States Looking To ACOs To Reduce Medicaid Costs
By Christine Kern, contributing writer
State Medicaid ACOs Up but Struggles Mount
As Health IT Outcomes previously reported, several states are launching accountable care initiatives that mirror experiments underway with Medicare and private insurers – but vary significantly in their approaches – in and attempt to keep Medicaid costs down.
These initiatives contract with networks of doctors, clinics, and hospitals to provide more integrated care of beneficiaries while reining in costs. In most versions, participating providers are eligible to receive shared-savings payments if the ACO meets quality benchmarks.
Despite generally low Medicaid reimbursement rates – 60 percent of Medicare rates on average – interest among hospitals and providers is high. That's not only because of the potential to earn bonus payments, but also because hospitals hope their efforts will reduce unnecessary ER visits.
MedPage Today notes Colorado was one of the first – if not the first – state to employ some ACO or ACO-like model when it adopted it in 2011. A number of other states, including Oregon, Utah, Illinois, Minnesota, New Jersey, Vermont, and Alabama, are now experimenting with ACO initiatives.
Each model is unique and differs significantly from state to state. Some lock patients into receiving care through a particular ACO, while others include an opt-out plan. And only a few models allow Medicaid managed-care plans to participate, according to Jennifer Flynn, senior director of state affairs at Premier, a company that provides performance-improvement and group-purchasing services to hospitals.
In Oregon, the Coordinated Care Organizations employs regional organizations that receive capitated payments to care for patients with quality incentives phased in, and is quite similar to Colorado’s Accountable Care Collaborative system.
Utah modified its existing managed care contracts into ACO contracts, so that the managed care plans will still be paid a monthly risk-adjusted, capitated payment for its beneficiaries, but payments will now be adjusted depending on the managed care plans' ability to lower costs and improve quality.
In Illinois, where the state spent 20 percent of its total state budget on Medicaid in fiscal 2012, efforts are underway to shift half of its Medicaid clients into new care coordination plans by the start of next year. These "Care Coordination Entities" then can determine whether they will be paid based on a bonus per member/per month bonus, a shared savings model, or a model they develop themselves.
In New Jersey, applications are due July 7 for providers to join a three-year Medicaid ACO demonstration project. The applicants must assume responsibility for coordinating the care of residents within specific geographic areas. The alliances must include all of the acute-care hospitals in that area, as well as 75 percent of the primary-care providers and four behavioral health providers. Two community residents must serve on the organization's board.
Several other states, including Maine, New York, Wyoming, and Washington are studying ways to make greater use of ACOs in their Medicaid programs. The National Academy for State Health Policy has created an interactive state accountable care activity map to organize the ongoing efforts.
According to Derek DeLia, associate research professor at Rutgers Center for State Health Policy, New Jersey officials turned to ACOs as a way to bring down program costs after managed Medicaid plans failed to achieve the goal. “This is the next step,” DeLia said. “Medicaid expenditures continue to grow and quality outcomes are not where we would like them to be.”
Medicaid expenditures increased an average of 4 percent a year from 2007-2012, even though 98 percent of the Medicaid population was in managed-care programs, according to a 2012 report from New Jersey's State Budget Crisis Task Force. New Jersey health officials say the ACO experiment could save as much as $284 million in inpatient costs by the end of the pilot, according to a report by Rutgers Center for State Health Policy.