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Arkansas Bets Farm on Value-Based Care

News  |  By Christopher Cheney  
   September 01, 2016

PCMHs, bundled payments, and Medicaid expansion are driving change and showing it is possible to transform a market on a wholesale basis, says one health insurance executive.

This article first appeared in the September 2016 issue of HealthLeaders magazine.

If you want to see what the healthcare industry landscape looks like after a statewide shift to value-based care models, look at Arkansas.

From the Mississippi Delta region in the east to the Ozark Mountains in the west, there are value-based reforms taking hold throughout the state's provider and payer markets. The patient-centered medical home has become the dominant primary care physician-practice business model; the top commercial payers and the state Medicaid program are jointly operating bundled payment reimbursement for nearly two dozen episodes of care; and private option Medicaid expansion through the Patient Protection and Affordable Care Act Health Insurance Exchange Marketplace has fueled the sharpest decline of uninsured patient rates in the country, with Gallup pollsters pegging the rate drop from 22.5% before Medicaid expansion in 2013 to 9.6% last year.

"What's different about the Arkansas market than just about anybody else you'll talk to is that the multipayer, public-private initiative did not start out as a voluntary or pilot effort. It was basically a mandatory, statewide approach that took the collaboration and consensus of multiple stakeholders to even have a chance. The story that could be learned from this marketplace is that it is possible to transform a market on a wholesale basis," says Steven Spaulding, senior vice president of enterprise networks at Little Rock–based Arkansas Blue Cross Blue Shield.

Medicaid expansion, PCMH proliferation, and a multipayer approach to bundled payments have had a significant financial impact on Arkansas providers, payers, and patients. The Arkansas Center for Health Improvement has helped spearhead payment reform efforts at the state level. In January, ACHI released the publicly and privately funded organization's Arkansas Health Care Payment Improvement Initiative: 2nd Annual Statewide Tracking Report, which shows the broad reach and deep financial effects of value-based reforms:

  • As of October 2015, 331,000 (82%) Arkansas Medicaid beneficiaries were receiving care through PCMHs.
  • In 2014, Medicaid spending on primary care totaled $522.3 million, with the program saving $34.3 million through PCMH cost reductions. Of the $34.3 million in savings, $12.1 million was allocated to per member per month (PMPM) payments to providers. The remaining $22.2 million was shared between the state and providers who met both quality and cost savings requirements. Shared savings checks were issued in October 2015, with several clinics receiving more than $100,000.
  • In 2014, practices enrolled in Medicaid's PCMH program posted a cost decrease of 1.2%, beating both the 2.6% benchmark increase and the 0.6% cost growth of practices outside the PCMH program.
  • As of October 2015, 780 primary care providers were participating in the Medicaid PCMH program (69% of eligible Medicaid providers).
  • About 250,000 Arkansas residents have gained health coverage through the state's "private option" Medicaid expansion. The 2010 U.S. Census pegs the state's population at 2.9 million residents.
  • For the annual period ending July 2015, Medicaid reported significant provider cost cutting for several episodes of care (EOC) in the state's multipayer bundled payment program: perinatal EOC, C-section rate reduced from 39% to 34%, with an estimated 2%–4% percent direct savings; upper respiratory infections EOC, 17% reduction in antibiotic prescriptions, with episode costs remaining flat despite a 10% increase in drug prices; ADHD EOC, average episode cost fell by 22%; and for total hip and knee replacement, the 30-day all-cause readmission rate fell from 3.9% to 0%, generating an estimated 5% to 10% direct savings.

Riding the reform rollercoaster
Medicaid expansion and physician-practice participation in federal and state PCMH programs have had profound impacts on Arkansas BCBS.

"Medicaid expansion did impact us in a big way here," Spaulding says.

"In Arkansas, they expanded Medicaid, which had a qualification point of about 18% of the federal poverty level, to 138%. And they decided to do that by getting federal money to purchase commercial insurance on the exchange. We got 140,000 people in Medicaid expansion, and we've learned a lot over the past two or three years. We originally thought these people might be a lot more like our commercial population than the historical Medicaid population, but what we found out was they probably were more like the traditional Medicaid population. We need to beef up our acute-care coordination services and our behavioral health services," he says.

In anticipation of serving thousands of Medicaid expansion beneficiaries, Arkansas BCBS boosted care management capabilities in 2013, says Maxine Greenwood, director of governmental and media relations at the health plan.

"We have community-based case managers in all areas of the state who use hospital census and discharge information to reach out to members who have been hospitalized. They also get referrals from providers and use emergency department and claims information to identify members with medical and behavioral health needs," Greenwood says. "Our case managers work closely with social workers and behavioral health staff to promote quality collaboration and care coordination for high-risk members with complex behavioral health conditions and for those with both medical and behavioral health needs. Community-based case managers are also familiar with local resources outside of the health plan that may benefit members with transportation and other services."

Since Arkansas BCBS started serving Medicaid expansion beneficiaries in 2014, the health plan has launched additional initiatives, including a telemedicine pilot designed to ease reimbursement for behavioral health services, she says.

Medicaid expansion has improved the lives of many economically disadvantaged residents, but Arkansas BCBS is grappling with a net negative financial impact from costs associated with serving Medicaid-eligible adults, he says.

"It started out as net positive. These people had never had coverage before, and they didn't really know how to use it; but as they got more comfortable and their providers helped them through the process, we've seen costs increase for us, particularly on prescription drugs. So right now, it's a financial challenge for us," Spaulding says.

"We have had to engage the delivery system in a different way to make sure we are collectively using our resources both from an insurer perspective and a provider perspective to get those people the right care, when they need it, where they need it from the people they need it from."

Medicaid expansion in Arkansas has transformed the roles of providers and payers, he says. "It's changed the whole relationship. Providers have less collectible debt. They have lower rates of uninsured patients. But now we have to battle with the way these people access the system—people who have never had insurance. For most of them, the only way they knew how to access the health system was through the emergency room."

Developing financially sustainable models to provide value-based care for Medicaid-eligible patients is daunting, Spaulding says. "It's resource intensive, and we have had to reassess our ratios of case management to population. We have had to engage the delivery system in a different way to make sure we are collectively using our resources, both from an insurer perspective and a provider perspective to get those people the right care, when they need it, where they need it, from the people they need it from; but going forward, it's going to require even more integration of both operations and culture, and there's going to have to be integration of financial incentives in all of this, so that we're all on the same end of the rope together.

"Part of that is the work that we are doing with the delivery systems across the state that are trying to organize themselves into clinically integrated networks to potentially share risk. The definition of the population under management begins with the alignment of the patient with a primary carephysician; so from that perspective,the role of the primary care physician is becoming more clearly defined," he says.

PCMH adoption has been building steadily in the state since 2010, with Arkansas BCBS launching PCMH contracting in 2010, the Centers for Medicare & Medicaid starting the Comprehensive Primary Care (CPC) Initiative in 2012—a multipayer program created to strengthen primary care that offers population-based care management fees and shared savings opportunities to primary care practices that participate, with the goal of improving care, achieving better health for populations, and lowering costs—and state lawmakers requiring all HIX-qualified health plans to participate in Medicaid's PCMH program.

Approaching population health with an emphasis on primary care is essential for PCMH success, says Alicia Berkemeyer, vice president of the enterprise primary care and pharmacy programs at Arkansas BCBS. "When we were trying to attribute members to a provider, we were quite surprised that many of our members had not seen a primary care doctor in two, three, four years. So because of our commitment to primary care and the belief in having a relationship with a primary care doctor, we spent an entire year going through our membership and educating them on the importance of primary care and having a primary care provider. If they did not choose a primary care provider in a 35-day period, we sent a second letter recommending one in their area to align them with, because if we want to get providers to manage a population, we have to identify the population they need to manage."

Another ingredient for PCMH success is financial support in the form of PMPM payments, with CPC PMPM Medicare payments in Arkansas averaging $20, Medicaid PMPM payments as high as $8, and commercial PMPM payments for Medicaid expansion patients set at a minimum of $5.

Getting up-front PMPM payments is crucial, Berkemeyer says. "That's the tool they needed to make this transformation. This is not an easy task for these providers. One of the key things that started early with the CPC money and the PMPM with the multipayers was that it enabled many of them to support care managers in their practices, and for care coordination and care management to be active and be proactive in closing gaps in care, getting the members in, making sure they're on their appropriate medication and that medication is reconciled. You could talk with any of the practices out there today with the CPC and the state PCMH—we have about 210—and they would say without that PMPM, they could not do the work that they are doing today."

Providers shift delivery of care to value-based models
Clinton, Arkansas–based Ozark Internal Medicine and Pediatrics is among the state's early adopters of PCMH. A practice with about 3,500 active patients, OIMP was among the first five physician practices selected for the Arkansas BCBS PCMH Pilot Project in 2010 and among the first 69 Arkansas practices selected for CPC participation in 2012.

PMPM payments have eased the financial pain that small rural physician practices face in the shift to value-based care, says Stacy Zimmerman, MD, FACP, FAAP, the leader and sole doctor at OIMP. "Care management is the most important area and also the most expensive, especially for the small practice. PMPMs must consistently support care manager salaries and staff overhead, or the PCMH model will fail," she says.

At small practices, matching financial resources with costly investments in PCMH capabilities such as electronic medical record systems is daunting, Zimmerman says. "Decreasing our total cost of care for all of our patient populations has allowed us to be eligible for shared savings; but, unfortunately, the small practice panel put us at a statistical disadvantage compared to the large practices."

So far, the OIMP journey has been financially arduous, she says. "Ours has been net negative because we have to put a larger percentage of overhead toward the model than larger practices. For example, all overhead items associated with a PCMH like care management duties and salaries cost me the same as a 10-doctor practice."

Searcy, Arkansas–based Unity Health has experienced a payer-mix boost from Medicaid expansion but the health system, which is centered on 286-bed White County Medical Center, is seeking to offset Medicare reimbursement reductions, says Vice President and Treasurer Stuart Hill.

"We did see an improvement in our payer mix. From an inpatient perspective, we did see a payer shift to fewer self-pay patients. We did see a few more Medicaid patients; but in Arkansas, Medicaid expansion was mostly on the private insurance side. Those who were 138% over the poverty guideline qualified for commercial insurance as opposed to traditional Medicaid," he says.

"We're still taking greater Medicare cuts than we are getting benefits from the private option Medicaid expansion. In 2016, we're estimating probably a $3.5–$4 million net deficit because Medicare essentially got zero market basket increases. You add that to sequestration," Hill says.

Baxter Regional Medical Center in Mountain Home, Arkansas, a not-for-profit 268-bed acute care hospital, also is facing financial cross-currents in the state's shift to value-based care, says Ivan Holleman, former vice president and chief financial officer, who retired in August 2016. "We have seen a significant shift from more profitable inpatient services to the outpatient setting. Despite substantial efforts and success in increasing our market share, we have seen a 10% decline in acute inpatient services over 2014."

Baxter Regional is pursuing several strategies to offset declining inpatient cases, he says. "We are working to maintain our financial position through market growth; ongoing efforts at efficiency; and, in partnership with our community physicians, establishment of a clinically integrated network and a Medicare Shared Savings accountable care organization. This organization is named Baxter Physician Partners or BPP, and we have partnered with North Arkansas Regional Medical Center in Harrison and their physicians to have the state's second-largest MSSP ACO as measured by benefit lives."

From 2013 to 2015, Medicaid expansion had a net positive financial impact at Baxter Regional, Holleman says. "The private option/Arkansas Works program has had a net financial favorable impact on BRMC of $3.3 million associated mainly in reduced costs from uncompensated care. It would have been difficult for us to maintain our financial position without this program."

Arkansas is blazing a trail for other rural states seeking to make the shift to value-based care, says ACHI Director Joseph Thompson, MD, MPH.

"From a timing perspective, our increases in efficiency and decreases in hospitalization coincide with our expansion of Medicaid under the Affordable Care Act. While we have reduced the cost associated with unnecessary hospitalizations, we have increased the number of hospitalizations through the private option. One of the reasons why the feds are interested in our model is that for the 30 states that have large, rural areas, this could be a way to introduce value-based payment without necessarily having complete ownership of a single network by a major health insurance plan," says Thompson.


Christopher Cheney is the CMO editor at HealthLeaders.

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