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Medicaid looks to payment reform to save money and improve care
States are pursuing a number of reform models for changing the way health care providers are paid, reports Deborah Bachrach, special counsel at Manatt, Phelps & Phillips, a health law and consulting firm in New York City, and former New York Medicaid director.
Although each state develops its own Medicaid purchasing strategies and payment policies subject to federal approval, says Ms. Bachrach, there are common themes. "All states want to advance payment and delivery strategies that will contain costs and improve quality," she says.
For many states, says Ms. Bachrach, this includes a review of fee-for-service payment methods and levels. "These policies are the building blocks of payment innovations such as medical homes and bundled and global payments," she says. "Fee-for-service policies also inform Medicaid managed care premium rates and care models."
Hospital rate decreases
States are increasingly targeting potentially preventable readmissions and complications as a way to improve quality and produce savings relatively quickly, according to Ms. Bachrach. States compare the risk-adjusted readmission or complication rates of hospitals, she explains, and reduce the payment rates of hospitals with relatively higher levels of potentially preventable events.
"Using a rate-based approach, states can both save money and create incentives for care improvement," says Ms. Bachrach. "The opportunity is significant."
The December 2010 report, Hospital Readmissions among Medicaid Beneficiaries with Disabilities: Identifying Targets of Opportunity, from the Hamilton, NJ-based Center for Health Care Strategies, found that the 30-day readmission rate for Medicaid beneficiaries with disability was 16.3%, and 50% of those readmitted within 30 days did not have a physician visit between discharge and readmission.
"While not all readmissions are preventable, this data strongly suggests that readmissions can be reduced with proper incentives and improved care transitions," says Ms. Bachrach.
Payments linked to outcomes
About 40 states have taken steps to enhance primary care through patient-centered medical home initiatives, says Ms. Bachrach, using a range of payment models. While some states pay primary care practices for achieving medical home certification, she notes, others pay for specific services or interventions such as care coordination.
"Consistent with the [Center for Medicare and Medicaid Innovation] priorities laid out in the ACA [Affordable Care Act], states are looking for opportunities to align their medical home initiatives with those of other purchasers," says Ms. Bachrach.
In some states, payments are risk-adjusted to reflect patient acuity, says Ms. Bachrach. "More advanced states are linking payments to outcomes, such as reduced emergency room visits and hospital admissions," she adds.
Ms. Bachrach says that "almost every state" is exploring how to maximize the potential of the health home option provided under the ACA.
"With two years of 90% federal matching dollars, states are evaluating how health home services can enhance efforts to reduce costly emergency room visits and inpatient admissions and readmissions for their chronically ill Medicaid enrollees," she says.
States recognize their increasing power in the health care market, adds Ms. Bachrach. "They are using that position to purchase cost-effective, quality care for Medicaid enrollees, and to make evidence-based decisions on what services to buy and how to buy them," she says.
By doing this, says Ms. Bachrach, they can "assure access, improve quality, and manage the costs of Medicaid beneficiaries today and the millions more expected to enroll in 2014."
Contact Ms. Bachrach at (212) 790-4594 or DBachrach@manatt.com.