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Newsletter Article


ACO-Type Models Growing in Medicaid

By Rebecca Adams, CQ HealthBeat Associate Editor

June 5, 2012 -- For the past couple of years, health policymakers have been developing new ways of delivering care in Medicare, most notably accountable care organizations (ACOs). But less attention has been given to similar models that are a growing trend in Medicaid.

Within the next week or so, the Center for Medicare and Medicaid Innovation is expected to announce a round of "innovation awards" that could support Medicaid demonstration projects that test out methods of coordinating care in a manner similar to ACOs. Medicare ACOs require medical providers to coordinate care for patients. They then share in any savings from this new model of care and, depending on the amount of risk a group is willing to assume, they could face penalties for not meeting savings goals.

The Medicaid versions are not all labeled ACOs and, in keeping with the experimental state-by-state nature of Medicaid, do not all have identical features. But at least a dozen states have begun testing different types of programs that emphasize closer communication and shared budgets among providers. Many of the state-based models do not emphasize sharp payment reductions for medical providers in ACOs that do not meet cost savings targets.

However, as in the Medicare ACO models, reducing costs is one goal. State officials are interested in the ideas behind ACO-type payment models in part because many are facing difficult fiscal situations and hope to lower costs through more effective coordinated care.

The innovation center, which will have up to $1 billion in Innovation Awards to give out, may serve as a significant catalyst for the expansion of these types of arrangements. Demonstration projects that go through the innovation center are expected to be able to begin operating more quickly than those that go through Medicaid state plan amendment negotiations with Centers for Medicare and Medicaid Services (CMS) officials.

The awards that will be announced this month will be the second round of Innovation Award funding. The goal of the center's grants is to reduce costs while improving care for patients.

Among the applicants waiting for news on the awards is the Boston Medical Center (BMC), which hopes to work with community health centers and health plans in a three-year project that will prepare the integrated system to become a Medicaid ACO. About half of BMC patients are Medicaid beneficiaries.

Last summer, the health center had talked to White House officials about participating in a multistate Medicaid demonstration project that would have used global capitation rates. The demonstration project had been included in the 2010 health care law (PL 111-148, PL 111-152) with the help of Sen. John Kerry, D-Mass. Officials in Boston had teamed with other health industry executives in Colorado, Florida and New York to push for the demonstration to proceed. They estimated that costs would decline by about 3 percent per year.

Federal officials did not move ahead with the five-state demonstration project but did tell the group about the innovation center awards. BMC and the Denver Health and Hospital Authority, another participant in last summer's proposal for a demonstration project, both applied for the innovation center grants and are optimistic that their proposals will be funded.

"There is a hunger at the state level to do better," said Kate Walsh, BMC's president and CEO.

The Denver Health and Hospital Authority, an integrated system with a hospital and health plans, is already participating in a state-run Medicaid program known as the Accountable Care Collaborative (ACC). State officials divided Colorado into seven regions and is allowing an ACO-type program to start enrolling Medicaid patients in each region.

David Brody, the medical director of Denver Health's managed-care plans, said funding from the innovation center could help build the type of infrastructure that is needed to expand capitated payment systems and hopefully improve patients' care through more coordination.

Brody said it has been helpful to apply for the grant and better think through plans for the future. He said the current fee-for-service system doesn't drive the right kinds of changes that are needed to improve patients' care.

"Even if we don't get the challenge grant funding we're requesting, we've moved forward since we submitted our proposal," said Brody. "As we look toward the future, I'm convinced that at some point we'll move more patients into a capitated system of care."

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