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Deloitte's Life Sciences & Health Care Blog

Could 2018 be the year of the Medicaid ACO?

A constant among many Medicaid programs is concern over rising costs. This applies to the 32 states that expanded their programs under the Affordable Care Act (ACA), and those that didn’t. In response, a growing number of states are eyeing alternative payment models (APMs), which reward health care providers for the value they offer, rather than the number of tests and services they perform.

In the years since the ACA was enacted, Medicaid enrollment has grown nearly 30 percent and now covers about one of every five people in the country. The program consumes an average of 28 percent of state budgets, which includes federal contributions. Many states already have turned to managed care to help contain costs, but the result often is a one-time savings. Managed care organizations may find that they can only squeeze out so much savings.

As fiscal pressures continue to grow, many Medicaid directors are searching for more innovative options. APMs are commonly seen as a key component of payment-reform models. In a recent policy brief, the Deloitte Center for Health Solutions highlights some of the trends we are seeing with APMs in Medicaid.

Several states are headed down the ACO path
Medicaid value-based care can provide states with more flexibility to design new and innovative approaches to care delivery and payment, but with increased financial risk and accountability for providers.

A handful of states have implemented accountable care organizations (ACOs), and others are interested in following their leads. Based on our research, early results from several states indicate that ACOs could reduce unnecessary utilization and reduce health care costs.

  • Maine launched its Accountable Communities Initiative, a provider-led ACO program, in 2014 as part of its comprehensive Medicaid value-based purchasing strategy. The state has four ACOs, dubbed Accountable Communities (ACs), which contract with physicians and behavioral health providers, hospitals, and public health organizations to serve Medicaid beneficiaries. The ACs are accountable for the total cost of care for their members, and have the option of participating in an upside-only or a two-sided risk-sharing arrangement. In the first year, the state reported a 3.16 percent savings ($5.41 million) across the program. Net savings to MaineCare, the state’s Medicaid program, was $4.56 million.
  • Colorado rolled out its Accountable Care Collaborative, an ACO-like Primary Care Case Management (PCCM) program, in 2011. Under this model, the Medicaid agency pays Regional Care Collaborative Organizations (RCCOs) for care coordination and practice transformation support for patients and providers in a defined geographic region. RCCOs partner with Primary Care Medical Providers (PCMPs), who are paid separately by the state, to serve as medical homes for enrolled Medicaid beneficiaries. According to a report from the Colorado Department of Health, the Accountable Care Collaborative program reduced Medicaid costs by an average of $60 per member, per month for adults, and $20 PMPM for children.

Massachusetts plans to launch three ACO options March 1, 2018
Medicaid makes up about 40 percent of Massachusetts’ budget, according to the governor’s office. Beginning March 1, 2018, Massachusetts’s Medicaid program, MassHealth, will transition to a payment strategy that includes three ACO models to serve its 1.3 million eligible members. The new program emphasizes care coordination and introduces “Community Partners” tasked with coordinating medical and behavioral health services for certain members with behavioral health and long-term services and supports needs. The state’s ACO program encourages close working relationships between health plans and providers with 17 ACOs participating in the program.

Participating providers receive financial incentives to improve care coordination and achieve performance standards across multiple measures of quality, including prevention and wellness, chronic disease management, and member experience. Primary care providers are restricted to participating in just one of the three MassHealth ACO models and are only allowed to see members who are enrolled in that ACO. The goal of the program is to improve population health and care coordination through value-based care.

Five considerations for implementing a Medicaid ACO
While coming up with a new payment model is a critical first step, implementation is typically where the rubber meets the road. For states contemplating a transition to APMs, here are a five lessons to consider based on our experience with ACO implementations to date:

  1. Know your market: Consider the state’s unique populations, stakeholders, delivery systems, and political environment when developing the vision for a new program. APMs typically require a close working relationship between health systems, providers, and health plans. Such an environment could make it easier for the program to create joint entities to care for beneficiaries. But this model might not work in states where long-standing relationships between health plans and health systems don’t exist. States should design their models based on what is most likely to succeed in their particular markets. They should consider designing programs that providers and health plans can realistically administer and oversee.
  2. Keep the program design simple: New models can quickly become over-baked and complex. The more complicated the model, often the more difficult it is to implement and the more challenging it is for stakeholders to participate in and understand. Some states might develop several ACO models, while others could decide to limit it to one or two, at least initially. During the program-design phase, the process to operationalize and the impact on enrollees should be top of mind. Additional options, or more complex components, can be introduced as needed after implementation.
  3. Include operational staff in the design phase: During design discussions, include staff members who have actual shoe-leather experience in operations…they can help pave a smoother road once implementation gets underway. Once the design phase begins, stakeholder engagement should be woven into the rest of the process. Once you turn the corner from design to implementation, you are moving from theory to what it means to the stakeholders and what should change. When reaching out to stakeholders, tailored messaging can help support buy-in and active participation.
  4. Conduct detailed program and operational reporting… and evaluate!  Data analytics—combined encounter and historical data—is likely essential for tracking costs and outcomes. For states that are considering ACOs, assessing historical data may be a good place to start. This process can be time consuming since historical data tends to be messy. But an ACO is unlikely to succeed if historical data can’t be relied upon to benchmark results. In addition to historical data, building in an evaluation component will be critical to measuring the program’s success. The ability to evaluate performance and demonstrate results is important to both federal and state policy makers.
  5. Follow the designed paths: Establish the governance model, build the plan, and then work the plan. Use the plan as a tool to drive action. This should include a governance structure and a work plan. There also should be a place where decisions are made and conflicts get resolved. This might sound simple, but it can be one of the most challenging components.

As Medicaid program costs continue to escalate, we expect more states will look into APMs. But when taking on something as significant as transforming a Medicaid program, it can be critical to develop a roadmap before plotting the journey.

Author bio

Jeff Burke is a Senior Manager in Deloitte’s Public Sector practice with more than nine years of state government consulting experience, focused on strategic planning, project management, organizational design and improvement, program transformation, operations improvement, and process reengineering. He has experience managing projects on a range of issues, including value-based care, payment reform, Medicaid Managed Care, and health care reform.

Matt Siegel is a Specialist Leader in the Life Sciences and Health Care practice of Deloitte Consulting.  He has led engagements with health care provider, health plan, and government clients seeking to develop and expand their use of data, analytics, and technology to position themselves for successful transition towards population health management and value-based care. Matt has more than 25 years of experience in health care strategy and solutions, predominantly in data analytics, risk stratification, and population health.