Several states describe using Medicaid insurers to move more providers into various payment reform models.

Oct. 14—State Medicaid programs are increasingly adopting payment and delivery reform initiatives, according to the latest national tracking survey.

The share of Medicaid programs adopting or expanding payment and delivery reform programs will grow to 25 states in FY17, up from 21 states in FY16, according to the latest state Medicaid budget survey from the Kaiser Family Foundation and National Association of Medicaid Directors.

“The initiatives and strategies are significant for how they coordinate and integrate care across physical health, behavioral health, and long-term care, and many of them explicitly include strategies to determine the social determinants of health,” said Vernon Smith, a senior fellow at Health Management Associates, which helped conduct the survey.

The biggest surge in the prevalence of reform models in Medicaid will come from the use of accountable care organizations (ACOs), which 11 states will create or expand in FY17, up from five that did so in FY16. Only three states launched or expanded ACOs in FY15.

Three states—Missouri, Pennsylvania and Rhode Island—were adding provisions to their Medicaid managed care contracts either encouraging or requiring those insurers to contract with ACOs. Vermont is moving its Medicaid ACO to a two-sided model and is negotiating an all-payer ACO for FY17.

The most widely adopted payment and delivery reform among state Medicaid programs is the patient-centered medical home (PCMH), which will launch or expand in 13 states in FY17, while health homes and episode-of-care programs each will launch or expand in seven states. Additionally, five states will launch or expand delivery system reform incentive payment programs, which are waiver programs to promote provider care delivery changes.

State Perspectives

“Providers have often talked about fee increases, and I have met with lots of providers every day where they talk about, ‘Can we encourage a fee increase; would this be something we should consider?’” Leesa Allen, an executive director for Pennsylvania’s Medicaid program, said at a briefing on the survey. “I’m trying to change that conversation to think about this in terms of what value and what outcome are you bringing for the participants that you are serving.”

For 2017, Pennsylvania has directed managed care organizations to spend 7.5 percent of their “medical and maternity” revenue on alternative payment arrangements, including PCMHs, ACOs, and global payments with full risk. Half of that share in alternative payment arrangements—which increases to 30 percent of such care in managed care contracts in three years—will need to be in ACOs or other “full-risk arrangements,” Allen said.

“We really like plans to work with providers along that continuum to move to those higher levels of value-based purchasing,” Allen said.

The state is one of 10—out of 36 that use managed care contracts—that intend to add alternative payment model percentage targets to their contracts in FY17.

In Pennsylvania, such requirements not only will apply to large health systems but also to home health providers, durable medical equipment suppliers, and pediatric shift nursing providers.

“We want to make sure that we are getting value, that they are keeping them out of the hospital, and we’re not seeing readmissions,” Allen said. “That’s the conversation we want providers and plans to be having that will lead to hopefully better outcomes.”

Similarly, beginning Jan. 1, Nebraska will contractually require Medicaid insurers to move 30 percent of their provider network into a “value-based contract” within three years.

“It can’t be accomplished with one or two large health systems; they have to reach out broadly to the provider community, engage with them at the level where they are, in terms of moving them along that continuum” toward higher risk, Calder Lynch, director of the Medicaid program for Nebraska, said at the briefing.

Pennsylvania, which is a state innovation model grantee, is coordinating its Medicaid program’s episode-based payments and PCMH payments with the state’s four largest commercial insurers.

“They’re not going to change how [physicians] practice medicine if only 10 to 20 percent of the people in that office will be impacted by this change,” John McCarthy, director of the Ohio Department of Medicaid, said at the briefing. “But guess what? If you have 80 percent of the people in your office who will be impacted, then you probably will change.”

Pennsylvania has sought to address provider concerns that only insurers are financially benefiting from the delivery reforms by using a 50-50 shared savings model for providers and insurers in the Medicaid program.

Funding Boost for Insurers

The growing focus on using Medicaid managed care plans comes as states are directing more funding toward those insurers. Twenty-five states plan FY17 rate increases for their managed care plans, while six states plan cuts. In comparison, only 15 states plan to increase inpatient hospital rates, while five plan to cut those rates. Similarly, 14 states plan outpatient hospital rate increases and four plan to cut them.

FY17 is the first year since FY12 that more states (41) planned provider rate cuts than planned any rate increases (40 states).

Allen said Pennsylvania, which provided a small increase to its managed care insurers in FY16, was still examining utilization, costs, and trends to determine whether to increase rates for those insurers in FY17.

One key metric, per-member costs, has changed “not much” since Pennsylvania expanded Medicaid eligibility in 2015, Allen said in an interview.

Allen also was optimistic that moving the expansion population directly into managed care will shift that population away from high-cost activities such as unnecessary emergency department (ED) utilization.

“Even though they knew that they were eligible now, did they actually know how to utilize the system, or were they still relying on the ED during that time period?” Allen said about new enrollee challenges. “So a lot of it has been education in the first year.”

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Friday, October 14, 2016