Introduction
Background
According to the Lanterman Developmental Disabilities Services Act (Lanterman Act) passed in 1977, the State has accepted responsibility for providing services and support to people with developmental disabilities. State law defines a developmental disability as including intellectual disability, cerebral palsy, epilepsy, autism, and any other condition that is found to be closely related to, or requires similar treatment to that of, an intellectual disability. Californians with developmental disabilities may access services and support through the State’s network of 21 regional centers. These regional centers are private, nonprofit corporations that receive funding and oversight from the Department of Developmental Services (DDS). The regional centers contract for services such as transportation, dental care, respite care, and residential care from a variety of private providers for people with disabilities. The centers also help consumers—those with developmental disabilities as defined by state law—both to obtain services from local public entities such as school districts and transportation agencies and to secure sources of funding from other federal and state agencies. Together, these services are meant to meet the unique needs of these consumers so that they may live independent, productive, and typical lives. In total, regional centers coordinate the provision of more than 150 separate services to support the needs of people with disabilities.
Some consumers are able to reside in their own homes in the care of family, and state law requires DDS to establish the in‑home respite services program (in‑home respite services) to assist their families with their care. In‑home respite services are intermittent or regularly scheduled temporary nonmedical care and supervision provided in the home for consumers who reside with family members; these services relieve family members from the constant demanding responsibility of caring for a developmentally disabled individual. In‑home respite services include nonmedical care and supervision to protect the consumer’s safety, and attention to basic self‑help needs and other activities that would ordinarily be performed by the caregiving family member. DDS administers this program through the network of regional centers, with each regional center servicing a specific geographic region. The regional centers generally operate over large areas and typically serve one or more counties.
Although in‑home respite services represent a small part of the direct services that DDS provides to those with disabilities, at the end of fiscal year 2015–16 nearly 60,000 consumers were receiving these services through the State’s regional centers. Specifically, in fiscal year 2015–16 DDS spent nearly $4.6 billion on direct services that the regional centers purchased and that private vendors provided to consumers. Of the nearly $4.6 billion it spent on direct services, more than $221 million, or about 5 percent, was spent on in‑home respite services.
Regional Centers and Coordination of Services
State law delegates service coordination to regional centers. Regional centers assess individuals and determine whether they are eligible for services. If a person is eligible, the regional center’s service coordinators work with a planning team consisting of the consumer, parents or guardian (if the consumer is under age 18), and advocates to choose the services that will best meet the consumer’s needs and preferences. Specifically, state law requires the planning team to develop an individual program plan that includes goals for the consumer and states how these goals will be met, including the use of specific services and supports. Figure 1 illustrates the process families and individuals use to obtain in‑home respite services. When obtaining these services, the consumer can use authorized vendors or can select an individual with the skills, training, or education necessary to provide the respite services. Appendix A presents the total number of vendors, consumers, and respite workers by regional center.
Figure 1
Process Used by Families and Individuals to Obtain In‑Home Respite Services
Source: Auditor generated based on review of state law and regional center documentation.
Regional Centers and Vendor Authorization
State regulations require that a business, organization, or individual wishing to provide in‑home respite services to consumers must first become an authorized vendor of a regional center. The process by which a vendor becomes authorized requires the regional center to determine that the vendor has obtained the necessary licenses and certificates, has created a program design, and meets other service requirements. One of the requirements for an in‑home respite vendor, for instance, is the assurance that all workers maintain current CPR and first aid certifications. When the regional center has received all necessary information from a potential vendor, it has 45 days to approve or deny the service provider’s eligibility. If the regional center approves the vendor, the vendor then submits the information to DDS for final review. For in‑home respite care vendors, DDS then establishes an hourly rate of pay that the vendor will receive for its service. Once provided an hourly rate of pay, the vendor may then be used by any regional center in the State. However, regulations stipulate that such approval does not guarantee that any regional center will use that vendor’s services. Figure 2 identifies the five regional centers we reviewed as part of our audit and includes key information regarding in‑home respite services.
Figure 2
Map of Regional Centers Selected for Review and Key In‑Home Respite Service Information as of June 30, 2016
Source: Department of Developmental Services.
Note: Expenditures presented are for fiscal year 2015–16.
* North Los Angeles County Regional Center and Westside Regional Center are both located within Los Angeles County.
DDS’s Vendor Rate‑Setting Methodology
Under the Lanterman Act, DDS is required to establish, maintain, and revise as necessary, an equitable process for setting hourly rates of state payment for in‑home respite services, and state regulations specify the methodology DDS should use when calculating those rates. However, DDS does not currently follow this methodology because of changes to state law dating back to September 1998. Two key pieces of legislation changed the approach DDS has taken when calculating the payment rates for vendors providing in‑home respite services. Before September 1998, the rate‑setting process set forth under state law required vendors to submit cost statements to DDS, which it used to calculate an appropriate hourly payment rate. This rate is called a permanent payment rate (permanent rate). The permanent rates all fall within a range of rates that have upper and lower limits. Because new vendors did not yet have a cost history that DDS could use to set a permanent rate, it assigned a temporary hourly payment rate (temporary rate) until the vendor had generated the necessary cost information. Once the new vendors had sufficient cost information, DDS used this information to establish their permanent rate.
In 1998 the Legislature directed DDS to develop a performance‑based consumer outcome rate system for in‑home respite services. Subsequently, effective September 1 of that year, the Legislature froze in‑home respite rates until such time as a new rate system was implemented or funds were otherwise appropriated for rate adjustments. Since that time DDS has not adopted a new rate system. However, as we describe further in the Audit Results, since fiscal year 2000–01, the Legislature has appropriated funds for rate adjustments due, in part, to changes in minimum wage or labor laws. These adjustments have increased in‑home respite vendors’ hourly rates and respite workers’ hourly wages.
Effective July 1, 2003, the Legislature revised state law to prohibit the conversion of temporary rates to permanent rates if the permanent rates would be higher than the temporary rates in effect at that time unless such increases were necessary to protect the health or safety of consumers. Similarly, vendors receiving a permanent rate cannot modify their program designs if such modifications would result in a rate increase or otherwise seek increases in their permanent rates unless such increases are necessary to protect consumers’ health and safety. Essentially, the 2003 legislation capped the amount that vendors could receive for temporary or permanent rates. At this time DDS stopped collecting cost statements. We discuss our concerns about DDS’s response to the 1998 and 2003 legislation in the Audit Results.
Most vendors of in‑home respite services use what we refer to as the Full Service model. The rates for this model changed most recently on July 1, 2016, when DDS set the lower and upper limits of the range of hourly rates at $20.63 and $28.51, respectively, and set the temporary rate at $24.70 per hour, for the purpose of enhancing wages and benefits. As mentioned earlier, consumers have a choice of obtaining services from either an authorized vendor (the Full Service model) or from an individual whom the consumer has identified—usually a family member or friend (the Employer of Record model). Under the Full Service model, the vendor identifies the respite worker and incurs certain costs for recruiting and training as well as scheduling services for the consumer. As a result, DDS pays a higher hourly rate under the Full Service model than it does under the Employer of Record model.3 The hourly rates for the Employer of Record model are negotiated between the regional center and the vendor. In addition to the Employer of Record model, some regional centers also use the financial management service (FMS) model when family members have identified the person to provide the respite services. One key difference, however, is that the rates paid to FMS vendors and their respite workers are prescribed in regulations rather than being negotiated with the vendor.
State Oversight of Regional Centers
The regional centers operate under five‑year contracts with DDS, subject to annual appropriations by the Legislature. State law and certain federal program provisions require DDS to oversee the regional centers. One of the Lanterman Act’s requirements is that DDS also monitor the regional centers’ performance of contract objectives. To ensure that the regional centers comply with federal requirements, DDS conducts onsite program reviews and fiscal audits of the regional centers.
Scope and Methodology
The Joint Legislative Audit Committee (Audit Committee) directed the California State Auditor to provide independently developed and verified information related to the rate‑setting policies and expenditures for in‑home respite services administered by DDS. Table 1 outlines the Audit Committee’s objectives and the methods we used to address those objectives.
| AUDIT OBJECTIVE | METHOD | ||
|---|---|---|---|
| 1 | Review and evaluate the laws, rules, and regulations significant to the audit objectives. | Reviewed relevant federal and state laws, rules, and regulations. | |
| 2 | Evaluate whether the Department of Developmental Services’ (DDS) process for setting payment rates for in-home respite services complies and is consistent with relevant laws, rules, and regulations. Determine the impact of any noncompliance or inconsistency in payment rates that may affect state expenditures, respite workers, developmentally disabled consumers (consumers), or create a disparity between vendors. | • Interviewed key staff and obtained available documentation to determine the historic and current process used by DDS to establish vendors’ temporary or permanent hourly payment rates for in-home respite services. • Reviewed the statutory changes related to minimum wage and labor laws effective during the period fiscal year 2013–14 through March 1, 2016, to determine whether DDS appropriately adjusted the vendors’ hourly payment rates. • Reviewed the in-home respite funding DDS provided to regional centers during fiscal year 2014–15 and selected the five regional centers that received the highest amount of funding and that were located geographically across California. Additionally, for each of these five regional centers, we selected five vendors, for a total of 25 vendors, that provided in‑home respite services to the largest number of consumers during the period fiscal year 2013–14 through March 1, 2016. • For the 25 vendors we selected, we reviewed the process DDS used to establish the hourly payment rate for each vendor. Specifically, we determined whether DDS assigned the vendor a permanent or temporary hourly payment rate. • Reviewed documentation to identify any instances of noncompliance or inconsistencies in hourly payment rates among in-home respite vendors. To the extent possible, determined any impact of vendors’ hourly payment rates on state expenditures, respite workers, and consumers or that created a disparity between vendors. |
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| 3 | Compare and contrast payment rates by the two types of respite models used–Full‑Service or Employer of Record. | • Interviewed key staff at DDS and each of the five regional centers we selected for review, regarding vendors’ hourly payment rates for in-home respite services. • Requested and obtained from each regional center in the State the hourly payment rates paid to all of their in-home respite vendors for fiscal years 2013–14, 2014–15, and through March 1, 2016. • For the 25 vendors selected in Objective 2, we evaluated their hourly rates under the Full‑Service and, if applicable, Employer of Record models to determine whether the rates were established in accordance with applicable laws and regulations. |
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| 4 | To the extent possible, compare by region the market rate for in-home respite services and the hourly rate paid to respite staff. | • Requested information from all vendors at each of the regional centers in the State to obtain detailed information about the hourly wages vendors pay their respite workers as of June 30, 2014, June 30, 2015, and March 1, 2016. We present this information in Appendix B, by region in California. • To compare the market rate by region for in-home respite services, we calculated a weighted average for the hourly wage paid to respite workers. Specifically, using information reported by all vendors within each regional center, we identified the average hourly wage paid for each vendor and multiplied this by the total number of consumers served by the respective regional center divided by the number of conumers serviced by the vendor. We present this information in Appendix B, by region and regional center. |
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| 5 | By region, identify the number of vendors providing in-home respite services, the number of respite workers, and the number of consumers receiving services. | Requested information from all regional centers in the State on the number of consumers receiving in‑home respite services, the number of vendors providing these services, and the number of respite workers. We present the information in Appendix A, by regional center and region in California, as of June 30, 2014, June 30, 2015, and March 1, 2016. | |
| 6 | Describe the requirements, including licenses and insurance, for a vendor to become an authorized in‑home respite service provider. | Obtained an understanding of the vendorization process, including any license and insurance requirements, and describe this information in the Introduction. | |
| 7 | Evaluate the level of oversight performed on in-home respite service providers, including processes to determine that providers meet license and insurance requirements, comply with applicable operational requirements, and have reasonable payment rates. | • Obtained any audits completed by DDS of the five regional centers for fiscal year 2013–14 through March 1, 2016. Determined the extent to which in‑home respite vendors or services were reviewed. • Interviewed key staff at the five selected regional centers and obtained available policies and any supporting documentation to determine the level of oversight regional centers perform of their in‑home respite vendors. • Reviewed a selection of vendor files at each of the five selected regional centers and determined whether the respective regional center ensured that they satisfied all requirements to provide in-home respite services, a process referred to as vendorization. Further, we determined whether the regional centers conducted biennial reviews of vendor files to ensure that vendors continue to satisfy vendorization requirements. • Determined whether the five selected regional centers requested and received audited financial statements from a selection of vendors earning $500,000 or more in in‑home respite revenue. • Determined whether the five selected regional centers reviewed and investigated any complaints received against their in-home respite vendors during fiscal year 2013–14 through March 1, 2016. We identified only one such complaint, and did not find any reportable concerns regarding the regional center’s processing of the complaint. According to the remaining four regional centers, they received no complaints against an in-home respite vendor during our audit period. |
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| 8 | For in‑home respite vendors whose total revenue provided by DDS exceeded $7 million in fiscal year 2013–14, determine the following to the extent that this information can be obtained: | • Using financial information provided by DDS, we identified four in-home respite vendors who earned more than $7 million in revenue for fiscal years 2013–14 and 2014–15. Requested these four vendors to provide the information specified in Objective 8 for these two fiscal years. • For each vendor whose total revenue exceeded $7 million in fiscal years 2013–14 and 2014–15, obtained and reviewed available audited financial statements. For those vendors that did not have recent audited financial statements to provide, we followed-up to determine why they had not obtained the required audits. • Using the information reported by the four vendors, we assessed whether the expenditure categories they reported for in-home respite services were allowable based on state law, and determined whether their expenditures were reasonable based on their previous audited financial statements. |
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| a. | Revenue received from public funds broken down by applicable model. | ||
| b. | The hourly rate of in‑home respite workers. | ||
| c. | Annual net income. | ||
| d. | The amount and source of revenue from public funds. | ||
| e. | The amount and percentage of administrative costs. | ||
| f. | Major categories of expenditures including, but not limited to, wages and benefits (management and in‑home respite workers broken out separately), in‑home respite worker recruitment and screening costs, staff training and orientation costs, travel costs, and other operating expenses. Determine whether expenditures were allowable and reasonable. | ||
| 9 | Examine the rationale for DDS establishing administrative cost caps for some contracts but not for others, including contracts with in‑home respite service vendors. | Reviewed relevant laws regarding the types of programs that are subject to administrative costs. Interviewed key staff at DDS and each of the five selected regional centers regarding administrative cost caps, the types of programs subject to such caps, and the reasons in‑home respite services are not subject to administrative cost caps. | |
| 10 | Review and assess any other issues that are significant to the audit. | Interviewed key staff and obtained documentation regarding the activities of the Developmental Services (DS) Task Force, which was formed for the purpose of strengthening the delivery of services to the community. As of September 2016, we determined that the Task Force has been focused on the closure of developmental centers, whose mission is to provide 24‑hour habilitation and treatment services for residents with developmental disabilities designed to increase, for example, levels of independence and functioning skills. The DS Task Force has not begun work on reviewing DDS’s payment rate structure. | |
Sources: California State Auditor’s analysis of Joint Legislative Audit Committee audit request number 2016‑108 as well as information and documentation identified in the column titled Method.
Footnote
3 Throughout the report we use the term Employer of Record model to indicate the process used when the family selects the individual who will provide the in‑home respite service. Certain vendors we reviewed refer to this model using other terms, such as the parent conversion rate. Go back to text