Healthcare Business News

Reform Update: States test Medicaid ACOs to cut costs

By Virgil Dickson
Posted: July 1, 2014 - 4:15 pm ET

Looking to control Medicaid costs, several states are launching accountable care initiatives that mirror experiments underway with Medicare and private insurers but vary significantly in their approaches.

The Medicaid programs are contracting with networks of doctors, clinics and hospitals that agree 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.

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Despite generally low Medicaid reimbursement rates—60% 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. Various incarnations of Medicaid ACO programs are underway or are about to launch in Alabama, Colorado, Maine, Massachusetts, Minnesota, Oregon, Texas, Utah and Vermont.

The models differ significantly from state to state. Only some allow Medicaid managed-care plans to participate, for example. And some lock patients into getting care through an ACO while others allow patients to opt out, said Jennifer Flynn, senior director of state affairs at Premier, a company that provides performance-improvement and group-purchasing services to hospitals.

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% of the primary-care providers and four behavioral health providers. Two community residents must serve on the organization's board.

“If we can keep them healthy and out of the hospital, you can significantly decrease expenses associated with admissions,” said Dr. John Brennan, president and CEO of Newark Beth Israel Medical Center and chairman of the Greater Newark Healthcare Coalition, which is planning to participate in New Jersey's ACO program.

New Jersey officials turned to ACOs as a way to bring down program costs after managed Medicaid plans failed to achieve the goal, said Derek DeLia, associate research professor at Rutgers Center for State Health Policy.

“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% a year from 2007-2012, even though 98% 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.

One advantage Medicaid ACOs may have over Medicaid managed care plans is community outreach. While most plans offer a care manager to make sure patients' medical and social needs are being addressed, most of the outreach tends to be telephone based, according to Dr. Ruth Perry, executive director of the Trenton Health Team, an alliance that includes the City of Trenton, all three of its hospitals and the Henry J. Austin Health Center, a federally qualified health center.

Medicaid ACOs will have the ability to send providers into neighborhoods and apartment complexes to reach patients directly, Perry said.

The challenges of implementing an ACO for Medicaid are many, providers say, especially because of the low health literacy levels and more serious chronic conditions. It will take an intense outreach effort to inform beneficiaries of the endeavor, according to Michael Randall, vice president of clinical innovation at Advocate Health Care in Illinois.

Creating a successful Medicaid ACO in Illinois is complicated by the low penetration of managed care in the state. Under a 2011 Medicaid reform law passed in the state, 50% of beneficiaries must be enrolled in risk-based coordinated-care programs by January 1, 2015.

That has required Advocate Health Care, which hopes to launch its Medicaid ACO in August, to invest in new staff members to help beneficiaries navigate the system, as well as a new IT system to better track patient treatment, Randall said.

Rural uninsured disproportionately affected

Rural residents who don't have medical insurance are disproportionately affected by state decisions not to expand Medicaid under the Affordable Care Act, reports the Kaiser Family Foundation.

About two-thirds of the nation's uninsured rural residents live in states that have not raised Medicaid eligibility under the healthcare law. That compares with 52% of the overall population of uninsured Americans who live in those states.

Among the 24 states so far declining to expand Medicaid, ones with particularly high percentages of their residents in rural areas include Alabama (41%), Mississippi (50%), Maine (60%) and South Dakota at (43%).

Montana expansion drive falls short

Advocates of expanding Medicaid eligibility to 70,000 low-income residents in Montana were unable to collect enough signatures by the June 20 deadline to get the issue on the November ballot, according to the Independent Record newspaper in Helena.

The ballot initiative’s supporters had collected about 25,000 signatures but discovered that at least 30% of the signatures were invalid. By that time, it was not possible to get the 32,000 signatures of registered Montana voters needed by the state deadline.

Still, the advocates will continue to push to have the 2015 Legislature accept the federal money that would expand Medicaid coverage in Montana.

Follow Virgil Dickson on Twitter: @MHvdickson

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