wisconsin department of health services contracting and wis. stat. 46.036 shelley malofsky dhs...

Wisconsin Department of Health Services

Contracting and Wis. Stat. 46.036

Shelley Malofsky

DHS Office of Legal Counsel

May 7, 2015

Wisconsin Department of Health Services

Protecting and promoting the health and safety of the people of Wisconsin 2

What are you buying? How long will you buy it? How will you pay for it? How will you monitor? Special conditions? What if things go bad?

Essence of Contracting

Essence of Contracting

Wis. Stat. 46.036 requires a written agreement for purchases over $10,000.– Must indicate, as applicable:

Maximum dollar amount of contract Number of clients Number of client service units Unit rate per client service Total dollar amount for each service unit


What are you buying?

Sec. 46.036 applies to purchase of care and services for clients.– Does not apply to purchase of items– Does not apply to purchase of administrative

services– Does not apply to DCF or DOC client services;

they have their own statutory requirements



Be clear and specific as to client services and outcomes/goals:– Services to be provided– Standards to be met – may be several standards– How performance will be measured – may be

several measurements within each standard– Services that apply to all clients– Services that are specific to each client, e.g.,

individualized service planProtecting and promoting the health and safety of the people of Wisconsin 5


List or refer to program requirements that must be met in providing the services:– Those required by law– Those required by policy and procedure manuals

Sec. 46.036 requires purchaser approval before a provider may transfer a client from one category of care/service to another.

Who will determine client eligibility?


How long will you buy it?

Set the term of the contract. Are there renewal options?

– Tie to satisfactory performance, not automatic renewal


How will you pay for it?

Sec. 46.036 permits paying actual allowable costs or paying by a unit rate per client service.

Regardless of method used, payments are limited by contract maximum.

If a start-up period is needed for a new or expanded service, sec. 46.036 permits paying start-up costs.



Sec. 46.036 permits advance payments up to one-twelfth of the annual contract amount .– Sec. 46.036 requires a surety bond if advance is

over $10,000– Indicate how reconciliation will occur

Take-back start at certain point in the contract? Final reconciliation at contract end?



Actual allowable costs (cost reimbursement):– Per Allowable Cost Policy Manual– Must carefully monitor that costs are allowable



Unit rate per client service multiplied by actual client units furnished:– High risk if there has been limited experience to

assure that the unit price is reasonable– May want to limit the profit or reserves available

under this method Final settlement would bring payments to actual

allowable cost plus the agreed-upon limited profit or reserve



Sec. 46.036 permits for-profit providers to include a percentage add-on for profit as an allowable cost.– Calculator is in the Allowable Cost Policy Manual

Sec. 46.036 permits nonprofit providers to retain a portion of a surplus generated through a rate-based service contract.



If revenue under a rate-based service exceeds allowable costs, the nonprofit provider may retain from the surplus up to 5% of the contract revenue.– Each rate-based contract can have a reserve

Retention is used to cover past or future deficits for the same rate-based service OR to address clients’ program needs.



The nonprofit provider may accumulate retained funds over multiple contract periods.

However, if the accumulation exceeds 10% of the revenue received under current contracts for the same rate-based services, it may have to return funds to the purchaser from the excess.



Sec. 46.036 requires that the provider return to the purchaser, at purchaser’s request, the purchaser’s proportional share of the accumulated excess.

Any excess not returned must be used to reduce the unit rate per client for the rate-based service in the next contract period.



If an accumulated reserve has been held for 4 consecutive contract periods and is equal to or exceeds 10% of the revenue under current contracts, sec. 46.036 requires that the nonprofit provider apply 50% of the accumulated amount to reduce its unit rate in the next contract period.



Sec. 46.036 requires a uniform fee be charged to clients, unless waived by the purchaser, to offset the amount paid under the contract.– Determine if purchaser or provider will charge the

client or liable third party



Sec. 46.036 requires that purchaser recover payments made in excess of the contract conditions from subsequent payments to the provider.– Add ‘collection through other means’ in case there

are no subsequent payments to the provider.


How will you monitor?

Sec. 46.036 requires:– Uniform double entry accounting system– Management information system– Certified financial and compliance audits for

contracts over $25,000, unless waived by DHS– Nonprofit providers in rate-based contracts must

comply with any financial reporting and audit requirements that DHS prescribes


How will you monitor?

Good contracting also includes:– Record retention– Purchaser’s right to inspect – Reporting requirements as needed


Special conditions?

Confidentiality requirements Civil rights compliance Indemnification and insurance Renegotiation Dispute resolution

– Sec. 46.036 permits appeals of purchaser decisions under ch. 68 (municipal administrative procedure)


What if things go bad?

Corrective action plans Withholding funds pending correction Liquidated damages Termination

– For cause (nonperformance) with right to cure – For non-cause – best interest of purchaser

Sec. 46.036 permits reimbursing provider’s actual costs


Resources

Financial Management Manual for Counties, Tribes and 51 Boards https://www.dhs.wisconsin.gov/business/fmm-toc.htm

Allowable Cost Policy Manual https://www.dhs.wisconsin.gov/business/allow-cost-manual.htm

Wis. Stat. 46.036 http://docs.legis.wisconsin.gov/statutes/statutes/46/036


https://www.dhs.wisconsin.gov/business/fmm-toc.htm

https://www.dhs.wisconsin.gov/business/fmm-toc.htm

https://www.dhs.wisconsin.gov/business/allow-cost-manual.htm

https://www.dhs.wisconsin.gov/business/allow-cost-manual.htm

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