Sincerest form of flattery

At least 11 states are adding initiatives resembling accountable care organizations to their Medicaid programs. And many providers who shied away from the Medicare ACO models are interested in the state versions, many of which lack sanctions for providers who fall short of quality and cost benchmarks.

State Medicaid ACOs cover a broad range of approaches that reflect the divergent private-sector arrangements and payment systems also referred to as ACOs. The Medicaid versions include some that state officials call ACOs but lack key components of the federal ACO models, as well as others that don't use the term but contain many core ACO features, such as tying provider payments to patient outcomes.

That may be because the label comes with both hype and a burden, said Xiaoyi Huang, assistant vice president for policy at the National Association of Public Hospitals and Health Systems. “Anyone can call something an ACO and not actually be it, or on the flip side no one wants to call it an ACO and they will call it their own thing,” she said. “You just have to figure out if that fits into this accountable care model.”

Neither federal nor state healthcare officials know the exact number of states experimenting with ACO-type programs, but key leaders from both levels of government are closely following the issue. Another gauge of state interest is that 13 states have submitted Medicaid amendments to the CMS to implement the new medical home model, which include aspects of ACOs. Four such amendments have received approval so far, federal officials said.

State interest in adding the concept to control spending growth in their increasingly costly Medicaid programs has surged within the past couple of years, according to health policy experts.

“States are trying to figure out what it means for them and what it means for their existing systems and where they want their systems to go,” said Kathleen Nolan, director of state policy and programs at the National Association of Medicaid Directors.

Part of the increased interest may stem from the national attention the federal Medicare ACO programs have received. Federal health officials, while not specifically urging ACOs, have consistently pushed states to institute more provider accountability and move their jointly federal- and state-funded Medicaid programs away from the fee-for-service model, those officials said.

“We're actively engaged with states and have been for quite a while to get states interested in it, and many states are by themselves interested in it,” said Cindy Mann, deputy administrator at the CMS and director of the Center for Medicaid and CHIP Services. “We're working on broader guidance about how those concepts fit into the Medicaid program.”

Many evolving delivery and payment models attempt to make providers accountable for their patients' health status, but few do so as explicitly as ACOs. Medical homes, for example, offer upfront payments to physicians to provide additional services, such as coordinating care with other providers. But such pre-ACO initiatives usually lack mechanisms to tie providers' pay to their patients' ongoing clinical outcomes—one of the hallmarks of the federal ACO model.

One Medicaid program that is building an ACO-like structure off a longstanding medical home model is in North Carolina. The state Legislature recently added ACO-like features to the Medicaid Community Care of North Carolina program, which dates from the 1990s and assigns a single primary-care provider to coordinate each beneficiary's care. The state will add shared savings and risk adjustment to the program, under the new state laws, according to national health policy experts following the plans.

Other states are modifying their Medicaid managed-care programs into ACO-type pilots. For example, in January, Hennepin County, Minnesota, launched a two-year expansion of its managed-care program that will provide extra provider payments for up to 10,000 Medicaid beneficiaries. The extra funding will allow longer examinations of patients and increased coordination of care, including mental health and substance- abuse treatment.

However, the county rather than providers will be subject to reduced payments for failing to improve clinical outcomes. “The county is at risk already for many of the services that these patients may need; some are already referred to four different county case workers from different agencies,” said Larry Kryzaniak, chief financial officer at the Hennepin County Medical Center, Minneapolis, which is participating in the program.

In another initiative viewed as an ACO-like model, a Colorado Medicaid program launched in mid-2011 gives providers regular bonus payments for offering extra care to patients. That program also plans to add bonus payments to providers whose patients' outcomes improve, and providers involved hope it will evolve into a global payment system that pays them a fixed sum for all the care a patient receives instead of fee-for-service payments.

The Denver Health Medical Plan, within which about 70% of the beneficiaries are Medicaid enrollees, began participating in Colorado's ACO-like initiative—called the Accountable Care Collaborative—this month because it funded more comprehensive care than the plan's more than 100 primary-care physicians are traditionally paid to provide, said LeAnn Donovan, executive director of the plan. “It's also an opportunity for us to collaborate with other providers and the state on best practice initiatives for this population,” she said.

Similar to other Medicaid ACO programs, the Colorado initiative does not penalize providers for poor patient outcomes. Instead, the regional entities that administer the program can face such cuts under the managed-care program.

Several states have not yet implemented their ACO-like Medicaid changes but are expected to complete their plans soon.

One of the most aggressive is part of a broader overhaul under discussion by the governor and legislative leaders in Massachusetts. The Massachusetts Medicaid's pay-for-performance programs already tie up to 2% of provider payments to patient-outcome measures, and the coming changes—which could be implemented by this summer—are expected to require global payments that increase providers financial risk if their Medicaid patients' health does not improve.

“It's a risky business, but we can mitigate that risk because we understand the particular needs of this patient population,” said Kate Walsh, president and CEO of Boston Medical Center, where about half of the patients are Medicaid beneficiaries.

The Cambridge Health Alliance, which already began moving some of its Medicaid patients into a global payment model through the managed-care plan under which it operates, already considers itself an operational ACO.

“We're at risk for some of the dollars that were normally paid on a fee-for-service basis,” Doug Thompson, chief administrative officer for ACO development at the Harvard Medical School affiliate, said about the global payment model, which is also found in some versions of the Medicare ACO.

Many of the ACO-like Medicaid initiatives have important differences from the federal ACO program, including sharp geographic and patient population limitations, as well as fewer financial accountability features tying provider pay to clinical outcomes.

Those differences are frequently on purpose, according to state officials.

For instance, an Oklahoma initiative that started as a Medicaid ACO is geographically limited to the Tulsa area because many of the providers there had previously implemented an advanced health information sharing network, which is needed for the patient outcome reporting at the heart of the ACO concept. However, the CMS recently rejected the program for Medicaid funding because of its small number of beneficiaries, said Buffy Heater, director of planning and development, at the Oklahoma Health Care Authority. So the state is expanding the program from dual-eligibles to other types of Medicare patients and will reapply under the Medicare ACO program.

State officials and providers in other ACO-like Medicaid programs also said the looser accountability components are critical to making the ACO concept work with frequently high-cost Medicaid populations.

For instance, the Washington state program, which is expected to launch by July, penalizes providers for so-called never events but it does not yet include provider-specific payment penalties for ongoing poor patient health.

“One of our biggest concerns as an academic health system is the adverse selection of patients that we have and the most severe risk patients coming from the entire state and making sure we have enough of a population that allows us to balance that risk,” said Johnese Spisso, chief health system officer for UW Medicine, a Washington state health system.

Two-way risks—when provider bonuses and penalties are linked to ongoing patient outcomes—have potentially serious impacts on the low-margin providers who treat large percentages of Medicaid patients, which is not lost on federal officials. Specifically, the accountability provisions of the Medicare ACO models are not meant as “the rule book on how ACOs need to be done,” Mann of the CMS said.

“Our goal is to think about improving care and improving health through better care, so we're looking for strong integrated care delivery systems and ways in which the payment and quality measures can assure good outcomes,” Mann said. “It doesn't always mean two-way risk.”

Several providers who avoided participating in the shared savings Medicare ACO program in part because of such payment penalties said they can participate in Medicaid versions of ACOs because they lack of such features or at least are slower to integrate them.

One such provider is the New York City Health and Hospitals Corp., which was recently certified under the state Medicaid program's Health Home initiative that features many ACO components. Specifically, the program requires HHC to integrate services and providers for high-cost patients with chronic illness, as well as reduce costs over the long term.

The ACO concept “has a lot of attraction to our system but the devil is often in the detail,” said Dr. Ross Wilson, chief medical officer at HHC. The original Medicare ACO “structure was not necessarily attractive to us, but going forward, the principles are very attractive to us and we will be playing them out through the Health Home program in the first instance,” he said.

Ultimately, providers expect the state and federal efforts to result in widespread ACO adoption within Medicaid programs because of the potential to improve health while saving money. And the latter goal will become ever-more important.

“Medicaid is going to be a very large employer in this country, particularly after 2014,” said Walsh, the Boston Medical Center CEO, referring to the coming addition of at least 16 million beneficiaries to the program under provisions of the Patient Protection and Affordable Care Act. “And the ability to appropriately manage and provide the services that those low-income patients need in a way that is cost-effective is the most important way to maintain access to care for all.”