Setting Rates for CBO Services 

Sandy Atkins, VP 

Partners in Care Foundation 
Assumptions/Experience 

• There is no competition offering exactly what we do, so 

difficult for customer to have an anchor price in mind 

– Offer at high end of reasonable rate 

– Know ROI (if you have info) for various prices - VALUE 

– You’re probably competing against “DIY”

• Do it yourself, i.e., build vs. buy 

• First year of contract is a pilot 

– Volume will be low 

– Pain will be short lived if we set the wrong price 

• Learning and building a résumé may be worth losing $ 

in the short run 
The evolution of a pricing model: Cost 

• Find a program in the agency that fully allocates 

all costs, both direct and indirect 

– Grants usually do not allocate full costs 

– For us it was our waiver program 

• Derive a % of variable direct program costs for: 

– Administrative support & other fixed direct cost 

– Indirect cost 

• Apply % to direct program costs 

• Overestimate everything so there’s room to 

negotiate 
Types of cost 

• Direct variable costs 

– Change based on # of clients/patients/participants 

• Direct fixed costs 

– Difficult to gauge for small/pilot programs 

– % allocation of program costs based on similar 

programs 

– Can also use for breakeven analysis approach 

• Indirect costs – keeping the agency whole 

• Margin – no margin, no mission 

• Something new: Network management costs 
What are the variable direct costs? 

• Staff to deliver program 

– Time study - Budget hours high 

– Budget salaries high 

• But know your lowest reasonable cost 

– Consider inefficiencies built into old ways of doing business 

• CMs (MSW/RN) spending as much time on data entry as on home visit 

– Direct data entry in home or have admin asst. do data entry 

– LCSW required to sign off on each assessment 

• 15 minutes of an existing staff member until volume is sufficient 

– Program variations lead to cost variations 

• Service plan to Health Plan CM vs. arranging services vs. long-term CM 

• Service plan startup $: in first months high because of previously unmet needs 

• Population: Frail, high medical risk, moderate risk, Medicare, Medicaid 

• Mileage & parking 

– High average distance traveled at federal mileage rate 

• HomeMeds license & pharmacist review for home visit programs 

• Materials/handouts 
Fixed direct costs – single agency 

• Oversight/supervision 

– Be realistic – for a pilot you probably can’t afford a 

project manager in the price 

• Admin staff, student stipends, etc. 

• IT system specific to the program/service 

• Cell phone/mobile hotspot 

• Program supplies, copying, general admin, etc. 
Indirect Costs 

• These are real costs 

– HR – staff will be hired and managed 

– Finance – more billing 

• Case rate involves many more transactions than grants 

– Communications 

– Rent – more people=more space 

– Insurance 

• Coverage limits doubled; new cyber policy required 

– General admin staff 

– IT Infrastructure & Security 

• If your bottom line is healthy, then you can 

negotiate price down and allocate less indirect 
Network Costs 

• Value to the plan is the convenience 

– E.g., one contract has cost us $40,000 in legal, at 

least 2,000 hours executive-level staff time 

– BUT the plan has matched us hour for hour in 

legal and staff time 

– Multiple versions of the same process would be 

untenable 
Startup Costs 

• Here’s where grants can help

– Some healthcare organizations will advance $ and deduct 

from future invoices 

– Some will be willing to guarantee a minimum volume to 

cover fixed costs and startup 

• Furniture & Equipment; new office space 

• Supervisory/management staff to hire & train staff 

• Cost of staff before first payment 

• Infrastructure, security & insurance improvements to 

conform with higher standards 
Network Cost in Subcontract Mode 

• Billing Cost (Finance Staff) 

• Insurance Differential or $ directly attributable to network contracts 

• Legal related to network contracts & network management 

• Marketing/Sales/Business Development/Contract Negotiations 

Staff & Consultants Related to Network Contracts 

• Credentialing, QA and Oversight of Network Providers 

• Software (Clinical/Billing/Client Management) 

• Accreditation/Training Requirements 

• Fiscal Intermediary Expenses to enable billing (Staffing agency; 

medical group) 

• Call Center

• Customer relations with plans – coordination 

• Member/patient satisfaction surveys, metrics, analysis