1. Ohio House Healthcare Efficiencies Summer Study Committee:
Ohio Medicaid Reform
John McCarthy, Medicaid Director
September 16, 2015

2. Ohio Medicaid Reform Overview
In January 2011, the Office of Health Transformation was created to control Medicaid spending and improve health outcomes. Key initiatives include:
Privatizing Medicaid
80 percent of Ohio’s Medicaid population is insured through private managed care plans. Just nine years ago, it was only 30 percent
Rewarding Value
Providers are paid, in part, on how well they perform on quality and outcome measures
Providing Better Choices
Ohio is a national leader for transitioning individuals out of institutional settings and back into the community
Program Integrity
Ohio leads the nation in fraud indictments and convictions

3. Jobs Budget Reforms (June 2011)
Governor Kasich’s first Jobs Budget reduced the annual rate of program growth from 8.9% annually to 3.3% - saving taxpayers nearly $2 billion. Highlights include:
Linking nearly ten percent of nursing home reimbursement to quality,
Increasing access to cost-effective home and community based services,
Freeing local behavioral health from Medicaid match requirements,
Consolidating health plan regions to be more efficient,
Linking one percent of health plan payments to performance,
Integrating Medicare and Medicaid benefits into one care delivery system, and
Implementing a new Medicaid claims payment system.

4. Mid-Biennium Review (June 2012)
The Mid-Biennium Review improved coordination across the state’s six Medicaid-related agencies by:
Implementing a new integrated eligibility system for Medicaid and all other programs that require income verification prior to receiving services,
Accelerating the adoption of electronic health information exchange,
Enhancing statewide data sharing through “agencies without walls” protocols,
Protecting individuals in home and community based services,
Supporting people with intellectual disabilities through Employment First, and
Targeting regional “hot spots” in mental health service capacity.

5. Jobs Budget 2.0 Reforms (June 2013)
Governor Kasich’s second budget continued to reshape the Medicaid program In all, actual Medicaid spending was $3.8 billion below budget over two years. Highlights include:
Fighting Medicaid fraud and abuse,
Capping Medicaid managed care spending at three percent annual growth,
Reducing avoidable hospital readmissions,
Assisting nursing facility residents with mental illness who want to move,
Increasing provider rates for home and community based services,
Committing Ohio to spend 50 percent of its Medicaid long-term care budget on home and community services,
Creating a new cabinet-level Ohio Department of Medicaid, and
Consolidating mental health and addiction services in a single agency.

6. Mid-Biennium Review (June 2014)
The Mid-Biennium Review improved coordination across the state’s health and human services agencies by:
Creating a new Office of Human Services Innovation,
Converting Ohio veterans on Medicaid to the federal benefits they earned, with first priority given to veterans residing in nursing homes,
Investing $50 million to rebuild community behavioral health system capacity, and
Automating background checks to protect vulnerable Ohioans.

7. Jobs Budget 3.0 (June 2015)
Governor Kasich’s third budget continued the focus on better fiscal management. Highlights include:
Holding per member per month cost growth below three percent over two years,
Preserving Medicaid coverage for children and pregnant women up to 200 percent of poverty and everyone else up to 138 percent of poverty,
Modernizing Medicaid managed care to further incorporate mental health and substance abuse benefits.
Targeting resources to reduce infant mortality in the most at-risk neighborhoods,
Speeding up the transition off of Medicaid and seeking a federal waiver to implement Health Savings Accounts,
Reducing potentially preventable hospital readmissions, and
Expanding the Medicaid in Schools Program to cover more services for children with special needs.

8. Governor’s Senior Staff
Payment Innovation Partners
John R Kasich
Governor
Governor’s Senior Staff
State of Ohio Health Care
Payment Innovation Task Force
Governor’s Advisory Council on
Health Care Payment Innovation
Office of Health Transformation
Project Management Team: Executive Director, Communications Director, Stakeholder Outreach Director, Legislative Liaison, Fiscal and IT Project Managers
Participant Agencies
Administrative Services, Development, Health, Insurance, JobsOhio, Ohio Medicaid, Rehabilitation and Corrections, Taxation, Worker’s Compensation, Youth Services, Public Employee and State Teachers Retirement Systems
Purchasers (Bob Evans, Cardinal Health, Council of Smaller Enterprises, GE Aviation, Procter & Gamble, Progressive)
Plans (Aetna, Anthem, CareSource, Medical Mutual, UnitedHealthcare)
Providers (Akron Children’s Hospital, Catholic Health Partners, Central Ohio Primary Care, Cleveland Clinic, North Central Radiology, Ohio Health, ProMedica, Toledo Medical Center)
Consumers (AARP, Legal Aid Society, Universal Health Care Action Network)
Research (Health Policy Institute of Ohio)
Public/Private Workgroups
State Implementation Teams
Patient-Centered Medical Homes
Episode-Based Payments
Workforce and Training
Health Information Technology
Performance Measurement
Ohio Patient-Centered Primary Care Collaborative
External Expert Teams for
specific episodes
Practice Transformation Network (PTN) Collaborative
External Expert Team TBD
State Innovation Model Core Team
HIT Infrastructure Core Team
SIM requires each state’s efforts to be governor-led. Governor Kasich has strongly endorsed this initiative and has convened the Ohio Health Care Payment Innovation Task Force and the Governor’s Advisory Council on Health Care Payment Innovation to drive these efforts.
These groups bring together leaders across healthcare stakeholders in Ohio.

9. 36 states have a healthier workforce than Ohio
Health Care Spending per Capita by State (2011) in order of resident health outcomes (2009)
Ohioans spend more per person on health care than residents in all but 17 states
36 states have a healthier workforce than Ohio
Case for change in Ohio – why paying for value is needed
- Ohio spends more per person on healthcare than all but 17 states
- But, Ohio has a less healthy workforce than 36 other states
Sources: CMS Health Expenditures by State of Residence (2011); The Commonwealth Fund, Aiming Higher: Results from a State Scorecard on Health System Performance (October 2009).

10. Payment Innovation Partners
More volume
To the extent fee-for-service payments exceed costs of additional services, they encourage providers to deliver more services and more expensive services.
More fragmentation
Paying separate fees for each individual service to different providers perpetuates uncoordinated care.
More variation
Separate fees also accommodate wide variation in treatment patterns for patients with the same condition – variations that are not evidence-based.
No assurance of quality
Fees are typically the same regardless of the quality of care, and in some cases (e.g., avoidable hospital readmissions) total payments are greater for lower-quality care.
Source: UnitedHealth, Farewell to Fee-for-Service: a real world strategy for health care payment reform (December 2012)

11. 17 States Testing Payment Innovation ModelsOR AR MN ME MA VT CA UT IA IL MI OH TN PA NH RI MD DE CT HI ID MT WA NV AZ NM CO OK WI NY VA KY WV NJ
Ohio is one of 16 states that received a CMS State Innovation Model design grant in 2013 – grants provided $1-3M for a state-led, multi-stakeholder effort to develop a State Health Innovation Plan.
Ohio also is one of seven states chosen to implement a comprehensive primary care initiative to foster collaboration among public and private health care payers to strengthen primary care. Medicare will work with commercial and state health insurance plans and offer bonus payments to primary care doctors who better coordinate care for their patients.
6 states also received State Innovation Model testing grants of $20-60M to implement their innovation plans over 3-5 years.
On May 22, 2014, CMS announced a new rounds of funding opportunities for State Innovation Models. $700M will be available to up to 12 states for Model Testing , and $30M for up to 15 more states for Model Design. Ohio will be applying for Model Testing.
Applications are due 7/21, expect funding decisions to be announced end of October, with funding to start January of 2015, to last for 4 years.
Round 1 Model Test States
Round 2 Model Test Awardees
Round 2 Model Design Awardees
Comprehensive Primary Care
SOURCE: State Innovation Models and Comprehensive Primary Care Initiative, U.S. Centers for Medicare and Medicaid Services (CMS).

12. Ohio’s Payment Model
Partners: Anthem, Aetna, CareSource, Medical Mutual, and UnitedHealthcare, covering ten million Ohioans
Build on momentum from extending Medicaid coverage, Medicare-Medicaid Enrollee project, etc.
Comprehensive, complementary strategies for health sector workforce development and health information technology
Active stakeholder participation: 150+ stakeholder experts, 50+ organizations, 60+ workshops, 20 months and counting …
Governor Kasich created the Office of Health Transformation to improve overall health system performance
Pay for health care value instead of volume across Medicaid, state employee, and commercial populations
Launch episode based payments in Q1 2015
Take Comprehensive Primary Care to scale in 2015

13. 5-Year Goal for Payment Innovation
Patient-centered medical homes
Episode-based payments
Goal
80-90 percent of Ohio’s population in some value-based payment model (combination of episodes- and population-based payment) within five years
Year 1
In 2014 focus on Comprehensive Primary Care Initiative (CPCi)
Payers agree to participate in design for elements where standardization and/or alignment is critical
Multi-payer group begins enrollment strategy for one additional market
Year 3
Year 5
State leads design of five episodes: asthma acute exacerbation, perinatal, COPD exacerbation, PCI, and joint replacement
Payers agree to participate in design process, launch reporting on at least 3 of 5 episodes in 2014 and tie to payment within year
Model rolled out to all major markets
50% of patients are enrolled
20 episodes defined and launched across payers
Scale achieved state-wide
80% of patients are enrolled
50+ episodes defined and launched across payers
State’s Role
Shift rapidly to PCMH and episode model in Medicaid fee-for-service
Require Medicaid MCO partners to participate and implement
Incorporate into contracts of MCOs for state employee benefit program
Overall, the 5-year focus at the state level is on PCMH and episodes.
For immediate term, the focus is on CPCI for PCMH and development of 5 episode models (with the goal to launch reports in November 2014).

14. Ohio’s Health Care Payment Innovation Partners
Commercial and managed Medicaid plans are participating.
These plans cover nearly 90 percent of Ohio’s population – that’s about 10 million covered lives.

15. Why the Medical Home Works: A Framework
CPC includes many of the elements we are looking for in a broad PCMH initiative.
Focus for initial year of SIM has been to let this model take shape in Southwest Ohio, and learn from this experience as we develop an approach for broader rollout.
Source: Patient-Centered Primary Care Collaborative (2014)

16. PCMH Proposed Payment Incentives
Payers agree to provide resources to support business model transformation for a finite period of time, particularly for small, less capitalized practices
Agree to provide resources to compensate PCMH for activities not fully covered by existing fee schedules (care coordination, non-traditional visits like telemedicine, population health)
Agree to reward PCMHs for favorably affecting risk-adjusted total cost of care over time by offering bonus payments, shared savings, capitation, or sub- capitation.

17. Retrospective Episode Model Mechanics
Patients and providers continue to deliver care as they do today 1 2 3
Patients seek care and select providers as they do today
Providers submit claims as they do today
Payers reimburse for all services as they do today
Payers calculate average cost per episode for each PAP 6
Providers may:
Share savings: if average costs below commendable levels and quality targets are met
Pay part of excess cost: if average costs are above acceptable level
See no change in pay: if average costs are between commendable and acceptable levels 4 5
Calculate incentive payments based
on outcomes
after close of
12 month performance
period
Ohio episode model is RETROSPECTIVE, not prospective.
To repeat, there is not pre-set price for a bundle in the retrospective model.
Patients seek care and providers bill and are reimbursed as they do today.
After the fact, claims data is analyzed to:
- identify the principal accountable provider, or PAP, who is held accountable for all episode costs, not just those he/she directly bills for
- calculate the average episode code per PAP and compare to set “commendable” and “acceptable” thresholds to determine any gain or risk sharing
Review claims from the performance period to identify a ‘Principal Accountable Provider’ (PAP) for each episode
Compare average costs to predetermined “commendable” and “acceptable” levels

18. Retrospective thresholds reward cost-efficient, high-quality care7
Provider cost distribution (average episode cost per provider)
Acceptable
Gain sharing limit
Commendable
ILLUSTRATIVE
Ave. cost per episode $
Principal Accountable Provider -
No change
Payment unchanged
Gain sharing
Eligible for incentive payment
Risk sharing
Pay portion of excess costs +
No Change Eligible for gain sharing based on cost, but did not pass quality metrics
Let’s walk through this chart to understand how the performance assessment works in the retrospective episode model.
There is 1 bar for each principal accountable provider. The height of the bar represents that PAP’s average episode cost across all their episodes in a given time frame, after adjustments have been applied (i.e., risk adjustment, outlier and other exclusions).
The bars are ordered from left to right, from the PAP with the highest average episode cost to the PAP with the lowest average episode cost.
If a PAP’s average cost is above a pre-set “acceptable” threshold (those in red, on the left), they may be at risk and pay back some of the cost to the payer.
If a PAP’s average cost is below a pre-set “commendable” threshold (those in green, on the right), they may share in the savings.
However, if these low-cost PAPs have an average episode cost below a gain-sharing limit, their savings will be capped, to reduce the incentive to limit care.
In addition, PAPs must also achieve certain clinical quality metrics (defined for each episode) to receive gain-sharing. The blue bars indicate PAPs who met the cost requirements for gain sharing but did not meet the quality requirements.
This model rewards both absolute performance – with shared savings for those who are already performing commendably - and performance improvement, with potential for gain-sharing (or to move out of risk-sharing) as PAPs improve.
The thresholds are not meant to be constantly moving targets, but to give everyone a chance to improve performance and realize gain-sharing.
NOTE: Each vertical bar represents the average cost for a provider, sorted from highest to lowest average cost

19. Difference between 25th and 75th percentile: 28%
Variation Across the Acute PCI Episode
Impact:
34 PAPs
311 Episodes
$4.3 million Spend
Select Quality Measures:
10% repeat PCI
1% post-operative hemorrhage
Select Risk Adjustments:
STEMI
Fluid and electrolyte disorders
Select Exclusions:
Inconsistent enrollment
Cardiogenic shock
Age <18 and >64
Sources of variability/value:
Diagnostic work-up
Setting of care
Complications
Readmissions
Difference between 25th and 75th percentile: 28%
Median cost
75th %ile
25th %ile
Non-adjusted: $13,437
Risk-adjusted: $6,956
Principal Accountable Providers (Inpatient and Outpatient Facilities)
NOTES: Each vertical bar represents the average risk adjusted cost in dollars per episode (including outliers) for one provider across Medicaid FFS and five Medicaid MCOs; data covers period from July 1, 2013 to June 30, 2014.

20. Difference between 25th and 75th percentile: 56%
Variation Across the Non-Acute PCI episode
Impact:
27 PAPs
273 Episodes
$2.4 million Spend
Select Quality Measures:
10% repeat PCI
1% post-operative hemorrhage
Select Risk Adjustments:
Fluid/electrolyte disorders
Multiple vessel procedures
Complex hypertension
Select Exclusions:
Inconsistent enrollment
Age <18 and >64
HIV comorbidity
Sources of variability/value:
Diagnostic work-up
Setting of care
Complications
Readmissions
Difference between 25th and 75th percentile: 56%
Median cost
75th %ile
25th %ile
Non-adjusted: $8,850
Risk-adjusted: $7,484
Principal Accountable Providers (Physician Entities)
NOTES: Each vertical bar represents the average risk adjusted cost in dollars per episode (including outliers) for one provider across Medicaid FFS and five Medicaid MCOs; data covers period from July 1, 2013 to June 30, 2014.

21. Difference between 25th and 75th percentile: 27%
Variation Across the Total Joint Replacement Episode
Impact:
45 PAPs
574 Episodes
$10.7 million Spend
Select Quality Measures:
10% Episodes where patient receives one or more blood transfusions
1% Episodes where patient develops pulmonary embolism
Select Risk Adjustments:
Anemia
Obesity
Select Exclusions:
Inconsistent enrollment
Presence of 3rd party liability
Lower leg open wounds, fracture or dislocation
Sources of variability/value:
Imaging choice/utilization
Setting of care
Implant choice
Median cost
Non-adjusted: $17,595
Risk-adjusted: $13,947
Difference between 25th and 75th percentile: 27%
75th %ile
25th %ile
Principal Accountable Providers (Physician Entities)
NOTES: Each vertical bar represents the average risk adjusted cost in dollars per episode (including outliers) for one provider across Medicaid FFS and five Medicaid MCOs; data covers period from July 1, 2013 to June 30, 2014.

22. Difference between 25th and 75th percentile: 20%
Variation Across the Perinatal Episode
Impact:
360 PAPs
30,939 Episodes
$223.7 million Spend
Select Quality Measures:
86% Episodes where patient receives screening for Group B streptococcus
76% Episodes where patient receives HIV screening
Select Risk Adjustments:
Menstrual disorders
Umbilical cord complication
Eclampsia
Anemia
Select Exclusions:
Presence of 3rd party liability
Cystic fibrosis
Inconsistent enrollment
Sources of variability/value:
Elective interventions
Readmissions
Difference between 25th and 75th percentile: 20%
Median cost
75th %ile
25th %ile
Non-adjusted: $7,013
Risk-adjusted: $4,753
Principal Accountable Providers (Physician or Physician Entities)
NOTES: Each vertical bar represents the average risk adjusted cost in dollars per episode (including outliers) for one provider across Medicaid FFS and five Medicaid MCOs; data covers period from July 1, 2013 to June 30, 2014.

23. Difference between 25th and 75th percentile: 32%
Variation Across the Asthma Exacerbation Episode
Impact:
160 PAPs
21,994 Episodes
$19.4 million Spend
Select Quality Measures:
50% Episodes where x-ray is performed
38% Episodes where patient fills prescription for asthma controller
Select Risk Adjustments:
Pneumonia
Heart disease
Obesity
Select Exclusions:
Age <2 and >64
Inconsistent enrollment
ICU stay > 72 hours
Sources of variability/value:
Medications
Inpatient admissions
Complications
Median cost
Non-adjusted: $804
Risk-adjusted: $326
Difference between 25th and 75th percentile: 32%
75th %ile
25th %ile
Principal Accountable Providers (Inpatient and Outpatient Facilities)
NOTES: Each vertical bar represents the average risk adjusted cost in dollars per episode (including outliers) for one provider across Medicaid FFS and five Medicaid MCOs; data covers period from July 1, 2013 to June 30, 2014.

24. Difference between 25th and 75th percentile: 32%
Variation Across the COPD Episode
Impact:
123 PAPs
4,533 Episodes
$13.7 million Spend
Select Quality Measures:
89% Episodes where x-ray is performed
61% Episodes where patient receives follow-up visit
Select Risk Adjustments:
Cardiac dysrhythmias
Blood disorders and anemia
Respiratory failure
Select Exclusions:
ICU stay > 72 hours
Inconsistent enrollment
Intubation of patient
Sources of variability/value:
Medications
Inpatient admissions
Follow-up care
Difference between 25th and 75th percentile: 32%
Median cost
75th %ile
25th %ile
Non-adjusted: $2,745
Risk-adjusted: $891
Principal Accountable Providers (Inpatient and Outpatient Facilities)
NOTES: Each vertical bar represents the average risk adjusted cost in dollars per episode (including outliers) for one provider across Medicaid FFS and five Medicaid MCOs; data covers period from July 1, 2013 to June 30, 2014.

25. Health Transformation Next Steps
Episode-Based Payments
March 2 – performance reports available for first six episodes
Convene payers to identify the next seven episodes, and then convene clinical advisory groups to design each episode
Patient-Centered Medical Homes
Convene a PCMH planning team to review lessons learned from CPC, define a PCMH approach to roll out statewide, and make recommendations for regional implementation

26. - Episode reports will be a valuable tool for providers to assess their practice patterns and identify opportunities for improvement
- These reports will provide data to understand their performance, including comparisons to other PAPs on overall costs, cost categories, and quality metrics, and details to understand episodes more thoroughly
- Reports will be shared by payers directly with each eligible PAP (identifying by billing provider)
- While reports for each episode will be provided separately by each participating payer, the goal is to align the look and feel of the reports, to make interpretation easier for providers
This is an example of the reports the plans listed above will make available to providers beginning in March 2015.