Press Release  Review of State’s Human Service Contracting Law Shows Mixed Results

Boston — State Auditor Suzanne M. Bump today released a review of the state’s rate-setting process for contracted human and social service programs under Chapter 257 of the Acts of 2008. Under Chapter 257, the Executive Office of Health and Human Services (EOHHS) establishes pricing and rate-setting procedures for human service vendors (other than special education programs) who would like to contract with the state. Bump’s audit reviewed aspects of implementation of the law including rate development, provider financial stability, wage growth, and the monitoring of provider service quality for the period of July 1, 2015 through June 30, 2017.

Bump’s audit notes the law appears to have had an initial positive impact. The report shows that a key financial metric, the average operating results for adult long-term residential services (program revenue less operating expenses), has nearly doubled since Chapter 257 pricing was implemented in 2014. This shows the law is achieving its goal of provider stability. A survey conducted by Bump’s office shows that human service providers are generally satisfied with the impact of the law. However, the audit notes the law has not resulted in significantly higher wages for direct-care workers, which was another goal of some of the law’s supporters.

“Our audit shows that, since its implementation, the Chapter 257 law has undoubtedly improved the financial standing of human service providers in the Commonwealth,” said Bump of the review. “However, more work is needed. I encourage lawmakers to examine ways to enhance this law to ensure human service providers can continue to effectively serve the residents of the Commonwealth, while paying a livable wage to their employees.”

Prior to Chapter 257, each state purchasing agency negotiated multi-year contracts with human service providers and would establish individual reimbursement rates by provider for similar program services. Many times these contracts contained rates that did not recognize cost increases. In January 2008, an EOHHS study tilted, “Recommendations for Reforming the Purchase of Service System,” concluded that the funding provided under human service contracts might be affecting the stability of human service providers. To address this funding issue, the Legislature enacted Chapter 257, which established that pricing for social service programs would be set by the Secretary of the Executive Office of Health and Human Services every two years.

Additionally, Bump’s audit found that EOHHS had not established formal policies and procedures for rate-setting processes under Chapter 257. In its response, EOHHS agreed with the audit findings and indicated it will develop written policies and procedures for rate-setting for human service programs. The audit notes, in 2014 EOHHS was sued after it failed to meet deadlines established by Chapter 257, and the Massachusetts Superior Court ordered the Secretary of EOHHS to establish payment rates for all social service programs within 90 days of the order.

In fiscal year 2017, nine EOHHS departments spent more than $2.39 billion on human service provider contracts subject to Chapter 257 rate setting.

The full report is available here.

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