HIGH-PERFORMANCE HEALTH CARE FOR VULNERABLE POPULATIONS A POLICY FRAMEWORK FOR PROMOTING ACCOUNTABLE CARE IN MEDICAID Deborah Bachrach, William Bernstein, and Anne Karl november 2012 Manatt, Phelps & Phillips, LLP The Commonwealth Fund, among the first private foundations started by a woman philanthropist—Anna M. Harkness—was established in 1918 with the broad charge to enhance the common good. The mission of The Commonwealth Fund is to promote a high performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society’s most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults. The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. An international program in health policy is designed to stimulate innovative policies and practices in the United States and other industrialized countries. HIGH-PERFORMANCE HEALTH CARE FOR VULNERABLE POPULATIONS A POLICY FRAMEWORK FOR PROMOTING ACCOUNTABLE CARE IN MEDICAID Deborah Bachrach, William Bernstein, and Anne Karl Manatt, Phelps & Phillips, LLP November 2012 Abstract: The Affordable Care Act and state Medicaid reform efforts present opportunities to reengineer health care payment and delivery systems to promote higher performance. This opportunity will be squandered, however, unless Medicare and Medicaid work collaboratively to develop a common framework for providers. This report explores how state Medicaid agencies might align with and build on the Medicare Shared Savings Program, which rewards groups of providers that meet cost and quality benchmarks by working together to coordinate patients’ care in accountable care organizations (ACOs). While the Shared Savings Program applies only to fee-for-service Medicare beneficiaries, federal policymakers recognize that the ACO infra- structure can be leveraged to other populations. Indeed, ACOs are most likely to succeed if they deploy care management strategies across all patient populations. Medicaid beneficiaries could benefit from payment and delivery system reform initiatives aligned with the Shared Savings Program, and state Medicaid programs could reap considerable savings. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the authors and not necessarily those of The Commonwealth Fund or its directors, officers, or staff. To learn more about new publications when they become available, visit the Fund’s Web site and register to receive e-mail alerts. Commonwealth Fund pub. 1646. CONTENTS ABOUT THE AUTHORS......................................................................................................................................... 6 EXECUTIVE SUMMARY.......................................................................................................................................... 7 INTRODUCTION.................................................................................................................................................. 11 PAYMENT AND DELIVERY SYSTEM REFORM IN MEDICAID..............................................................................13 THE ROLES OF ACOs AND MCOs IN MEDICARE AND MEDICAID....................................................................17 BUILDING AN ACO FRAMEWORK IN MEDICAID...............................................................................................18 CONCLUSION..................................................................................................................................................... 25 APPENDIX. OVERVIEW OF MEDICARE ACO PROGRAMS................................................................................. 26 NOTES................................................................................................................................................................. 29 LIST OF EXHIBITS EXHIBIT 1 PROJECTED MEDICAID EXPENDITURES AND PERCENTAGE OF POPULATION COVERED BY MEDICAID EXHIBIT 2 PERCENTAGE OF MEDICAID BENEFICIARIES ENROLLED IN FULLY CAPITATED MCOs EXHIBIT 3 STATES ISSUING DEMONSTRATION PLANS FOR DUALLY ELIGIBLE INDIVIDUALS EXHIBIT 4 THE ACO–MCO CONTINUUM ABOUT THE AUTHORS Deborah Bachrach, J.D., is special counsel at Manatt, Phelps & Phillips, LLP, where she advises states and other policymakers on implementation of federal health reform and Medicaid reform strategies. She is also a frequent commentator on health reform implementation, Medicaid payment, and purchasing strategies. Until 2010, Ms. Bachrach was the Medicaid director and deputy commissioner of health for the New York State Department of Health. In this capacity, she was responsible for coverage, care, and payment policies for over 4 million children and adults enrolled in New York’s Medicaid and Child Health Insurance Programs. She holds a law degree from the New York University School of Law. William Bernstein, J.D., is a partner at Manatt, Phelps & Phillips, LLP. Mr. Bernstein chairs Manatt’s Healthcare Division and is a member of the firm’s Executive Committee. He advises providers, states, and other health care stakeholders on new business models for the organization and payment of health services, the use of health information technology to support new care delivery systems, and on implementation issues resulting from health reform. Mr. Bernstein began his health care career working for the U.S. Department of Health, Education and Welfare. He served as a law clerk to the Honorable Raymond J. Pettine, U.S. District Court of Rhode Island. He holds a law degree from the New York University School of Law. Anne Karl, J.D., is an associate at Manatt, Phelps & Phillips, LLP, where she advises providers, Medicaid managed care plans, and commercial health insurers on a variety of regulatory and transactional matters in the health care industry. She also conducts research and policy analysis on a wide range of Medicaid payment issues, including pay-for-performance incentive payments and supplemental payments. Prior to joining Manatt, Ms. Karl served as a law clerk to the Honorable José A. Cabranes, U.S. Court of Appeals for the Second Circuit. She holds a law degree from Yale Law School. Editorial support was provided by Martha Hostetter. 6 High-Performance Health Care for Vulnerable Populations EXECUTIVE SUMMARY This report focuses on the Medicare Shared Both the federal and state governments are adopting Savings Program (MSSP) as an example of how new payment and delivery system models aimed at Medicaid might build on delivery system and pay- improving the quality of health care services and reining ment reform programs in Medicare. While the MSSP in costs. In addition to a wide range of reforms enacted program is designed to create accountable care organi- in the Patient Protection and Affordable Care Act, zations (ACOs) for fee-for-service Medicare benefi- there are several state policies supporting these goals. ciaries, CMS has explicitly recognized that the ACO An emerging challenge for policymakers is to create infrastructure can be leveraged to care for Medicaid alignment among these initiatives so that the prolifera- populations, and that ACOs will be most successful tion of payment and delivery system models does not if they deploy their infrastructure across all of their lead to conflicting financial incentives and burdensome patient populations. In this report, we propose a policy reporting requirements for providers, thus undermining framework for states to create ACOs for their Medicaid the goal of achieving coordinated, effective, and efficient populations. care. Medicaid could play a significant role in har- Landscape for Payment and Delivery System monizing the various delivery system reform initiatives Reform in Medicaid and driving change that fosters greater accountability The Medicaid program has taken several steps to and improved performance across the health system strengthen primary care, which is the essential founda- and across payers. First, the sheer size of Medicaid—by tion for any delivery system reform efforts. First, under 2019, up to 25 percent of Americans could receive cov- the Affordable Care Act, Medicaid must pay providers erage through the program, and it could account for at least the Medicare payment rate for primary care as much as 20 percent of national health care spend- services provided during 2013 and 2014. The additional ing—makes it vitally important to the success of any payments will be fully funded by the federal govern- initiative. Second, states have a financial imperative to ment, resulting in an estimated investment of $8.3 contain Medicaid costs: Medicaid accounts for over billion. 70 percent of states’ health care expenditures, and is Second, at least 17 states have launched the first- or second-largest item in every state’s budget. patient-centered medical home initiatives in their Implementing coordinated, accountable delivery sys- Medicaid programs that provide incentive payments tems could help contain costs and achieve better out- to primary care providers that act as medical homes. comes for Medicaid beneficiaries. Through the Affordable Care Act, several other states The Centers for Medicare and Medicaid are also creating “health homes” in which providers Services (CMS) recognizes the importance of having receive a per member per month fee to provide care state Medicaid programs align with other payment coordination services for patients with chronic condi- and delivery system reform efforts, as evidenced by the tions. Medicare is also taking steps to strengthen pri- recent Center for Medicare and Medicaid Innovation mary care for its beneficiaries through programs such (CMMI) State Innovation Models initiative, which as CMS’s Multipayer Advanced Primary Care Practice provides funding for states to design and test multipayer Demonstration and CMMI’s Comprehensive Primary delivery system and payment reforms. Medicare and Care Initiative, both of which promote alignment of Medicaid must articulate a shared vision and adopt pol- Medicare, Medicaid, and commercial payers to improve icies that are aligned in their support of providers work- care coordination for Medicare beneficiaries. Such pro- ing together to maximize the value of care they deliver grams are examples of federal support for multipayer to their patients and communities. delivery system reform efforts. www.commonwealthfund.org7 Finally, several states already have taken steps held accountable for achieving integrated, efficient, and to establish ACO programs for their Medicaid popula- effective care. tions. For example, Oregon has launched coordinated care organizations for its Medicaid population and Policy Recommendations for Building an ACO plans to transition all beneficiaries currently enrolled Framework in Medicaid in Medicaid managed care plans into these ACO-like This report offers the following policy framework for entities. states to establish ACOs in their Medicaid programs While states have taken steps to strengthen by building on the MSSP model, adapting program primary care and experiment with accountable care requirements where appropriate to accommodate the strategies, the far more dominant trend is for states unique characteristics of the Medicaid population, the to expand their use of managed care to try to control needs of Medicaid providers, and market conditions. costs and improve quality in their Medicaid programs. Nationally, as of 2010, 48 percent of Medicaid benefi- 1. Getting the strategy right. At the outset, states ciaries are enrolled in a fully capitated managed care should develop a core strategy for achieving their plan. This will increase to 62.4 percent by 2019. States goals of containing costs and improving quality in are also using managed care and ACO-like models to Medicaid and decide whether supporting ACO improve quality and reduce costs for their dually eligible formation is central to this strategy. populations. 2. Translating strategy into action. States will need to ensure that fee-for-service and managed The Roles of ACOs and MCOs in Medicare care policies are aligned within their Medicaid and Medicaid programs, as well as with Medicare policies to the Policymakers have largely viewed ACOs and managed extent possible. States using primarily fee-for- care organizations (MCOs) as distinct approaches, even service payment structures may want to model though both seek to provide high-quality, cost-effective their ACO programs on the MSSP. States with care. ACOs and MCOs may be viewed as two poles on sizable Medicaid managed care programs may a continuum: at one end, a managed care organization want to adopt contracting guidelines governing receives a monthly capitation payment and oversees the relationship between MCOs and ACOs to patients’ comprehensive care through a contracted net- support a more integrated care model. Over time, work of participating providers; at the other end, an states will want to minimize their use of fee-for- accountable care organization takes on responsibility for service contracts and develop payment models that a designated patient population and receives fee-for- combine quality metrics with capitation or shared service payments, shares in any savings from meeting savings that reward providers for high performance. spending targets, and in some cases takes on risk for 3. ACO certification. States should adopt a exceeding targets. While a range of models exists on streamlined certification procedure that builds on the spectrum between these two poles, there is a “sweet the MSSP certification process and accounts for spot” where the entity bearing financial risk is success- the needs of the Medicaid program, which provides fully integrated with the delivery system; well-known care to a vulnerable patient population. States may examples include Kaiser Permanente, Geisinger Health facilitate certification of Medicaid ACOs by several System, and Denver Health. This point can be achieved means, including: deeming ACOs participating in regardless of whether the starting point is an ACO or the MSSP certified for the purposes of Medicaid MCO; the challenge for states is to ensure that provid- ACO participation; creating a supplemental ers are supported, given appropriate incentives, and certification process; or creating a parallel state certification process for providers not applying for 8 High-Performance Health Care for Vulnerable Populations certification as a Medicare ACO. States also may Medicaid ACO initiatives, states should not allow consider working with an outside accreditation Medicaid beneficiaries to opt out of assignment to body to develop certification criteria that bridge the an ACO. requirements of both Medicare and Medicaid. 7. Exclusivity of primary care providers. States will 4. ACO governance and ownership. States should likely want to follow Medicare’s lead and limit align any ACO governance and ownership primary care providers to participating in only one requirements with those set forth in the MSSP in ACO for each tax identification number under order to avoid imposing conflicting standards on which they bill Medicaid. However, states should providers participating in both programs. While ensure that this requirement does not impede access one such requirement is that clinical providers lead to care for Medicaid beneficiaries. and own a majority stake in the ACO, the success 8. Financial model. To make participation in a of ACOs depends on the formation of partnerships Medicaid ACO program more appealing to with entities having expertise in areas such as providers, particularly safety-net providers who information technology and care coordination. may have limited resources to invest in ACO ACO implementation requires significant capital infrastructure, states should follow the MSSP investments to put these elements in place. approach in developing a financial model that States should consider how to support safety-net allows ACOs to be eligible for shared savings, organizations, in particular, in their efforts to form but not shared losses, during their first three- ACOs. year contract with the state. States also should 5. Assignment to an ACO. For Medicaid fee-for- consider the extent to which they share savings service patients, it may make sense to follow with providers and MCOs. For example, states MSSP’s lead and assign patients retrospectively, should permit Medicaid ACOs to share in the first based on where they receive a majority of their dollar of savings, so that ACOs may recoup their primary care in each year. However, retrospective investments in ACO infrastructure. States also assignment may not be ideal in Medicaid since should require MCOs to share a portion of their fee-for-service beneficiaries are not restricted to savings with the state, so that Medicaid programs a fixed network of providers, and since Medicaid benefit from greater efficiencies in care. beneficiaries experience more frequent disruptions 9. Benchmark calculation and trending. In order to in insurance coverage than do Medicare compare actual ACO spending to a benchmark— beneficiaries. Retrospective assignment also may an estimate of what would have been spent on the be less effective for treating Medicaid beneficiaries ACO’s assigned beneficiaries—states may want to who have complex medical and behavioral health adapt three core features of the methodology used needs. States may want to consider prospectively to calculate benchmark expenditures in the MSSP. assigning individuals with complex needs to First, the MSSP uses claims data from beneficiaries ACOs in order to reach out to and closely manage who are not necessarily assigned to the ACO, which these individuals. States also may want to use will pose challenges for Medicaid programs that a prospective assignment system for Medicaid are expanding to the newly eligible population of managed care beneficiaries, based on enrollees’ childless adults with incomes below 133 percent assigned primary care provider. of the federal poverty level. For this reason, 6. Opt-out. To avoid imposing conflicting standards states may want to exclude the newly eligible for beneficiary notification and consent on populations for the first year to avoid inaccurate organizations participating in both Medicare and benchmarks. Second, the MSSP methodology risk www.commonwealthfund.org9 adjusts benchmarks based on beneficiaries’ health and use of public health information exchanges to status. States that do not risk adjust Medicaid support care coordination. Special consideration managed care capitation rates should develop a risk must be given to safety-net organizations, which adjustment methodology for the Medicaid ACO may lack the capital needed to invest in a robust program that adjusts benchmark expenditures to health information technology infrastructure. States account for the health status of individuals. If this should consider whether additional support is is not technically feasible, states could adjust the needed to ensure that safety-net providers can meet benchmark using only demographic and geographic certification requirements related to data sharing factors. Third, in calculating benchmarks the MSSP and use of health information exchanges. uses trend factors based on the growth in national 13. Federal fraud and abuse provisions. Fraud and health care spending for Medicare beneficiaries. abuse waivers remove several barriers to creating States should apply statewide trends in Medicaid an ACO for entities participating in the MSSP, spending to adjust the benchmark in their Medicaid and they apply to all arrangements between MSSP ACO programs. ACOs and other payers. States can request that 10. Compensation of ACO participating providers. CMS and the Office of the Inspector General The MSSP gives ACOs considerable flexibility extend the same waivers to Medicaid ACOs to in determining how to distribute shared savings reduce barriers to participation among groups that (or shared losses) among providers. States should are not also participating in the MSSP. follow this lead in order to encourage innovation 14. Antitrust guidance and the state action doctrine. and collaboration among providers participating in To protect Medicaid ACOs from antitrust scrutiny Medicaid ACOs. States also may want to require for actions taken to further the ACO’s efforts, states that ACOs distribute a fixed percentage to safety- may request that the Department of Justice and net providers to further Medicaid’s mission of the Federal Trade Commission extend antitrust ensuring access to care for low-income individuals. provisions in the MSSP program to Medicaid 11. Quality metrics. The MSSP and Medicaid ACO ACOs. Alternatively, states could employ the quality metrics should be aligned to the extent “state action doctrine,” which would protect ACOs possible to ensure consistency across programs formed under a state-created ACO program and to enable ACOs to create systemwide quality from federal antitrust scrutiny, provided the state improvement initiatives. States should adopt maintains an active role in overseeing the ACOs. relevant MSSP quality metrics and add additional 15. State laws and levers. States should examine which metrics for core services provided to Medicaid state laws pose roadblocks to the implementation beneficiaries, such as measures assessing the quality of Medicaid ACOs and follow the federal lead of pediatric, obstetric, and behavioral health care. by issuing waivers or establishing guidance that 12. Health information technology and exchanges. supports ACO development and growth. States also Although the effective exchange of health should consider whether Medicaid supplemental information is indispensable to the success of payment policies or their certificate of need ACOs, the MSSP does not require that ACOs programs need to be restructured to align with participate in health information exchanges in their the goals of Medicaid and Medicare payment and states. States thus have a unique opportunity to delivery system reform. promote the interoperability of electronic medical records by building requirements into the Medicaid ACO certification process related to data sharing 10 High-Performance Health Care for Vulnerable Populations HIGH-PERFORMANCE HEALTH achieving coordinated, effective, and efficient care. To promote the success of the payment and delivery system CARE FOR VULNERABLE reform programs under way, policymakers and purchas- POPULATIONS: A POLICY ers should consider how best to align incentives and FRAMEWORK FOR ACCOUNTABLE metrics within and across public and private programs. CARE IN MEDICAID Medicaid can play a significant role in harmo- nizing the various delivery system reform initiatives and driving change that fosters accountability and higher INTRODUCTION performance across payers. First, the sheer size of the Both the federal and state governments are adopt- program makes its efforts to reform payment and deliv- ing new payment and delivery system models aimed ery systems vitally important. By 2019, up to 25 percent at improving the quality of health care and reining in of Americans could receive coverage through Medicaid costs. There is a wide range of reforms enacted in the and the program could account for as much as $900.8 Patient Protection and Affordable Care Act and new billion—20 percent of national health care spending state initiatives targeting these goals, including support (due primarily to the expansion in coverage, rather than for patient-centered medical homes, health homes for growth in per capita costs) (Exhibit 1).2 individuals with chronic conditions, bundled payment Second, Medicaid has the market power and demonstration programs, promotion of accountable financial imperative to advance payment and delivery care organizations, and reduced payments for poten- system reform initiatives. Medicaid is the first- or sec- tially preventable readmissions and complications.1 At ond-largest item in every state’s budget. States continue the same time, Medicaid managed care programs are to face significant budget deficits—23 predict a budget rapidly expanding, fueled by the desire of the federal shortfall of at least 10 percent for fiscal year 2012— and state governments to control growth in health making cost containment in Medicaid a top priority.3 care spending and improve health care outcomes for The Centers for Medicare and Medicaid beneficiaries. Services (CMS) has emphasized the importance of This proliferation of models could lead to con- having state Medicaid programs align their efforts with flicting financial incentives and burdensome reporting other payment and delivery system efforts. In a July requirements for providers, undermining the goal of 2012 letter to state Medicaid directors, CMS stated Exhibit 1. Projected Medicaid Expenditures and Percentage of Population Covered by Medicaid Projected Medicaid expenditures Projected population covered by Medicaid Expenditures ($ billions) Percent $1,000 $900.8 30% 25% $800 25% 20% $600 15% $400.7 15% $400 10% $200 5% $0 0% 2010 2020 2010 2020 Year Year Source: Centers for Medicare and Medicaid Services, National Health Expenditure Projections 2010–2020, 2011, p. 2, available at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/National HealthExpendData/Downloads/proj2010.pdf. www.commonwealthfund.org11 that it will issue a series of letters describing policy by CMS with considerable input from stakeholders. considerations for states creating payment and deliv- Second, providers are embracing the MSSP—as of July ery system reform initiatives “to ensure that Medicaid 2012, 116 accountable care organizations (ACOs) in 33 reaches its fullest potential as a high performing health states have been approved to participate.6 Finally, the system and aligns with promising delivery system and MSSP includes waivers of fraud and abuse laws, as well payment reforms under way in the private and pub- as unique treatment under antitrust laws, that enable it lic sectors.”4 Thereafter, the Center for Medicare and to be leveraged across payers—providing a platform on Medicaid Innovation issued a new funding opportunity which states can build multipayer reform strategies. announcement, State Innovations Models: Funding for Under the program, groups of health care pro- Model Design and Testing Assistance, to enable states to viders agree to work together to provide overall care plan and test new payment and service delivery models for fee-for-service Medicare beneficiaries. ACOs that through state-sponsored State Health Care Innovation demonstrate their ability to provide more effective and Plans. These Innovation Plans target better health, bet- efficient care will be able to share in the savings they ter care, and reduced costs and specifically recognize achieve. While the MSSP program applies only to the unique power of state governments, governors, and fee-for-service Medicare beneficiaries, CMS explicitly their executive agencies working with CMS and other recognized that the infrastructure providers use to par- stakeholders to “accelerate community-based health ticipate can be leveraged to care for other populations— system improvements with greater sustainability and and that ACOs will be most successful if they deploy effect, to produce better results for Medicare, Medicaid, that infrastructure across other populations. Indeed, in and CHIP [the Children’s Health Insurance Program].” the final MSSP rule, CMS noted that “we stated our Notably, state Innovation Plans will be required to build belief that the more patients an ACO sees for which it on and coordinate with other CMS health care reform is eligible to receive performance-based incentives, such initiatives taking place within the state, particularly as shared savings, the more likely it is that the ACO those issued under Section 1115 of the Social Security will adopt substantial behavior changes conducive to Act. improved quality and cost savings.” In the case of the Achieving the goals of better health, better care, Pioneer ACO program, CMS went so far as to require and reduced costs requires an accessible, organized, and successful applicants to commit to having ACO-like accountable delivery system supported by a wide swath contracts affecting at least 51 percent of participating of payers.5 Medicare and Medicaid should articulate a providers’ revenues by the end of the second year of the shared vision and adopt policies that, while not neces- program.7 (See the Appendix for an overview of both sarily identical, are at least aligned in their support of Medicare ACO programs.) providers that work together to maximize the value of Medicaid beneficiaries—including those who the care they deliver to their patients and communities. are sick and vulnerable, such as special needs children, Such an approach will benefit both programs and ulti- disabled individuals, frail elders requiring long-term mately all Americans. care services, and mentally ill patients—are likely to This report focuses on the Medicare Shared benefit from payment and delivery system reforms Saving Program (MSSP) and discusses how state aligned with the MSSP. As demonstrated in a number Medicaid agencies could align with and build on this of delivery system reform efforts, high-performance, program. The MSSP is not the only initiative states provider-led delivery systems are especially important should consider in crafting their Medicaid strategy, for improving the care of low-income and medically but it is important for three reasons. First, the MSSP vulnerable beneficiaries. ACOs are well positioned to is to date the most detailed and far-reaching national manage the care of those with multiple chronic condi- delivery system reform initiative, and it was crafted tions.8 ACOs also could improve care for dual eligibles, 12 High-Performance Health Care for Vulnerable Populations the 9 million Americans covered by both Medicare Other states, including Iowa, Missouri, New and Medicaid who account for 15 percent of Medicaid York, North Carolina, Oregon, and Rhode Island, have enrollees but 39 percent of its costs.9 created “health homes” for individuals with certain This report examines the attributes of the complex conditions.14 Under the Affordable Care Act, MSSP program and suggests how states could build on health homes are required to link care coordinators with this framework to catalyze cost containment and qual- a network of cooperating primary care behavioral health ity improvement in their Medicaid programs. First, we care providers, as well as social and community support describe the landscape for payment and delivery system services, to ensure that patients’ full range of needs are reform initiatives, highlighting Medicaid initiatives met. Health homes generally receive a per member per in the Affordable Care Act and the steps states have month care coordination fee for providing these ser- taken to promote payment and delivery system reform. vices to beneficiaries with chronic illnesses. States will Then we advance policy recommendations for states to receive federal funds to cover 90 percent of the cost of build on the MSSP model, thereby facilitating a com- the care coordination payments for eight quarters.15 To mon framework for Medicare and Medicaid to promote further encourage health homes to improve efficiency high-performance delivery systems. through care coordination, New York is offering, and Missouri will consider offering, limited shared savings payments.16 PAYMENT AND DELIVERY SYSTEM In addition to these efforts, through CMS’s REFORM IN MEDICAID Multipayer Advanced Primary Care Practice Medicaid has taken various steps to promote pay- Demonstration, Medicare has joined existing efforts ment and delivery system reform. First, largely spurred involving Medicaid and commercial payers in eight by the Affordable Care Act, states have taken steps states (Maine, Michigan, Minnesota, New York, North to strengthen primary care, which is the foundation Carolina, Pennsylvania, Rhode Island, and Vermont) for any delivery system reform effort.10 Under the to improve access to medical homes for Medicare health reform legislation, state Medicaid programs beneficiaries. Under this demonstration, CMS will must pay providers at least the Medicare payment rate pay medical home providers a monthly fee to provide for primary care services provided during 2013 and care management services to Medicare beneficiaries.17 2014.11 Medicaid managed care plans also must pay The Center for Medicare and Medicaid Innovation the Medicare rate for primary care services during is also supporting the Comprehensive Primary Care 2013 and 2014. The additional amounts states invest Initiative, another multipayer effort involving Medicare, in primary care rates will be funded 100 percent by the Medicaid, and commercial payers in which CMS will federal government during this two-year period. It is pay a monthly fee to 500 primary care practices in eight estimated that these enhanced payments will result in states (Arkansas, Colorado, Kentucky, New Jersey, New an investment of $8.3 billion, laying the groundwork for York, Ohio, Oklahoma, and Oregon) to improve care other initiatives that depend on a robust primary care management for Medicare fee-for-service beneficiaries. infrastructure.12 After two years, participating practices will be eligible Additionally, some states have created incen- to share in any savings generated.18 These initiatives tive payments to promote care coordination, further demonstrate support at the federal level for increasing strengthening the foundation on which states can create alignment among Medicare and Medicaid to achieve ACO programs. At least 17 states, including Colorado, broader delivery system and payment reform goals. Maine, and Nebraska, are providing payments (either States also have begun exploring the ACO enhanced fee-for-service rates or per member per concept as a way to promote quality and efficiency in month fees) to primary care providers that act as Medicaid. Several, including Colorado, Connecticut, patient-centered medical homes.13 www.commonwealthfund.org13 Florida, New York, Utah, Vermont, Washington, and advisory committee to estimate the cost of restructuring Wyoming, have passed statutes either authorizing the state’s Medicaid program, including by implement- ACOs or requiring a state agency to study how the state ing options such as ACOs. might launch an ACO initiative.19 The Connecticut A handful of states have taken significant steps statute, for example, authorizes the Commissioner of to develop ACO programs for Medicaid populations. the Department of Social Services to implement poli- For example, Oregon launched an ACO-like program cies that would enable the state to participate in pedi- for its Medicaid population (see box), including the atric ACOs for its Medicaid population. Washington, roughly 78 percent of beneficiaries who are currently similarly, created a demonstration project to modernize enrolled in Medicaid managed care plans.20 These Medicaid by, among other things, testing innovative CCOs will be jointly governed by a risk-bearing entity, reimbursement models, including ACOs. Other states providers, and the community and subject to global have taken a more limited approach and authorized budgets, meaning that they will bear full financial risk the study of ACOs. Wyoming, for example, created an for the cost of medical services rendered. Oregon will OREGON COORDINATED CARE ORGANIZATIONS In May 2012, CMS approved Oregon’s request to move Medicaid beneficiaries from managed care organizations (MCOs) to coordinated care organizations (CCOs). Key features of the CCO program include: • Shift away from MCOs. Currently, 78 percent of Oregon’s Medicaid beneficiaries are enrolled in fully capitated MCOs. Beginning in July 2012, Oregon plans to transition all of these beneficiaries into CCOs. Many MCOs, however, will sponsor CCOs, using their existing provider networks and plan infrastructure to coordinate and deliver care. • Direct Contract Between State and CCOs. Rather than require that MCOs contract with CCOs (or enter into another ACO-like payment structure with providers), Oregon chose to move its direct contracts from MCOs to the CCOs. • Multi-Stakeholder Governance Structure. CCOs will be governed by providers, community members, and risk-bearing entities. In many regions of the state, the existing MCOs will join forces with local health care providers and community members to create the CCOs. • Assignment. Beneficiaries will enroll in one of the CCOs in their geographic region. • Global Budget. CCOs will be held to a global budget for all physical, mental, and dental health care. During the initial implementation of the program, CCOs will receive a fixed per member per month capitation payment to cover the costs of services currently provided by physical health, mental health, and by 2014, dental care organizations. The CCOs also will be held accountable for the costs of physical, mental, and dental health care services that are not covered under existing managed care arrangements, though the exact methodology for paying CCOs for this noncapitated portion of the global budget may vary. The global budgets will be adjusted to account for the geographic region in which the CCO will operate. If a CCO operates in an area with little managed care experience, then its capitation payments will be risk-adjusted based in part on a population-based methodology. • CCO-Specific Licensure. Since the CCOs will bear financial risk, Oregon is currently developing a new category of license that CCOs will need to obtain. 14 High-Performance Health Care for Vulnerable Populations use quality metrics that are aligned with existing federal currently covered under Medicaid managed care or the programs, such as the MSSP and the Hospital Value- fee-for-service program. Based Purchasing Program. Many existing MCOs will While some states have begun to experiment sponsor CCOs, leveraging their provider networks and with accountable care strategies, the far more dominant infrastructure within the new governance structure and trend is to embrace managed care as a means to control financial model. By shifting Medicaid beneficiaries costs and improve quality in Medicaid. Nationwide, from MCOs to CCOs, Oregon expects to achieve total 49.4 percent of Medicaid beneficiaries are enrolled in a savings of $3.1 billion over five years through improved fully capitated managed care organization (MCO).21 By coordination of physical and mental health and greater contrast, approximately 25 percent of Medicare benefi- provider accountability for the costs and quality of care. ciaries are enrolled in managed care through Medicare Similarly, Minnesota has created a three-year Advantage plans.22 But there is great variation among demonstration project to create ACO-like entities. states in terms of the numbers of Medicaid beneficia- Under the demonstration, nonintegrated providers and ries enrolled in MCOs (Exhibit 2). As of May 2012, no provider organizations can join together to coordinate Medicaid beneficiaries were enrolled in MCOs in 15 care for patients, receiving shared savings payments states while more than three-quarters of Medicaid ben- but not bearing downside risk. Alternatively, integrated eficiaries were enrolled in MCOs in seven states. delivery systems that currently provide both inpatient The growth in Medicaid managed care is and ambulatory care will be eligible for shared savings expected to continue to accelerate. By one estimate and responsible for shared losses. Participating enti- that assumes all states will expand Medicaid eligibility ties will be responsible for the quality and costs of care levels to 133 percent of the federal poverty level, the for non–dually eligible adults and children who are number of beneficiaries enrolled in Medicaid managed Exhibit 2. Percentage of Medicaid Beneficiaries Enrolled in Fully Capitated MCOs WA NH VT ME MT ND OR MN ID WI NY MA SD WY MI RI IA PA CT NE NJ NV OH UT IL IN DE CA CO WV MD KS VA MO KY DC NC TN AZ OK NM AR SC AL GA MS TX LA 0% AK FL 1%–25% 26%–50% 51%–75% HI 76%–100% U.S. average: 49.62% Note: Oregon is reflected as having a high percentage of Medicaid beneficiaries enrolled in MCOs, but, as described above, the state began shifting Medicaid beneficiaries from MCOs to CCOs in September 2012. Source: Manatt Health Solutions, based on Kaiser Family Foundation data, May 2012. www.commonwealthfund.org15 Exhibit 3. States Issuing Demonstration Plans for Dually Eligible Individuals WA *† NH VT † ME MT ND OR † MN ‡* ID † MA * SD WI * NY *† WY MI * RI † IA * PA CT * NE NJ NV OH * UT IL * IN DE CA * CO * WV MD KS MO ‡ VA † KY NC * TN † AZ † OK * NM † AR SC * No proposal AL GA State has submitted a proposal to CMS MS for the capitated financial alignment model TX † LA State has submitted a proposal to CMS for the managed fee-for-service model AK FL State has submitted a proposal to CMS for both the capitated financial alignment and the managed fee-for-service model HI † ‡ Proposed program launch in 2012 * Proposed program launch in 2013 † Proposed program launch in 2014 Note: Washington has proposed a 2013 start date for the capitated and managed fee-for-service models and a 2014 start date for a hybrid model. Minnesota has proposed a 2012 start date for seniors and a 2014 start date for those with disabilities. Source: Manatt Health Solutions, updated Aug. 22, 2012. care will jump to 62.4 percent by 2019, while Medicaid To achieve these savings, the Center for enrollment is expected to grow only 33.9 percent dur- Medicare and Medicaid Innovation has announced ing the same period.23 States also are developing plans two models for reforming payment for care provided to improve quality and reduce costs for their dually to dually eligible individuals: fully integrated capitation eligible populations, with some working on managed and managed fee-for-service payments. Under the first, care models and others focusing on ACO-like strate- MCOs would receive a blended capitation payment gies. Nationwide, dually eligible individuals represent from CMS and the state Medicaid agency to cover the 15 percent of the Medicaid population but account costs of both Medicare and Medicaid benefits. By con- for 39 percent of Medicaid expenditures.24 Currently, trast, under the managed fee-for-service model, provid- less than 15 percent of dually eligible individuals are ers would continue to receive fee-for-service payments enrolled in managed care plans, and most dually eligible from Medicare and Medicaid but would be eligible individuals receive Medicaid benefits through fee-for- to receive a portion of any savings achieved through service arrangements that do not promote coordination improved care coordination, much like an ACO that among providers. As a result, some studies estimate that participates in the MSSP. As Exhibit 3 illustrates, states Medicare and Medicaid could save $125 billion over 10 have taken varied approaches to managing care for their years by improving coordination of care for dually eli- dually eligible populations, with 18 states proposing to gible individuals. adopt the fully integrated capitated model, six propos- ing to adopt a managed fee-for-service approach, and two states proposing to adopt both models. 16 High-Performance Health Care for Vulnerable Populations THE ROLES OF ACOs AND MCOs providers who are not participating in the ACO. Unlike IN MEDICARE AND MEDICAID MCOs, care management is at the practice level, and To date, policymakers have largely viewed MCOs and care managers will likely be embedded in hospitals or ACOs as distinct approaches. At the federal level, the providers’ offices to manage care for all patients, regard- MSSP applies exclusively to fee-for-service beneficia- less of payer. State licenses are generally not required ries. Similarly, the capitated enrollment program for for a financial model incorporating fee-for-service pay- dual eligibles allows only licensed MCOs to participate ments plus shared savings or shared losses. and does not provide any guidance as to how enrollees In between these two extremes is a range of in this program might relate to ACOs. The managed models, including provider-sponsored MCOs, staff- fee-for-service model for dual eligibles is an entirely model HMOs, and fully capitated ACOs. Likewise, an distinct approach with providers, rather than MCOs, at MCO with a contracted network can share risk and the core. The bifurcation of managed care and fee-for- savings and offer quality incentives to its providers. The service initiatives presents a challenge for providers and issue is less about the legal or corporate structure and policymakers alike.25 Ultimately, the goal should be to more about whether the delivery model and the pay- define and harmonize the models, so that both support ment model support integrated, cost-effective, quality integrated delivery systems that provide cost-effective, care. Exhibit 4 on page 18 depicts the ACO–MCO quality care for patients and communities. continuum. We propose that MCOs and ACOs can be Moving from left to right on the continuum viewed as two poles on a continuum. At one end, illustrated in Exhibit 4, the ACO entity accepts more MCOs receive monthly capitation payments and are financial risk for the total cost of care—triggering responsible for arranging comprehensive health care state licensing and reserve requirements at some point. to enrolled individuals and families through a con- Moving from right to left, by contrast, the MCO entity tracted network of participating providers. Providers becomes more integrated with the health care delivery are generally paid on a fee-for-service basis by the system by developing financial and clinical initiatives MCO. Patients select or are assigned to the MCO. that foster greater coordination and accountability Additionally, patients are generally required to receive across the delivery system. The overlapping area repre- all of their care, except emergency care, through provid- sents a “sweet spot” where the entity bearing financial ers in the MCO’s network. The MCO provides care risk is clinically integrated with the delivery system. management at the plan level, and care managers, who This can be achieved whether the starting point is an are generally employed by the plan or its vendor, man- ACO or an MCO model; in each case, the key chal- age care for enrollees. Finally, MCOs are required to lenge for states is to ensure that providers are supported, obtain a state license to bear risk and must establish given incentives, and held accountable for providing adequate reserves. integrated, efficient, and effective care. At the other end of the continuum is a non- In developing Medicaid policy, states should capitated ACO, an entity formed by providers that con- assess their market characteristics to determine the best tracts with payers (whether public or private) to receive building blocks for advancing shared clinical care pro- fee-for-service payments with shared savings (or shared cesses, a common information technology infrastruc- losses). Shared savings (or losses) are determined by ture, and common quality metrics and payment struc- measuring the total cost of care for the ACO’s patients tures, including incentives, across payers. In markets against a benchmark. ACOs are owned and led by par- with strong and well-functioning Medicaid managed ticipating providers, at times with nonproviders holding care systems, the key issue will be how to harmonize the a minority stake. Patients are generally assigned to an policies of multiple plans to support accountability at ACO based on where they receive care, and may see the provider level, including supporting development of www.commonwealthfund.org17 Exhibit 4. The ACO–MCO Continuum MCO fully integrated with delivery system ACO participating MCO that is not integrated in MSSP with delivery system ACO MCO ACOs MCOs Ownership: Owned and led by participating Ownership: May be owned by providers or providers. other entities. Financial model: Fee-for-service plus shared Financial model: Plan paid on a PMPM savings/losses. capitated basis, with plan responsible for providing or arranging all covered services; Assignment and provider choice: Patients providers paid FFS by plan. are assigned to an ACO based on where they receive care. Patients may see providers who ACO accepting full MCO sharing savings Assignment and provider choice: Patients are not participating in the ACO. select or are assigned to a plan and, with capitation with providers limited exception, receive care from MCO Care management: Care management provider network. is at the practice level. Care management: Care management is at Licensure and reserves: License generally the plan level. Care managers, who are not required. Reserves generally not generally employed by the plan or a plan’s required. vendor, will manage care only for enrollees. Licensure and reserves: Required to obtain a state license and establish adequate reserves. Reserve requirements may be Source: Authors’ analysis. substantial. ACO initiatives. In markets where the Medicaid man- statewide payment and delivery reform. To the extent aged care penetration is more limited or the managed states build on Medicare policies, they may achieve care program is not functioning as desired, states may some efficiencies in terms of data collection and moni- want to consider direct provider contracting vehicles toring of ACOs.26 States should begin by building on similar to those in the MSSP program. Some states may the MSSP program requirements and adapting them want to consider a mix of managed care and direct con- to accommodate the unique characteristics of their tracting vehicles; in such instances there will be a higher Medicaid population or market conditions. States will burden to ensure that the proliferation of models does want to strike a careful balance in addressing the needs not cause administrative complexity and undermine of the Medicaid population without losing the benefits accountability. of consistent standards across ACO initiatives. Getting the Strategy Right BUILDING AN ACO FRAMEWORK States will need to decide whether supporting the for- IN MEDICAID mation and ongoing operations of accountable care This section advances policy recommendations for organizations is central to achieving their goals of states to consider in constructing a framework in containing cost and improving quality in the Medicaid Medicaid to support the development and operation program. of accountable care organizations that: 1) aligns with ACOs have the potential to improve the quality the Medicare Shared Savings Program; 2) addresses of care and reduce the overall cost of care for Medicaid the needs of Medicaid beneficiaries, and 3) advances beneficiaries for several reasons. First, ACOs make 18 High-Performance Health Care for Vulnerable Populations providers directly accountable for patient costs and out- ACOs, payment methodologies, and risk allocation. comes, fostering accountability at the level at which care Most important, to realize the benefits of high-per- is delivered.27 Additionally, by holding large groups of forming delivery systems, states will want to minimize providers jointly accountable for quality and costs, the the use of fee-for-service payment methodologies that ACO model promotes systemwide change, rather than can promote disjointed or duplicative care. Whether discrete changes limited to individual providers or prac- through direct contracting or downstream contracting tices. And since most ACOs will involve partnerships requirements between Medicaid managed care plans between individual physicians or group practices and and ACOs, Medicaid programs should seek to advance hospitals, hospitals will have both the incentives and the development and implementation of new payment ability to invest in the infrastructure to enable providers models that combine quality metrics (such as those in to reduce costs and improve quality.28 the MSSP) with capitation or shared savings payment Finally, ACOs are well positioned to improve methodologies that reward providers for performance. care for patients with complex health care needs. In In short, states will want to ensure that their Medicaid particular, they are well suited to integrate community- fee-for-service and managed care policy priorities align based resources into beneficiaries’ care, which could with each other and to the maximum extent possible benefit those who experience poor health outcomes and appropriate with Medicare as well. driven by poverty and related social issues, including Some states have begun to recognize the unstable housing and employment, problems getting importance of contracting requirements. In New York, transportation, and insufficient access to a nutritious for example, MCOs are required under their contract diet.29 By bringing together primary care physicians, with the state to provide enhanced payments to medical specialists, and acute care hospitals with community- homes certified by the National Committee for Quality based mental health and social services agencies, ACOs Assurance (NCQA) and to contract with health homes can ensure coordination of care across the spectrum of to coordinate care for individuals with certain chronic providers, potentially eliminating the gaps in care that conditions.31 Additionally under the Affordable Care have the most negative effects on those with complex Act, MCOs are also required to pay providers the health care needs.30 Medicare rate for primary care services provided in 2013 and 2014.32 Finally, Pennsylvania requires that Translating Strategy into Action its Medicaid managed care plans share with providers In markets that are dominated by traditional fee-for- $1 per member per month from the performance-based service payment structures, states may want to model payment that the plan receives from the state to pro- their ACO programs on the MSSP. But, as discussed mote patient-centered medical homes.33 above, for the large number of states with significant Medicaid managed care programs, limiting ACOs to ACO Certification the fee-for-service population may hamper the develop- States should adopt a streamlined certification proce- ment of ACOs in Medicaid and among safety-net hos- dure that takes advantage of the extensive MSSP certi- pitals serving the largest numbers of Medicaid patients. fication process already in place. Currently, the MSSP To promote the development of ACOs in requires that applicants set out their governance model, high-density Medicaid managed care markets, states plan for use of shared savings payments, data-sharing will want to consider adopting contracting guidelines protections, and intended use of beneficiary data. governing the relationship between MCOs and ACOs, Applicants also must outline their clinical processes for thereby supporting integrated care delivery. Such guide- promoting patient-centered care, delivering evidence- lines might address issues such as the assignment of based medicine, engaging beneficiaries, and coordinat- patients to an ACO, services performed by MCOs and ing care. Certification of ACOs is the pathway through www.commonwealthfund.org19 which ACOs become legally recognized and entitled federal requirement so as to promote consistency in to significant benefits, both in terms of the ability to organization and program design. receive shared savings and to structure commercial States also may want to consider working with arrangements with payers and network participants that an outside accreditation body to develop certification entail reduced legal liability. criteria for ACOs that bridge the requirements of both States might deem ACOs participating in the the Medicare and Medicaid programs. In fact, NCQA MSSP to be certified for purposes of a Medicaid ACO, announced three levels of accreditation for ACOs in thus streamlining the application process for these November 2011, and other accreditation bodies are ACOs as well as for the state. There is ample precedent likely to follow suit.36 for states relying on external certification processes for state law purposes. Beginning in 1965, the federal ACO Governance and Ownership government stated that all hospitals accredited by the States will want to align any Medicaid ACO-specific Joint Commission on Accreditation of Health Care governance and ownership requirements with those set Organizations were “deemed” to be in compliance with forth in the MSSP in order to avoid imposing conflict- the conditions for participation in Medicare. States have ing standards on ACOs participating in both programs. followed suit. Currently, at least 38 states grant deem- The MSSP requires that clinical providers lead the ing authority to various NCQA and URAC accredita- ACO and own a majority stake in it.37 According to the tion programs.34 For example, NCQA-certified medical preamble to the final rule establishing the MSSP, this homes are deemed medical homes in Iowa’s Medicaid requirement is intended to ensure that the organizations incentive program.35 are driven by providers, not investors.38 Other MSSP While reliance on the Medicare certification governance requirements include the following: 1) all process is an appropriate starting point, states may want providers forming the ACO must be able to partici- to add their own requirements or support an alterna- pate meaningfully in the composition and control of its tive certification route for ACOs with small numbers governing body; 2) the governing body must include of Medicare patients. For example, Medicaid ACOs a Medicare beneficiary who is served by the ACO; 3) will likely need to demonstrate network adequacy and providers participating in the ACO must control at least care management capabilities that extend to pediatric 75 percent of the governing body; and 4) the governing patients, have greater capabilities to address substance body must adopt a conflict-of-interest policy. abuse and mental health problems, and have the ability Encouraging partnerships, especially among to address beneficiaries’ community-based and institu- providers serving large numbers of Medicaid beneficia- tional long-term care needs. To address these unique ries, is an important way in which states can support the characteristics of the Medicaid program, states need not formation of ACOs. Early evidence suggests that there set up a separate ACO certification process. Instead, the is a wide range of private companies with experience state could simply accept Medicare’s certification and in information technology, risk management, and care require a streamlined supplemental state certification to coordination interested in supporting ACO develop- address the unique issues of the Medicaid program. ment and operations.39 In addition to expertise, capital Providers serving predominantly Medicaid is required to launch an ACO. Federal estimates sug- patients, such as pediatric providers and safety-net gest that putting an ACO infrastructure in place will hospitals, may not be able to or wish to apply for and take $1.5 million to $2 million.40 But the size of the receive certification as an MSSP ACO. For these pro- investment needed to launch a successful ACO may be viders, the state may want to create a parallel state cer- considerably higher, depending on the required invest- tification process. If a state takes this course, it would ment in information technology, care management staff, make sense to mirror wherever possible the MSSP 20 High-Performance Health Care for Vulnerable Populations network development staff, and quality reporting and newly enrolled in Medicaid experience a disruption of financial analytics capabilities. coverage within 12 months.45 States should consider how to support safety- One of the limitations of retrospective assign- net providers in their efforts to form ACOs. The partic- ment is that it may prove ineffective for individuals with ipation of safety-net providers is critical to the success the most complex conditions, particularly those with of any Medicaid ACO. As The Commonwealth Fund’s behavioral health conditions. Outreach and close man- Commission on a High Performance Health System agement of these individuals is required upfront, and noted in a recent report, safety-net providers have after-the-fact assignment may not address their needs. historically provided “otherwise unavailable or unaf- States may want to consider prospectively assigning fordable care to vulnerable populations” and “are often individuals with complex needs to ACOs and providing better able to meet the complex social, cultural, and lin- those ACOs with additional payments for outreach and guistic needs that are more prevalent within vulnerable engagement of those beneficiaries. Minnesota’s ACO- populations.”41 like Health Care Delivery Systems Demonstration uses retrospective assignment methodology but then takes Assignment to an ACO into account whether the individual had been assigned An accurate assignment methodology is key to the suc- to a health home affiliated with the ACO-like entity cess of an ACO, since it must be held accountable only and where that individual receives primary care.46 for the cost and quality of care rendered to patients By contrast, for Medicaid beneficiaries enrolled accessing its providers. The MSSP assigns beneficiaries in Medicaid managed care plans, states may want to to an ACO retroactively, based on where they received require a prospective assignment system based on the the majority of their primary care in a given year.42 As enrollee’s selected (or assigned) primary care provider. described in the final MSSP rule, it is critically impor- In the preamble to the MSSP final rule, CMS noted tant that the assignment process “accurately reflect that managed care members tended to have lower the population that an ACO is actually caring for, in year-to-year variability in treating physicians than fee- order to ensure that the evaluation of quality measures for-service Medicare beneficiaries.47 Assuming the is fair and that the calculation of shared savings, if any, same is true for Medicaid beneficiaries, a prospective accurately reflects the ACO’s success in improving the assignment methodology would ensure that ACOs are quality and efficiency of the care provided to the benefi- assigned responsibility for beneficiaries for whom its ciaries for which it was actually accountable.”43 participating providers are responsible. A prospective In the case of Medicaid fee-for-service patients, assignment methodology also would enable ACOs to following the MSSP lead and assigning patients on a focus their care coordination efforts on the patients retrospective basis, though not without problems, may for whom they and the managed care plan will be held be the most sensible approach. Medicaid beneficiaries, financially responsible.48 especially those in fee-for-service Medicaid who are not required to receive care from a fixed network of Opt Out providers, may not receive primary care from a regular Permitting patients to opt out of an ACO is not a sig- provider, but instead receive primary care services in nificant issue because participation does not impose emergency departments or from multiple providers gatekeeper restrictions or risk loss of benefits based on in health clinics.44 Additionally, Medicaid beneficia- where patients choose to receive care. Consequently, ries, unlike Medicare beneficiaries, may move on and states will not want to permit Medicaid beneficiaries off coverage during a year as their income fluctuates. to opt out of an ACO, just as Medicare beneficiaries Research indicates that as many as 43 percent of adults may not opt out of assignment to a MSSP ACO. States should follow MSSP’s lead and allow beneficiaries to www.commonwealthfund.org21 opt out of having their data shared with an ACO.49 By rule, including: 1) the minimum savings/losses thresh- aligning with the MSSP with respect to opt out, states old that ACOs must achieve to trigger savings; 2) what will avoid imposing conflicting standards for beneficiary portion of the savings are eligible for sharing; and 3) notification and consent on ACOs participating in both the sharing rate. For each of these aspects, states should the MSSP and Medicaid ACOs. weigh the extent to which the program is appealing to providers with the potential for it to garner significant Exclusivity of Primary Care Providers savings for the state. States will likely want to follow CMS’s lead and limit Specifically, states should consider the extent to primary care providers to only one ACO for each tax which they share savings with providers and, if applica- identification number (TIN) under which they bill ble, MCOs. In the MSSP, the ACO is eligible to share Medicaid. In the MSSP, primary care providers may in the first dollar of savings or losses, and the ACO’s participate in only one ACO for each TIN under which share of the savings is adjusted to reflect their quality they bill Medicare, since the beneficiary assignment scores.55 Because they can share in the first dollar of methodology relies on the TINs of primary care pro- savings, ACOs are better able to recoup their invest- viders.50 In other words, a primary care physician who ments in ACO infrastructure. To make the Medicaid bills under one TIN as part of a physician group and ACO program appealing to providers, especially to another TIN when providing care at a health center safety-net providers that may find it challenging to could participate in different ACOs for each TIN. By invest in the ACO infrastructure, states should permit contrast, specialty providers may participate in multiple ACOs to share in the first dollar of savings. In the man- ACOs with a single TIN.51 While exclusivity seems aged care context, states also should require that MCOs highly desirable, states will want to be certain that this share a portion of their savings with the state, so that requirement does not erode or impede access to care for the state Medicaid program benefits from greater care Medicaid beneficiaries. efficiency. In Minnesota’s Health Care Delivery Systems Financial Model Demonstration, MCOs are not required to contract States should follow the MSSP approach in develop- with ACO-like entities, but the MCO must contrib- ing a financial model to support ACOs that allows ute a portion of the shared savings payment owed to them to choose to avoid downside risk during their ACO-like entities serving the MCO’s enrollees.56 For first three-year contract with the state.52 Permitting example, if an ACO-like entity is entitled to a shared ACOs to be eligible for shared savings, but not shared savings payment of $100,000, and 30 percent of that losses, will make participation more appealing to pro- ACO-like entity’s assigned patients are also enrolled in viders, especially groups that are still developing the a particular managed care plan and 70 percent are cov- capabilities to work under performance-based contract- ered through fee-for-service Medicaid, then the MCO ing arrangements. Minnesota’s Health Care Delivery would be responsible for $30,000 (30%) of the shared System Demonstration takes this approach by allowing savings payment to the ACO-like entity and the state providers who are not part of an integrated delivery would be responsible for $70,000 (70%) of the shared system to participate in gainsharing only.53 New Jersey, savings payment. While the MCO is not required to too, permits gainsharing only in its Medicaid ACO contract directly with the ACO-like entity, it benefits demonstration.54 from decreased utilization because of the ACO-like State financial models also will need to consider entity’s efforts and is responsible for a portion of the a number of other issues addressed in the final MSSP shared savings payment to the ACO-like entity, just as if it had contracted directly with that entity.57 22 High-Performance Health Care for Vulnerable Populations Benchmark Calculation and Trending The MSSP increases the benchmark each year by the To evaluate whether an ACO has achieved savings (or absolute dollar amount of growth in national health incurred losses), the state will want to compare actual care spending for Medicare beneficiaries.61 By using a spending to a benchmark—an estimate of what would national growth factor to adjust the benchmark, CMS have been spent on the ACO’s assigned beneficiaries. will hold ACOs in regions with high growth in health There are three core features in CMS’s methodology care spending to a lower growth rate. Likewise, states for calculating the benchmark expenditures for the can apply statewide trends in Medicaid spending to a MSSP program that state policymakers can import into benchmark. their Medicaid ACO programs: 1) using claims data from beneficiaries who are not necessarily assigned to Compensation of ACO Participating Providers the ACO; 2) risk-adjusting benchmarks based on ben- States should give ACOs wide latitude to determine eficiary health status; and 3) using trend factors based how they distribute shared savings (or, if applicable, on growth in health care expenditures across a broad shared losses) among providers. The MSSP affords region. ACOs considerable flexibility in determining how to States that opt to expand their Medicaid distribute shared savings payments among participating populations to include childless adults with incomes providers, but it does require that applicants to the pro- of less than 133 percent of the federal poverty level gram describe how they plan to do so.62 States should beginning in 2014 will face additional challenges in provide flexibility in distributing savings to encourage creating spending benchmarks for this newly eligible innovation and collaboration. States also may want to population.58 Since these populations will be new to the require that ACOs distribute a fixed percentage of sav- Medicaid program, there will not be similar individu- ings to safety-net providers, such as federally qualified als with claims experience from years prior to the start health centers and disproportionate share hospitals, to of the Medicaid ACO program. To avoid inaccurate further Medicaid’s mission of ensuring access to care for benchmarks, states may want to exclude the newly eligi- low-income individuals. ble populations for the first year of the Medicaid ACO program and then include them in subsequent years. Quality Metrics States also should risk adjust the benchmark States may choose to base their ACO quality measures expenditures to account for the health status of the on the MSSP’s quality metrics while incorporating individuals enrolled, to the extent that this is technically additional metrics tailored to the Medicaid population. feasible. As discussed above, the MSSP borrows its risk- In the MSSP, ACOs must report their performance adjustment methodology from the Medicare Advantage on 33 quality measures.63 An ACO’s total quality score program.59 Only a small number of states, however, risk directly affects its sharing rate, so maintaining high adjust Medicaid managed care capitation rates based on scores is essential for collecting significant shared health status; most use a combination of demographic savings payments. Aligning the Medicaid ACO and factors and regional adjustments to create capitation MSSP quality metrics would ensure consistency across rates.60 States that do not currently risk adjust Medicaid initiatives and better enable ACOs to create systemwide managed care capitation rates may consider developing quality improvement initiatives. The MSSP’s qual- a risk adjustment methodology for the Medicaid ACO ity metrics, though applicable to most patients, were program. If this is not possible, states could adjust the designed for the Medicare population. As a result, they benchmark using only demographic and geographic do not include metrics for some services provided to factors. Medicaid beneficiaries, such as pediatric care, obstetric Finally, states should use statewide trend fac- care, or behavioral health care. tors to account for growth in health care spending. www.commonwealthfund.org23 Health Information Technology and The waivers remove several key barriers to creating an Exchanges ACO, and they apply to all arrangements between the The effective exchange of health information is ACOs participating in the MSSP and other payers. As critical for an ACO’s success. In the preamble to the some ACOs may form to coordinate care for Medicaid MSSP final rule, CMS stated that “health information patients, but not Medicare patients, it seems reasonable exchanges are of the utmost importance for both effec- to request that the same waiver program be made avail- tive coordination of care activities and the success of able to such groups. the [MSSP].”64 CMS allows ACOs to craft their own health information exchange strategies. States have a Antitrust Guidance and the State Action unique opportunity to promote interoperability of elec- Doctrine tronic medical records by building into the Medicaid As part of the MSSP, the Department of Justice and the ACO certification process requirements related to data Federal Trade Commission also issued antitrust guid- sharing and use of public health information exchanges ance that will likely protect ACOs from some antitrust to support care coordination. scrutiny for actions taken to further their collaborations. Safety-net providers may, however, lack the States could request that the Department of Justice and capital needed to invest in a robust health information the Federal Trade Commission extend such antitrust technology infrastructure. The Health Information guidance to ACOs participating in a state’s Medicaid Technology for Economic and Clinical Health Act ACO program. Alternatively, states could use the “state provided a down payment for Medicaid providers seek- action doctrine” to insulate ACOs from federal antitrust ing to adopt electronic health records.65 States should provisions. Under the state action doctrine, the federal consider whether additional support is needed to ensure antitrust laws do not prohibit activities that arise out that safety-net providers can meet the certification of a state regulatory scheme, so long as public actors requirements related to data sharing and use of health supervise the otherwise unlawful activities.66 Therefore, information exchanges. if a state, when acting in its regulatory capacity, cre- Without multiple payers implementing pro- ates an ACO program, ACOs that organize under such grams to promote high-performance delivery systems, program are not subject to federal antitrust scrutiny, there will not be enough patients, and thus enough provided that the state maintains an active role in over- potential shared savings, to justify the upfront costs of seeing the ACOs. Significantly, in assuming this more investments in ACO infrastructure, health informa- active role, states would be positioned to take steps or tion technology, and care processes necessary to sup- impose requirements to ensure that the arrangements port its operations. The alternative—adopting separate that providers and payers develop benefit the public health IT systems and care processes depending on the interest or even drive the arrangements so as to advance patient’s source of coverage—will hinder the success of public priorities. the ACO. As CMS recognized, the more patients an ACO sees for which it is subject to a coordinated set State Laws and Levers of performance-based payments, the more likely it will Just as some federal laws posed roadblocks to the estab- achieve the desired cost and quality outcomes. lishment of ACOs, some state laws may pose barriers to ACO formation. States starting ACO programs Federal Fraud and Abuse Provisions targeting Medicaid beneficiaries should assess which States could request that CMS and the Office of the state laws will have an impact on the success of the Inspector General extend the MSSP’s existing fraud program and, where necessary, follow the federal lead and abuse waivers to Medicaid ACOs to reduce bar- and issue waivers or establish guidance that supports riers for groups not also participating in the MSSP. ACO development and growth. A number of state laws 24 High-Performance Health Care for Vulnerable Populations can be considered in this assessment, including fraud CONCLUSION and abuse laws, antitrust laws, corporate practice of The Affordable Care Act and state Medicaid reform medicine laws, laws relating to the privacy and security efforts present an enormous opportunity to reengineer of health information, and laws relating to risk-bearing health care payment and delivery to promote a high- entities.67 Additionally, states should consider whether performing health care system. But this opportunity their Medicaid supplemental payment policies or certif- will be squandered unless Medicare and Medicaid work icate-of-need programs need to be restructured to align collaboratively to develop a common framework in with the goals of Medicare and Medicare payment and which providers can develop and sustain an integrated delivery system reform. A final state policy lever that care model for their patients. Aligning the require- should not be overlooked is the role of newly formed ments for ACOs in both Medicare and Medicaid, to state-based Health Insurance Exchanges in supporting the extent practical, will support more streamlined and multipayer ACO initiatives. efficient health care delivery systems. Even more impor- tant, coordinating ACO efforts will create coherent eco- nomic incentives for providers that encourage the best results in terms of quality improvement and cost control for all patients and communities. www.commonwealthfund.org25 APPENDIX. OVERVIEW OF MEDICARE ACO PROGRAMS The Affordable Care Act promotes payment and delivery system reform by creating programs designed to encour- age providers to form ACOs. An ACO is a “group of providers who are willing and able to take responsibility for improving the overall health status, care efficiency, and healthcare experience for a defined population.”68 The group of providers linking together to form an ACO may have existing relationships, such as a hospital forming an ACO with its employed physicians, or the providers may not have existing relationships, such as a patchwork of physician practices and hospitals in a service area forming an ACO. Generally, an ACO is held accountable for the total per capita spending for its patients. Depending on an ACO’s arrangement with a payer, the ACO may receive a portion of any savings relative to a benchmark for the ACO’s population (“shared savings”); the ACO also may be respon- sible for paying for a portion of any losses (“shared losses”). ACOs also may accept partial or complete capitation to cover the costs of care for their patients. Through the Affordable Care Act, Medicare adopted the ACO concept as a strategy for improving the quality and increasing the efficiency of care provided to its beneficiaries. Two separate ACO programs have been established: the Medicare Shared Savings Program (MSSP) and the Pioneer ACO Program.69 Through the MSSP, CMS has estimated that 50 to 270 ACOs will form in the first four years, affecting 1 million to 5 million Medicare beneficiaries.70 As of the most recent announcement, in July 2012, there are 116 ACOs in the MSSP. The Pioneer ACO program, established in December 2011, is designed for providers with experience coordinating care for patients across multiple care settings. The program enables these groups of providers to move quickly from a shared savings ACO model to a population-based payment model. There are 32 Pioneer ACOs that are estimated to care for 860,000 Medicare beneficiaries.71 The Pioneer program is generally viewed as a laboratory for the further devel- opment of the more far-reaching MSSP initiative. Taken together, the MSSP and Pioneer programs represent a path-breaking attempt by the federal govern- ment to empower high-performing delivery systems. These programs provide a regulatory structure and economic incentives to promote providers’ efforts to improve the quality and efficiency of health care services. When announc- ing the release of the MSSP final rule, Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services, stated that the MSSP represented an opportunity to “give doctors, hospitals, and other providers the flex- ibility and support they need to work together and focus on making sure patients get the care they need.”72 The MSSP final rule, published on November 2, 2011, sets out the framework for most ACOs caring for Medicare beneficiaries. It is thus the starting point for any assessment relating to how Medicare and Medicaid can work together to create a common framework for advancing the development and operation of high-performing delivery systems.73 Under the final rule, an ACO is defined as a legal entity recognized under state law that consists of Medicare providers that manage and coordinate care for Medicare fee-for-service beneficiaries.74 Some of the key features of the MSSP that state Medicaid agencies should consider are described below. Entities Eligible to Form ACOs Several types of providers can join together to form a Medicare ACO, including physicians in group practice, net- works of individual providers, partnerships or joint ventures between hospitals and providers, hospitals employing providers, federally qualified health centers, critical access hospitals that bill under Method II, and rural health cen- ters.75 The ACO entity must be capable of the following: 1) receiving and distributing shared savings; 2) repaying shared losses; 3) establishing, reporting, and ensuring provider compliance with health care quality criteria, including quality performance standards; and 4) fulfilling other ACO functions.76 If two or more otherwise independent par- ticipants form an ACO, it must be a legal entity separate from any of its participants.77 26 High-Performance Health Care for Vulnerable Populations ACO Governance Structure An ACO participating in the MSSP must have a governing body with the authority to perform the functions of an ACO, including, among other things: 1) defining processes to promote evidence-based medicine and patient engagement; 2) reporting on quality and cost measures; and 3) coordinating care.78 ACO participants must control at least 75 percent of the ACO’s governing body, limiting the control of nonprovider investors.79 Each ACO also must include a Medicare beneficiary representative on the governing body.80 ACOs may apply to CMS for waivers of these governance requirements. Beneficiary Assignment CMS will assign beneficiaries to ACOs participating in the MSSP on a retrospective basis at the end of each year.81 Assignment will be completed through a two-step process. In the first step, CMS will assign a beneficiary to an ACO if the beneficiary received a majority of his or her primary care services from primary care providers within the ACO.82 In the second step, CMS will assign beneficiaries who received no primary care services from a primary care provider to the ACO if the individual received most of his or her primary care services from a specialty physician or certain non-physician practitioners (namely, nurse practitioners, clinical nurse specialists, and physician assistants) who participate in the ACO.83 Care Management and Health Information Technology Initiatives CMS does not require that ACOs adopt specific care management criteria. Instead, it requires that an ACO docu- ment its plans to define, establish, implement, and update its care management processes.84 Additionally, CMS does not require that a certain number of primary care providers in the ACO engage in “meaningful use” of health infor- mation technology. Rather, CMS includes meaningful use by primary care providers as one of 33 quality metrics that will affect an ACO’s total shared savings payment.85 Financial Model CMS establishes two tracks for participating in the MSSP. Track One features shared savings only for the first three years of participation; Track Two includes shared savings and shared losses for all three years of participation.86 To calculate shared savings or losses, CMS will first calculate the benchmark to establish what CMS would have paid for the care of beneficiaries attributed to the ACO.87 The benchmark is calculated by identifying the beneficiaries who would have been assigned to the ACO in the three years prior to it participating in the MSSP and tallying the costs of care for those patients.88 CMS then risk adjusts the benchmark and inflates it to account for growth in health care expenditures.89 For each performance year of the contract, CMS will compare the actual expenditures to the benchmark. If the savings meet a specified savings or loss threshold—specifically, 2.0 percent to 3.9 percent for ACOs in Track One, depending on the number of beneficiaries assigned to the ACO, and 2.0 percent for ACOs in Track Two, regardless of size—then the ACO will share in a portion of the savings or losses.90 An ACO’s share of savings or losses will vary based on its quality score. Quality Metrics The MSSP measures 33 separate quality metrics to assess an ACO’s performance.91 These metrics fall into the fol- lowing four domains: 1) patient/caregiver experience; 2) care coordination and patient safety; 3) preventive health; and 4) at-risk populations. In year one, all 33 measures are pay-for-reporting, meaning that an ACO receives a www.commonwealthfund.org27 perfect quality score for reporting the quality measures, regardless of their actual performance.92 In year two, 25 mea- sures are pay-for-performance; in year three, 32 measures are pay-for-performance.93 Fraud and Abuse and Antitrust Provisions Along with the final rule creating the MSSP, CMS and the Office of the Inspector General (OIG) at the U.S. Department of Health and Human Services announced waivers of three key federal fraud and abuse laws for enti- ties participating in the program.94 The Federal Trade Commission (FTC) and Department of Justice (DOJ) also announced antitrust protections for ACOs participating in the MSSP.95 Specifically, CMS and OIG announced that they would waive the Physician Self-Referral Law (referred to as the “Stark Law”), the federal Anti-Kickback Statute, and the Civil Monetary Penalties law provisions prohibiting certain gainsharing arrangements between hos- pitals and physicians (the “Gainsharing CMP”) for certain arrangements among providers in ACOs participating in the MSSP.96 In the antitrust policy statement, DOJ and FTC stated that ACOs participating in the MSSP will be deemed clinically integrated, an important designation enabling them to conduct joint rate and other negotiations with commercial payers, without incurring the substantial financial risk (usually 20 percent of fees) that is otherwise required to justify providers jointly negotiating rates and key terms.97 DOJ and FTC also established a “safety zone” for ACOs with a market share of less than 30 percent for each service, effectively insulating these providers from antitrust review.98 For ACOs formed after March 23, 2010, with market shares above 30 percent, ACOs may submit their proposed arrangements to DOJ and FTC for expedited review, but review is not required.99 28 High-Performance Health Care for Vulnerable Populations 7 NOTES Center for Medicare and Medicaid Innovation, 1 Pioneer ACO Request for Application, § II.I. Affordable Care Act, Pub. L. No. 111-148, § 3502; 8 Affordable Care Act § 2703; Affordable Care Act § See Guterman, Schoenbaum, Davis et al., High 2704; and Affordable Care Act § 2702. See also 76 Performance Accountable Care, 2011; Davis and Federal Register 32,816 (June 6, 2011). Schoenbaum, Toward High-Performance 2 Accountable Care, 2010; Boland, Polakoff, and Centers for Medicare and Medicaid Services, Schwab, “Accountable Care Organizations Hold National Health Expenditure Projections 2010– Promise,” 2010; and P. B. Ginsburg, “Reforming 2020, 2011, p. 2, available at http://www.cms.gov/ Provider Payment,” 2011. Research-Statistics-Data-and-Systems/Statistics- 9 Trends-and-Reports/National HealthExpendData/ Kaiser Commission on Medicaid and the Downloads/proj2010.pdf. Note that these figures Uninsured, Medicare’s Role for Dual Eligible assume that all states will expand Medicaid eligi- Beneficiaries (Washington, D.C.: Henry J. Kaiser bility to all childless adults with incomes below 133 Family Foundation, April 2012). percent of the federal poverty level. In the wake of 10 the recent Supreme Court decision in National For a discussion of Medicaid payment and delivery Federation of Independent Businesses v. Sebelius, Slip system reform initiatives in several states, see Op. No. 11-393 (June 28, 2012), some states may National Association of Medicaid Directors, State opt to not expand Medicaid eligibility for this pop- Medicaid Directors Driving Innovation: Payment ulation. Reform (Washington, D.C.: NAMD, July 20, 2012). 11 3 Ibid. Affordable Care Act § 1202; see also 77 Federal Register 27, 671 (May 11, 2012) (proposed rules 4 See Center for Medicaid and CHIP Services, State implementing primary care rate increase). States Medicaid Director Letter #12-001, July 10, 2012. receive federal funds to cover the difference 5 between the Medicaid and Medicare rates. For a See E. Emanuel, N. Tanden, S. Altman et al., “A discussion of the proposed rule, see T. McGinnis, Systematic Approach to Containing Health Care “Raising Medicaid Primary Care Rates: Next Steps Spending,” New England Journal of Medicine: for States,” The Commonwealth Fund Blog, May 24, Election 2012 (Aug. 1, 2012), recommending, inter 2012. alia, that the Federal Employees Health Benefits 12 Program align with Medicare by requiring plans to M. K. Abrams, R. Nuzum, S. Mika, and G. Lawlor, phase in alternative payment methods. See also S. Realizing Health Reform’s Potential: How the Guterman, S. C. Schoenbaum, K. Davis, C. Schoen, Affordable Care Act Will Strengthen Primary Care A.-M. J. Audet, K. Stremikis, and M. A. Zezza, High and Benefit Patients, Providers, and Payers (New Performance Accountable Care: Building on Success York: The Commonwealth Fund, Jan. 2011). and Learning from Experience (New York: The 13 Commonwealth Fund, April 2011); K. Davis and S. M. Takach, “Reinventing Medicaid: State C. Schoenbaum, “Toward High-Performance Innovations to Qualify and Pay for Patient- Accountable Care: Promise and Pitfalls,” The Centered Medical Homes Show Promising Commonwealth Fund Blog, Sept. 14, 2010; P. Results,” Health Affairs, July 2011 30(7):1325–34. Boland, P. Polakoff, and T. Schwab, “Accountable 14 Center for Health Care Strategies, State-by-State Care Organizations Hold Promise, But Will They Health Home State Plan Amendment Matrix: Achieve Cost and Quality Targets?” Managed Care, Summary Overview (Hamilton, N.J.: CHCS, June Oct. 2010; P. B. Ginsburg, “Reforming Provider 2012), available at http://www.chcs.org/usr_doc/ Payment—The Price Side of the Equation,” New State_by_State_HH_SPA_matrix.pdf. See Missouri England Journal of Medicine, Oct. 6, 2011 State Plan Amendment, approved Oct. 2011. 365(14):1268–70. 15 6 Affordable Care Act § 2703. See Centers for Medicare and Medicaid Services, Program News and Announcements, available at 16 CHCS, State-by-State Health Home, 2012. https://www.cms.gov/Medicare/Medicare-Fee-for- Service-Payment/sharedsavingsprogram/News. html. www.commonwealthfund.org29 17 27 Multi-Payer Advanced Primary Care Practice E. S. Fisher, D. Staiger, J. P. W. Bynum et al., Demonstration Fact Sheet, (Washington, D.C.: “Creating Accountable Care Organizations: The CMS, April 2012), available at http://www.cms.gov/ Extended Hospital Medical Staff,” Health Affairs, Medicare/Demonstration-Projects/ Dec. 2006 26(1):w44–w57; S. DeVore and R. DemoProjectsEvalRpts/Downloads/mapcpdemo_ Wesley Champion, “Driving Population Health Factsheet.pdf. Through Accountable Care Organizations,” Health 18 Affairs, Jan. 2011 30(1):41–50; E. S. Fisher, M. B. Comprehensive Primary Care Initiative Fact Sheet McClellan, J. Bertko et al., “Fostering Accountable (Washington, D.C.: CMMI, Aug. 2012), available at Health Care: Moving Forward in Medicare,” Health http://www.innovations.cms.gov/Files/fact-sheet/ Affairs, Jan. 27, 2009 28(2):219–31. See also K. Comprehensive-Primary-Care-Initiative-Fact-Sheet. Devers and R. Berenson, Can Accountable Care pdf. Organizations Improve the Value of Health Care by 19 See H.B. 1242 (Colorado); S.B. 1154 (Connecticut); Solving the Cost and Quality Quandaries? H.B. 7107 (Florida); H.B. 450 (Utah); H.B. 202 (Princeton, N.J., and Washington, D.C.: Robert (Vermont); S.B. 5596 (Washington); and S.F. 50 Wood Johnson Foundation and Urban Institute, (Wyoming). 2009), which notes that ACOs differ from MCOs because the former promote accountability at the 20 See Application for Amendment and Renewal: provider level. Oregon Health Plan 1115 Demonstration Project, 28 March 1, 2012, available at https://cco.health.ore- Ibid. gon.gov/DraftDocuments/Documents/narrative. 29 T. McGinnis and D. M. Small, Accountable Care pdf. Organizations in Medicaid: Emerging Practices to 21 Manatt Health Solutions analysis based on Henry Guide Program Design (Hamilton, N.J.: Center for J. Kaiser Family Foundation data. Note: this figure Health Care Strategies, Feb. 2012). excludes individuals enrolled in primary care case 30 See, e.g., A. R. Nissenson, F. W. Maddux, R. L. management. Velez et al., “Accountable Care Organizations and 22 Henry J. Kaiser Family Foundation, Medicare ESRD: The Time Has Come,” American Journal of Advantage Enrollment Market Update, Sept. 2011. Kidney Disease, May 2012 59(5):724–33 (arguing that ACOs could greatly improve care provided to 23 Barclay’s Capital, The Barclay’s Capital Medicaid patients with end-stage renal disease). Guidebook, 7 (2012). 31 New York State Medicaid Managed Care Model 24 Kaiser Commission on Medicaid and the Contract. Uninsured, Medicare’s Role for Dual Eligible 32 Beneficiaries (Washington, D.C.: Henry J. Kaiser Affordable Care Act § 1202; see also 77 Federal Family Foundation, April 2012). Register 27, 671 (May 11, 2012). 33 25 See Guterman, Schoenbaum, Davis et al., High Takach, “Reinventing Medicaid,” 2011. Performance Accountable Care, 2011; Davis and 34 W. Bernstein, L. DuPont, and A. Garcimonde, Schoenbaum, Toward High-Performance Examining the Potential Role for RHIO Accreditation Accountable Care, 2010; Boland, Polakoff, and in New York’s Health Information Technology Schwab, “Accountable Care Organizations Hold Strategy (New York: New York eHealth Promise, 2010; and Ginsburg, “Reforming Provider Collaborative, 2008). Payment,” 2011. 35 26 M. Takach, “Reinventing Medicaid,” 2011. See T. McGinnis and N. Highsmith, Accountable 36 Care Organizations: Creating a Workable Approach National Committee for Quality Assurance, for Medicaid (Hamilton, N.J.: Center for Health Accountable Care Organizations (Washington, Care Strategies, June 2011). D.C.: NCQA), available at http://www.ncqa.org/ tabid/1312/default.aspx (last visited May 22, 2012). 37 42 C.F.R. §§ 425.106, 108. 38 76 Federal Register 67,802, 67,819–20 (Nov. 2, 2011). 30 High-Performance Health Care for Vulnerable Populations 39 46 For examples of companies developing strategies Request for Proposals, Minnesota Health Care to assist providers in forming ACOs, see M. Blatt, Delivery Systems Demonstration, 9, available at E. Dishman, and B. Wilson, Accountable Care http://www.dhs.state.mn.us/main/ Organizations and Beyond: IT Strategies for 21st idcplg?IdcService=GET_DYNAMIC_CONVERSION Century Healthcare (Santa Clara, Calif.: Intel, 2011), &RevisionSelectionMethod=LatestReleased&dDoc available at http://www.intel.com/Assets/PDF/ Name=dhs16_161441. whitepaper/325069.pdf (outlining Intel’s views on 47 how it can assist accountable care organizations in MSSP Final Rule, 67,861. designing and implementing their health informa- 48 Sommers, “Loss of Health Insurance,” 2009. tion technology infrastructures); Press Release, 49 “Aetna Enters Accountable Care Collaboration with 42 C.F.R. § 425.708. Banner Health Network, Introduces Aetna Whole 50 Health to Employers in Phoenix Area,” Nov. 11, 42 C.F.R. § 425.306. 2011, available at http://www.aetna.com/news/ 51 Ibid. newsReleases/2011/1121-Aetna-Banner-Health-Net- work.html (describing Aetna’s collaboration with 52 42 C.F.R. § 425.600. Banner Health Network); Press Release, 53 “WESTMED Medical Group Launches Accountable Request for Proposals, Minnesota Health Care Care Organization (ACO) in Collaboration with Delivery Systems Demonstration, 9. UnitedHealthcare and Optum,” March 20, 2012, 54 McGinnis and Small, Accountable Care available at http://www.uhc.com/united_for_ Organizations in Medicaid, 2012. reform_resource_center/health_reform_provi- sions/accountable_care_organizations/value_ 55 42 C.F.R. §§ 425.604 & .606. based_contracting_and_acos/westmed_launches_ 56 aco.htm (describing the collaboration of United Request for Proposals, Minnesota Health Care HealthCare and Optum with WESTMED Medical Delivery Systems Demonstration, 9. Group). 57 Ibid. 40 McGinnis and Small, Accountable Care 58 Organizations in Medicaid, 2012. Affordable Care Act § 2001. Note that the Supreme Court’s decision in National Federation of 41 E. L. Schor, J. Berenson, A. Shih, S. R. Collins, C. Independent Business v. Sebelius, Slip. Op. No. Schoen, P. Riley, and C. Dermody, Ensuring Equity: 11-393 (June 28, 2012) effectively made the expan- A Post-Reform Framework to Achieve High sion of Medicaid eligibility to childless adults with Performance Health Care for Vulnerable Populations incomes below 133 percent of the federal poverty (New York: The Commonwealth Fund, Oct. 2011). level optional for states. 42 59 42 C.F.R. § 425.402. Note, however, that ACOs 42 C.F.R. § 425.602. receive a preliminary list of beneficiaries who are 60 likely to be assigned to them through the year-end Barclay’s Capital, The Barclay’s Capital Medicaid retrospective assignment process. Guidebook, 65 (2012). 61 43 MSSP Final Rule, 67,862. Medicare Parts A & B only. 42 C.F.R. § 425.602. 62 44 See generally G. Rust, J. Ye, P. Baltrus et al., 42 C.F.R. § 425.204. “Practical Barriers to Timely Primary Care Access: 63 42 C.F.R. § 425.602. Impact on Adult Use of Emergency Department 64 Services,” Archives of Internal Medicine, Aug. 2008 76 Fed. Reg. 67,830. 168(15):1705–10. 65 42 C.F.R. Part 495. 45 B. D. Sommers, “Loss of Health Insurance Among 66 Non-Elderly Adults in Medicaid,” Journal of General See, e.g., S. Semeraro, “Demystifying the Antitrust Internal Medicine, Jan. 2009 24(1):1–7. State Action Doctrine,” Harvard Journal of Law and Public Policy, 2000 24(1):203; and Sommers, “Loss of Health Insurance,” 2009. www.commonwealthfund.org31 67 72 For an overview of state law issues that may U.S. Department of Health and Human Services, impede the development of ACOs, see D. Press Release, “HHS Announces New Incentives Bachrach, R. Belfort, W. Berstein et al., for Providers to Work Together Through Considerations for the Development of Accountable Accountable Care Organizations When Caring for Care Organizations in New York State (New York: People with Medicare” (Washington, D.C.: DHHS, New York State Health Foundation, June 2011); W. Oct. 20, 2011), available at http://www.hhs.gov/ S. Bernstein, J. P. B. Frohlich, F. J. LaPallo et al., news/press/2011pres/10/20111020a.html. “Accountable Care Organizations in California: 73 Programmatic and Legal Considerations” 76 Federal Register 67,802 (Nov. 2, 2011). (Sacramento, Calif.: California HealthCare 74 42 C.F.R. § 425.20. Foundation, July 2011). Several states, for example, 75 have fraud and abuse laws that mirror the federal Under Method II, the critical access hospital bills fraud and abuse provisions. See, e.g., cal. bus. & for facility and professional services; 42 C.F.R. § prof. code § 650(a) (California); La. Stat. Ann § 425.102. 37:1745 (Louisiana); Mich. Comp. Laws Ann. § 76 42 C.F.R. § 425.104. 752.1004 (Michigan); Minn. Stat. Ann. § 62J23(2) (Minnesota); Mo. Rev. Stat. § 191.905(3) 77 Ibid. (Missouri). States may also have antitrust 78 provisions that track the federal antitrust laws. 42 C.F.R. § 425.106. See, e.g., Mass. Gen. Laws ch. 93 § 6 79 Ibid. (Massachusetts). Additionally, several states pro- 80 hibit the corporate practice of medicine, which Ibid. may affect how ACOs may be structured. See, e.g., 81 People v. Cole, 135 P.3d 669, 671 (Cal. 2006) 42 C.F.R. § 425.400. (California); Colo. Rev. Stat. § 12-36-134(1)(g)(7) 82 Ibid. (Colorado); Carter-Shields, M.D. v. Alton Health 83 Inst., 777 N.E.2d 948, 958 (Ill. 2002) (Illinois); N.J. Ibid. Admin. Code tit. 13, § 35-6.16(f) (New Jersey); 84 42 C.F.R. § 425.112. People v. John H. Woodbury Dermatological Inst., 85 N.E. 697 (N.Y. 1908) (New York); Ohio Rev. 85 42 C.F.R. § 425.500. Code Ann. § 1701 (Ohio); Gupta v. E. Idaho Tumor 86 Institute, Inc., 140 S.W.3d 747, 752 (Tex. App. 2004) 42 C.F.R. § 425.600. (Texas). 87 42 C.F.R. § 425.602. 68 DeVore and Wesley Champion, “Driving Population 88 Ibid. Health,” 2011; see also Fisher, Staiger, Bynum et 89 al., “Creating Accountable Care Organizations,” Ibid. 2006. 90 42 C.F.R. §§ 425.604 & .606. 69 Affordable Care Act § 3022 (creating the Medicare 91 42 C.F.R. § 425.500. Shared Savings Program); Center for Medicare and Medicaid Innovation, Pioneer ACO Request for 92 Ibid. Applications, available at http://innovations.cms. 93 gov/Files/x/Pioneer-ACO-Model-Request-For- Ibid. Applications-document.pdf. 94 76 Federal Register 67,992 (Nov. 2, 2011). 70 76 Federal Register 67,802, 67,962 (Nov. 2, 2011). 95 76 Federal Register 67,026 (Oct. 28, 2011). 71 U.S. Department of Health and Human Services, 96 76 Federal Register 67,992 (Nov. 2, 2011). Press Release, “Affordable Care Act Helps 32 97 Health Systems Improve Care for Patients, Saving 76 Federal Register 67,026 (Oct. 28, 2011). up to $1.1 Billion” (Washington, D.C.: DHHS, Dec. 98 Ibid. 19, 2011), available at http://www.hhs.gov/news/ press/2011pres/12/20111219a.html. 99 Ibid. 32 High-Performance Health Care for Vulnerable Populations One East 75th Street 1150 17th Street NW New York, NY 10021 Suite 600 Tel 212.606.3800 Washington, DC 20036 Tel 202.292.6700 www.commonwealthfund.org