State Medicaid Programs Invest in Accountable Care Organizations

February 02, 2017 - Last month, the Center for Health Care Strategies released a fact sheet outlining the growth of state Medicaid programs operating accountable care organizations (ACOs). Right now, there are 10 states that are managing Medicaid ACO programs while an additional 11 states are looking to create Medicaid programs to advance accountable care organizations.

In order to improve care coordination and quality of patient services, accountable care organizations have been created to financially incentivize providers to better manage their patient populations. The main ways that accountable care organizations operate effectively and hold providers accountable for population health are adopting a value-based care payment system, tracking and measuring quality improvement initiatives, and analyzing healthcare quality metrics.

States looking to expand their Medicaid programs to support accountable care organizations have two value-based care reimbursement structures to choose from: shared savings arrangements or the global budget model, according to the fact sheet.

Shared savings arrangements work by financially rewarding providers participating in an ACO that have reduced their healthcare spending and use less costly services among their patient population. Often, shared savings also require providers to meet quality improvement benchmarks. Over time, many providers take on more financial risk for employing more expensive services, which means the provider would pay back the state part of these costs if they go past baseline spending data.

Under a global budget model, accountable care organizations receive a capitated per-patient payment for their work and must take on full financial risk for treating their patient community.

READ MORE: Medicaid Challenges with Value-Based Care Payment Models

In order to better define how costs are measured through ACOs, state Medicaid programs are required to outline the kind of medical services available under accountable care organizations and calculate the anticipated total costs of care either on a per-patient basis or a population-based scale.

Medicaid programs will need to measure quality improvement efforts using targeted benchmarks in order to ensure that accountable care organizations continually improve patient outcomes and do “not withholding health services to retain savings,” the fact sheet stated.

Both patient health outcomes and patient experience or satisfaction is tracked among Medicaid ACO programs. When comparing an ACO’s quality metrics, the benchmarks could be contrasted against prior performance, the performance of other accountable care organizations, or statewide provider performance averages.

Healthcare providers operating under an accountable care organization will need to meet quality benchmarks in order to receive part of the shared savings under their value-based care payment contract.

State Medicaid programs and private health insurance companies operating accountable care organizations will need to have accurate and timely access to patient data as well as relevant health information technologies. This would allow ACO payers and providers to track patient outcomes and costs while determining which patients need care management interventions.

READ MORE: Accountable Care Organizations May Improve Diabetes Management

Creating a data infrastructure will be key for supporting the operations of accountable care organizations as well as for analyzing quality metrics related to payment contracts. Private payers along with state Medicaid programs may need to assist providers with implementing and purchasing health information technology needed for quality data analysis.

One example of a commercial health plan that partnered with ACOs comes from UnitedHealthcare and its investment in the  NexusACO health plan option.

“We spent the last several years working with our partners in the provider space and we have expanded our footprint with ACOs across markets and regions,” Reed Bjergo, VP, Product, UnitedHealthcare, told HealthPayerIntelligence.com last month. “We’ve established a sizable national footprint in the ACO space.”

“While we’ve been expanding our geographical reach, we are committed to investing in those relationships with our provider partners. We’ve reorganized ourselves and committed organizationally to deepening those relationships through an ACO activation approach.”

The states of Colorado, Minnesota, Oregon, and Vermont have already shown beneficial results from adopting Medicaid ACO programs. The fact sheet outlines $77 million in net savings for Colorado’s Medicaid program and $76.3 million in savings for Minnesota’s Integrated Health Partnerships program.

READ MORE: Accountable Care May Bring Savings in Healthcare Costs

Oregon was able to decrease emergency department visits among members served through their Coordinated Care Organizations by 23 percent. Also, during the first year of the Vermont Medicaid Shared Savings Program (VMSSP), the state saved $14.6 million.

“These early efforts demonstrate the value of connecting providers’ reimbursement to patient health outcomes and cost savings rather than the volume of services, as in the traditional fee-for-service model. Although the model is still evolving, Medicaid ACOs offer significant potential for positive change at the provider level to support a healthier population at lower cost,” the report states.

Commercial health insurance companies may need to follow in the footsteps of state Medicaid programs and invest in accountable care organizations in order to see similar advantageous results.