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.
