C A L I FOR N I A H EALTH C ARE F OU NDATION Implementing National Health Reform in California: Payment and Delivery System Changes November 2011 Implementing National Health Reform in California: Payment and Delivery System Changes Prepared for California HealthCare Foundation By Jonah P. B. Frohlich, MPH Brenda Pawlak Molly E. Smith, MS William S. Bernstein, JD Manatt Health Solutions November 2011 About the Authors Manatt Health Solutions is the interdisciplinary policy and business advisory division of Manatt, Phelps & Phillips, LLP, a law and consulting firm. Manatt Health Solutions provides expertise in health care coverage and access, health information technology, health care financing and reimbursement, and health care restructuring, as well as strategic and business advice, policy analysis and research, project implementation, alliance building/advocacy, and government relations services. For more information, visit www.manatt.com. Acknowledgments This report would not have been possible without the valuable parti­ cipation of the Centers for Medicare and Medicaid Services, California state government officials, and California health care stakeholders. In addition, we extend our thanks to Othman Ouenes at Manatt Health Solutions for his contribution to this report. About the Foundation The California HealthCare Foundation works as a catalyst to fulfill the promise of better heath care for all Californians. We support ideas and innovations that improve quality, increase efficiency, and lower the costs of care. For more information, visit us online at www.chcf.org. ©2011 California HealthCare Foundation Contents 3 I. Introduction and Background A. Reimbursement and Care Delivery Reforms B. Potential Outcomes 5 II. Shifts in Managed Care and Payment Arrangements: The California Context A. Aligning ACA Reforms with Existing California Initiatives B. Bridge to Reform 1115 Waiver 7 III. ACA Reimbursement and Payment Reforms A. Government-Mandated Reimbursement Reforms B. Reimbursement Pilot Programs 14 IV. ACA Delivery Reform Demonstrations and Pilot Programs A. Innovation Center Programs B. Accountable Care Organizations C. Patient-Centered Medical Homes 25 V. Transparency Provisions A. ransparency Components of ACA Payment and Care T Delivery Programs B. Developing a Cohesive Transparency and Information Framework 27 VI. Observations and Conclusions 29 Appendices A. List of Interviews B. Center for Medicare and Medicaid Innovation Initiatives C. unding Opportunities to Promote Payment and Delivery F System Innovation 47 Endnotes Implementing National Health Reform in California: Payment and Delivery System Changes   | 1 Index of Tables 5 Table 1: Largest Hospital Systems in California 8 Table 2: Hospital Readmissions Reduction Program (§3025) 9 Table 3: Medicare Hospital Value-Based Purchasing Program (§3001) 11 Table 4: Medicaid Reimbursement for Primary Care (§1202) 13 Table 5: National Pilot Program on Medicare Payment Bundling (§3023) 16 Table 6: State Demonstrations to Integrate Care for Dual-Eligible Individuals 17 Table 7: Medicaid Health Home State Plan Option (§2703) 18 Table 8: Federally Qualified Health Center (FQHC) Advanced Primary Care Practice Demonstration 20 Table 9: Community-Based Care Transitions Program (§3026) 21 Table 10: Medicare Shared Savings Program (MSSP) (§3022) and Pioneer ACO 22 Table 11: Pediatric Accountable Care Organization Demonstration Project (§2706) 23 Table 12: Community Health Team Support for Patient- Centered Medical Homes (§3502, §10321) 2  |  C alifornia H ealth C are F oundation I. Introduction and Background Federal health reform will change the Besides reimbursement reforms, ACA features a way millions of Californians purchase health insurance series of pilots and demonstration projects focused on and receive health care services. More than 3 million coordinating and improving care delivery for Medicare uninsured Californians will be able to obtain coverage FFS and Medicaid beneficiaries. These efforts include under the Patient Protection and Affordable Care Act several projects such as the Medicare Shared Savings (ACA) — 2 million of whom will be newly eligible Program establishing accountable care organizations for Medi-Cal.1,2 Beyond these large numbers of newly (ACOs), as well as patient navigator and community- insured, the ACA will have an even wider impact with based care transition programs. Some observers believe its provisions altering how providers and hospitals are these demonstrations represent a comprehensive reimbursed for and deliver care. The ACA includes realignment of the health care delivery infrastructure; changes to mandatory reimbursement rules that will others are skeptical that they will prove sustainable or reduce fees paid to institutions under Medicare fee-for- replicable on a national scale. What is clear is that in service (FFS), and establishes demonstration projects order to reach their full potential, these programs will and grant programs intended to test and rapidly deploy require support from state policymakers and program new care delivery models. administrators, and very close collaboration among a wide range of providers, payers, state and local health In many respects, the reimbursement changes and agencies, and consumers. care delivery reforms complement each other: The care delivery projects may help providers and Woven throughout ACA’s payment and care delivery hospitals accommodate the lower reimbursement provisions is the principle of transparency. The ACA rates by helping them find ways to reduce costs while outlines a number of requirements to support open improving quality. and transparent program oversight and fraud and abuse monitoring. These programs typically include a Taken as a whole, the payment and care delivery substantial set of reporting obligations and mandates reforms discussed in this report have broad implications for a broad range of participating stakeholders. The for the health care delivery system, and they stand to data generated by these reporting requirements, if made impact all health care consumers in the United States. broadly available to support detailed program and policy analyses, could greatly enhance decisionmaking A. eimbursement and Care Delivery R by state and federal policymakers and program Reforms administrators and staff; as well as by providers, consumers and purchasers. Central to ACA’s payment reform efforts are reimbursement changes that will reduce FFS payments to hospitals for preventable hospital readmissions and hospital-associated infections, and budget-neutral or cost-saving provisions such as the Hospital Value- Based Purchasing program intended to pay incentives to hospitals that meet specific performance measures. These changes are projected to save Medicare $11.4 billion over 10 years (2010 to 2019).3 In addition, ACA establishes a number of reimbursement pilot programs to test alternate payment models. Implementing National Health Reform in California: Payment and Delivery System Changes   | 3 B. Potential Outcomes This report is the third in a series commissioned by It remains to be seen whether payment and care the California HealthCare Foundation (CHCF) delivery reforms can produce enough savings — and describing the implications of ACA and their expected to what extent those savings will accrue to the public impact on California’s health care delivery system, programs that administer them — to offset ACA’s public coverage programs, and private insurance expansion of coverage under the Medicaid program. markets. The initial policy analysis, published in In California where the market is far ahead of the June 2010, focused on health insurance coverage national curve in adoption of managed care, the provisions; the second report, published in March low-hanging fruit in terms of savings opportunities 2011, addressed access to care.4 This policy report may not exist. The burden of implementation of many focuses on reimbursement changes, ACA pilot of ACA’s Medicaid provisions and the state’s 1115 programs, grants, and other provisions designed waiver programs will fall squarely on the shoulders to demonstrate alternative health care delivery and of California’s Medicaid managed care plans. The payment models. It also reviews related transparency pressure they will face to increase capacity, enroll new provisions that are intended to make information and members, expand their networks to accommodate data more forthcoming for individuals, health care them, reduce costs, and improve outcomes will be purchasers, and policymakers. The report has been enormous and may not be achievable without policy, informed by the perspectives of 11 federal and state programmatic, and fiscal support. officials, stakeholders, and thought leaders; the list of interviewees is included in Appendix A. Further, planned ACA reductions in reimbursement to hospitals may cause significant financial hardship for a number of institutions, including safety-net hospitals, and will likely also result in further cost-shifting onto the commercial market, applying upward pressure on commercial premiums. Given the state’s ongoing fiscal crisis and concerns over the national debt, additional reductions in spending for entitlement programs, including Medicaid, are likely. Policymakers will need to consider how to address these critical contingencies as more individuals receive insurance coverage under ACA and test the capacity of the health care delivery system. In some states such as Oregon and Florida, policymakers used legislation to enable the creation of state-based ACOs for Medicaid and other populations. It will be important to consider the extent to which these arrangements could be established in California, how they align with the current Medi-Cal migration from FFS into managed care, and what additional benefits could result from Medi-Cal ACOs. 4  |  C alifornia H ealth C are F oundation II. hifts in Managed Care and Payment S Arrangements: The California Context Despite the overall decline in managed Table 1. Largest Hospital Systems in California care enrollment over the past seven years, more HOSPITALS LICENSED BEDS than 15 million of California’s 38 million residents Percent Percent currently receive care through delegated or capitated Number of Total Number of Total arrangements with provider organizations in the Catholic commercial market, or through Medi-Cal, Healthy 30 8% 7,088 9% Healthcare West Families, and Medicare Advantage plans.5,6 A steady Kaiser 31 8% 7,039 9% decline in the commercial managed care market has been partially offset by a rise in managed care Sutter Health 27 7% 5,182 6% enrollment among individuals covered by Medi-Cal Tenet Healthcare 20 5% 3,824 5% and Healthy Families. The Medi-Cal managed care Adventist market will continue to expand under the new federal 15 4% 2,753 3% Health System 1115 waiver (discussed in more detail below). St. Joseph 11 3% 1,853 2% Health System The changes in the managed care market and University of cost-shifting have contributed to more consolidation California 8 2% 3,215 4% in both the hospital and provider group markets.7,8 Of All Others 252 64% 49,662 62% the 394 general acute care hospitals in California, 36% (about 140) belong to one of seven hospital systems Total 394 80,616 while 8% (just over 30) are public.9 Source: California HealthCare Foundation. California Health Care Almanac, California Hospital Facts and Figures, April 2010.10 In the 1990s, many hospitals entered into global risk arrangements with Knox-Keene licensed physician Most public hospitals have a lower commercial payer organizations. However, challenges associated with mix compared with other acute care hospitals, reducing managing global risk forced many hospitals to shift cost-shifting options. These hospitals remain critical toward shared risk arrangements with providers and providers of care for Medi-C million al and uninsured carriers. Subsequent financial losses incurred by patients, providing more than half of all hospital both providers and hospitals caused many of these care for the state’s 6.6 million uninsured. Medi-Cal institutions to withdraw from commercial shared risk accounts for nearly two-thirds of their patient arrangements altogether in favor of more traditional revenues.12 per diem or diagnosis related group (DRG) payments. Today, hospitals rely heavily on these reimbursements California’s community clinics are also vital providers from private payers to cover expenses associated for Medi-Cal and Healthy Families beneficiaries with more costly Medicare and Medi-Cal patient and for the uninsured. These clinics deliver primary populations. In 2007, private payers contributed almost care and other services for more than 4 million FFS half of total patient revenues while accounting for only and managed care patients in California.13 Medi-Cal one-third of discharges.11 remains the predominant payer, accounting for over half of patient revenues. Implementing National Health Reform in California: Payment and Delivery System Changes   | 5 A. ligning ACA Reforms with Existing A B. Bridge to Reform 1115 Waiver California Initiatives Another important element in California’s health While California’s managed care experience may help reform landscape is the state’s $10 billion Bridge to position providers and hospitals to take advantage of Reform 1115 waiver. The waiver was approved by the numerous pilot programs contained within ACA, the federal government on November 2, 2010, and many providers and carriers believe that ACA’s delivery establishes a series of programs to prepare California’s reforms represent a step backward for California.14 Full health care delivery system and safety-net providers for and partial capitation, shared risk pools, and pay-for- federal health reform. Payment and delivery system performance quality incentive programs have been part changes authorized by the waiver include: of the California reimbursement landscape for well over n Expansion of county-based coverage for up to a decade. Many providers and hospitals are questioning 500,000 low-income adults who will become newly why they should assume additional risk as proposed eligible in 2014 under federal health reform.18 under federal ACO demonstration programs if, in their Participating counties must ensure that beneficiaries view, the reward does not significantly outweigh their are enrolled in a medical home and meet other investment costs or downside risk. program requirements. In contrast, institutions in California have been willing n Mandatory enrollment of 380,000 Medi-Cal-only to enter into modified capitated arrangements. Early seniors and persons with disabilities (SPDs) into commercial ACO-like demonstrations supported fully capitated managed care. by CalPERS have produced promising reductions n Creation of the Delivery System Reform Incentive in costs.15 However, such arrangements are more Pool (DSRIP) program, which could provide reminiscent of a capitated managed care arrangement up to $3.3 billion to public hospitals that: than a proposed federal ACO model. Further, it is make improvements to their health information unclear if the incurred cost savings are sustainable technology (IT) infrastructure; enhance care over the long run or if the savings have significantly delivery for patients with chronic conditions; make exceeded the costs required to establish the programs.16 measurable improvements in health care quality; and develop innovative care delivery models. Ultimately, health reform offers California policymakers, program staff, providers, and hospitals n Implementation of pilot programs to test alternative an opportunity to develop and test new care delivery health care delivery models for children with special and reimbursement models. All stakeholders will need health care needs who are eligible for the California to consider how these models can align with and Children’s Services (CCS) program. reinforce existing initiatives. Medi-Cal in particular will need to assess whether hospital and provider Under the waiver, the state will receive up to $8 networks that serve large numbers of Medi-Cal billion in federal Medicaid funds over the next five beneficiaries have the capacity and resources to test years. DSRIP represents a significant investment in innovative care delivery and reimbursement models at a relatively small pool of hospitals, and Medi-Cal the same time they are being asked to accommodate managed care enrollment is already swelling to growing enrollment under health reform. Emerging accommodate the newly eligible low-income and SPD models such as the Accountable Care Network in populations. Many Medi-Cal managed care plans Los Angeles show promising signs of innovative care may be challenged to meet the unique requirements of delivery models specifically targeting Medi-Cal and new populations, develop the infrastructure required other safety-net populations.17 to support them, and contract with provider organizations to ensure an adequate and effective health care delivery network. 6  |  C alifornia H ealth C are F oundation III. ACA Reimbursement and Payment Reforms Fee-for-service reimbursement remains Policymakers and Medi-Cal managed care plan the dominant payment model for health care services administrators will therefore need to carefully consider in the U.S. and is still employed by Medi-Cal as the how to support and test new value-based purchasing, primary reimbursement mechanism for half of its shared savings, and other payment and delivery models. enrollees. Traditional FFS models have been criticized It will also be important to monitor the impact of these for providing few incentives for providers to coordinate reforms on safety-net hospitals to ensure that they care and control costs; for encouraging over-utilization; remain viable. and for rewarding providers for making mistakes that result in additional services. In an FFS payment model, Hospital Readmissions Payment volume is rewarded over value; providers may be Reductions (§3025) penalized financially for improving the quality of the Beginning in federal fiscal year 2013, hospitals with care they deliver. readmission rates that exceed their risk-adjusted expected rate will see their Medicare inpatient The ACA includes both mandatory reimbursement payments reduced. The reduction will be approximately changes and pilots to test better ways of paying for equal to the dollar value of the payments made for health care that reward higher-value care. Several the excessive number of readmissions. In federal fiscal mandatory quality-based payment reforms are directed years 2013 and 2014, the readmission payment penalty at acute care hospitals, while demonstrations and policy will be based on readmissions related to three pilots target reimbursement changes for ambulatory conditions (it will expand to seven in 2015), and grants providers and institutions. Payment models to be tested the federal government authority to expand the number include bundled payments, value-based purchasing for of conditions in future years, including all-cause providers, and all-payer models, among others. readmissions. Some hospitals can expect to face considerable reductions in Medicare reimbursement: A. Government-Mandated The Centers for Medicare and Medicaid Services Reimbursement Reforms (CMS) has estimated that this program will generate The ACA-mandated payment reforms described below $8.2 billion in savings through 2019. To avoid stand to significantly impact Medicare and Medicaid reimbursement penalties, hospitals will need to providers, particularly acute care hospitals. Mandatory assertively manage processes and metrics to reduce reimbursement adjustments will apply considerable potentially avoidable readmissions. downward pressure on Medicare and Medi-Cal rates. At the same time that many hospitals will see their Public hospitals in California must pay particular reimbursements cut, the total number of Medi-Cal attention to this policy change, as readmissions tend patients will increase. The combination of these factors to be higher in the sicker populations served by these will have implications systemwide as hospitals face institutions. Data provided by the Office of Statewide increasing pressure to cost-shift onto commercially Health Planning and Development (OSHPD) and insured individuals and groups. Institutions with reported through the California Hospital Assessment smaller commercial payer bases, including the majority and Reporting Taskforce (CHART) indicate that of safety-net hospitals, will be hard-pressed to make potentially avoidable readmissions to public hospitals up volume with their commercial populations. participating in DSRIP, and almost all non-University Implementing National Health Reform in California: Payment and Delivery System Changes   | 7 of California public hospitals, were markedly higher Table 2. Hospital Readmissions Reduction Program than state averages.19 Medicare beneficiaries typically (§3025) represent between 10% to 15% of these hospitals’ total What it To account for “excess readmissions,” effec- discharges; payment reductions to this major source of says tive October 1, 2012, Medicare Diagnosis Related Group (DRG) payment rates will be revenue would significantly impact their bottom line. reduced based on a hospital’s ratio of actual to expected readmissions. The reduction California’s Bridge to Reform 1115 waiver provides applies to the base DRG payment only. a framework and an opportunity for Medi-Cal to For fiscal year (FY) 2013 the readmissions policy will apply to the three measures encourage hospitals to improve care coordination and currently being reported on Hospital discharge planning in an effort to reduce readmissions, Compare: heart attack (AMI), heart failure, and pneumonia. 21 In FY 2015, the policy will which could help minimize the reimbursement expand to include COPD, CABG, PTCA, penalties of this payment policy. Medi-Cal can and other vascular conditions. use the waiver’s DSRIP program as a lever to steer Who it Medicare subsection (d) hospitals (acute care participating hospitals toward implementing advanced affects hospitals). 22 care delivery and care coordination programs, and to Effective Begins FY 2013 (October 1, 2012). The focus efforts on high-cost and dual-eligible patients date(s) maximum payment reduction is 1% in FY with chronic conditions. The waiver also grants 2013, 2% in FY 2014, and capped at 3% for FY 2015 and beyond. Medi-Cal the authority to test ACOs, enhanced primary care programs, and other models for the What The federal government issued final regula- needs to tions August 18, 2011. CCS program to reduce readmissions. The results be done Hospitals will be required to submit the of various pilots, which will be carried out through appropriate information for CMS to calculate a request for proposal process, could serve as a basis hospital-specific all-payer readmission rates, for more widespread adoption of alternative payment which will be publicly reported on Hospital Compare. and delivery structures for other segments of publicly insured individuals in California.20 Who’s CMS, Medicare subsection (d) hospitals responsible (acute care hospitals). Payment Adjustments for The Hospitals will need to aggressively manage bottom processes and metrics to avoid reimburse- Hospital-Acquired Conditions (HACs) line ment penalties. Commercial payers tend to (§3008 and §2702) follow Medicare in payment structures and will likely be looking to evolve their pay-for- Medicaid will introduce payment adjustments for performance programs and reimbursement underperforming hospitals related to hospital-acquired structures to align with this policy. Medi-Cal should use its authority under the Bridge conditions (HACs): potentially preventable conditions to Reform 1115 waiver to test new reim- resulting from treatment in a hospital.23 The ACA bursement and care delivery programs that focus on reducing preventable readmissions. extends rules around non-payment for HACs under Medicare (which have been in effect since October 1, 2008) to Medicaid. Under the new ACA provisions, Medicaid will not reimburse hospitals for 10 types of Several commercial payers in California have followed hospital-acquired conditions and other injuries and Medicare’s lead and instituted their own payment illnesses deemed preventable. The ACA allows states policies for “never events”: particularly shocking to add additional conditions and injuries to state HAC medical errors (such as wrong-site surgery) that should programs and expand the penalties beyond hospitals, never occur.24 However, California is not one of the conditional on CMS approval. 17 states that has implemented a statewide no-pay program for HACs. 8  |  C alifornia H ealth C are F oundation While ACA mandates a July 1, 2011 start, CMS Similar measures are in place under Medi-Cal’s DSRIP issued a final rule on June 1, 2011 stating it will delay program, which outlines specific enhancements to compliance action until July 1, 2012 to allow states health IT infrastructure for public hospitals to adopt time to comply. In other words, Medi-Cal has until in support of higher quality care. As such, Medi-Cal September 30, 2012 to submit a plan to implement should align DSRIP requirements related to health the rule. IT adoption and use, as well as related reporting requirements and performance measures, with the Beginning in 2015, ACA also adds a 1% Medicare requirements of the federal Value-Based Purchasing DRG payment reduction for acute care hospitals with program. This would create an additional incentive HAC rates in the top quartile nationally.25 for DSRIP hospitals to institute processes to improve performance and quality for the publicly insured Hospital Value-Based Purchasing Program patient population. (§3001) Beginning in federal fiscal year 2013, Medicare will Table 3. Medicare Hospital Value-Based Purchasing launch a Hospital Value-Based Purchasing program. Program (§3001) Under this program, incentives will be paid to What it A Value-Based Purchasing program will hospitals that perform successfully against quality says pay hospitals based on their performance and patient satisfaction metrics, and that have health for certain quality measures. The incentive payments will be based on both attainment IT infrastructure in place to capture, assemble, and and improvement. analyze patient-specific data and report measures to Who it Medicare subsection (d) hospitals (acute care CMS. While participation is voluntary, all acute care affects hospitals). hospitals will experience a reduction in their DRG base Effective FY 2013 (Based on discharges occurring on payment rate to fund the incentive pool; the payment date(s) or after Oct. 1, 2012). The schedule for the reductions will occur irrespective of whether a hospital reductions is as follows: 1% in FY 2013, 1.25% in FY 2014, 1.5% in FY 2015, 1.75% receives an incentive payment. FY 2016, and 2% in FY 2017 and beyond. What The federal government issued regulations Under the final rule on the Value-Based Purchasing needs to implementing the voluntary program in 2011. program published by CMS in May 2011, 12 be done Participating hospitals must adjust their IT performance measures (a subset of those measures infrastructure, to collect and analyze patient- already reported on CMS’s Hospital Compare website) specific data and report measures to CMS. will be tied to $850 million in Medicare hospital Who’s CMS, Medicare subsection (d) hospital (acute payments.26 In FY 2014, outcome and efficiency responsible care hospitals). measures will be added. Beginning in 2015, physicians The This budget-neutral program is a reimburse- participating in Medicare will also be subject to a new bottom ment redistribution from lower-performing line to higher-performing hospitals. Those unable budget-neutral value-based reimbursement system. to meet quality measure targets will see their Medicare reimbursements decrease. The redistributive nature of the program means that some hospitals will receive greater reimbursement than what they are currently paid under Medicare’s hospital Inpatient Prospective Payment System (IPPS), while others will not recoup the reductions in IPPS payments made to create the value-based payment incentive pool.27 Implementing National Health Reform in California: Payment and Delivery System Changes   | 9 to attract and retain providers into Medi-Cal over Other Value-Based Purchasing Pilots the long term to accommodate the influx of new Value-Based Purchasing for Physicians and Medi-Cal beneficiaries. Increasing reimbursement Physician Practice Groups (§3007). Directs the rates, creating and expanding medical school loan Health and Human Services (HHS) Secretary to repayment programs, and expanding medical training develop and implement a budget-neutral payment system to adjust the Medicare physician fee opportunities (such as the new medical school schedule based on the quality and cost of the care campuses in Riverside and Merced) are examples of they deliver. By January 1, 2012, specific measures some options. of quality and cost, specific dates for implementation of the payment modifier, and the initial performance Low reimbursement is a root cause of Medi-Cal’s period must be established.28 Beginning no later than low provider participation. California physicians are January 1, 2017, the modifier will be applied to all physicians and groups of physicians participating in much less likely to have Medi-Cal patients (68%) than Medicare. patients with private insurance (92%) or Medicare Value-Based Purchasing for Skilled Nursing coverage (78%), with widely varying participation rates Facilities (§3006a), Home Health Agencies among specialties.31 Further, Medi-Cal patients are (§3006b), and Ambulatory Surgical Centers concentrated in a small share of practices and clinics, (§10301). Directs the HHS Secretary to develop with 25% of physicians providing care to 80% of plans to implement value-based purchasing programs Medi-Cal patients.32 for skilled nursing facilities, home health agencies, and ambulatory surgical centers. The ACA required a plan for ambulatory surgical centers be submitted to The Medicaid payment rate increases for primary care Congress no later than January 1, 2011, while plans providers must also be reflected in capitation rates for skilled nursing facilities and home health agencies paid to Medicaid managed care plans and passed were due no later than October 1, 2011.29 on to providers. This is particularly important for physicians in California, where Medi-Cal pays less than half of what Medicare pays for primary care services, Medicaid Reimbursement for Primary Care and where overall Medi-Cal physician fees rank 47th (§1202 of the Health Care and Education among all states.33 Reconciliation Act) While payment and access provisions under ACA will This provision of ACA establishes a temporary floor provide some support to help meet the state’s expanded for Medicaid payments to primary care physicians. capacity requirements, they are not enough to resolve The floor is set at Medicare levels for two years, in longstanding provider participation issues.34 It is 2013 and 2014, with the difference between current unlikely that primary care physicians will substantially Medicaid rates and Medicare rates being fully alter their participation in Medi-Cal without some federally funded. guarantee that fee increases will become permanent. While managed care organizations tend to offer better Medi-Cal currently faces a shortage of primary care reimbursement, they will be similarly pressured to and specialty physicians; roughly half of all practicing reduce rates and cannot be relied upon to resist this California physicians have closed their practices pressure without additional federal and state assistance. to new Medi-Cal patients.30 With 2 million new Medi-Cal enrollees expected as a result of ACA, access problems will be considerably exacerbated if provider supply issues are not addressed. Policymakers and program leaders need to carefully consider how 10  |  C alifornia H ealth C are F oundation Table 4. Medicaid Reimbursement for Primary Care Medicare and Medicaid Payment Bundling (§1202 of the Health Care and Education Demonstrations (§3023 and §2704) Reconciliation Act) ACA’s five-year Medicare bundling pilot program What it The program establishes a temporary (§3023) directs the Health and Human Services says reim­ ursement rate floor for Medicaid b pay­ ents to primary care physicians. The m (HHS) Secretary to develop a national, voluntary floor is set at Medicare levels for two years, pilot program encouraging hospitals, doctors, 2013 and 2014. Differences between current reimbursement rates and Medicare rates and post-acute care providers to improve patient care are fully federally funded. and achieve savings for the Medicare program through bundled payment models starting no later than Who it Primary care physicians with a designation affects of family medicine, general internal medicine, January 1, 2013. Under a system of bundled payments or pediatric medicine. (also known as “episode of care” payments), an insurer Effective January 1, 2013 through December 31, 2014. pays a single price for the services needed in a patient’s date(s) entire episode of care, beginning three days prior to a What Payment arrangements between the Medi- hospital admission and ending 30 days after discharge needs to Cal FFS program and primary care providers with “applicable conditions.”37 Medicare services be done need to be modified to accommodate the temporary rate change. Medi-Cal managed included in the bundled payment can include: acute care plans will similarly be required to ensure care inpatient services, physician services delivered their capitated and FFS rates are equivalent inside and outside of the hospital setting, long term to or better than proscribed Medicare rates. care, and others as defined by the HHS Secretary. Who’s CMS, DHCS, and Medi-Cal managed care responsible plans. The single payment inclusive of multiple services cannot exceed what it would cost to provide the same The While ACA increases reimbursement for services outside of the pilot. bottom primary care services for two years, it expires line at the end of 2014 and may not be suffi- cient to increase the supply of primary care The Medi-Cal FFS program and managed care physicians to care for the 2 million additional Medi-Cal beneficiaries expected under ACA. plans should take note and carefully consider how Providers will likely want to see permanent bundled payment programs can help control hospital reimbursement parity with Medicare to entice and provider costs. Inpatient costs alone in the FFS more providers to open their practices to new Medi-Cal patients. program represent approximately one-fifth of total Medi-Cal expenditures, and managed care plans will likely see increases in the proportion of inpatient expenditures as they enroll more SPDs through the B. Reimbursement Pilot Programs Bridge to Reform 1115 waiver. Results of existing As the nation’s largest health insurance program federal and Integrated Healthcare Association (IHA) covering 46 million Americans (including 4.7 bundled payment pilots should help inform potential million Californians) and accountable for over 20% policy and program actions for Medi-Cal and their of the nation’s health care spending, Medicare has managed care plans (see sidebar, Experiments with tremendous market leverage.35, 36 In an effort to reduce Bundled Payment Options). Nationally, other bundled Medicare cost increases and shift toward a payment payment programs, including Geisinger Health system that rewards care coordination, value, and System’s ProvenCare model, have demonstrated outcomes, ACA establishes a number of pilot programs promising results. ProvenCare’s coronary artery bypass to test alternate payment models. surgery program demonstrated that ProvenCare patients had shorter lengths of stay, incurred 5% lower hospital charges, were more likely to be discharged to the home, and had lower readmission rates compared with those receiving conventional care.38 Implementing National Health Reform in California: Payment and Delivery System Changes   | 11 Medi-Cal can get a jump-start by participating in Experiments with Bundled Payment Options another demonstration project — authorized under Providers and payers in California have recently ACA though funding has not yet been appropriated tested bundled payment options. In August 2010, — to evaluate integrated care around hospitalizations Cedars-Sinai Medical Center, UCLA Health System, (§2704).39 Should federal funding be made available and Hoag Memorial Hospital Presbyterian joined a bundled episode-of-care pilot in Los Angeles and for the Medicaid pilot, five-year demonstration Orange counties for hip and knee replacements. projects in up to eight states would be selected The pilot was supported by the Integrated Healthcare through a competitive process starting January 1, Association (IHA) in Oakland and focused on 2012. Participating Medicaid programs would make commercial PPO patients. The lump-sum payments bundled payments for the provision of integrated care were negotiated individually by each participating during an episode of care, including a hospital stay hospital and four California health insurers: Aetna, Blue Shield of California, Cigna, and Health Net. and concurrent physician services provided during hospitalization. A participating Medicaid program In February 2011, IHA was awarded a three-year, may target its initiative to particular categories of $2.9 million grant by the Agency for Healthcare Research and Quality (AHRQ) to build upon the Los beneficiaries such as dual-eligibles, SPDs or other Angeles and Orange county pilot and expand the patients with complex needs, or particular geographic project statewide. The program will eventually involve regions within the state. If Medi-Cal participates, it 20 teams of physicians, hospitals, surgery centers, must determine which services to include in its bundled and other providers, including: payment and decide whether to test this approach n Physician organizations: Brown & Toland in its fee-for-service program, which accounts for a Physicians, HealthCare Partners, Monarch shrinking share of inpatient hospital spending; or to HealthCare, and St. Joseph Heritage Healthcare. partner with Medi-Cal managed care plans to test this n Hospitals: Cedars-Sinai, Hoag Memorial Hospital approach in its managed care population. Presbyterian, Huntington Hospital, Mission Hospital, Saddleback Memorial Medical Center, St. Joseph Hospital, St. Jude Medical Center, Tenet California, and UCLA Medical Center. n Ambulatory surgery centers: Monterey Peninsula Surgery Centers. n Health plans: Aetna, Blue Shield of California, Cigna, and HealthNet. The demonstration will expand the effort over three years to include 10 acute conditions and procedures, and to cover HMO, Medicare Advantage, and Medi-Cal managed care populations.40 12  |  C alifornia H ealth C are F oundation Table 5. National Pilot Program on Medicare Payment Bundling (§3023) Other Value-Based and Episode-of-Care Medicare Payment Pilots What it This Medicare pilot program for integrated Independence at Home Demonstration Program says care will use bundled payments for the services needed in a patient’s entire episode (§3024). Provides incentives for physicians, physician of care involving a hospitalization to improve assistants, and nurses to: develop home-based coordination, quality, and efficiency of health primary care teams for Medicare beneficiaries; care services. provide 24-7 availability of home visits; and use Who can Providers: Hospitals, physician groups, skilled electronic health information systems, remote participate nursing facilities, home health agencies. moni­oring, and mobile diagnostic technology. t Applicable beneficiaries: Individuals entitled Participating practices may share savings in excess to or enrolled for Medicare Part A and Part B of 5%. benefits (excludes beneficiaries enrolled in Part C or a PACE program). Pay-for-Performance Pilot Testing for Certain Providers (§10326). Directs the HHS Secretary Effective January 1, 2013 to December 31, 2018. to conduct separate pilot programs for inpatient date(s) rehabilitation facilities, inpatient psychiatric What The federal government will establish an hospitals, long term care hospitals, PPS-exempt needs to application process outlining program require- cancer hospitals, and hospice providers to test the be done ments. At a minimum, selected entities will implementation of a value-based purchasing program. be required to collect and report data on quality measures. Medicare Hospice Concurrent Care Demonstration California hospitals and integrated delivery Program (§3140). Will allow up to 15 hospice networks will need to monitor opportunities programs to test the impact of providing Medicare to participate, submit competitive applica- patients with both hospice care and all other tions, and engage with CMS to support pilot Medicare benefits on patient care, quality of life, and programs. cost-effectiveness. Who’s CMS; eligible providers. responsible The New Medicare payment mechanisms bottom provide significant opportunities for California line providers and hospital systems. California institutions with experience in local bundled payment initiatives or who aim to form tighter hospital-physician organizations could participate and benefit from federal funding to better coordinate care. Medi-Cal should consider participating in a separate project featuring Medicaid bundled payment for integrated care around hospitalization (should funding be appropriated for it), to evaluate its effectiveness in improving quality and reducing costs. Implementing National Health Reform in California: Payment and Delivery System Changes   | 13 IV. CA Delivery Reform Demonstrations A and Pilot Programs The Centers for Medicare and Medicaid introduced under the Patient Care Model umbrella: Services has realigned and created new offices to The Partnership for Patients and Bundled Payments more readily advance Medicare and Medicaid delivery for Care Improvement Initiative. reforms under ACA. The ACA establishes a Medicare- Medicaid Coordination Office within CMS to improve The Partnership for Patients the integration of care for beneficiaries eligible for both The Partnership for Patients aims to support Medicare and Medicaid (dual-eligibles or “duals”), physicians, nurses, and other clinicians working in and creates a new Center for Medicare and Medicaid and out of hospitals to make patient care safer, and to Innovation (CMMI, also called the “Innovation support effective transitions of patients from hospitals Center”) within CMS. The purpose of the Innovation to other settings. The two goals of the partnership are Center is to test innovative payment and service to decrease preventable hospital-acquired conditions delivery models that reduce program expenditures by 40% by 2013, and to decrease overall hospital while preserving or enhancing quality in the Medicare readmissions by 20% by 2013. CMS estimates and Medicaid programs. The ACA appropriates $10 achieving these goals could save up to $35 billion across billion for the Innovation Center to test new models the health care system — including up to $10 billion initiated from 2011 to 2019 through the Medicare, in Medicare savings — over the next three years.41 Medicaid, and CHIP programs without having to seek The Innovation Center has committed $500 million specific legislative authority. in technical assistance to hospitals to meet the goals of the partnership (see Appendix B). A. Innovation Center Programs The Innovation Center will test many, but not all of As of August 2011, over 220 California hospitals the delivery reform programs specifically outlined in have signed the Partnership for Patients pledge along ACA, as well as develop and pilot its own models. with 214 other stakeholders including associations, Section 3021 of ACA establishes the Innovation Center consumer groups, and employers.42 In California, and describes care delivery and payment approaches 82% of hospitals reported having participated in one the Center may consider. It also grants the Innovation or more such collaborative initiatives in the past (see Center broad authority to develop and test new care sidebar, Provider-Payer Safety Collaborative Initiatives). delivery models for populations experiencing deficits Meaningful impact of these initiatives on safety or in care leading to poor clinical outcomes or potentially costs, however, has been difficult to measure. In 2008, avoidable expenditures. The Innovation Center has California enacted “Nile’s Law,” requiring hospitals centered its agenda around a three-part aim: to improve to submit data on hospital-associated infections patient experience, improve patient outcomes, and (HAIs) beginning January 2009.43 In its January 2011 reduce costs. inaugural report, the California Department of Public Health (CDPH) reported that it was missing data A table of Innovation Center-led initiatives is included from up to 20% of hospitals.44 Aligning the reporting in Appendix B. To date, its efforts have been organized requirements of CDPH and Partnership for Patients primarily around two programmatic themes: Patient would reduce hospital reporting burdens and may Care Models and Seamless Coordinated Care Models. improve participation in both initiatives. As of August 31, 2011, two initiatives have been 14  |  C alifornia H ealth C are F oundation Bundled Payments for Care Improvement Provider-Payer Safety Collaborative Initiatives Initiative The California Healthcare-Associated Infection In August 2011, the Innovation Center invited Prevention Initiative (CHAIPI): Blue Shield of California Foundation (BSCF) funded a $4.5 million providers to apply, test, and develop four different project to evaluate the impact of automated bundled payment models. (This Innovation Center surveillance technology on reduction in healthcare- initiative is distinct from the National Pilot Program associated infections (HAIs). The pilot launched in on Medicare Payment Bundling mandated by ACA, 2005 with 11 hospitals and expanded to include described above.) Three models involve a retrospective 50 nonprofit hospitals across the state by 2008. bundled payment arrangement, and one model would Participating hospitals focused on two foundational infection prevention practices: (1) appropriate hand pay providers prospectively.45 Participating providers hygiene, and (2) appropriate contact precautions. Each will have flexibility in selecting conditions to bundle, hospital also selected a hospital-specific emphasis developing the health care delivery structure, and on one or two specific HAIs and measured progress determining how payments will be allocated among against hospital-specific goals. The initial 11-hospital participating providers. Final applications from pilot (July 2005 to June 2007) resulted in 605 patients interested providers were due by October 21, 2011 protected from HAI, 4,641 hospital days avoided, and $3 million in hospital savings. BSCF estimates for Model 1 and will be due by March 15, 2012 for its initial $1 million investment in the CHAIPI pilot Models 2-4. lowered costs of care by more than $9 million total in all-payer savings. Initial results from 10 of the In addition to the initiatives just described, a number hospitals participating in the second phase of the of initiatives focused on improving care coordination initiative show that 905 patients were likely prevented have been introduced under the Seamless Coordinated from acquiring an infection, hospitals alone saved over $4.1 million, and there was a 29% reduction Care Model umbrella. These are discussed below. in MRSA, a bacterial infection that is highly resistant to antibiotics. State Demonstrations to Integrate Care Patient Safety First — A California Partnership for Dual-Eligible Individuals for Health: In January 2010, Anthem Blue Cross, The overall goal of this demonstration is to identify California’s three regional hospital associations, and validate delivery system and payment integration and the National Health Foundation launched a models that can be rapidly tested and, upon successful three-year, $6 million effort to improve the quality and consistency of care Californians receive. The demonstration, replicated in other states. Dual-eligibles collaborative’s three initial areas of focus include: (1) account for 16% to 18% of enrollees in Medicare and perinatal care: reduction of elective deliveries prior Medicaid, but roughly 25% and 45% of spending in to 39 weeks; (2) sepsis: reduction of incidence and these programs respectively.46 In April 2011, CMS morbidity by 25% statewide over three years; and awarded up to $1 million in funding each to 15 (3) hospital-acquired infections in the ICU setting: states, including California, to support the design of reduction of incidence of (with a target of 0 in three years) ventilator-associated pneumonia (VAP), central innovative service delivery and payment models for line blood stream infections (CLBSI), and catheter- dual-eligible individuals.47 States were awarded funding associated urinary tract infections (CAUTI). to build upon existing programs to create new patient- centered programs that align acute, behavioral health, and long term supports and services, and improve the patient experience and quality of care for dual-eligible beneficiaries. Implementing National Health Reform in California: Payment and Delivery System Changes   | 15 There are 1.1 million duals residing in California, Table 6. State Demonstrations to Integrate Care for representing one out of eight duals nationally.48 Nearly Dual-Eligible Individuals 70% of Medicaid spending nationally for duals is What it This program aims to identify and validate for long term care services, which are mostly not says delivery system and payment integration models that can be rapidly tested and, upon covered under Medicare or by private insurance.49 This successful demonstration, replicated in other places a greater burden on state Medicaid programs states. and highlights the need for care coordination. Only Who can 15 states won awards, including California. 175,000, or 20%, of California’s duals are enrolled in participate a Medicare managed care plan, a Medi-Cal managed Effective April 2011 to May 2012 for planning contracts. care plan, or in a fully integrated Program for date(s) All-Inclusive Care for the Elderly (PACE) plan, which What The primary outcome of the initial design targets seniors who qualify for a nursing home-level needs to period will be a demonstration proposal that be done describes how the state would structure, of care.50 In 2007, the state spent $3.2 billion on long implement, and evaluate a model aimed term care services and supports for duals, representing at improving the quality, coordination, and 75% of total Medi-Cal long term care spending.51 cost-effectiveness of care for dual-eligible individuals. Under Senate Bill 208 (2010), Medi-Cal is required to develop a program to provide more streamlined and Who’s California Department of Health Care Services responsible in coordination with CMS. Medi-Cal managed coordinated care for duals. care and PACE plans will likely be tasked with carrying out pilots. Medi-Cal plans will enroll up to 150,000 duals in four The Duals account for 18% of enrollees but 45% pilots over the next two years with a goal of making bottom of spending for Medicaid, and 75% of all long line term care spending in the Medi-Cal program. integrated care for duals available statewide by 2015, The demonstration allows Medi-Cal to test based on the successes and lessons learned in the care delivery models tailored to support- pilots.52 The pilots will provide coverage for California ing the high-intensity medical needs of dual-eligible beneficiaries. The July 9, 2011, dual-eligible beneficiaries through an integrated State Medicaid Director Letter describes delivery system that includes all medical services, long opportunities to enter into new contracting term services and supports (LTSS), and coordination arrangements to support such pilots and should be considered by Medi-Cal to support with or coverage for behavioral health services. one of the state’s highest-cost populations. With the ongoing state budget fiscal crisis and the increased attention on reducing entitlement spending Medicaid Health Home State Plan in Washington, Medi-Cal needs to sharpen its focus on Option (§2703) reducing expenditures for its dual-eligible population. Moving duals into managed care programs in Beginning on January 1, 2011, states will have the which provider networks have the potential to better option to amend their Medicaid plans to create “health coordinate care is a necessary first step. homes” for Medicaid beneficiaries, including duals, with chronic conditions. The health home model of service is designed to be a longitudinal “home” that expands on the traditional medical home models that many states have developed in their Medicaid programs. It seeks to build additional linkages and enhance coordination and integration of medical and behavioral health care and LTSS to better meet the needs of people with multiple chronic illnesses.53 16  |  C alifornia H ealth C are F oundation States that implement this option will receive enhanced Table 7. Medicaid Health Home State Plan Option financial resources from the federal government to (§2703) support health homes in their Medicaid programs. What it This program provides states the option to says offer health home services to eligible indiv­ iduals with chronic conditions who select The health home option has the potential to provide a designated health home provider. States additional financial resources to Medi-Cal providers participating in this option must also require to coordinate care for beneficiaries with chronic that Medicaid participating hospitals refer emergency room patients with chronic conditions. To help states with the initial costs, CMS conditions to designated providers. will pay 90% of health home reimbursements for Who can State Medicaid programs. the first two years. CMS will also provide up to participate Eligible beneficiaries must have at least two $500,000 per state, available at a state’s regular chronic conditions; one chronic condition Medicaid matching rate, to support planning activities and at risk for another; or one serious and persistent mental health condition. around developing a state plan amendment for the health home option. Effective January 1, 2011 to December 31, 2016. date(s) To date, Medi-Cal has not invested in establishing a What DHCS needs to submit a state plan needs to amend­ ent to implement this provision. m statewide medical home program, though there are be done Amendments must propose a method for some medical home-component requirements for monitoring preventable hospital readmis- providers under the Bridge to Reform and previous sions and a plan for use of health information technology in providing services under this 1115 waivers. Assistance to participate in the state provision. option planning process requires an upfront investment Who’s DHCS must establish administrative which is currently being supported by The California responsible oversight; participating providers and plans Endowment. However, long term reimbursement after must establish medical homes. the initial eight quarters of enhanced federal match The Health home services are reimbursed at will require additional state funding. Policymakers bottom a 90/10 federal match for the first eight line quarters of the state’s health home program; will therefore need to consider how they will allocate this program presents an important funding resources to support a program in the long term, opportunity to establish new health homes or should it be successful. strengthen existing programs. Policymakers should consider whether a current health home, disease management, or targeted case Existing Medicaid medical home programs in other management program would be eligible to states have been shown to reduce overall costs primarily transfer under this provision. Policymakers must also consider funding sources to by reducing emergency room visits and unnecessary support the program after the enhanced hospital admissions. A nationally recognized medical federal match ends. home program in North Carolina saved the state Hospitals participating in the DSRIP program and clinics with medical home experience between $186 million and $194 million in fiscal year may be well-suited partners for Medi-Cal. 2009 alone.54 Illinois reported a savings of more than $220 million in the first two years of its Medicaid medical home program.55 Given these results, Medi-Cal should strongly consider testing and evaluating health home programs in its efforts to both improve outcomes and reduce costs. Implementing National Health Reform in California: Payment and Delivery System Changes   | 17 Federally Qualified Health Center (FQHC) Table 8. Federally Qualified Health Center (FQHC) Advanced Primary Care Practice (APCP) Advanced Primary Care Practice (APCP) Demonstration Demonstration This CMS demonstration in partnership with the What it This demonstration tests whether payment says of a monthly care coordination fee ($6.00 per Health Resources Services Administration (HRSA) month for each eligible Medicare beneficiary) will test the effectiveness of doctors and other health assists participating FQHCs in providing and expanding the delivery of continuous, professionals working in teams to improve care for up comprehensive, and coordinated primary to 195,000 Medicare patients. CMS will provide an health care. estimated $42 million each to as many as 500 FQHCs Who can FQHCs that have provided primary care over three years to coordinate care for Medicare participate medi­ al services to at least 200 eligible c patients. To qualify, FQHCs will be expected to Medicare beneficiaries in the most recent 12-month period, including those with both achieve National Committee for Quality Assurance Medicare and Medicaid (dual eligible) (NCQA) Level 3 patient-centered medical home coverage. (PCMH) recognition to help patients manage chronic Effective October 1, 2011 to September 30, 2014. conditions; and demonstrate how the PCMH model date(s) can improve quality of care, promote better health, and What Participating FQHCs are expected to achieve lower costs. (The application submission deadline for needs to NCQA Level 3 patient-centered medical be done home recognition, help patients manage eligible FQHCs was August 26, 2011.) Up to $1 billion chronic conditions, and actively coordinate is expected to be invested nationally over the course care for patients. of the program. Who’s CMS, HRSA, and eligible FQHCs. responsible California clinics and primary care practice providers The The APCP’s focus on Medicare patients have been relatively slow to achieve NCQA-PCMH bottom might be a challenge for many California line clinics, most of whom are not PCMH-recog­ certification. As of March 2011, over 1,800 provider nized and whose patient mix is predominantly groups nationally have been NCQA-certified, but Medi-Cal, indigent, or uninsured. Health only 155 of those are in California.56 Achieving Level home initiatives funded by the California Endowment could help increase clinic partici- 3 NCQA recognition requires significant investment pation by supporting PCMH training and in workflow redesign and infrastructure development; Level 3 NCQA recognition. certification requires a fully functional electronic health record (EHR) system, adoption and use of evidence- based guidelines, population health management and clinic’s patient mix is Medicare.59 The Medicare and care coordination, culturally competent care, and Medi-Cal populations are significantly different, and patient self-management support. Clinics in California have different health care needs. Seniors tend to have are catching up and have been rapidly adopting EHRs; more chronic conditions: 40% have multiple chronic in 2011, 47% of clinics reported having an EHR in conditions, compared with 24% of non-seniors. Seniors place, compared with just 3% in 2005.57 California also suffer far more frequently from a specific set of clinics are also increasingly participating in health diseases such as hypertension and heart disease than home demonstrations.58 do non-seniors, requiring different treatment pathways and more frequent visits and follow-up care.60 To be The Advanced Primary Care Practice Demonstration’s competitive in securing APCP funding and succeed focus on Medicare patients might be a challenge in developing PCMHs that support this population, for many California clinics. The vast majority of California FQHCs must pay special attention to the clinics have a patient mix of Medi-Cal, indigent, or specific and unique needs of California’s Medicare and uninsured; on average fewer than 5% of a California dual-eligible members. 18  |  C alifornia H ealth C are F oundation Community-Based Care Transitions Program Participation by eligible hospitals in the Medicare (CCTP) (§3026) CCTP program would also complement care transition The CCTP Program provides funding to test models improvement efforts under the Bridge to Reform for improving care transitions for high-risk fee-for- 1115 waiver. Under the waiver, California will work service Medicare beneficiaries, including duals. CCTP with CMS to establish a mechanism within its aims to improve transitions of beneficiaries from Money Follows the Person (MFP) demonstration — the inpatient hospital setting to other care settings “California Community Transitions” — to increase to improve quality of care, reduce readmissions for opportunities for eligible individuals to access home- high-risk beneficiaries, and document measureable and community-based services (HCBS) upon discharge savings to the Medicare program. Medicare subsection from hospitals and nursing facilities as an alternative (d) hospitals with 30-day readmission rates in the top to institutional services. Medi-Cal should work quartile in their state for heart attack, heart failure, closely with CMS to ensure its MFP demonstration and/or pneumonia are eligible to submit an application aligns with CCTP, and should support and help in partnership with community-based organizations guide CCTP applications to ensure that the program (CBOs) that provide care transition services.61 CBOs provides funding for organizations in California and may submit an application with any subsection (d) captures lessons for those institutions and the Medi-Cal hospital, regardless of the hospital’s readmission rate. program. Up to $500 million in program funding over five years is expected. In addition to the voluntary Medicare- and Medicaid- related demonstration projects supported by the California has 47 designated subsection (d) hospitals Innovation Center, other grant programs and delivery with high readmission rates.62 In 2013, Medicare system reform pilots are being tested. These initiatives will stop paying for many readmissions within 30 involve multiple providers across the continuum of care days of discharge. The CCTP program provides an and require coordination around both care delivery opportunity for these hospitals to reduce avoidable and payment distribution. Some demonstrations may readmissions — and avoid financial penalties — by overlap with current initiatives underway through developing better infrastructure and processes for care public and commercial payers in California. As a transitions from the hospital to those responsible for the result, many of these programs will require careful next phase in a patient’s recovery. The CCTP program consideration by state policymakers. also provides an opportunity for hospitals to partner with local health departments; with Administration An overview of key demonstration programs is of Aging (AoA) and Aging and Disability Resource included in Appendix C. Connection (ADRC) program participants; and with other community-based organizations to support the long term care, home care, skilled nursing facility, hospice, and other care transition needs of Medi-Cal seniors and persons with disabilities in new managed care programs.63 Implementing National Health Reform in California: Payment and Delivery System Changes   | 19 Table 9. Community-Based Care Transitions Program B. Accountable Care Organizations (§3026) ACA authorizes the federal government to test new What it This program tests models for improving health care payment and delivery models through says care transitions for Medicare FFS benefi- accountable care organizations (ACOs). ACOs will be ciaries at highest risk for preventable re-hospitalization. Program goals are to: accountable for the cost and quality of care for FFS reduce hospital readmissions, test sustain- Medicare beneficiaries by offering more effective and able funding streams for care transition services, maintain or improve quality of care, efficient care, and will share resulting savings or losses and document measurable savings to the with the federal government. New federal rules have Medicare program. been proposed to support the federal ACO initiative. Who can Eligible hospitals partnering with a commu- Together with a companion framework for granting participate nity-based organization or community-based waivers under federal Stark and anti-kickback laws, and organizations that provide such care transi- tion services. Eligible hospitals are inpatient gain-sharing provisions of the Civil Monetary Penalties prospective payment system (IPPS) hospitals Law, these rules present a new framework for care identified by the HHS Secretary as having high readmission rates. Priority is given delivery and reimbursement in the Medicare program. to applicants that partner with Administration on Aging grantees with care transition Medicare Shared Savings Program (MSSP) experience, and entities that provide services to medically underserved populations, small (§3022) communities, and rural areas. The MSSP ACO program, combined with the Pioneer Effective January 1, 2011 to December 31, 2015, open ACO demonstration (an Innovation Center program; date(s) solicitation demonstrations. see sidebar, Pioneer Accountable Care Organization What Applications to participate must include a (Pioneer ACO) Model), are expected to support as needs to detailed proposal with at least one evidence- be done based care transition intervention. many as 180 ACOs facilitating care for up to five million Medicare FFS beneficiaries, and could save Who’s Eligible applicants. responsible Medicare $1.5 billion nationwide over three years.64, 65 ACOs created as a result of MSSP may negotiate new The Medi-Cal and California providers have bottom made important investments in improving payment and care delivery arrangements with other line transitions in care, but more work needs payers, including those in the commercial sector and to be done. This pilot could provide a unique within other publicly funded programs. opportunity for California hospitals on the high readmission list to foster stronger partnerships with community-based organi- zations, both to extend care support for high-risk beneficiaries and avoid new penal- ties under Medicare. CCTP can also be leveraged by Medi-Cal to support its efforts to bolster care management for duals under the Bridge to Reform waiver. 20  |  C alifornia H ealth C are F oundation Table 10. Medicare Shared Savings Program (MSSP) (§3022) and Pioneer ACO Pioneer Accountable Care Organization (Pioneer ACO) Model What it Providers may participate in three- to five- says The Innovation Center’s Pioneer ACO Model is year shared savings programs with Medicare by managing and coordinating care for at least designed to allow organizations with advanced 5,000 FFS Medicare beneficiaries (15,000 care coordination and experience with capitated for most Pioneer ACOs), and demonstrat- payment to rapidly test an ACO model. Pioneer ACO ing improvements in quality and decreases participants must have 15,000 Medicare beneficiaries in expected expenditures. Failure to meet assigned to them. Participating entities are eligible requirements could result in penalties and removal from the demonstration program. for both shared savings and shared losses in all three years of the program. Eligibility for shared savings Who can Providers: An MSSP ACO may include will be based on performance on a set of 65 quality participate physicians in group practices; networks of measures, mirroring those in MSSP. Participants individual providers; partnerships or joint venture arrangements between hospitals and are required to enter into pre-paid population-based providers; or hospitals employing providers. reimbursement arrangements. By the third year, FQHCs may form Pioneer ACOs but can only these ACOs are expected to generate a majority of participate and not independently form an their total revenues from outcomes-based payment MSSP ACO. arrangements. Beneficiaries: Assignment to an MSSP ACO is retroactive based on factors includ- The Innovation Center is currently considering an ing where beneficiaries receive a plurality of Advance Payment Initiative for those ACOs entering primary care. Pioneer ACO assignment may the Medicare Shared Savings Program to test be driven by certain specialty care encoun- whether and how pre-paying a portion of future ters and assignment may be retrospective or prospective. shared saving could increase participation in the Medicare Shared Savings Program. The Innovation Effective MSSP ACO: No later than January 1, 2012. Center is also offering four learning sessions in date(s) Pioneer ACO: Applications were due August 2011 for providers who are interested in forming an 19, 2011; program initiation expected in ACO. The sessions will focus on core competencies Q4 2011. for ACO development, such as improving care Funding Budget neutral; total expected combined delivery to increase quality and reduce costs; using savings estimated at up to $1.5 billion over health information technology and data resources three years. effectively; and building capacity to assume and What MSSP ACO: CMS must issue final regula- manage financial risk. needs to tions implementing the program. Interested be done qualified institutions must submit applications conforming to program requirements. Pediatric Accountable Care Organization Pioneer ACO: Interested entities must submit applications. Selected ACOs will be required Demonstration Project (§2706) to submit data on quality measures and work with other payers to align payment strategies, ACA authorizes a pediatric-specific ACO program for among other program requirements. Medicaid. The ACO requirements articulated in ACA Who’s Centers for Medicare and Medicaid Services include clinical and administrative systems needed to responsible (CMS); participating entities. support evidence-based medicine; coordinated care The These are optional demonstration programs, including the use of telehealth and other enabling bottom up to 180 of which may be funded nationally. technologies; the ability to report quality and cost line Capitated provider organizations in California measures; and the ability to meet patient-centeredness have extensive experience managing risk and may be well-suited to participate. criteria, such as the use of patient and caregiver However, extensive requirements and risk, assessments or the use of individualized care plans. and a perception of limited benefit may limit provider participation, especially in the MSSP Once a process is defined and funding appropriated, ACO program. Lack of alignment between states may apply to participate in the demonstration federal ACO programs, Medi-Cal, and which is scheduled to run from January 1, 2012 to commercial demonstrations will further limit ACOs, appeal. Implementing National Health Reform in California: Payment and Delivery System Changes   | 21 December 31, 2016. Funding for this program has been Table 11. Pediatric Accountable Care Organization authorized but not yet appropriated; see Appendix C Demonstration Project (§2706) for details. What it States may apply for the five-year shared- says savings demonstration program and support the enrollment of children in ACOs. Program Under the Bridge to Reform 1115 waiver, Medi-Cal requirements have not yet been released but is authorized to create ACOs to support high-need are expected to require participants to use children with complex conditions. As the program clinical and administrative systems needed to support evidence-based medicine and develops, the Department of Health Care Services will coordinated care; use health IT and telehealth; need to decide whether it will adopt federal ACO rules report quality and cost measures; and meet patient-centered care criteria. (if it has a choice), undertake a state-based rule-making process to define a Medi-Cal ACO, or provide a Who can States and provider organizations treating participate publicly insured children (regulations and/or framework for its contracted managed care plans to program guidance forthcoming as to which develop their own ACO program for this population. beneficiaries and programs will be included). Effective January 1, 2012 to December 31, 2016. In developing a Medi-Cal ACO program, DHCS date(s) should carefully assess how they can fully leverage and Funding The program is authorized under ACA; extend existing managed care networks. Creating a however, funding has not yet been appropri- program that adds significant administrative, actuarial, ated. Federal budget pressures may prevent the program from receiving fiscal support. and operational activities that do not align with either the federal ACO program or emerging commercial What Federal funding must first be appropriated needs to to support the demonstrations, and program ACO models in California would reduce the program’s be done requirements and/or regulations must be overall effectiveness and cost savings and likely limit issued. Eligible entities (states) would be participation. In addition, program requirements that required to apply through what likely would be a competitive application process. necessitate significant changes to existing network arrangements may prove challenging for many Who’s Centers for Medicare and Medicaid Services responsible (CMS); California Department of Health Care Medi-Cal and commercial providers to meet and could Services. Medi-Cal managed care plans and add to program costs. As an early warning sign, many provider organizations would likely be tasked with executing the program. organizations have voiced concerns that the proposed ACO requirements are too burdensome and do not The If this project is funded, DHCS would need bottom to work closely with hospital and provider create a risk/reward profile that is worth undertaking. line organizations and Medi-Cal managed care plans to establish the shared-savings program States including New York, Oregon, and others for children, enroll them in pilots, and track and report quality, cost, utilization, and other have enacted laws to create ACO demonstrations, measures. The program could serve as a certification programs, or requirements to transition basis for a more widespread rollout of shared savings models for high-need, high-cost Medicaid and other beneficiaries into alternative children with complex conditions, including shared-savings programs. Given the issues described children enrolled in CCS. above and the preliminary reluctance expressed by many providers toward the federal ACO program, as well as decades of experience in risk-based contracting arrangements, policymakers in California should consider how they can align policies to encourage broader participation in shared-savings programs for commercial and government-sponsored insurance programs that are best suited to California’s unique delivery system. 22  |  C alifornia H ealth C are F oundation C. Patient-Centered Medical Homes prospective primary care and community-based While previous provisions describe state-plan options organizations with whom they could enter into to create health homes for beneficiaries with chronic contracts. Given the high-cost, high-need nature of conditions, additional patient-centered medical home these populations, a federally funded demonstration (PCMH) programs have been authorized that include targeting these groups could provide an excellent a broader pool of program participants. These PCMH opportunity for Medi-Cal to test the efficacy of such demonstrations are designed to promote integrated a program, demonstrate value and sustainability, and service delivery, team-based care, and flexible models consider more widespread rollout as an alternative of care management. Under ACA, PCMH pilots will delivery and reimbursement model to care for focus on incentives and reimbursement arrangements high-cost, high-need individuals and populations. that emphasize primary care case management, disease management, care coordination, and the use of Table 12. Community Health Team Support for physician extenders and other home- and community- Patient-Centered Medical Homes based care providers. (§3502, §10321) What it This program provides grants for (or contracts Community Health Team Support says with) eligible entities to establish community- based interdisciplinary, inter-professional for Patient-Centered Medical Homes teams (“health teams”) to support primary (§3502, §10321) care practices providing care to beneficiaries with chronic conditions, including 24-hour ACA authorizes a program to provide grants to or care management and support during transi- enter into contracts with eligible entities to establish tions in care settings. community-based interdisciplinary, inter-professional Who can States or state-designated entities (SDEs); “health teams.” Although not currently funded participate participating practices must be primary care providers. (see Appendix C for details), if implemented, the demonstration would require health teams to provide Effective To be determined. date(s) medical home services to eligible individuals with chronic conditions, coordinate their care, improve What CMS has yet to issue program guidance or needs to an application; the state or its SDE will need access to services, share information across settings, and be done to submit an application to participate once promote effective prevention, treatment, and patient the program is launched. management strategies. States, state-designated entities A primary care provider who contracts with (SDEs), and Indian tribes or tribal organizations may a care team must: (1) provide a care plan to the care team for each patient participant; apply, and must provide capitated payments to primary (2) provide access to participant health care providers (including obstetrics and gynecology records; and (3) meet regularly with the care team to ensure integration of care. practices) within the hospital service areas served by the eligible entities. Awardees must also submit a plan Who’s CMS; California DHCS. responsible for achieving long term financial sustainability within three years. The Medi-Cal could serve as the lead agency and bottom apply with Medi-Cal managed care organiza- line tions and focus initiatives in high-need areas. While the demonstration is not specific to Medicare Many of these plans already have capitated or Medicaid, the participants must provide services to contracts in place with primary care and other provider organizations, and they could individuals with specified chronic conditions. States use this demonstration to test alternative and SDEs could therefore target hospital service areas contracting mechanisms within their existing or expanded networks. with large pockets of Medicaid and dual-eligible beneficiaries with chronic conditions, and identify Implementing National Health Reform in California: Payment and Delivery System Changes   | 23 Medicaid Long Term Care ACA includes several provisions targeted to making long term care accessible and affordable, and to shift care from institutional to community settings. New options and incentives will be available for Medicaid home- and community-based services (HCBS), providing authority and funding for a series of demonstration projects and pilot programs that develop, integrate, and pay for home- and community-based long term care services. Medicaid is the primary payer for 64% of the almost 1.4 million nursing home residents nationwide.66 In California, over 100,000 residents are in nursing homes and, as the senior population is expected to triple in the next 40 years, nursing home capacity will need to expand considerably. Currently, Medi-Cal is the primary payer for 67% of California nursing home residents and spends $13.7 billion annually on long term care, accounting for nearly one-third of all Medi-Cal expenditures.67 The growing cost pressures of long term institutional care are daunting. One study suggests that the Medicaid expenditures needed to support one adult in a nursing home are almost enough to support three adults with physical disabilities through HCBS.68 Fostering opportunities to provide HCBS-supported care options continues to be attractive both in terms of potentially reducing Medi-Cal costs around institutional stays, and for patient satisfaction and quality of life. However, these HCBS options present their own challenges: they require considerable up-front investment, are resource-intensive, and can instigate the “woodwork effect” where families currently taking care of family members may move dependents into new HCBS programs, further driving up costs. Thus, while participation in ACA long term care programs could allow Medi-Cal to increase patient care options by leveling the playing field between institutional and home-based services, the programs need to be considered carefully. A list of long term care demonstrations and state plan options is provided in Appendix C. 24  |  C alifornia H ealth C are F oundation V. Transparency Provisions ACA contains both general transparency n The Independence at Home Demonstration provisions and requirements specific to individual Program requires participating entities to report programs and demonstrations. This discussion focuses quality measures to the HHS Secretary. These on ACA’s transparency and reporting requirements measures will be incorporated into program linked to specific payment and delivery system evaluations and reports to Congress that provide provisions. These requirements are quite detailed an analysis of the program’s impact on care and include: reporting of financial performance and coordination, expenditures, access to services, and program expenditures; quality of care, process, and service quality. outcome measures; patient experience and patient n The Hospital Value-Based Purchasing program safety provisions; and other components. Much of requires hospitals to report results of each perfor­ the reported data will be posted on publicly available mance measure, and must also report outcomes, websites such as CMS’s Hospital Compare, where clinical processes of care, patient experience, the data can be used to identify higher- or lower- hospital-acquired conditions, and patient safety performing institutions on a range of measures, such measures. as hospital-associated infection rates and readmission rates.69 Reported data may also be used to determine n The Medicare Shared Savings Program and reimbursement, as is the case in the proposed MSSP Pioneer ACO demonstrations have extensive ACO program. reporting requirements described in initial federal guidance, including 65 quality measures. ACOs While many ACA initiatives contain transparency would also provide organizational information provisions to track changes in cost and quality, a regarding provider participation, governing body framework for collectively using these data to support representatives, leadership, financial information, meaningful policy and purchaser decisionmaking and distribution of shared savings among has not been defined and could significantly advance participants. Total payments to ACOs would also beneficiary, purchaser, and public policy changes. be based on publicly reported quality and outcome Federal and state websites posting these data are measures. helpful, but unless the data are actionable and n Other programs with transparency components incorporated into purchaser and policy decisionmaking, include: Pay-for-Performance and Payment the full utility of publicly reported measures will Bundling Pilots; Patient-Centered Medical Home not be realized. and Community Transformation demonstrations; Medicare Payment Adjustment for Hospital- A. ransparency Components of ACA T Associated Infections (and for potentially preventable Payment and Care Delivery Programs hospital readmissions); among others. The transparency requirements associated with each individual ACA program tend to be focused on reporting quality, utilization, and financial information. Examples include: Implementing National Health Reform in California: Payment and Delivery System Changes   | 25 B. eveloping a Cohesive Transparency D State policymakers and program staff should consider and Information Framework how to effectively integrate the significant quantity The substantial reporting requirements contained of data that will be generated under these programs within ACA will be layered on top of existing state into the existing state reporting framework. For and federal reporting requirements, some of which example, OSHPD and CDPH should assess their will likely need to be brought into alignment to current reporting requirements, perform gap analyses reduce administrative burdens to hospital and provider comparing their requirements with existing and organizations and encourage their participation. emerging ACA (and other federal) programs, and Aligning state and federal reporting requirements develop a roadmap to align reporting processes with would also allow these institutions to devote more the federal government. If this is not done, reporting resources to resolving quality and patient safety issues compliance, accuracy, and completeness will suffer as identified through public reporting. institutions stretch resources to meet state and federal mandates, and fewer entities may decide to participate Some of the existing reporting requirements upon in optional care redesign and alternative reimbursement which ACA’s requirements will be layered include: programs that add to their reporting burden. n Voluntary reporting efforts for hospitals under Information generated by programs such as the CHART, a publicly available hospital quality Medicaid Health Home State Plan Option, or the “report card.” Currently, more than 240 hospitals state’s 1115 waiver programs should also be considered. representing 86% of California’s daily census Making these data available to conduct analyses and participate in the program.70 research would support better assessment of programs n OSHPD-required data from health facilities who and participants, inform policy decisions, and promote must report: quarterly summary financial and successful implementations that may be worth statistical data under Section 12874 of the Health replicating broadly. Using them to drive decisions and Safety Code; hospital charges; and fair pricing regarding participation in qualified health plans, value- and charity care policies, among others.71, 72 based purchasing, insurance design, and incentive programs would likely drive significant improvements n New CDPH reporting programs as a component of in outcomes and processes associated with publicly licensing and certification, including requirements reported measures. for publicly reporting surgical site infections (SSIs) under Health and Safety Code 1288.55.73 Individually, ACA requirements can provide useful information to help guide program development and document meaningful changes (or failures) associated with each program. Collectively, these provisions could be used to package data into useful and actionable information, guiding employer and individual purchasing decisions through California’s health benefit exchange, and contributing to value-based insurance designs. 26  |  C alifornia H ealth C are F oundation VI. Observations and Conclusions ACA’s patchwork quilt of delivery n Much of the burden to reduce costs and improve reform pilots and the “building block” approach care in the Medicaid program will be borne by outlined by the federal government provides important managed care plans, which will be increasing their levers and experiments to test and learn from. enrollments under both ACA and the Bridge to However, California cannot rely on ACA alone to Reform 1115 waiver. Growing pressure on California resolve longstanding cost and quality problems in lawmakers to make additional cuts in state spending, the health care delivery system. The state will need and on federal policymakers to reduce the federal to create and align policies and programs designed to deficit may result in further cuts to entitlement increase efficiencies and stabilize costs through a mix programs such as Medicaid. These ACA initiatives of alternative reimbursement models and care delivery will therefore require significant policy, financial, reform approaches. and programmatic support if they are to enable the kinds of reforms envisioned by the state and Other conclusions include the following: federal government. n Mandatory ACA reimbursement changes will have n California’s decades-long experiment with managed a significant impact on hospital systems, squeezing care also raises the question as to what makes ACA margins and accelerating both cost-shifting onto and its myriad demonstrations different this time the commercial market and vertical and horizontal around. With the less-than-enthusiastic reception by consolidation. Safety-net hospitals in particular providers and hospitals to the federal ACO program, will be less able to shift costs to commercial payers state policymakers should consider how they can due to their payer mix. Consequently, they may foster greater accountability for coordinating care find their financial position jeopardized and be and containing costs across settings, and supporting faced with reducing or eliminating services at a broader adoption of shared-savings arrangements time when demand for them is expected to increase in the private health insurance market and in under federal health reform. Policymakers will Medi-Cal. California policymakers can learn both have to carefully consider policy options, both with from other states that will be requiring Medicaid respect to premium pressures in the commercial enrollment into their state-based accountable care market, and financial problems that many safety-net organizations, and from commercial ACO-like hospitals will face. demonstrations currently underway, and should consider how California-ACO models might be n ACA’s demonstration programs and pilots to broadly rolled out in public coverage programs. improve care delivery are patchwork in nature and fall short of a comprehensive, permanent package of health care delivery reform efforts. While this is largely attributable to the limitations of the legislation, the likely result will be a set of demonstrations that point toward needed outcomes, without a policy mechanism for moving the entire industry toward the needed end goal of generating better health care with less money. Implementing National Health Reform in California: Payment and Delivery System Changes   | 27 n Finally, while many ACA initiatives contain transparency provisions to track changes in cost and quality, a framework for collectively using these data to support meaningful policy and purchaser decisionmaking has not been defined. To truly drive value-based purchasing and insurance design, pressure in the FFS Medicare program in the form of payment reductions needs to coincide with pressure on commercial purchasing. A cohesive transparency framework that transforms data into actionable information for better decisionmaking would support purchasing decisions such as those made in health benefit exchanges, driving value-based purchasing and insurance design through the exchange. To maximize the likelihood and impact of lasting reform, state policymakers and program leaders should take full advantage of the demonstrations under ACA, the Bridge to Reform 1115 waiver, and commercial efforts; study their impact; and consider how successful initiatives can be instituted in state-supported coverage programs. To do so will require careful attention to the needs, limitations, and resources of Medi-Cal managed care organizations, safety-net hospitals, clinics, and others who provide the majority of care for California’s safety-net populations. Ultimately, the burden — and opportunity — of health reform under ACA may fall to providers and hospitals to navigate the landscape and support real and lasting changes to how Californians pay for and receive health care. 28  |  C alifornia H ealth C are F oundation Appendix A: List of Interviews FEDERAL GOVERNMENT Melanie Bella, Director, Federal Coordinator Care Office (Duals Office), Centers for Medicare and Medicaid Services Richard Gilfillan, head of CMS Innovation Center, and a former head of the Geisinger Health Plan in Pennsylvania Jim Hester, Senior Advisor to CMS Innovation Center STATE GOVERNMENT Toby Douglas, Medi-Cal Director, California Department of Health Care Services David Maxwell-Jolly, Undersecretary, California Health and Human Services Agency CALIFORNIA STAKEHOLDERS AND THOUGHT LEADERS Duane Dauner, President and CEO, California Hospital Association Jay Gellert, CEO, Health Net Howard Kahn, CEO, L.A. Care Health Plan Ralph Silber, CEO, Community Health Center Network Wright Lassiter, CEO, Alameda County Medical Center Arnold Millstein, Director, Clinical Excellence Research Center Implementing National Health Reform in California: Payment and Delivery System Changes   | 29 Appendix B: Center for Medicare and Medicaid Innovation Initiatives The following table lists Innovation Center initiatives implemented as of June 2011. INITIATIVE DESCRIPTION The Partnership for The Partnership for Patients is a public-private partnership that aims to support physicians, Patients nurses, and other clinicians working in and out of hospitals to make patient care safer and to support effective transitions of patients from hospitals to other settings. The two goals of the new partnership are to decrease preventable hospital-acquired conditions by 40% by 2013 (as compared to 2010 numbers) and to decrease overall hospital readmissions by 20% by 2013. CMS estimates achieving these goals could save up to $35 billion across the health care system, including up to $10 billion in Medicare savings, over the next three years. Hospital Engagement The Partnership for Patients will contract with large health care systems, associations, state Contractors organizations, or other interested parties to support hospitals in the hard work of redesigning care processes to reduce harm. “Hospital Engagement Contractors” will be asked to conduct the following: • Design intensive programs to teach and support hospitals in making care safer. • Conduct trainings for hospitals and care providers. • Provide technical assistance for hospitals and care providers. • Establish and implement a system to track and monitor hospital progress in meeting quality improvement goals. State Demonstrations The overall goal of the State Demonstrations to Integrate Care for Dual-Eligible Individuals is to to Integrate Care for identify and validate delivery system and payment integration models that can be rapidly tested Dual-Eligible Individuals and, upon successful demonstration, replicated in other states. In April 2011, CMS awarded (contracts awarded) contracts to up $1 million each to 15 states to develop a demonstration proposal around how the state will structure, implement, and evaluate a model aimed at improving the quality, coordination, and cost-effectiveness of care for dual-eligible individuals. Federally Qualified Applications from eligible FQHCs for the FQHC Advanced Primary Care Demonstration project Health Center (FQHC) were due September 9, 2011. This demonstration project, operated by CMS in partnership with Advanced Primary Care the Health Resources Services Administration (HRSA), will test the effectiveness of doctors and Demonstration Projects other health professionals working in teams to improve care for up to 195,000 Medicare patients. The FQHC Advanced Primary Care Practice demonstration will show how the patient-centered medical home model can improve quality of care, promote better health, and lower costs.  Multi-Payer Advanced Eight states were selected to participate in a demonstration project to evaluate the effectiveness Primary Care Practice of doctors and other health professionals across the care system working in a more integrated Demonstration fashion and receiving a common payment method from Medicare, Medicaid, and private health (pre-ACA; contracts plans.74 awarded) Medicaid Health Home This new state plan option allows patients enrolled in Medicaid with at least two chronic condi- State Plan Option tions to designate a provider as a “health home” to help coordinate treatments for the patient. States that implement this option will receive enhanced financial resources from the federal government to support “health homes” in their Medicaid programs. The Innovation Center will be assisting with learning, technical assistance, and evaluation activities. Pioneer Accountable Care The Pioneer ACO Model is designed to allow organizations with advanced care coordination Organizations Model and capitated payment experience to rapidly test an ACO model. Pioneer ACO participants must have 15,000 Medicare beneficiaries assigned to them. Participating entities are eligible for both shared savings and shared losses in all three years of the program. Eligibility for shared savings will be based on performance on a set of 65 quality measures (quality reporting require- ments mirror those in the Medicare Shared Savings Program (MSSP)). Participants are required to enter into pre-paid population-based reimbursement arrangements. By the third year, these ACOs are expected to generate a majority of their total revenue from outcomes-based payment arrangements. At this time, Medicare FFS payments will be reduced to 50% with per-beneficiary per-month payments covering the rest of estimated payments. CMS may use findings from the Pioneer ACO Model to inform the MSSP. 30  |  C alifornia H ealth C are F oundation INITIATIVE DESCRIPTION Bundled Payments The Bundled Payment for Care Improvement initiative will test episode-based payment for acute for Care Improvement care and associated post-acute care, using both retrospective and prospective bundled payment Initiative methods. Participating providers will have a degree of flexibility in selecting conditions to bundle, developing the health care delivery structure, and determining how payments will be allocated among participating providers. Applicants propose a target price, which would be set by apply- ing a discount to total costs for a similar episode of care as determined from historical data. Participants in these models would be paid for their services under the traditional FFS system; after the conclusion of the episode, the total payments would be compared with the target price. Participating providers may then be able to share in those savings. ACO Advance Payment The Innovation Center is currently considering an Advance Payment Initiative for those ACOs Initiative (proposed) entering the Medicare Shared Savings Program to test whether and how pre-paying a portion of future shared saving could increase participation in the Medicare Shared Savings Program. Implementing National Health Reform in California: Payment and Delivery System Changes   | 31 Appendix C: Funding Opportunities to Promote Payment and Delivery System Innovation REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT a. Medicare Care Delivery and Payment Reforms Section 3001 Establishes a program The program aims to October 1, 2012. CMS promulgated final California public hospitals under which value-based be budget neutral or to regulations on April 29, with the exception of most Hospital Value-Based incentive payments are promote cost savings. 2011. UC facilities are less likely Purchasing Program made in a fiscal year to to have adopted EHRs than (Medicare) Incentives are paid from a acute care hospitals that other hospitals—they likely reduction in DRG payment meet a set of performance will be challenged to meet for all hospitals. standards across a fiscal requirements which will year. result in DRG reductions from Medicare. Performance measures will cover at least the following five specific conditions or procedures: acute myocar- dial infarction (AMI); heart failure; pneumonia; surger- ies, as measured by the Surgical Care Improvement Project; and hospital- associated infections. Section 3007 Mandates development Budget neutral. Phased in over two years CMS issued final regula- and implementation of a beginning in 2015. tions on November 29, Value-based payment budget-neutral payment 2010. modifier under the system to adjust the physician fee schedule Medicare physician fee schedule based on the quality and cost of the care they deliver. Section 3008 Mandates a Medicare The program aims to be October 1, 2014. payment adjustment for budget neutral or promote Medicare Payment hospital-acquired condi- cost savings. The CMS Adjustment for Hospital- tions. Hospitals in the top Office of the Actuary Acquired Conditions 25th percentile of rates estimates $3.2 billion in (Medicare) of hospital-acquired Medicare savings from and other high-cost and through 2019. common conditions will face Medicare penalties. 32  |  C alifornia H ealth C are F oundation REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT a. Medicare Care Delivery and Payment Reforms (cont.) Section 3022 Allows providers organized The program aims to No later than January A Notice of Proposed The DMHC Financial as accountable care be budget neutral or to 1, 2012. Rulemaking was issued Solvency Standards Board Medicare Shared Savings organizations (ACOs) that promote cost savings. April 7, 2011. The is currently considering Program (“Accountable voluntarily meet quality comment period closed how it may regulate ACOs Care Organizations”) Providers are paid standard thresholds to share in the June 6, 2011. in their various forms. Medicare fee-for-service costs savings they achieve rates but have the oppor- Medi-Cal pediatric ACO in the Medicare program.75 tunity to share in savings could be formed to This new category of and/or losses. support high-need pediatric Medicare contactors will be population. able to contract with CMS to share in the Medicare Medi-Cal managed care savings which result organizations could help from using new patient drive adoption, but need care models that coordi- to consider alignment with nate care, particularly for current market offerings beneficiaries with chronic and proposed federal ACO conditions, or those using requirements. an episode-based approach to managing health care services, including the important transitions from hospitals to nursing home or home-based care with community support. Section 3025 (as modified Mandates a Medicare This provision is intended October 1, 2012. CMS issued final regula- The majority of California by Section 10309) payment adjustment for to produce savings. tions on August 18, 2011. public hospitals and almost hospitals paid under the all non-UC public hospitals Medicare Payment The CMS Office of the inpatient prospective have worse than average Adjustment for Acute Care Actuary estimates $8.2 payment system (IPPS) readmission rates. While Hospitals (Medicare) billion in Medicare savings for potentially preventable Medicare typically repre- from 2013 to 2019. readmissions for conditions sents 10% to 15% of with risk-adjusted readmis- business, financial penal- sion measures that are ties could be substantial currently endorsed by the enough to warrant action National Quality Forum. to support better discharge planning and care coordina- tion responses. Implementing National Health Reform in California: Payment and Delivery System Changes   | 33 REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT a. Medicare Care Delivery and Payment Reforms (cont.) Section 5501 (as modified 10% Medicare bonus Paid for through Medicare. January 1, 2011 through CMS issued final regula- Approximately 1.6 million by Section 10501) payment for primary care December 31, 2015. tions on November 29, of California’s 4.6 million The CMS Office of the services (office and other 2010. Medicare beneficiaries 10% Medicare Bonus Actuary estimates that this outpatient visits) furnished are enrolled in Medicare Payment for Primary Care provision will cost $1.3 by primary care physi- Advantage plans; bonus (Medicare) billion from 2010 to 2019. cians, nurse practitioners, calculations do not include 10% Medicare Bonus for clinical nurse specialists, charges for services Some Surgical Procedures and physician assistants, provided under Medicare (Medicare) provided at least 60% of Advantage. their Medicare-allowed charges in a prior period were for primary care services.76 10% Medicare bonus for major surgical procedures for general surgeons providing care in health professional shortage areas.77 b. Medicare Pilots and Demonstrations Section 3021: Innovation The Pioneer ACO Model is Funded through the The deadline for final CMS issued a Request for Prevalence of capitation Center designed to allow organiza- Innovation Center. applications was August Applications on May 17, and emerging commercial tions with advanced care 19, 2011. 2011. ACO pilots in the state Pioneer ACO The program is intended coordination and capitated should support demonstra- to be budget neutral or CMS intends to implement payment experience to tions in California and allow generate savings. CMS the program in Q3/Q4 of rapidly test an ACO model. providers and hospitals to estimates the program may 2011. Participants will receive meet payer participation save up to $430 million standard Medicare FFS requirements. over three years. rates for the first two years and are eligible for both shared savings and losses in all three years of the program. In the third year, Medicare FFS payments will be reduced to 50% with per-beneficiary per-month payments cover- ing the rest of estimated payments. 34  |  C alifornia H ealth C are F oundation REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT b. Medicare Pilots and Demonstrations (cont.) Section 3021: Innovation This demonstration will Funded through the Applications were accepted CMS issued a Request for The APCP’s focus on Center test whether payment of a Innovation Center. through September 9, Applications on June 6, Medicare patients might monthly care coordination 2011. 2011. be a challenge for many Federally Qualified Health CMS estimates it will pay fee assists participating California clinics, whose Center (FQHC) Advanced $42 million to up to 500 FQHCs in providing and patient mix is predomi- Primary Care Practice FQHCs over three years. expanding the delivery nantly Medi-Cal, indigent, (APCP) Demonstration of continuous, compre- or uninsured. Recently hensive, and coordinated funded health home initia- primary health care. tives under the California Endowment should support increased participation. Section 3021: Innovation The Bundled Payment for This provision is intended CMS anticipates that the CMS issued an application Center Care Improvement initia- to generate cost savings. program will launch in early and guidance on August tive will test episode-based 2012. Participants will have 23, 2011. Bundled Payments for Care payment for acute care and a three-year performance Improvement Initiative associated post-acute care, period with the possibil- using both retrospective ity of extending for an and prospective bundled additional two years. payment methods. Section 3023 Establishes a voluntary This provision is intended No later than January 1, California providers are pilot program to test and to be budget neutral. 2013. participating in a number National Pilot Program evaluate Medicare Part of non-Federal bundled on Payment Bundling A and Part B payment payment pilots, the results (Medicare) bundling methodologies for of which should help integrated care during an inform potential policy and episode of care provided program implications for to an applicable beneficiary the Medi-Cal program. around a hospitalization. The program aims to improve the coordination, quality, and efficiency of health care services. The HHS Secretary will establish eight applicable medical conditions for the program plus required quality measures. Implementing National Health Reform in California: Payment and Delivery System Changes   | 35 REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT b. Medicare Pilots and Demonstrations (cont.) Section 3024 Establishes a Medicare Transfer from the Medicare No later than January 1, Medicare Advantage and demonstration program to Part A and B Trust Funds. 2012, for a period of up to PACE plans are excluded, Independence at Home test a payment incentive three years. which will limit participa- Demonstration Program $5 million per year for FYs and service delivery model tion by some California (Medicare) 2010 through 2015. that utilizes physician- providers. (primarily primary care Participating entities may physicians) and nurse share in savings in excess practitioner-directed of 5%. home-based primary care teams designed to reduce expenditures and improve health outcomes for applicable beneficia- ries (beneficiaries who have two or more chronic illnesses, a nonelective hospital admission within the past 12 months, previ- ous acute or subacute rehabilitation services, and two or more functional dependencies). Section 3026 This demonstration Transfer from the Medicare Program launched April 12, CMS issued a Solicitation Local governmental area program provides funding Part A and B Trust Funds. 2011. for Applications on April 12, agencies on aging may be Community-Based Care to test models for improv- 2011. eligible to apply as CBOs. Transition Program $500 million for FYs 2011 ing care transitions for to 2015. high-risk Medicare fee-for- service beneficiaries. The goals of the program are to improve transitions of beneficiaries from the inpatient hospital setting to other care settings, to improve quality of care, to reduce readmissions for high-risk beneficiaries, and to document measureable savings to the Medicare program. 36  |  C alifornia H ealth C are F oundation REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT b. Medicare Pilots and Demonstrations (cont.) Section 3140 This demonstration The program is intended to Not specified. program authorizes the be budget neutral. Medicare Hospice HHS Secretary to allow Concurrent Care Medicare beneficiaries in Demonstration Program up to 15 sites to receive hospice services as well as other Medicare services at the same time for up to three years. Section 3510 Reauthorizes demonstra- $3.5 million appropriated FY 2010. Total grant period The grant application was Northeast Valley Health tion programs to provide for FY 2010, and such must not exceed four released May 11, 2010. Corporation in San Patient Navigator Program patient navigator services sums as may be neces- years. Applications were due Fernando, California (Medicare) within communities to sary for each of FYs 2011 June 18, 2010. received one of six patient assist patients overcome through 2015. navigator grants in 2008. barriers to health services with an emphasis on Medicare beneficiaries with chronic conditions. Section 10326 Directs the HHS Secretary This provision is intended No later than January 1, to conduct separate pilot to be budget neutral. 2016. Pilot Testing Pay-for programs for inpatient Performance Program rehabilitation facilities, for Certain Providers inpatient psychiatric (Medicare) hospitals, long term care hospitals, PPS-exempt cancer hospitals, and hospice providers to test the implementation of a value-based purchasing program. Implementing National Health Reform in California: Payment and Delivery System Changes   | 37 REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT c. Medicaid Care Delivery and Payment Reforms Section 2702 States cannot receive CMS estimates that the July 1, 2011; however, CMS issued final regula- The state will need to federal match to reimburse impact of the rule will be a CMS will not enforce tions on June 6, 2011. submit a state plan amend- Medicaid Program; ment to implement these Medicaid providers for net $2 million in savings for compliance until July 1, Payment Adjustment provisions. hospital-acquired conditions FY 2011 ($1 million for the 2012. for Provider-Preventable specified in the regulation. federal share and $1 million Conditions Including Health The state/OSHPD may need States may expand the for the state share), with Care-Acquired Conditions to build a provider reporting list of applicable provider- an aggregate federal cost system capable of meeting preventable conditions for savings of $46 million for program requirements. which Medicaid payment FYs 2011 through 2019. will be prohibited. Section 2703 This program provides Health home services Available beginning CMS issued a State California needs to submit states the option to offer are reimbursed at 90/10 January 1, 2011. Medicaid Director Letter a state plan amendment to Medicaid State Plan Option implement this provision. health home services Federal match for the first on November 16, 2010. to Provide Health Homes California should consider to eligible individuals eight quarters of the state’s for Chronically Ill Patients whether an existing health with chronic conditions health home program. who select a designated home, disease manage- The CMS Office of the ment, or targeted case health home provider. Actuary estimates that management program The chronic conditions federal costs will be would be eligible to transfer include a mental health approximately $1.1 billion under this provision, thus condition, a substance use from 2010 to 2019. drawing a higher FMAP rate disorder, asthma, diabetes, heart disease, and being for the first eight quarters. overweight. Medicaid beneficiaries participating in the health home must have at least two chronic conditions, one chronic condition and be at risk for another, or one serious and persistent mental health condition. 38  |  C alifornia H ealth C are F oundation REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT c. Medicaid Care Delivery and Payment Reforms (cont.) Section 1202 Requires states to pay Funding appropriated. January 1, 2013 through California will need to (of the Health Care and physicians for primary December 31, 2014. determine whether it For services furnished in Education Reconciliation care services (evaluation can leverage the feder- calendar years (CYs) 2013 Act) and management services ally funded increased and 2014,100% federal (E/M) and immunization reimbursement to expand Medicaid Reimbursement funding for the difference administration) furnished its provider network. for Primary Care between the payment in 2013 and 2014 at a rates required under this Since the enhanced FMAP rate that is no less than provision and the level of will expire at the end of CY 100% of the Medicare payment in effect on July 2014, California will need payment rate. (If greater, 1, 2009. to determine whether it the Medicare payment rate will continue to reimburse in effect in 2009 is to be Regular federal matching Medicaid primary care used.) applies for any payment providers for these proce- amounts above the Medicaid managed care dures and services at the minimum requirement. plans must make payments enhanced rate and assume to physicians consistent the state’s share of these with these minimum additional costs in CY 2015 payment rates, regardless and beyond. of the manner in which payments are made by the plans, including capitation payments. Limited to physicians with a primary specialty desig- nation of family medicine, general internal medicine, or pediatric medicine. d. Medicaid Pilots and Demonstrations Section 3021: Innovation CMS is interested in States can share in Letter of intent was due CMS released a State California must determine Center testing two payment savings. October 1, 2011. Medicaid Director letter on whether it is interested models for states inter- July 8, 2011. in testing either or both Financial Models to Expected Implementation ested in integrating financial models. To apply, Support State Efforts date: Late 2012. primary, acute, behavioral California must first submit to Integrate Care for health, and long term a Letter of Intent and Medicare-Medicaid services and supports subsequently work with Enrollees for their dual-eligible CMS to determine whether population:capitation and it meets established criteria. managed fee-for-service (FFS). Implementing National Health Reform in California: Payment and Delivery System Changes   | 39 REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT d. Medicaid Pilots and Demonstrations (cont.) Sectin 3021: Innovation CMS is interested in Unknown. Fall 2011. Process for participation is Center working with independent still under development. organizations to partner Improving Readmission with interested nursing Rates for Dual Eligible facilities. The organizations Nursing Home Residents would work with nursing homes to test interven- tions such as using nurse practitioners in nursing facilities, supporting transi- tions between hospitals and nursing facilities, and implementing best practices to prevent falls, pressure ulcers, urinary tract infections, or other events that lead to poor health outcomes and expensive hospitalizations. e. Grants and Contracts Section 3021: Innovation The overall goal of this $15 million. 12 months from the date CMS issued the solicita- California received a $1 Center initiative is to identify and of the signed contract tion in December 2010. million grant to design a $1 million contracts validate delivery system between CMS and the Awardees were announced demonstration proposal. State Demonstrations awarded to 15 states and payment integra- state (April or May 2011, in April 2011. to Integrate Care for each: California, tion models that can be depending on the state). Dual-Eligible Individuals Colorado, Connecticut, rapidly tested and, upon Massachusetts, Michigan, successful demonstration, Minnesota, New York, replicated in other states. North Carolina, Oklahoma, The primary outcome of Oregon, South Carolina, the initial design period Tennessee, Vermont, will be a demonstration Washington, and proposal that describes Wisconsin. how the state would structure, implement, and evaluate a model aimed at improving the quality, coordination, and cost- effectiveness of care for dual-eligible individuals. 40  |  C alifornia H ealth C are F oundation REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT e. Grants and Contracts (cont.) Section 3021: Innovation The Innovation Center $500 million through the June 22, 2011. CMS issued a Solicitation California should assess Center seeks entities to provide Partnership for Patients. for Proposals on June 22, whether any state institu- technical assistance to 2011. tions should seek technical Hospital Engagement hospitals to improve the assistance. Contractors quality of care. Eligible applicants include large systems, associations, state organizations, and other interested parties. The selected entities, known as hospital engage- ment contractors (HECs), will design and conduct various types of training events (e.g., webinars, meetings, conferences) for hospitals. The trainings will focus on develop- ing and evaluating quality improvement projects. The HECs are encouraged to target the 10 areas of focus of the Partnership for Patients but can also target additional conditions. Section 4201 (as modified Establishes a competitive Discretionary program. FYs 2010 to 2014. The Centers for Disease States, as well as state- by Section 10403) grant program for states Control issued a Request designated entities, local $900 million is available and other eligible entities, for Applications in May governments, nonprofit Community Transformation through the Prevention including national networks 2011. Applications were organizations, and others Grants (CTGs) and Public Health Fund of community-based due July 15, 2011. are eligible to apply. The (appropriated). organizations (CBOs), to list of California entities promote individual and that filed Letters of Intent community health and to apply can be found on prevent the incidence of the CDC website. chronic disease. Programs can focus on weight issues and obesity, tobacco use, mental illness, or other activities that are consistent with the goals of promoting healthy communities. Implementing National Health Reform in California: Payment and Delivery System Changes   | 41 REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT e. Grants and Contracts (cont.) National Dissemination Grant funding for national Discretionary program. FYs 2011 to 2016. The Centers for Disease In some cases, there are and Support networks of CBOs. These Control issued a Request opportunities for sub-recip- for Community $4.2 million annually for national networks will for Applications in June ient funding to local Transformation Grants five years. support the efforts of the 2011. Applications were communities. (CTGs) CTG program by funding Funded through the due July 22, 2011. national networks of Prevention and Public community-based organiza- Health Fund. tions to disseminate and provide for the replication of successful program models and activities. National networks of CBOs with activities in at least 85% of U.S. states and territories are eligible to apply. Minority-serving organizations that have local affiliates and chapters in at least four states and have the ability to reach at least 30% of their selected racial and ethnic population are also eligible to apply for funding. Section 5604 Authorizes grants for $50 million was authorized FYs 2010 to 2014. Grants were awarded on The following entities in coordinated and integrated for FY 2010. Sums deemed September 24, 2010. California received grants: Co-Locating Primary and services through the necessary are authorized Alameda County Behavioral Specialty Care co-location of primary and for FYs 2011 to 2014. Health Care Services, specialty care in commu- Asian Community Mental nity-based mental and Health Board, County of behavioral health settings. San Mateo, Glenn County Health Services Agency, and Tarzana Treatment Centers Inc. 42  |  C alifornia H ealth C are F oundation REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT f. Programs Authorized but Not Appropriated Section 2704 This demonstration No funds have been appro- No later than January 1, program will test whether priated. 2012. Integrated Care Around a a bundled payment for Hospitalization (Medicaid) integrated care around a hospitalization, includ- ing physician services, improves quality and reduces expenditures. Section 2705 This demonstration project Funds as necessary to FY 2010 to FY 2012. will allow up to five partici- operate the program were Medicaid Global Payment pating states to adjust their authorized but not appropri- System Demonstration current payment structure ated. Project for safety-net hospitals from a fee-for-service model to a global capitated payment structure. Section 2706 This demonstration project Funds as necessary to January 1, 2012 to While CMS has yet to will allow qualified pediatric operate the program were December 31, 2016. launch this program, Pediatric Accountable providers to be recognized authorized but not appropri- California is considering Care Organization and receive payments as ated. using 1115 waiver authority Demonstration Project accountable care organi- to create pediatric ACOs to Participating entities will be zations (ACOs) under support high-need children eligible for shared savings. Medicaid. The pediatric with complex condi- ACO would be required to tions. DHCS has initiated meet certain performance a Request for Proposal guidelines. process to assess potential pediatric ACO participants for the California Children’s Services program. Implementing National Health Reform in California: Payment and Delivery System Changes   | 43 REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT f. Programs Authorized but Not Appropriated (cont.) Section 3502 (as CMS would provide Discretionary program; Undetermined. In order to participate in modified by Section grants or contracts to no funds have been the program, the state 10321) eligible entities to estab- appropriated. must submit an application lish community-based to the HHS Secretary, and Community Health Teams interdisciplinary, inter- meet federal requirements. to Support the Patient- professional teams (‘‘health Alternatively, the state Centered Medical Home teams’’) to support primary may designate a state- care practices provid- designated entity to act on ing care to beneficiaries its behalf. with chronic conditions. Participating providers will be reimbursed through capitated payments. Eligible entities include a state, a state-designated entity, or an Indian tribe or tribal organization. Section 3503 This section establishes a Funds have not been No later than May 1, 2010. grant program for eligible appropriated. Grants to Implement entities to implement Medication Management medication management Services in Treatment of services provided by Chronic Disease licensed pharmacists, as a collaborative, multidisci- plinary, inter-professional approach for the treat- ment of chronic diseases for targeted individuals. The goal is to improve the quality of care and reduce overall costs in the treat- ment of such diseases. Participation requires an annual comprehensive medication review by a licensed pharmacist or other qualified provider and follow-up interventions. 44  |  C alifornia H ealth C are F oundation REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT g. Long Term Care Provisions (Options for State Medicaid Programs) Section 2401 State plan amendment 6% FMAP increase. The October 1, 2011. CMS issued proposed California would need option to provide coverage CMS Office of the Actuary regulations on February 25, to submit a state plan Medicaid Community First of home- and community- estimates federal expendi- 2011. amendment to offer these Choice Option based attendant services tures of $23.5 billion from services. and supports, such as 2010 to 2019. assistance to accomplish activities of daily living, to those who meet the state’s nursing facility clinical eligi- bility standards. Section 2402 Simplify provision of home- Regular match rate. April 1, 2010. CMS issued a State California currently offers and community-based Medicaid Director Letter HCBS services through Home- and Community- The CMS Office of the services through a state August 6, 2010 (SMDL # a waiver. California could Based Services State Actuary estimates federal plan option rather than 10-015). take advantage of the state Plan Options expenditures of $1.6 billion pursuing more onerous plan option under 1915(i) from 2010 to 2019. Federal waiver author- to provide HCBS services ity. Provides a full range to individuals eligible of Medicaid services to for waiver coverage up individuals whose income to 300% FPL. California does not exceed 300% of would need to revise the the Supplemental Security state plan via an amend- Income (SSI) standard. ment. Section 2403 Demonstration estab- $450 million in new money April 22, 2010. CMS issued a State California is one of 43 lished through the Deficit was appropriated for each Medicaid Directors Letter states currently participat- Medicaid Money Follows Reduction Act of 2005 (P.L. year from FY 2011 to 2016. June 22, 2010. ing in the MFP Rebalancing the Person (MFP) 109-171) to reduce reliance The CMS Office of the Demonstration. Rebalancing Demonstration An Invitation to Apply was on institutional care and Actuary estimates federal released July 26, 2010. develop community-based expenditures of $2.25 systems of care. The ACA billion from 2010 to 2019. modifies eligibility rules In February 2011, 13 states to require that individuals were awarded more than reside in an inpatient facil- $45 million in MFP grants ity for not less than to start the program, with 90 days. a total of $621 million committed through 2016. Implementing National Health Reform in California: Payment and Delivery System Changes   | 45 REGULATIONS SECTION/TITLE OVERVIEW FEDERAL FUNDING EFFECTIVE DATE PROMULGATED CALIFORNIA ALERT g. Long Term Care Provisions (Options for State Medicaid Programs) (cont.) Section 10202(a) Expands and diversifies 2% to 5% FMAP increase. October 1, 2011 through California will need to Medicaid coverage for September 30, 2015. assess whether it is Balancing Incentive Allocates up to $3 billion home- and community- eligible for the program Payments Program for Medicaid home- and based long term services (spends less than 50% of community-based services, and makes structural its long term care spending which align with CMS changes to improve coordi- on HCBS services). With actuarial estimates of $3 nation and access to such its history of participation billion in federal expendi- services. Creates new and investments in HCBS tures from 2010 to 2019. financial incentives for initiatives, California will states to shift Medicaid likely not meet the required beneficiaries out of facili- threshold. ties and into HCBS. Sources: Patient Protection and Affordable Care Act (P.L. 111-148) and Modifications by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). The Scan Foundation, Policy Brief No. 2, March 2010. Centers for Medicare and Medicaid Services, “Estimated Financial Effects of the Patient Protection and Affordable Care Act, as Amended,” April 22, 2010. Note: Blue-shaded programs have not yet been appropriated funding. 46  |  C alifornia H ealth C are F oundation Endnotes 1. eter Long and Jonathan Gruber, “Projecting The Impact P 15. CalPERS, “Integrated Health Care Pilot Exceeds Of The Affordable Care Act On California,” Health Affairs, Expectations,” news release, April 12, 2011 January 2011. (www.calpers.ca.gov). 2. alifornia HealthCare Foundation, “What Will Federal Health C 16. William Bernstein, Jonah Frohlich, Francis LaPallo, Arun Reform Mean to Californians?” March 2010 (www.chcf.org). Patel, and Martin Thompson, Accountable Care Organizations in California: Programmatic and Legal Considerations, 3. enters for Medicare and Medicaid Services, Estimated C California HealthCare Foundation report prepared by Manatt Financial Effects of the Patient Protection and Affordable Care Act, Health Solutions, July 2011 (www.chcf.org). as Amended, April 22, 2010 (www.cms.gov). 17. Cope Health Solutions, Regional Safety Net Accountable Care 4. elinda Dutton and Alice Lam, Implementing National Health M Network, April 2011 (www.copehealthsolutions.org). Reform in California: Opportunities for Improved Access to Care, March 2011; and William Bernstein, Patricia Boozang, Paul 18. California Department of Health Care Services, California Campbell, Melinda Dutton, and Alice Lam, Implementing Bridge to Reform: A Section 1115 Waiver Fact Sheet, November National Health Reform in California: Changes to Public and 2010 (www.dhcs.ca.gov). Private Insurance, June 2010 (www.chcf.org). Both reports 19. California HealthCare Foundation website, prepared for California HealthCare Foundation by Manatt CalHospitalCompare.org (www.calhospitalcompare.org). Health Solutions. 20. State of California, Department of Health Care Services, 5. attaneo & Stroud, 2010 Update, HMO & Medical Group C Notice to Prospective Proposers, in Request for Proposals Activity in California, 2004-2010, August 2011 Number 11-88024, “California Children’s Services (www.cattaneostroud.com). Demonstration Projects,” April 19, 2011 (www.dhcs.ca.gov). 6. alifornia HealthCare Foundation, California Health Care C 21. The measures included in the policy must represent Almanac: California Health Plans and Insurers, October 2010 high-volume and high-cost conditions, and be endorsed by (www.chcf.org). the National Quality Forum (NQF). The measures must have 7. ee, for example recent mergers and affiliations including S appropriate exclusions for readmissions that are unrelated to Brown & Toland and Alta Bates Medical Group; UCSF and the prior discharge, such as planned admissions or transfers to Hill Physicians Medical Group; and HealthCare Partners and another hospital. Talbert Medical Group; among others. 22. A Medicare subsection (d) hospital is defined by Section 1886 8. amara Hayford, “The Impact of Hospital Mergers on T of the Social Security Act as (in part): “a hospital located in Treatment Intensity and Health Outcomes,” Working Paper one of the fifty States or the District of Columbia other than Series, Congressional Budget Office, October 2011 — (i) a psychiatric hospital (as defined in Section 1861(f)), (www.cbo.gov). (ii) a rehabilitation hospital (as defined by the Secretary), (iii) a hospital whose inpatients are predominantly individuals under 9. isa Simonson Maiuro, Bret Corzine, and Ben Rosenstein, L 18 years of age, (iv)(I) a hospital which has an average inpatient California Health Care Almanac: California Hospital Facts and length of stay (as determined by the Secretary) of greater than Figures, California HealthCare Foundation report prepared 25 days.” (www.ssa.gov) by Health Management Associates, April 2010 (www.chcf. org). Public hospitals include University of California, city, and 23. he ACA defines a hospital-acquired condition as: “a condition T county hospitals. identified for purposes of subsection (d)(4)(D)(iv) and any other condition determined appropriate by the Secretary that 10. Ibid. Totals may not add to 100% due to rounding. an individual acquires during a stay in an applicable hospital, 11. Ibid. as determined by the Secretary.” (ACA §3008(a)(3).) 12. alifornia HealthCare Foundation, California Health Care C 24. The term “never event” was first introduced in 2001 by Ken Almanac: Medi-Cal Facts and Figures, September 2009 Kizer, MD, former CEO of the National Quality Forum (www.chcf.org). (NQF), in reference to particularly shocking medical errors (such as wrong-site surgery) that should never occur. The 12. he Kaiser Family Foundation website, State Health Facts T NQF initially defined 27 such events in 2002 and revised and (www.statehealthfacts.org). expanded the list in 2006. See (www.psnet.ahrq.gov/resource. 13. California Office of Statewide Health Planning and aspx?resourceID=5363). Development (OSHPD), 2007. 25. The conditions include those already selected for the current 14. bservations from interviews conducted as part of this report. O Medicare HAC payment policy and any additional conditions the Secretary deems appropriate. (ACA §3008.) Implementing National Health Reform in California: Payment and Delivery System Changes   | 47 26. enters for Medicare and Medicaid Services website, Hospital C 41. U.S. Department of Health and Human Services, “Partnership Compare (www.hospitalcompare.hhs.gov). for patients to improve care and lower costs for Americans,” news release, April 12, 2011 (www.hhs.gov). 27. PPS is a system of Medicare reimbursement for Part A I benefits which bases most hospital payments on the patient’s 42. Centers for Medicare and Medicaid Services, Partnership for diagnosis at the time of hospital admission. Payment amounts Patients Health Care Pledge, accessed August 23, 2011 for particular services are determined according to the (http://partnershippledge.healthcare.gov). classification system of that service (for example, diagnosis- 43. Helen Halpin, Arnold Milstein, Stephen Shortell, Megan related groups for inpatient hospital services). Vanneman, and Jon Rosenberg, “Mandatory Public Reporting 28. rom January 1, 2015 through December 31, 2016, the F Of Hospital-Acquired Infection Rates: A Report From modifier applies only to physicians as defined in Section California,” Health Affairs, April 2011. Nile’s Law requires 1861(r). Beginning on January 1, 2017, the HHS Secretary may hospitals to report: (1) rates of bloodstream infections include all eligible professionals as defined for the physician associated with health care that were caused by methicillin- quality reporting program. resistant Staphylococcus aureus and Clostridium difficile (with the total number of inpatient days); (2) rates of 29. .S. Department of Health and Human Services, Report to U vancomycin-resistant enterococcal bloodstream infections Congress: Medicare Ambulatory Surgical Center Value-Based (with total number of inpatient days); (3) rates of bloodstream Purchasing Implementation Plan, 2011 (www.cms.gov). infections associated with central-line catheters (with the 30. ndrew B. Bindman, Philip W. Chu, and Kevin Grumbach, A number of days of inpatient central-line catheter use); and Physician Participation in Medi-Cal 2008, California (4) rates of infections associated with health care at surgical HealthCare Foundation, July 2010 (www.chcf.org). sites or in the organs or space (other than the incision) that is opened or manipulated during surgery. 31. Ibid. 44. Deborah Schoch, “California Health Department 32. Ibid. releases Infection data, but with caveats,” CHCF Center 33. Stephen Zuckerman, Aimee Williams, and Karen Stockley, for Health Reporting, January 2, 2011 Medi-Cal Physician and Dentist Fees: A Comparison to Other (www.centerforhealthreporting.org). Medicaid Programs and Medicare, California HealthCare 45. n a retrospective bundled payment arrangement, CMS and I Foundation report prepared by The Urban Institute, April providers would set a target payment amount for a defined 2009 (www.chcf.org). episode of care. Applicants would propose the target price, 34. elinda Dutton and Alice Lam, Implementing National Health M which would be set by applying a discount to total costs for Reform in California: Opportunities for Improved Access to Care, a similar episode of care as determined from historical data. California HealthCare Foundation prepared by Manatt Health Participants in these models would be paid for their services Solutions, March 2011 (www.chcf.org). under the original Medicare fee-for-service (FFS) system, but at a negotiated discount. At the end of the episode, the 35. State Health Facts (www.statehealthfacts.org). total payments would be compared with the target price. 36. imons, Brandi, “Can ‘bundled’ payments help slash health S Participating providers may then be able to share in those costs?,” USA Today, Oct. 26, 2009. savings. In prospective arrangements, CMS would make a single, prospectively determined bundled payment to the 37. Applicable conditions” will include up to 10 different “ hospital that would encompass all services furnished during conditions selected by the HHS Secretary, based on a variety of the inpatient stay by the hospital, physicians, and other statutory factors. Medicare Part C and PACE are excluded. practitioners. Physicians and other practitioners would submit 38. lfred Casale, Ronald Paulus, Mark Selna, Michael Doll, A “no-pay” claims to Medicare and would be paid by the Albert Bothe, Jr., Karen McKinley, Scott Berry, Duane hospital out of the bundled payment. Davis, Richard Gilfillan, Bruce Hamory, and Glenn Steele, 46. Centers for Medicare and Medicaid Services, State Jr., “‘ProvenCareSM’: A Provider-Driven Pay-for-Performance Demonstrations to Integrate Care for Dual Eligible Individuals, Program for Acute Episodic Cardiac Surgical Care,” Ann Surg Informational Bulletin, December 10, 2010 (www.cms.gov). 2007 246 (4): 613-21. 39. The program is authorized under ACA, though funding has yet to be appropriated for it. Other program details are listed in Appendix C. 40. ntegrated Healthcare Association, “IHA Bundled Episode I Payment and Gainsharing Demonstration: Project Description,” March 14, 2011 (www.iha.org), accessed June 15, 2011. 48  |  C alifornia H ealth C are F oundation 47. n April 2011, 15 states were awarded grants of up to $1 million I 59. California Office of Statewide Health Planning and each: California, Colorado, Connecticut, Massachusetts, Development (OSHPD), 2007. Michigan, Minnesota, New York, North Carolina, Oklahoma, 60. Gerard Anderson and Katherine Wilson, Chronic Disease Oregon, South Carolina, Tennessee, Vermont, Washington, in California, Facts and Figures, California HealthCare and Wisconsin. The demonstrations are broken into two Foundation, 2006 (www.chcf.org). phases: a design phase and an implementation phase. The design phase will last for a period of 18 months. States will 61. The ACA defines CBOs as organizations that provide care have 12 months to develop an implementation proposal, and transition services across the continuum of care through the Innovation Center and Office of Duals will use the last arrangements with hospitals, and whose governing bodies six months to review proposals and negotiate with states. sufficiently represent multiple health care stakeholders, Demonstration implementation contracts will be awarded at including consumers. (ACA §3026.) that point. (It is important to note that if a state receives a design phase contract, it is not necessarily guaranteed 62. Centers for Medicare and Medicaid Services, an implementation contract.) Implementation of the High Readmission Hospitals, 2011 (www.cms. demonstrations will likely begin in the fall or winter of 2012. gov/DemoProjectsEvalRpts/downloads/CCTP_ FourthQuartileHospsbyState.pdf). 48. David Rousseau, Lisa Clemans-Cope, Emily Lawton, Jessica Langston, John Connolly, and Jhamirah Howard, 63. In 2010, the Aging and Disability Resource Center (ADRC) Dual Eligibles: Medicaid Enrollment and Spending for Medicare program awarded a grant to the California Health and Human Beneficiaries in 2007, Kaiser Family Foundation, December Services Agency to expand current care transition models 2010 (www.kff.org). to underrepresented communities over a two-year period (September 30, 2010 to September 30, 2012). The grant 49. Ibid. supports four California ADRC programs that are currently implementing Care Transitions Intervention (CTI): Riverside 50. alifornia Department of Health Care Services, Response to C ADRC with Riverside County Regional Medical Center, Requests for Proposal: State Demonstrations to Integrate Care Orange ADRC with area hospitals serving OneCare members, for Dual Eligibles, January 28, 2011 (www.dhcs.ca.gov). San Francisco ADRC with St. Mary’s Medical Center, and 51. Ibid. San Diego ADRC with Sharp Memorial Hospital. 52. Ibid. 64. U.S. Department of Health and Human Services, Medicare Shared Savings Program: Accountable Care Organizations and 53. Centers for Medicare and Medicaid Services, State Medicaid Medicare Program, Federal Register, 76 (67) (April 7, 2011): Director Letter #10-024: Health Homes for Enrollees with 19,528. Chronic Conditions, November 16, 2010 (www.cms.gov). 65. enter for Medicare and Medicaid Innovation, Pioneer C 54. ost savings were reported in an actuarial analysis of C Accountable Care Organization (ACO) Model Request for Community Care of North Carolina (CCNC), conducted Application, May 17, 2011 (http://innovations.cms.gov). by Mercer. Results were reported at CCNC’s website at (www.communitycarenc.org), accessed June 20, 2011. 66. State Health Facts (www.statehealthfacts.org). 55. ruce Japsen, “’Medical home’ concept saving Illinois millions B 67. Ibid. on health care,” Chicago Tribune. August 11, 2010. 68. Enid Kassner, Susan Reinhard, Wendy Fox-Grage, Ari Houser, 56. CQA Database (http://recognition.ncqa.org) accessed N and Jean Accius, A Balancing Act: State Long-Term Care March 2011. Reform, AARP Public Policy Institute, July 2008 (www.aarp.org). 57. odi Simon, The State of Health Information Technology in J California, California HealthCare Foundation, 2011 69. Hospital Compare (www.hospitalcompare.hhs.gov). (www.chcf.org). A previous version of this publication was 70. alifornia HealthCare Foundation, California Hospital C released in 2008. Assessment and Reporting Taskforce (CHART), May 2009 58. he Community Clinics Initiative with financial support T (www.chcf.org). from the California Endowment launched the Health Home 71. California Codes: Health and Safety Code, Section 128675- Innovation Fund to provide flexible funding supporting 128810. local partnerships among private and public safety-net providers and local health plans and develop health homes. 72. California Code of Regulations, Title 22, Social Security, (www.communityclinics.org). Division 7, Health Planning and Facility Construction, Chapter 9, Hospital Charges and Fair Pricing Policies Reporting. Implementing National Health Reform in California: Payment and Delivery System Changes   | 49 73. alifornia Department of Public Health, AFL Revision Notice. C All Facilities Letter (AFL) No. 11-32: Requirements for Reporting Surgical Site Infections, April 27, 2011. 74. Maine, Vermont, Rhode Island, New York, Pennsylvania, North Carolina, Michigan, and Minnesota will participate in this demonstration that will ultimately include up to approximately 1,200 medical homes serving up to one million Medicare beneficiaries. 75. The following groups of providers of services and suppliers which have established a mechanism for shared governance are eligible to participate as ACOs under the program: ACO professionals in group practice arrangements; networks of individual practices of ACO professionals; partnerships or joint venture arrangements between hospitals and ACO professionals; hospitals employing ACO professionals; such other groups of providers of services and suppliers as the HHS Secretary determines appropriate. 76. rimary care services are defined as those provided in a P primary care physician office, or other outpatient visits, nursing facility visits, domiciliary and rest home visits, and home visits. Primary care physicians are defined as physicians working in family medicine, internal medicine, geriatric medicine, or pediatric medicine. 77. Major surgical procedures are defined as those with a 10- or 90-day global period. 50  |  C alifornia H ealth C are F oundation