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Fairview: The Closing Chapter

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Fairview Training Center Budget Information Brief: January 1998

This report provides information about the Fairview Training Center, a facility operated by the Mental Health and Developmental Disabilities Services Division of the Department of Human Resources. The report includes a brief history of the institution, an overview of its budget, including information on expenditures for contracted services, and an explanation of how and why a cost-per-resident is determined.

Background:

Fairview Training Center was founded in 1908 with 39 residents to provide residential care, treatment, and training for individuals with developmental disabilities. The Center reached a peak population of over 3,000 in the early 1960's. With the gradual move to community-based programs, the population had dropped to approximately 1,300 by 1981, when legislation was passed directing the Department of Human Resources (DHR) to move toward a predominately community-based system of treatment. The system was to include residential facilities, day programs, home care, and other services designed to allow maximum independence for developmentally disabled persons in the proximity of family, friends, and home communities. Since that time, the population of Fairview has been systematically reduced. By July 1997, there were approximately 300 residents at the facility.

Concurrent with the downsizing of Fairview based on the state's preference for community-based services, actions were taking place at the federal level that significantly affected operations and increased expenditures. In 1986, the U.S. Department of Justice (USDOJ) sued Fairview for alleged civil rights abuses. The following year the Health Care Financing Administration de-certified the institution due to health, safety, and treatment violations. These actions were followed by several years of legal and de-certification actions leading to a consent decree and plan of correction. The plan called for accelerating the movement of residents into community facilities, while increasing the staffing ratios, training, and clinical services for those remaining in the institution. To avoid further legal action, the state agreed, in a stipulated order approved by the U.S. District Court in April 1995, to extensive monitoring by a USDOJ-selected consultant and to the development of a plan for the closure of Fairview. The Long Range Plan for Developmental Disability Services, adopted in 1997, plans for Fairview's closure by July 2000.

Fairview Budget and Expenditures:

During the 1985-87 biennium, Fairview had an average population of 1,204 residents and expenditures of $89.5 million. By 1989-91, the population had dropped to 699, but the budget had increased to $182.5 million-a 42% decrease in population coupled with a 104% increase in expenditures. This was the direct result of increased staffing and service levels growing out of the federal suit and de-certification actions. Although the average number of residents dropped by 505, the number of staff increased by 535 full-time equivalent positions (FTE). Subsequently, accelerated movement of residents into the community reduced the population to an average of 353 during the 1995-97 biennium, with expenditures of $130.3 million and a staff of 1,488.

The 1997-99 biennial budget for Fairview totals $114.8 million. Within that amount, $69 million (60%) is Federal Funds, which come primarily from the Medicaid program. State General Fund resources of $42.8 million support 37 % of the expenditures, and the remaining $2.9 million (3%) comes from a variety of sources including Medicare Part B payments, patient resources, insurance, and miscellaneous income.

Over 83% of the expenditures ($95.8 million) covers the cost of salaries, benefits, and other payroll expenses for Fairview's staff of 1,211 FTE positions. Staffing costs are broken down as follows:

· Direct care staff, such as habilitative training technicians, therapy aids, nurses, and other occupations that have daily or regular contact with residents - $68.5 million (72%);

· Clinical and other professional staff, such as pharmacists, clinical psychologists, and others that contribute to care, but do not have direct contact on a continuing basis - $4.7 million (5%); and

· Support staff in areas such as physical plant maintenance, food, laundry and custodial services, fiscal services, and general administration - $22.5 million (23%).

The services and supplies budget category, which includes contracted services, totals $18.7 million and accounts for 16 % of expenditures. The largest single category of expense within this area is for workers' compensation premiums. This is followed in order of significance by medical services and supplies, food and kitchen supplies, and fuels and utilities. Capital outlay for operations and physical plant equipment is minimal ($137,000), constituting only one-tenth of one percent of the budget.

The budget for professional (contracted) services is $401,000. It constitutes 2% of services and supplies costs and less than one half of one percent of all Fairview expenditures. Approximately 43% of the contract expenditures are for persons who work directly with residents or contribute to their treatment plans. As Fairview is downsized and employees leave, expenditures for short-term direct care services are likely to increase. The remaining contracts are for services that affect residents indirectly. Among these indirect services is the contract for the consultant who monitors services and makes recommendations for improvements, as a condition of the consent decree and stipulated order mentioned earlier. During the 1995-97 biennium, the consultant was paid $308,128 in combined hourly compensation and expense reimbursements.

The budget for the consultant was reduced this biennium to $167,000, due to recent negotiations with the USDOJ that changed the scope of the monitoring activities. Unlike the legal costs that persisted prior to the stipulated order, 62% of the expenditures for the USDOJ-selected consultant are paid from federal Medicaid funds. The purpose of the monitoring contract is to avoid further legal action by providing a buffer between the state and the USDOJ. The stipulated order provides for immediate termination of the consultant's contract if the USDOJ initiates another suit against Fairview.

Cost-per-Resident:

At least once a year, the Department of Human Resources must calculate the average cost-per-resident at Fairview. The purpose of the calculation is for billing the federal government, insurance companies, and other sources of non-state revenue for their share of the cost of providing services. The cost-per-resident is determined by multiplying the number of days in a year by a per diem cost of care. The federal Office of Management and Budget determines costs that are to be included in setting the rate. Eligible costs include personnel expenditures, services and supplies, a pro-rated share of central administration, and building and equipment depreciation. Costs covered by federal grants and earned income, such as from vocational programs, are not eligible. The federal guidelines place a check on any attempt to overstate the cost-per-resident. On the other hand, understating the cost would reduce the amount of non-state revenue available to offset the cost of services.

Effective July 1, 1997, the per diem cost of care rate for Fairview was updated to $619.81, based on the 1997-99 budget. Therefore, the annual cost-per-resident at Fairview is approximately $226,000. The high per-resident cost is the result of federal staffing, treatment, and safety requirements combined with a declining resident population. As the population of Fairview decreases over the next two years, the cost-per-resident will increase, because fixed costs will be spread over fewer residents.

State of Oregon Legislative Fiscal Office

Budget Information Brief 98-2 January 1998