.
State of Arizona
page 32
does not account for service providers who are late in reporting services to the
Division.
Uncollected amounts reduce funds available to others—Division
collections are deposited in the Long Term Care Program Fund, which the Division
can then use for providing services. Although the amounts auditors discovered as
unbilled are not large in comparison to total division funding, these monies could
help to provide additional services. For example, the $26,000 in unbilled residential
services could pay for more than a year of room and board for four individuals based
on the 2005 rate of $16.68 per person per day for a six-person group home in District
1 (Maricopa County). An additional effect of unbilled services is the hardship it can
create for individuals later when the error is discovered. For example, the Division
initiated a billing in April 2004 that covered services that started in January 2001. The
unbilled total in this case was over $24,000. Similarly, in April 2003 the Division began
billing an individual for services that had started in June 2001. The total in this case
was over $7,000. Because paying this large amount would be a hardship for the
individual’s parent, the Division waived half the amount and agreed to accept
payments of $25 per month over a period of 149 months.
Division should use a more systematic method of identifying
individuals who should be billed—To better ensure it identifies people who
should be billed, the Division should develop a process that uses its information
system in conjunction with information from OARC to identify individuals whose
cases should be reviewed for possible billing. Similar to the process auditors
followed to identify missed billings, the Division could match individuals receiving
residential, institutional, or skilled nursing facilities with OARC records to determine
those not currently being billed, and research the cases with support coordinators’
assistance. In addition, the Division should work with AHCCCS to develop a method
for obtaining complete information about individuals who should be billed under the
share of the ALTCS cost requirement, instead of relying on the list of individuals billed
in the previous month. For example, the Division could participate in a process
followed by AHCCCS and the Department’s Division of Benefits and Medical
Eligibility that allows them to request and receive benefit information regarding clients
from the Social Security Administration. Following this process would allow the
Division to standardize the way benefits are identified.
The sum of $26,000
could pay for more than
a year of room and
board for four
individuals.
Recommendations:
1. To better ensure it identifies in a timely manner individuals who must pay for all
or part of the cost of their services, the Division should:
a. Develop a process for first matching records of individuals receiving
services that could be subject to billing—specifically, residential,
institutional, and skilled nursing facility—with records maintained by the
Department’s Office of Accounts Receivable and Collections (OARC) to
identify unbilled individuals, and then researching individual cases to
determine whether they should be billed.
b. Develop a process to systematically obtain information regarding Social
Security benefits for its individuals receiving services. To do this, the Division
should consider working with the Division of Benefits and Medical Eligibility
as well as OARC to standardize its process with other department
processes for obtaining benefits information from the Social Security
Administration.
2. To better ensure its billing amounts are accurate, the Division should correct its
procedures for determining the total amount due in the fee-for-service category
to capture services provided in a previous month but reported later by providers.
Office of the Auditor General
page 33
State of Arizona
page 34
During the audit, auditors reviewed information about the recent implementation of
the fiscal intermediary program and the Arizona Training Program at Coolidge.
Fiscal intermediary program
The Division has begun to implement a fiscal intermediary program in order to
simplify the process of paying providers, facilitate individual choice, and ensure
proper payment of employment taxes for individual service providers. The Division
entered into an agreement with a vendor in June 2004, and is currently in the process
of implementing the program state-wide. As of June 2005, four of the Division’s six
districts have implemented the fiscal intermediary program. According to division
administrators in districts where the program has already been implemented, the
responses from individual service providers as well as from individuals receiving
services have been relatively positive regarding the program.
Fiscal intermediary program operation and goals—Fiscal intermediaries
act as agents for individuals receiving services who choose to employ individuals,
rather than agencies, as service providers. The fiscal intermediary performs the
accounting functions required of employers, including payroll, payroll taxes, workers’
compensation, and unemployment insurance. Prior to the fiscal intermediary
program, the Division treated the individual provider as a contractor, paying the
provider directly and making the provider responsible for paying appropriate taxes.
However, Internal Revenue Service guidelines indicate that individual providers are
not contractors but are employees of the individuals or families. Under the fiscal
intermediary program, the fiscal intermediary registers with the federal Internal
Revenue Service as the agent on behalf of the individual or family receiving services.
The Division pays the fiscal intermediary a fixed monthly fee for each individual
receiving services from an individual provider.
The program is intended to allow the Division to continue offering families the option
of choosing an individual service provider while ensuring that taxes and other
employer obligations are properly administered for the individual providers. In
addition, the Division established contract provisions requiring the fiscal intermediary
to ensure payment for only authorized services and rates. Eventually, the Division
Office of the Auditor General
OTHER PERTINENT
INFORMATION
page 35
The program is
intended to allow
families to choose
individual service
providers and ensure
taxes are properly
administered.
believes use of a fiscal intermediary will allow families and individuals to manage their
own personal budget for services and control the amount and types of services. The
Division reports it is working with AHCCCS to obtain approval to implement a pilot
program for consumer-directed services, which will give the individual and the
individual’s family a budget for purchasing services. The pilot consumer-directed
services program requires a fiscal intermediary and will begin in late 2005 and
conclude in 2007. A few states have adopted similar programs and found that this
form of service delivery gives the individual more choice and power in decision-making
over providers.
Implementation in progress—The Division began planning for fiscal
intermediaries several years ago and began enrolling individuals with a vendor in
February 2005. In its July 2001 final report, the Division’s Design Team—a work group
charged with recommending changes in response to 1999 legislation regarding
equitable rates, self-determination, and public input—recommended that the
Division consider using a fiscal accounting service to establish a consumer-directed
services program. In 2002, as reported in an Auditor General letter
report on the Division’s electronic benefit transfer pilot program, the
Division had identified fiscal intermediaries as a solution to
administering employer obligations related to individual service
providers, but the program was on hold because of the State’s
budget position. Finally, the Division issued a Request for Qualified
Vendor Agreement on February 1, 2004, and awarded an
agreement to the selected vendor on June 15, 2004. The Division
and the vendor held several meetings with staff and individuals to
educate providers and individuals with disabilities about the fiscal
intermediary program. These meetings occurred between August
and December 2004. In addition, the Division included information
about the program in its newsletter and published questions and
answers on its Web site.
The Division began executing new contracts with individual
providers, that require them to use the fiscal intermediary program,
between August 2004 and February 2005.
District administrators report few problems—Despite a
few technical challenges to the implementation of the fiscal
intermediary program, the district administrators reported that the
program is a benefit to all invested parties. Auditors interviewed
district program administrators in all six districts. The administrators
offered insight into the positive and negative aspects of
implementing the fiscal intermediary program. In Districts 1 and 2
(Maricopa and Pima Counties), which had not implemented the
program at the time of the audit, administrators reported that they and the fiscal
intermediary had held several meetings to educate providers and individuals on the
program’s operation. These districts have the State’s largest population of individuals
State of Arizona
page 36
Figure 4: Implementation of Fiscal Intermediary
Program by District in 2005
Source: Auditor General staff analysis of division independent
provider rate change sequence by district report dated
June 10, 2005.
June
May
July
March
July February
with disabilities, so the district administrators said they had reviewed the other,
smaller districts’ experiences in order to prevent any problems that may have
occurred in those districts.
Administrators in the four districts that had implemented the program during the audit
reported some minor problems and concerns, most of which they had resolved. Two
of the administrators reported some issues related to the billing process and
payment procedures. For example, in a few cases, providers were confused about
the processing time for submitting timesheets to the district office. In addition, one
administrator reported there was a miscommunication between the district
administrators and providers over the timeline of shifting from billing monthly to billing
bi-monthly for services. Some providers also reported concerns regarding the tax
aspects of being considered employees instead of self-employed contractors.
Overall, the district administrators reported that the program seems to be a positive
experience for the Division, the providers, the individual with the disability, and the
individual’s family. They stated that they had received positive comments about the
fiscal intermediary program from several providers and individuals receiving services.
The vendor has a customer service telephone number, and many families report that
this is very helpful. In addition, two district administrators reported that the Division’s
central office has been helpful in answering questions and providing support in the
early stages of implementation.
Arizona Training Program at Coolidge
The Division has been adjusting to issues related to the deinstitutionalization of
individuals with developmental disabilities for nearly 30 years. In 1977, it developed
a 5-year plan that called for creating community-based alternatives to
institutionalization. At the time, the Division operated three institutional facilities,
located in Phoenix, Tucson, and Coolidge. Currently, Arizona operates only one
institution, the Arizona Training Program at Coolidge (ATP-C), which includes several
homes licensed as Intermediate Care Facilities for the Mentally Retarded (ICF/MR).
Institutional population decreasing—ATP-C was established in 1952 as the
Arizona Children’s Colony, and is now the only state-run large institution for
individuals with developmental disabilities in Arizona. According to a 1984 legislative
committee report, state and federal laws support deinstitutionalization, based on the
premise that each individual with a developmental disability should be provided for
in the least-restrictive environment available.1 The residential population at ATP-C has
been decreasing for at least three decades, and new residents are not accepted. The
facility had 1,108 residents in fiscal year 1970. By fiscal year 1977, that number had
fallen to 630. As of June 2005, only 137 individuals with disabilities were residing at
ATP-C.
Office of the Auditor General
page 37
1 Joint Legislative Committee on Arizona Training Program Facilities, Final Report, November 26, 1984.
State of Arizona
page 38
As the number of residents has declined, the cost per resident has risen. The State
Appropriations Report for fiscal year 1996 shows ATP-C had an estimated $14.9
million in funding and 190 residents, or approximately $78,250 per resident ($214 per
day). The Division’s strategic plan shows that in fiscal year 2004, ATP-C had
approximately $15.4 million in funding and 141 residents, or about $108,500 per
resident ($297 per day). The Division’s experience is comparable to other states’.
According to a national study, daily costs per resident in public institutions nation-wide
increased by 165 percent, from $115 to $321 per day in inflation-adjusted
terms, from 1977 to 2000.1 By contrast, daily costs at Arizona’s only contracted
ICF/MR range from $392.63 to $560.37, depending on the individual’s level of
severity. To partly mitigate ATP-C’s costs, the Division has encouraged residents to
apply for ALTCS, resulting in $2 million savings to the State, according to division
officials. As of June 2005, all residents at ATP-C are enrolled in ALTCS. Further,
according to the Division’s strategic plan, the Division reduced administrative costs
including costs of staff, travel, and supplies in fiscal year 2003. The plan shows the
Division held per-resident costs relatively steady between fiscal years 2002 and 2004,
and projects reductions in the costs for fiscal years 2005 through 2007.
State has reduced number of institutions but has no plans to close
ATP-C—The State closed institutional facilities in Phoenix and Tucson during the
1980s and 1990s, respectively, and the Legislature has considered legislation related
to the future of the remaining institution at Coolidge. However, although per-resident
costs are increasing with the declining population, the Division has no plans for
closing ATP-C. Officials point out that the Legislature made a promise to families in
statute to keep the facility open. A.R.S. §36-554(A)(8), enacted in 1985, requires the
Division to:
The Legislature considered establishing a study committee in 2004 to recommend a
long-range plan for the institution. However, the bill was held in a senate committee
and died.2
The Division does not
plan to close ATP-C.
1 Braddock, David, ed. Disability at the Dawn of the 21st Century and the State of the States. Washington, D.C.: American
Association on Mental Retardation, 2002.
2 Forty-sixth Legislature, Second Regular Session, House Bill 2036.
“. . .reduce the clientele at Arizona training program facilities to those
developmentally disabled persons who are required to be in Arizona
training program facilities because the community lacks an appropriate
community residential setting that meets their individual needs or whose
parents or legal guardians want them in an Arizona training program
facility.” (emphasis added)
Office of the Auditor General
page 39
Although the Division has no plans to close the facility, it has examined the costs and
benefits associated with closure. The National Association of State Directors of
Developmental Disabilities Services issued a report to the Division in May 2002,
entitled Assessment of the Costs and Benefits of Closing the Arizona Training Program
at Coolidge. That report concluded that the needs of ATP-C residents are not
substantively different from those receiving state-funded services in the community.
The report estimated that closing ATP-C could result in annual State General Fund
savings of as much as $2.7 million. The report stated that Arizona could effectively
serve ATP-C residents in the community with the State’s array of flexible community-and
family-based supports. Division management agrees with the report’s
conclusion.
Previous institution closures required several years to complete. In 1984, the Joint
Legislative Committee on Arizona Training Program Facilities recommended closing
the Phoenix facility, which had 110 residents at the time. In 1985, the Legislature
directed the Division to close the facility, and it closed in 1988.1 The Phoenix buildings
were torn down and the property was sold. According to a division official, the Tucson
facility, which at one time housed 250 individuals, was phased out over a 4-year
period and finally closed in February 1997. The Tucson facility was converted to other
uses, such as a video teleconferencing center and Meals on Wheels kitchen.
According to division management, there has been opposition to closing its
institutions. Reasons include concerns about moving individuals from the institution
where they may have lived most of their lives and concerns that the closure will
adversely affect the local economy. According to a division report, most families of
residents at ATP-C choose the institution as the preferred residential option. The
division official who oversaw closure of the Tucson facility stated that there was
opposition to that closure. The district spent 10 years working with families and
guardians of that facility’s residents to identify acceptable alternative living
arrangements, and the Division set up new state-funded group homes to
accommodate some individuals who moved out of the facility.
Division continues to invest in ATP-C—Although the Division has examined
the possible savings from closing the facility, it has continued to invest in the facility
and grounds. It has also looked into alternatives for unused parts of the site to help
offset the costs of operating the facility.
The Division has continued to take actions necessary to continue facility operations.
For example, in 1999, the Division obtained a remedial action plan for containing
petroleum hydrocarbons on the site. The recommended excavation and disposal of
contaminated soil was estimated to cost $11,400. That work was completed in May
2000. In February 2004, an internal report by the superintendent indicated that since
2002, approximately $400,000 in infrastructure improvements had been completed
Families prefer ATP-C
as a residential option.
1 Laws 1985, Ch. 313, Section 12.
and work valued at approximately $200,000 was in progress. The improvements
included roof replacement, HVAC replacement, fire alarm upgrades, and security
lighting.
To help offset the costs of operating the facility, the Division has considered using
parts of the ATP-C site for other uses, similar to its conversion of the closed Tucson
institution’s facilities to different uses. The Department reviewed the existing condition
of ATP-C buildings in January 2005 to determine the costs of bringing six buildings
into compliance with office occupancy standards. As the ATP-C residential
population decreases, several dormitories and cottages that once housed staff or
residents are vacant. The Division suggested that these buildings might be used as
office space for the Department. The study estimated that the renovations would cost
more than $1.8 million, but did not identify a source of funding to pay for the
renovations. Additionally, the Department noted that it did not receive funding it
requested in fiscal year 2005 for a sewage treatment plant that cost nearly $600,000.
Increasing use of the facility by adding office staff would exacerbate health and
groundwater risks resulting from the lack of a sewage treatment plant. A preliminary
analysis estimated that the benefit of the capital improvements would take about 8
years to realize from saving lease payments the Department would otherwise make
for current office space in Coolidge.
State of Arizona
page 40
The Division considered
converting parts of the
facility to other uses.
Office of the Auditor General
AGENCY RESPONSE
State of Arizona
ARIZONA DEPARTMENT OF ECONOMIC SECURITY
1717 West Jefferson • P.O. Box 6123 • Phoenix, Arizona 85005
Janet Napolitano David A. Berns
Governor Director
Debra K. Davenport, CPA
Auditor General
Office of Auditor General
2910 North 44th Street, Suite 410
Phoenix, AZ 85018
Dear Ms. Davenport:
The purpose of this letter is to forward the Arizona Department of Economic Security’s
written response to the preliminary draft report of the performance audit of the Division of
Developmental Disabilities.
Thank you for the opportunity to review the preliminary draft report. We appreciate the
cooperation of your staff throughout the audit process.
If you have any questions regarding this response, please contact me at (602) 542-5678
or Ric Zaharia, Assistant Director for the Division of Developmental Disabilities, at (602)
542-6857.
Sincerely,
David A. Berns
Enclosures
DEPARTMENT OF ECONOMIC SECURITY
PERFORMANCE AUDIT OF THE DIVISION OF DEVELOPMENTAL DISABILITIES
RESPONSE TO AUDITOR GENERAL RECOMMENDATIONS
AUGUST 30, 2005
Finding 1: Division developed appropriate model for setting provider rates
The Department concurs with this finding.
Auditor General Recommendation:
1. The Division should continue its efforts to establish benchmark rates for therapy and
employment-related services.
The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
DES Response:
Employment-related rates should be published by December 2005. Interim and new therapy
rates should be published by June 2006.
Finding 2: Division can improve availability of therapy services
The Department concurs with this finding.
Auditor General Recommendation:
1. To ensure its waiting list accurately measures service needs, the Division should:
a. Regularly audit the list for accuracy; and
b. Take appropriate steps to ensure support coordinators add and remove
individuals from the list in a timely manner.
The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
DES Response:
The Division of Developmental Disabilities will monitor the waiting list as follows:
1. The Division will establish a quarterly audit of the waiting list through a representative
sampling methodology. District quality control plans will be included in these audits.
Arizona Department of Economic Security
Response to Auditor General Recommendations
Page 2
2. New support coordinators will be trained in the function of the waiting list during their first
months on the job (CORE training). Existing support coordinators and their supervisors will
receive an updated training session on the waiting list policy, the database and expectations
regarding keeping the waiting list current.
3. The Division’s new web-based, HIPAA compliant automation system (FOCUS) will, when
introduced this fall, provide Support Coordinators a more user-friendly, Windows based
environment to enter waiting list data.
2. To address outdated rates paid to therapists, the Division should:
a. Include in its study of therapy rates the costs of providing services, including
administrative costs associated with complying with division third-party
liability and other requirements;
b. Adopt appropriate rates based on its study; and
c. If necessary, identify funding to pay increased rates.
The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
DES Response:
A zero based rate model has been under development since spring 2005 with attention to
productivity assumptions, mileage, equipment, and administrative overhead (including third
party liability). Interim rates will be published by October 1, 2005 to bring rates closer to
market rates. The final proposed rates to accommodate the Early Intervention re-design will be
published in January 2006. Funding issues are part of the rate setting, which determines how
much of benchmark rates can be funded. Consequently, additional increases in appropriation
may be necessary to fund competitive market rates for therapists.
3. To help alleviate problems related to administrative requirements, the Division should:
a. Assess provider interest in a training program related to complying with
administrative requirements, such as third-party liability;
b. Based on the results of that assessment, determine whether to develop and
provide a training program for providers;
c. Consider publishing a document for providers with information on division
requirements, systems, and processes, and where they can obtain additional
information. This might include administrative information such as billing
requirements, third-party liability issues, and service-related issues such as
the availability of community centers or other venues outside the home
where services might be provided.
Arizona Department of Economic Security
Response to Auditor General Recommendations
Page 3
The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
DES Response:
The Department has already determined that providers are interested in and can benefit from
third party liability training. Trainings have been held and more are being planned around the
state to discuss third party liability, billing, and other issues for therapists. During the trainings,
therapists will be reminded of its availability. A published document, available on the Internet as
well as hardcopy, is being reviewed and will be updated. This document explains the systems,
processes, eligibility etc.
4. To reduce confusion and the possible dissemination of misinformation, the Division
should examine its practices for responding to provider questions, and consider providing
additional training and guidance to staff regarding common provider issues such as third-party
billing, or designating specific, knowledgeable staff members to respond to
providers’ questions.
The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
DES Response:
The Division of Developmental Disabilities will realign resources to establish a Third Party
Liability Coordinator position in the Program Development section to support therapy
recruitment and retention by facilitating third party liability collections.
5. To help alleviate service scheduling problems, the Division should complete system
improvements to the qualified vendor system that would allow individuals with disabilities,
their families, and support coordinators to more readily access available providers and
providers to indicate through the Internet the days and times when they provide services.
The finding of the Auditor General is agreed to and the audit recommendations will be
implemented.
DES Response:
The Division continues to update and complete system improvements to the qualified vendor
system. System improvements will increase consumer and provider access to services by moving
towards a consumer friendly directory, including provider availability.
Arizona Department of Economic Security
Response to Auditor General Recommendations
Page 4
Finding 3: Division should improve billing practices
The Department concurs with this finding.
Auditor General Recommendation:
1. To better ensure it identifies in a timely manner individuals who must pay for all or part
of the cost of their services, the Division should:
a. Develop a process for first matching records of individuals receiving services
that could be subject to billing-specifically, residential, institutional, and
skilled nursing facility- with records maintained by the Department’s Office
of Accounts Receivable and Collections (OARC) to identify unbilled
individuals, and then researching individual cases to determine whether they
should be billed.
b. Develop a process to systematically obtain information regarding Social
Security benefits for its individuals receiving services. To do this, the
Division should consider working with the Division of Benefits and Medical
Eligibility as well as OARC to standardize its process with other department
processes for obtaining benefits information from the Social Security
Administration.
The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
DES Response:
To ensure that the Division bills all eligible individuals, a report will be generated on a monthly
schedule. Lists will be matched with the names of individuals being billed by OARC. Those not
being billed will be flagged and appropriate residential billing procedures undertaken. When
appropriate a referral will be made to AHCCCS to determine the share of cost amount to be
billed, which will be forwarded to OARC to initiate billing procedures. The Division will pursue
process improvements with the Department and the Division of Benefits and Medical Eligibility
to ensure the Division bills all other eligible individuals.
2. To better ensure its billing amounts are accurate, the Division should correct its
procedures for determining the total amount due in the fee-for-service category to capture
services provided in a previous month but reported later by providers
The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
Arizona Department of Economic Security
Response to Auditor General Recommendations
Page 5
DES Response:
The current billing program developed by the Division almost 10 years ago on an older Paradox
program will only bill services that have been a) delivered, b) billed by the service provider, +
and c) paid for within two months of delivery of service. Any services that are billed or paid
more than two months after the month of service are not included on any billing. The Division is
planning on transferring the current Cost of Care billing system from the Paradox program to a
more efficient Windows program. The advantages for this conversion are that it will be able to
determine late payments and incorporate them into billing adjustments.
03-08 Arizona Department of
Commerce
03-09 Department of Economic
Security—Division of Children,
Youth and Families,
Child Protective Services—
Caseloads and Training
04-L1 Letter Report—Arizona Medical
Board
04-L2 Letter Report—Gila County
Transportation Excise Tax
04-L3 Letter Report—Department of
Economic Security—Population
Estimates
04-01 Arizona Tourism and
Sports Authority
04-02 Department of Economic
Security—Welfare Programs
04-03 Behavioral Health Services’
HB2003 Funding for Adults
with Serious Mental Illness
04-04 Department of Emergency and
Military Affairs and
State Emergency Council
04-05 Department of Environmental
Quality—Water Quality Division
04-06 Department of Environmental
Quality—Waste Programs
Division
04-07 Department of Environmental
Quality—Air Quality Division
04-08 Department of Environmental
Quality—Sunset Factors
04-09 Arizona Department of
Transportation, Motor Vehicle
Division— State Revenue
Collection Functions
04-10 Arizona Department of
Transportation, Motor Vehicle
Division—Information Security
and E-government Services
04-11 Arizona Department of
Transportation, Motor Vehicle
Division—Sunset Factors
04-12 Board of Examiners of Nursing
Care Institution Administrators
and Assisted Living Facility
Managers
05-L1 Letter Report—Department
of Health Services—
Ultrasound Reviews
05-01 Department of Economic
Security—Division of
Employment and
Rehabilitation Services—
Unemployment Insurance
Program
05-02 Department of Administration—
Financial Services Division
05-03 Government Information
Technology Agency (GITA) &
Information Technology
Authorization Committee (ITAC)
05-04 Department of Economic
Security—Information Security
05-05 Department of Economic
Security—Service Integration
Initiative
05-06 Department of Revenue—Audit
Division
Performance Audit Division reports issued within the last 24 months
Future Performance Audit Division reports
Depart