• States Go Bold in Healthcare Redesign

    Sidebar: Lola Butcher Apr 27, 2016

    A closer look at four state-based healthcare innovation initiatives:

    Arkansas: Episode Payments and Medical Homes

    The majority of payers—Medicaid, four commercial insurers, state and school employee benefit programs, Walmart, and other self-funded employers—support two reform strategies:

    • Retrospective episodes of care with physicians or hospitals in control, depending on the episode. A principal provider is accountable for managing quality, minimizing treatment variation, and controlling cost. There are 14 types of episodes, ranging from total joint replacement and perinatal services to urinary tract infections and attention deficit hyperactivity disorder (ADHD).
    • Patient-centered medical homes. More than 82 percent of the state’s Medicaid beneficiaries are enrolled in a medical home; nearly 70 percent of all Medicaid-eligible physicians work in a medical home practice.

    A third strategy—health homes to serve individuals with developmental disabilities or severe or persistent behavioral health needs, among other highly vulnerable patient populations—has not yet been successfully implemented. “We’re still trying,” Golden says.

    Medicaid saved $34 million in the first year of the patient-centered medical home program. Of that, $12 million went to providers as care coordination payments. The remaining $22 million was shared by the state and providers that met quality and cost savings targets.

    The episodic care initiative has reduced the rate of Caesarean sections among Medicaid-covered mothers from 39 percent to 34 percent; reduced antibiotic prescriptions for upper respiratory infections; cut the average episode cost for ADHD treatment; and generated at least 5 percent direct savings on total joint replacements. More than 1,200 providers received gain-sharing or risk-sharing payments in the most recent fiscal year.

    Maryland: Global Budgets

    All payers—Medicare, Medicaid, and private insurers—pay hospitals on a fee-for-service basis, but total revenue is capped, which incentivizes hospitals to reduce their care-delivery costs. The initial revenue budget for each hospital was based on historical revenue; budgets are adjusted annually for utilization changes related to shifts in the market, population, service mix, and other factors.

    Under terms of the state’s Medicare waiver, per capita hospital revenue growth is capped at 3.58 percent per year. Maryland hospitals must save the Medicare program at least $330 million over the five years of the demonstration, reduce their aggregate Medicare 30-day all-cause readmission rate to the national rate over five years, and reduce infections and other hospital-acquired conditions by 30 percent.

    If state hospitals as a group fail to meet the requirements, all hospitals will revert to national Medicare payment rates and rules.

    In the first year of the program, inpatient use fell by more than 4 percent and Maryland hospitals saved Medicare $116 million, or more than half of the amount required for the entire five years. Spending growth was held to 1.47 percent, compared with 6 percent in the previous year. Medicare hospital spending growth per beneficiary fell 1 percent, compared with a 1 percent increase nationally. The aggregate rate of 65 potentially preventable conditions, ranging from catheter-related UTI to septicemia, fell by more than 26 percent in the first year.

    Minnesota: Medicaid ACOs

    The state recognizes two types of ACOs, called Integrated Health Partnerships (IHPs):

    • “Integrated” IHPs are health systems that provide both inpatient and outpatient care and serve at least 2,000 Medicaid members. Using a phased-in approach, they assume upside and downside financial risk by the third year of IHP participation. They can propose their own performance thresholds for shared savings.
    • “Virtual” IHPs are composed of providers that are not integrated with a hospital system or small integrated systems that serve between 1,000 and 1,999 attributed members. Virtual IHPs are eligible for shared savings but have no downside risk.

    Shared savings is based on a total-cost-of-care target, and contingent on an IHP’s performance on quality measures.

    The program saved the state $15 million in the first year, when six IHPs participated, and $62 million in the second year, when nine were operational. All IHPs earned shared savings and exceeded quality targets in the second year.

    Oregon: Coordinated Care

    Oregon has been working for five years on significant changes that include:

    • Shifting all health services, including public health, Medicaid and employee benefits, into the newly created Oregon Health Authority (OHA)
    • Creating 16 regional coordinated care organizations (CCOs) that are accountable for outcomes and costs for a population of Medicaid patients
    • Recognizing nearly 600 patient-centered medical homes
    • Keeping stakeholders convinced that all this work will pay off

    As of this year, more than 90 percent of the state’s Medicaid beneficiaries are enrolled in a CCO, more than 80 percent are engaged with a medical home—and the state is on track to save nearly $2 billion in healthcare costs by 2022.

    Sixteen CCOs have been established as the official payers responsible for Medicaid patients in their respective geographic regions. Each CCO can include hospitals, physicians, health clinics, social service agencies, and other stakeholders.

    CCOs receive a global budget that covers all services. Each month, 4 percent of payments to CCOs are held back to fund a quality pool used to make incentive payments to CCOs that meet quality benchmarks.

    CCOs are expected to hold cost increases to 2 percent per member per year, a target they have met in each of the first three years of the program. All-cause readmissions fell to 9.9 percent for the fiscal year that ended June 30, 2015, down from 12.9 percent in 2011. Emergency department visits and some types of hospital admissions have decreased since the program started, and CCOs are steadily increasing the percentage of members enrolled in patient-centered primary care homes.