Are You Ready for Managed Care?
Bearing and Contracting for Risk in New York’s
Managed Care Environment
Stephen A. Warnke, Esq.
Ropes & Gray LLP
ROPES & GRAY LLP
Agenda
• Legislative and Regulatory Context for the Transition to
Managed Care
• Impact of Managed Care on Providers of Services to the
Intellectually and Developmentally Disabled
• What It Means to Bear “Risk”
• Types of Risk Sharing Arrangements
– Independent Practice Associations (IPAs)
– Care Management
•
Pitfalls to Avoid in Provider Contracting
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Legislative and Regulatory Context
•
New York’s application for a Medicaid “Section 1115” waiver to enroll
developmentally disabled (DD) individuals in managed care is poised for
final federal approval
•
Under 2013-2014 budget legislation passed in March, Medicaid DD
recipients will receive a comprehensive benefit package, including
habilitation services and health and long-term health care services, through
one of the following Article 44 managed care organization (MCO) vehicles:
•
–
A Developmental Disabilities Individual Support and Care Coordination Organization
(DISCO)
–
A commercial HMO that expands its service offerings and commercial benefit package to the
DD population
–
A specialized Medicaid Long-Term Care Plan (MLTCP) capable of furnishing services to the
DD population (three of which are eligible to participate in the Fully Integrated Duals
Advantage demonstration program)
Rules are still inchoate; we await:
–
“Special Terms and Conditions” of CMS’s Section 1115 approval
–
Issuance of a revised Request for Applications by OPWDD for DISCOs
–
Other application forms and regulatory guidance
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Impact on DD Providers
• Under the Cuomo Administration’s philosophy of “Care Management
for All,” a phase-out of fee-for-service payment for DD services
• DD providers will need to contract with multiple DD-authorized
MCOs in order to maintain their existing revenue streams
• Participating provider agreements, not OPWDD Medicaid payment
regulations, will determine:
– Rates of payment
– Claims submission windows
– Remedies for late or denied payment
– Credentialing standards
– Audit and documentation requirements
• Potential upside if a provider is able to assume and manage risk
(i.e., the assumption of financial responsibility for the cost and
utilization of services)
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Risk Transfer
• Risk may be borne at both the MCO and downstream provider levels
• By statute and contract, an MCO accepts responsibility for payment
of claims out of a capitation budget
– MCO realizes surplus if the cost of claims and administrative expenses is less
than aggregate premiums
– MCO realizes loss if the opposite equation prevails
• Under New York law, an MCO may also share financial
responsibility with its contracted providers under an approved risktransfer arrangement
• Risk transfer is highly regulated, and never absolute: an MCO may
share, but not divest itself of, financial responsibility
• The level of regulation and capital reserve requirements depends on
the amount of risk transferred by the MCO to the provider
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DFS/DOH Jurisdiction Over Risk
• Both the Department of Financial Services (DFS) and Department of
Health (DOH) have jurisdiction over risk-transfer arrangements
involving the cost of care delivered to MCO enrollees
• DOH guidance requires advance review and approval of an MCO’s
template agreements with downstream providers, including any
“material amendments” to such template agreements
– “Material amendments” include any change in compensation terms, thus
capturing all risk transfer arrangements
• Regulatory impetus is two-fold
– Ensure adequate reserves against adverse claims experience
– Prevent undue incentives for “skimping” or withholding of care
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Levels of Risk Sharing
DOH requires different types of provider arrangements to meet financial
viability and financial security deposit requirements depending on the
level of risk shared by the provider
• Fee-for-Service: Payment for services on a fee-for-service basis
pursuant to a pre-defined fee schedule
– No requirement to demonstrate financial viability or to maintain a financial
security deposit
• Level 1: Fee-for-service arrangements with withholds or bonuses
up to 25% of the payment for health care services
– No requirement to demonstrate financial viability or to maintain a financial
security deposit
• Level 2: Capitated risk transfers to a provider for a single specific
service that the provider directly provides
– No requirement to demonstrate financial viability or to maintain a financial
security deposit
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Levels of Risk Sharing (cont.)
• Level 3: Broader risk transfer to a provider (e.g., capitated
arrangement for multiple services provided directly or fee-forservice arrangements with withholds or bonuses of greater
than 25% of the payment for health care services)
– Such contracts must demonstrate the provider’s financial viability
– If the provider’s net worth is less than or equal to zero, a security
deposit must be established for the provider’s in-network costs
• Level 4: Contracts that transfer risk to IPAs for single or
multiple services
– Such contracts must demonstrate the IPA’s financial viability and
establish a security deposit
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Medical Loss Ratio Requirements
• Regardless of the amount of risk transferred to a provider, MCOs
receiving New York state funding will be held to increasing medical
loss ratio (MLR) requirements
• MLR requirements limit the percentage of state funds received by an
MCO that may be spent on services other than health care services
(e.g., a MLR of 75/25 requires that 75% of state funds received by
an MCO be spent on health care services, leaving 25% to support
administrative costs)
• Governor Cuomo has mandated a phase-in of MLR requirements
such that, by April 1, 2015 and thereafter, MCOs will be held to an
85/15 MLR
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IPA Structure and Formation
• An IPA is a special-purpose MCO contracting vehicle
under Part 98 of DOH regulations
• Serves as an intermediary between an MCO and all or a
portion of the MCO’s downstream providers,
subcontracting with providers to arrange for the delivery
of care to MCO enrollees
• Authorized to arrange for services of multiple providers,
whether on a fee-for-service or risk sharing basis,
without violating New York corporate practice of
medicine prohibitions
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IPA Reserve Requirements
• If at risk, an IPA must carry a separate, IPA-level reserve
– Equal to 12.5% of the payments received from the MCO
– Must be held in a special account, subject to the approval of
DOH
• Unlike with reinsurance contracts, IPA reserves are not a
basis for reducing the MCO’s reserve requirements
• End Result: Downstream risk-based payments to an
IPA require reserves to be met by both the MCO and IPA
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IPAs: Pros and Cons
Pros
Cons
•
Relatively easy to form
•
•
Allows separately organized
(otherwise competitive) DD providers
to come together for purposes of
single-signature contracting with
MCOs
Joint contracting must be ancillary to
integrative efficiencies
•
Basing joint contracting on clinical
integration can be time consuming
and expensive
•
Separate, non-waivable IPA reserve
requirements
•
If IPA engages in utilization review, it
must:
•
•
Allows DD providers to accept risk
(upside/downside) and realize
benefits of care coordination without
the burdens of MCO licensure and
operations
Vehicle through which to perform key
MCO delegated functions (e.g.,
credentialing, quality assurance)
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–
Do so through a separate DOH-approved
management contract, and
–
Be licensed as a utilization review agent
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Care Management as an Alternative
• As an alternative to forming an IPA with other DD providers, a DD
provider may contract to provide care management administrative
services (CMAS) for MCOs
• Through a CMAS arrangement, a DD provider can realize the
benefits of care coordination without many of the burdens
associated with being part of an IPA
• DOH requirements for CMAS contracts are less onerous
–
Traditional “management functions” such as quality assurance must be addressed in a
separate management services agreement that satisfies applicable DOH guidance
–
The CMAS-contracting entity must be a licensed health care provider or other entity
approved by DOH
• Stand-alone care management contracts may have a short shelf live
as delegated care coordination functions transition to health homes,
as they have for certain non-DD populations
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Managed Care Provider Contracts:
Potential Pitfalls
• Understanding key terms and issues for a DD provider contracting
with an MCO:
– Definition of “clean claim”
– Submission windows and pre-authorization
– Prompt payment requirements
– Definition of “medical necessity”
– Appeal and grievance processes
– Recoupment rights
– Unilateral amendment based on MCO’s government contract
– Unilateral amendment based on changes in MCO’s Provider Manual
– Understand the MCO’s Utilization Review and Quality Assurance processes
• Understanding bargaining power and limited room for negotiation
(many requirements are mandated by DOH)
• Thinking carefully about how provisions will be operationalized
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Thank You
Stephen A. Warnke
Ropes & Gray LLP
stephen.warnke@ropesgray.com
212-841-0681
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