March 16, 2015 Tricia McGinnis and Rob Houston Center for Health Care Strategies Value-Based Purchasing Efforts in Medicaid: A National Perspective

Value-Based Purchasing: What Is It? Value-Based Purchasing (VBP) = Broad set of payment strategies that link financial incentives to providers’ performance on a set of defined measures of quality and/or cost or resource use VBP Goal = Achieve better value by driving improvements in quality and slowing the growth in health care spending by encouraging care delivery patterns that are not only high quality, but also cost- efficient 2 SOURCE: Pacific Health Consulting Group

Provider-Facing VBP |Accountability Continuum 3 Capitation + PBC Level of Financial Risk Degree of Care Provider Integration and Accountability Performance- Based Programs Accountable Care Programs Shared Risk Shared Savings Condition or Service Line Programs Performance- Based Contracts (PBC ) Primary Care Incentives Fee-for- Service Bundles & Episodes of Care Programs 3

Popular VBP Approaches Pay for Performance (P4P) Delivery System Reform Incentive Programs (DSRIP) Bundled payments Shared savings/risk Global payments Fully capitated managed care 4

Pay for Performance Rewards: providers receive a bonus payment for measureable performance in: quality, patient satisfaction, resource use, and cost ► New Jersey: Two pools – performance payment and high performance bonus; focuses on (i) pre-term births, (ii) pre-natal care timeliness, (iii) post-partum care timeliness, (iv) HbA1C (diabetes test), and (v) body mass index documentation Penalties: providers receive lower or no payment for events and procedures that are harmful and were avoidable ► South Carolina’s Birth Outcomes Initiative ► Medicaid non-payment for “never” events at hospitals ► Medicare Hospital Readmissions Reduction Program 5

DSRIP Safety net hospital payments tied in part to successful implementation of transformation initiatives Improvement projects are well-defined and tailored to state-specific issues Payment is contingent upon achieving a set of process and outcomes measures, specific to each project Implemented in California, Kansas, Massachusetts, New York, New Jersey, and Texas 6

Bundled Payments Providers receive an inclusive payment for a specific scope of services to treat an “episode of care” with a defined start and end point Incentivizes coordination across physicians and hospitals to provide care at or below the payment level for specific episodes Payment contingent on quality performance Arkansas has implemented 14 multi-payer bundled payments for specific conditions such as knee replacement surgery and congestive heart failure 7

Shared Savings/Risk Sets an annual, risk-adjusted, predicted total cost of care target for an attributed set of patients ► Providers that succeed in keeping the actual costs below projected costs keep a cut of the savings ► Payment contingent upon quality performance Incentivizes quality and cost improvements across all services included in the total cost Utilized with patient centered medical homes, health homes, accountable care organizations (ACOs), etc. New Jersey’s Medicaid ACO program includes shared savings 8

Global or capitated payment Providers receive a per beneficiary per month payment to cover a wide range of services Providers bear full financial risk for patients Incentivizes investments in care coordination, quality improvement, and efficiency across the full continuum of care Utilized with ACOs, hospitals, and multi-specialty provider groups Maryland developed an all-payer global payment system for its hospital systems 9

Medicaid Managed Care Health plans receive a per member per month budget to purchase and oversee the delivery of cost- effective and high quality health services Nationally covers 74% of all Medicaid patients Improves access to services and receives high satisfaction ratings from enrollees Typically yield cost savings (1 to 20 percent) and provide budget predictability for states 10 SOURCE: Medicaid Managed Care Cost Savings – A Synthesis of 14 Studies. The Lewin Group, 2004; Medicaid Managed Care Enrollment Report, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, November 2012.

Provider VBP in Medicaid Managed Care In Medicaid managed care states, health plan implementation of VBP is crucial ► Requiring adoption of VBP strategies as part of the procurement/contracting strategy ► Linking percentage of health plan spending to VBP initiatives/payment in the provider network ► Holding a percentage of the health plan’s premium at risk for quality and/or cost performance Arizona requires all Medicaid MCOs to have at least 5% of expenditures tied to VBP arrangements subject to a 1% withhold 11

Key Trends in Medicaid VBP Strategy Managed care contract language ► Mandating use of general or specific VBP arrangements Integration of behavioral health and social services ► Tie payment to total cost of care and performance on behavioral health or social service metrics Data and technical assistance ► It takes more than a change in payment to help providers change the way care is delivered Multi-payer alignment Population Health integration strategies ► Accountable Communities of Health (ACHs) 12