State Level Accountability

By William Foltz

Could a new ACO model work at the state-level?

Medicare and commercial insurers dominate the current conversation about accountable care organizations (ACOs) today, but a lesser-known type of ACO has risen in few states looking to improve care and reduce the cost of their Medicaid programs. Though not referred to explicitly as “ACOs,” the initiatives serve as interesting examples of how states have adopted accountable care principles to reform government-organized healthcare on the local level.

Medicaid and accountable care
According to data from Leavitt Partners, a healthcare intelligence and consulting firm, at least 10 states have Medicaid ACO programs in various stages of development. Only Colorado, Oregon, and Utah have operational Medicaid ACO models, which together cover roughly three-quarters of a million lives. Minnesota and New Jersey are the next closest to launching Medicaid ACOs and are currently evaluating their potential benefits through small-scale demonstration projects. In addition, Alabama, Arkansas, Illinois, Iowa, and Vermont have all passed legislation to create accountable care models for Medicaid.

Much like their Medicare counterparts, Medicaid ACOs aim to decrease costs and improve patient outcomes. However, unlike ACOs participating in the Medicare Shared Savings Program or Pioneer ACO Model, Medicaid ACOs are largely state-run initiatives. Some Medicaid ACOs have received grants or waivers from federal organizations, but their operating and reimbursement structures are not dictated by national legislation, which gives them greater flexibility and has led to a variety of different Medicaid ACO models.

Where Medicaid ACOs differ
The greatest difference between Medicaid ACOs lies in the extent of participating providers’ responsibility for costs and quality. For example, the Colorado Medicaid ACO model emphasizes care coordination and development of community-based support services that work with patient-centered medical homes to improve outcomes. Providers can earn incentive payments upon meeting goals for reduced utilization of inpatient readmissions, ER visits, and imaging procedures, but they bear no responsibility for overall costs.

In Oregon’s Coordinated Care Organization model, however, each ACO is given a lump monthly payment and bears full responsibility for quality as well as the total cost of patient care. One of Minnesota’s pilot programs, the Hennepin Health demonstration ACO, extends provider accountability even further through a shared savings model that includes nonmedical services such as public housing, social services, and corrections in an attempt to integrate services typically associated with low-income populations.

In some ways, Medicaid ACOs are fulfilling the same role as managed care organizations (MCOs), which handle medical care for the majority of Medicaid recipients across the country. Both operate under cost restrictions or incentives, typically through capitated budgets or shared savings, and their performance is often tied to clinical quality measures to ensure adequate patient care.

However, Medicaid ACOs differ in a few key respects that make the model attractive to some states. Because medical providers, rather than the MCO, bear direct responsibility for patient care and costs, it’s easier for Medicaid ACOs to coordinate care and launch initiatives to improve patient outcomes or reduce expenses, especially if the providers are part of an existing PHO or community medical organization. Even in Medicaid ACO models like Colorado’s that have prioritized patient care over cost reduction in their early stages, lower utilization and healthier patients may decrease the growth of Medicaid spending over time and present a better long-term solution for states concerned with the value of cost-driven managed care plans.

Even so, managed care will still be a major part of the Medicaid program, and if Medicaid ACOs prove successful, future Medicaid reimbursement models will likely involve partnerships between ACOs and MCOs that leverage the strengths of each. A November 2013 briefing paper from the Center for Health Care Strategies (CHCS) outlines such a care model in which the two organizations can complement each other and improve care. Though setting relative capitation rates and delineating patient care responsibilities present challenges, Medicaid ACOs can benefit from the data analytics, utilization management, and quality support capabilities of established MCOs, while ACOs are better positioned to improve outcomes and reduce costs at the point of care for the MCO’s population.

Though most state’s Medicaid ACOs are still in their pilot or development stages, Colorado and Oregon have released preliminary results showing modest improvements. In Colorado, patients covered by the Accountable Care Collaborative experienced a lower rate of hospital readmissions and number of imaging procedures from June 2012 to 2013 compared to a historical baseline population. Oregon’s Coordinated Care Organization program demonstrated a 13 percent decrease in emergency department visits and an 8 percent reduction in preventable hospital readmissions over the project’s first nine months of operation.

Whether the positive findings are borne out by more rigorous comparison research or can be sustained over the long term has yet to be seen, though they are encouraging signs for advocates of an accountable care approach in Medicaid.