An Operational Vision for
Care Delivery Reform in Alabama
Moving from extremely limited managed care to a fully capitated
Medicaid model … in a couple of years!
Defining the Problem – Alabama Medicaid Needed Reform
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2
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Costs: Health costs – and the portion of the state budget
dedicated to Medicaid – continue to rise rapidly.
Medicaid Financing: The state lacks a long term sustainable
funding model. Current financing builds perverse incentives by
basing program funding on utilization and costs.
3
Provider Reimbursement: The current model does not pay
based on value and incentivizes utilization.
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Care Delivery: The care delivery system is fragmented, with
minimal incentives and infrastructure to coordinate care across
providers.
Collaborative Approach
1. Medicaid Agency director resigned and replaced with
politically savvy and well-liked public health officer.
2. Governor convened commission to explore various reform
options and develop framework for reform.
3. State leaders were careful to include all provider types,
business and consumers on commission.
4. Commission presented findings to governor, findings that
formed the basis for initial legislation.
5. Legislation wasn’t perfect, but structured to keep all parties
in the boat and allow for community-led managed care.
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Initial member thoughts …
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What are RCOs?
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Overview of RCOs
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Regional Care Organizations
Summary
Risk-bearing “regional care organizations” that manage the full
continuum of health care services under a single capitated
rate
Population
All Medicaid beneficiaries, excluding dual eligibles, those in
long term care facilities or utilizing home and communitybased waiver services, and the developmentally disabled
Provide and coordinate primary, acute, behavioral, and postacute care services
Capitation (transition period would include FFS) with care
management payments
RCOs in all regions with capacity to organize and accept risk
Benefits
Financing
Geographic
Infrastructure RCOs to build or contract for infrastructure, such as claims
processing, network development, member services, provider
relations, etc. Providers are expected to leverage statewide
HIE to share clinical information
Regional Care Organizations
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Capitated
Rate
Regional Care Organization
Governing Board
Health Care
Providers
Consumers
Advisory
Other
Community
Stakeholders
Employers
Citizen’s
Services
Member
Services
Provider
Relations
Data
Analytics
Quality
Programs
Provider
Payments
Hospitals
Nursing Homes
Care
Management
Pharmaceuticals
Physicians
Utilization
Review
Transition
Protocols
Clinical
Integration
Clinics
Behavioral
Health
Other Services
RCO Case Manager
Beneficiary
Reform Principles
1. The RCO must be able to implement effective care
interventions to reduce utilization and improve outcomes.
2. RCOs must have fiscal integrity and provide the state fiscal
certainty.
3. The RCO must be beneficiary-centric and community led.
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The RCO Must be Beneficiary-Centric
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Care Management Team
Primary Care
Physician & Care
Coordinator
Data portals
Patient
• Tailored Care Planning
Behavioral
Health
• Coordination of Care
• Improved Access
• Aggregated Clinical Information
• Improved Communication
• Event Notification
• Alerts & Reminders
• Chronic Disease Management
Tools
Specialist
RCO
Acute
SubAcute
RCOs should implement medical and health homes to coordinate care for
beneficiaries.
RCOs must bend cost curve and provide fiscal certainty
1.
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Alabama must bend the cost curve in order to leverage 1115 dollars.
$
Savings
RCOs must have Lean Administrative Costs
Alabama’s administrative costs (and total spending per beneficiary)
are already lower than the national average. In order to preserve
provider payment rates, administrative costs must stay in the range
of 5-7%. In order to achieve this goal, RCOs will need to limit
certain administrative expenses and eliminate others entirely.
Alabama Medicaid Spending
2011
X
Sales and Marketing
• Rating and Underwriting
• Product Development /
Market Research
• Sales
• Commissions (external)
• Advertising and Promotion
Average National Medicaid Administrative Costs
2011
4.36%
Administrative
Costs
95.64%
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Benefit
Payments
Source: Sherlock Company, “MEDICAID PLANS’ ADMINISTRATIVE COSTS SURGE IN 2011,” Sept 2012.
http://www.sherlockco.com/docs/navigator/Revised%20Late%20September%202012%20Navigator.pdf
RCO Implementation Timeline
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The following dates are “not later than.” The Medicaid Agency is permitted to
certify RCOs prior to the dates identified below.
CY 2013
CY 2014
Medicaid Agency
establishes RCO
regions
•
RCOs establish
governing board
and structure,
approval of which
may result in
“probationary
certification”
•
RCOs must
demonstrate they
meet solvency
and financial
requirements
April 1, 2015
•
CY 2016
October 1, 2015
October 1, 2014
October 1, 2013
•
CY 2015
RCOs must
demonstrate
ability to establish
an adequate
provider network
October 1, 2016
•
•
RCOs must
demonstrate they
are capable of
providing services
pursuant to a risk
contract
RCOs must be in
all regions of the
State
Operationalizing the RCOs
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Board Composition
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Appointment Authority
Primary Care
Physician
Risk-Bearing
Participant
Risk-Bearing
Participant
Primary Care
Physician
Risk-Bearing
Participant
Risk-Bearing
Participant
APHCA &
Al Ch. NMA
Primary Care
Physician
(FQHC)
Risk-Bearing
Participant
Risk-Bearing
Participant
AL Optometric Association
Optometrist
Risk-Bearing
Participant
Risk-Bearing
Participant
AL Pharmacy Association
Pharmacist
Risk-Bearing
Participant
Risk-Bearing
Participant
Per Committee Rules
Chair CAC
Risk-Bearing
Participant
Risk-Bearing
Participant
Medical Association of
the State of Alabama
Elected by Committee
Nominated by Chamber of
Commerce
CAC Member
(AL Arise or Disabilities
Leadership Coal. of AL)
Employer
Key Decision Points
Issue
Governance
Corporate Structure
Board/Committee Requirements
RCO Finance
Payment from the State
Reserve Requirements
Reinsurance
Capitalization
Supplemental payments to hospitals including GME and other teaching
supplements, DSH, and access payments
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Decision Points
(continued)
Issue
Benefit Management
Interface with long term care including eligible enrollees, transitions, and
covered benefits
Interface with behavioral health, including covered benefits,
implementation timing, and network requirements
Pharmacy approach
Provider Networks & Contracting
Network Adequacy
Out of state provider payment/contracting
Tertiary/quaternary service payment/contracting
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Question for Hospitals: To Assume Risk or Not?
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Definition of Risk Bearing:
A participant bears risk by:
•
Contributing cash, capital, or other assets to the RCO,
•
Contracting with the RCO to treat Medicaid beneficiaries at a capitated rate per
beneficiary,
•
Contracting with the RCO to treat Medicaid beneficiaries even if the RCO does not
reimburse the participant.
Open Questions:
•
What kinds of payment methodologies will be considered risk bearing for purposes of
RCO Board membership?
•
Who should set the minimum amount of cash, capital, or other assets required to be
considered risk-bearing – RCOs or the state?
•
What requirements should providers be required to meet if they choose to contract
with the RCO to treat Medicaid beneficiaries even if they are not reimbursed?
Changes in Governance Requirements - Implications
Implications
• In instances where a single entity is the only risk-bearing participant,
that entity may hold a majority of the Board seats – providing those
who are most at risk the most control
• Hospitals that choose not to invest capital into the RCO may be
considered risk-bearing if they accept a risk-based contract from the
RCO
• No single member of the Board has veto authority, which more fairly
distributes power amongst Board members
• To achieve diversity requirements, RCOs must coordinate across all
appointing bodies, which may delay filling seats on the Board
• RCOs governance structure may be less nimble since the executive
committees powers are limited by the statute
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The Legislation Included a Rate Development Methodology
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• The rate development methodology:
• Required the state to set a minimum reimbursement rate for providers, which
would be the prevailing Medicaid fee-for-service payment schedule unless the
RCO and provider have a separate contract
• Incorporated the minimum reimbursement rates into the actuarially sound rate
development methodology for each RCO
Implications
• RCO’s capitation rates will be adjusted based on the FFS rates
• RCOs cannot mandate alternative payment methodologies with providers
but may negotiate them
• Risk-based contracts are one way for hospitals to be defined as a riskbearing participants & be eligible for certain Board seats
• Hospitals will be guaranteed, at least initially, the current Medicaid FFS
rates. The amount of those rate may change as the Agency implements APRDRGs
The Legislation Added a Provider Appeals Process…
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The Medicaid Agency was required to establish procedures for addressing contract
grievances of providers. The appeals processes would include:
1
RCO Review Board
Providers may seek redress with a panel composed of an RCO representative, a
similar type of provider, and a representative of the Citizen’s Advisory Board.
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3
4
Medicaid Agency
If the provider or RCO is dissatisfied with the redress, either may request a review by
the Medicaid Agency. The agency must issues its decision, in writing, regarding the
dispute within 10 days.
Contract Dispute Committee
If the provider or RCO is dissatisfied with the decision of the Medicaid Agency, either
may request a review, within 30 days of the agency’s decision, by way of the
Contract Dispute Committee. The Committee will be required to issue a written
ruling no more than 20 days after the dispute is submitted.
Circuit Court
If provider or RCO is dissatisfied with the decision of the Contract Dispute
Committee, they may file an appeal in the Montgomery County Circuit Court within
30 days of the decision.
Transition to New Delivery Model – 1115 waiver
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Section 1115 Medicaid Waivers Refresher
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Section 1115
“Research &
Demonstration Waiver”
New Money
States can use savings
generated from delivery system
reforms to make new money
available to providers, e.g.,
payments for new populations,
new services, or to offset stateonly expenditures.
Delivery System
Reforms
Waivers allow states to test
new delivery system
reforms, such:
•Mandating managed care
•Testing shared savings models
•Covering new populations
Savings are often generated
through:
•Offering alternative benefit
packages
• Transitioning to managed care or
other care management models
•Creating innovative financing
models to expand coverage to
low-income
• Redirecting DSH payments
• Modifying benefits/cost sharing
•Rationalizing payment schemes
Overview of Alabama’s Waiver
• Risk bearing, provider-based RCOs
Delivery
System
• Medical home and health homes
• Care coordination, including improved
coordination of physical and behavioral health
Nearly all Medicaid populations will be enrolled in
Beneficiaries RCOs, with the exception of duals and individuals
eligible for long term care services
Benefits
RCOs are responsible for full scope of Medicaid
benefits, including primary, acute, behavioral,
maternal, pharmacy and post-acute services
EXCEPT dental and long term care
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Development of Quality Measures
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Guiding Principles for RCO Quality Measures
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AlaHA initiated discussion of guiding principles to try and bring focus to
the discussions:
• Measures should be designed for RCOs, not providers within RCO
• Measures should be well-defined, easy to collect and important
to measure
• Measures may need to be tweaked based on population of RCO
and should measure things over which RCO has the ability to
affect outcome
• Initial measures should be used to establish baseline with
performance measured later after gaining benchmark data
• Performance should be measured on achievement, along with
improvement
Financial Implications
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Regional analysis - Population Breakout by Region - 2012
Membership % by Aid Category, CY 2012
*Excludes QMB, SLMB members included previously
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Total Cost of Care per Enrollee Statewide Trend
 Spending per RCO eligible member has decreased by 3%
– This is appears to be due to an increase in eligible members for 2012
• 27% of which were Non-Users in 2012
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Statewide Spend per Enrollee by Service Type
Non Risk Adjusted Spend by Service Category, CY 2010,2011, 2012
$1,600
$1,495.54
$1,489.47
$1,400
$1,371.06
Paid per Enrollee
$1,200
$1,000
$820.39
$800
$844.74
$813.32
$600
$537.83
$508.81
$479.26
$400
$358.83
$286.97
$246.83
$200
$101.53
$68.78
$51.53
$2010
2011
IP Paid per Enrollee
OP Paid per Enrollee Non-ER (Includes Access)
Professional Paid per Enrollee
RX Paid per Enrollee
2012
OP Paid per Enrollee ER
 Professional, ER and RX spend per member are trending down while
Inpatient and Outpatient spend per enrollee are increasing
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Preventable ED Visits
Complex and Simple Chronic Members
Patient
Segment
Members
Preventable
OP PPV Visits
-
Preventable OP
PPV Paid (In
Millions)
Non User
63,087
$ 0.0
Healthy
248,039
76,655
$ 13.7
At Risk
76,146
37,134
$ 13.6
Stable
62,876
52,114
$ 10.5
Simple Chronic
Complex
Chronic
97,640
71,502
$ 25.9
102,147
61,326
$ 38.3
Critical
13,555
9,453
$ 13.0
Total
663,490
308,184
$ 115.0
Primary Chronic Condition
Diabetes
Asthma
Mental Health
COPD
Congestive Heart Failure
Hypertension
SA and Alcoholism
Members
PPV Visits
PPV Paid (In
Millions)
33,326
31,305
30,749
11,768
8,770
12,312
4,028
18,432
31,282
22,517
8,299
4,603
4,913
3,905
$ 10.2
$ 8.8
$ 7.7
$ 4.8
$ 3.7
$ 1.9
$ 1.4
Chronic Renal Failure
4,914
1,335
$ 1.3
Coronary Artery Disease
Alzheimer's and Dementia
Cerebrovascular Disease
1,618
5,360
3,130
1,346
2,350
1,108
$ 1.2
$ 1.1
$ 0.9
Other Chronic Conditions
52,507
32,738
$ 21.3
199,787
132,828
$ 64.2
Total
Technical notes:
Technical notes:
• Numbers in the table represent members attributed to each Patient
Segment
Data Source: ALAHA, 2012/01 – 2012/12
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Preventable Inpatient Initial Admissions
Complex and Simple Chronic Members
Preventable
IP PPA
Admits
Preventable IP
PPA Paid (In
Millions)
63,087
-
Healthy
248,039
At Risk
Patient Segment
Members
Primary Chronic Condition Members
PPA Admits
PPA Paid (In
Millions)
Diabetes
33,326
3,794
$ 12.2
$ 0.0
Congestive Heart Failure
8,770
3,237
$ 10.6
418
$ 1.3
COPD
11,768
2,124
$ 6.7
76,146
907
$ 3.0
Chronic Renal Failure
4,914
1,443
$ 5.0
Stable
62,876
1,325
$ 4.8
Asthma
31,305
1,277
$ 4.6
Simple Chronic
Complex
Chronic
97,640
6,102
$ 20.2
Mental Health
30,749
673
$ 2.3
102,147
13,902
$ 49.0
Alzheimer's and Dementia
5,360
341
$ 1.2
Critical
13,555
4,900
$ 20.5
Cerebrovascular Disease
3,130
328
$ 1.1
Total
663,490
27,554
$ 98.8
SA and Alcoholism
4,028
294
$ 1.1
Coronary Artery Disease
1,618
317
$ 1.0
Other Chronic Conditions
64,819
6,176
$ 23.4
Total
199,787
20,004
$ 69.2
Non User
Technical notes:
Data Source: ALAHA, 2012/01 – 2012/12
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Preventable Inpatient Readmissions
Complex and Simple Chronic Members
Members
Preventable
IP PPR
Admits
Preventable IP
PPR Paid (In
Millions)
Non User
63,087
-
$ 0.0
Mental Health
30,749
363
$ 2.6
Healthy
248,039
16
$ 0.1
Diabetes
33,326
493
$ 2.2
At Risk
76,146
207
$ 0.8
Chronic Renal Failure
4,914
204
$ 1.7
Stable
62,876
32
$ 0.1
Congestive Heart Failure
8,770
353
$ 1.7
Simple Chronic 97,640
Complex
Chronic
102,147
358
$ 2.1
COPD
11,768
252
$ 1.1
2,109
$ 12.0
Alzheimer's and Dementia
5,360
60
$ 0.4
Technical
notes:Conditions
Other Chronic
104,900
742
$ 4.5
199,787
2,467
$ 14.1
Patient
Segment
Critical
13,555
723
$ 4.3
Total
663,490
3,445
$ 19.4
Primary Chronic Condition
Total
Members
PPA Admits
PPA Paid (In
Millions)
Data Source: ALAHA, 2012/01 – 2012/12
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ALAHA Benchmark Comparison
% Difference from Benchmark
ALAHA utilization compared to Treo Medicaid Benchmark
Data Source: ALAHA, 2012/01 – 2012/12;
Treo Medicaid Benchmark 2012/01-2012/12
Technical notes:
• Age group 3-18 used for comparison
• Total bar height represents % difference from Treo’s Medicaid Benchmark
• Results are risk adjusted for the illness burden of ALAHA’s population
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Association Lessons Learned
• Member communications is critical, even if it’s just restating the questions
with no immediate answers.
• Critical for leaders to be inclusive
• While having a hospital tax is not ideal, it has definitely provided a seat at
the table.
• Constant evolution of learning for association staff and members that
requires expert advice.
• A per-diem payment system doesn’t result in good coding
• Governance is first and foremost.
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In the end …
It’s about better population health … not heads in beds!
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