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Health Innovation Spreads to the States in New HHS Grant Program

By Jane Norman, CQ HealthBeat Associate Editor

July 19, 2012 -- States are being encouraged to rethink their payment and delivery systems for public health programs under a new Department of Health and Human Services (HHS) initiative unveiled last week that includes $275 million in grant money.

HHS Secretary Kathleen Sebelius, a former Kansas governor, said in a statement, "I've seen states in action and I know what great laboratories they are for innovations we can put into practice nationwide." States may apply to receive competitively awarded grants that can be used either to test systems already in development or design new ones.

The effort springs from the Innovation Center created under the health care law (PL 111-148, PL 111-152) and is intended to spur improvements in Medicaid, the Children's Health Insurance Program and Medicare. Called the "State Models Innovation Models" project, it's meant to help states find ways to maintain or improve quality while reducing costs.

For example, some states are forming statewide networks for primary care, combined with advanced health information technology systems, so that primary care doctors, specialists and hospitals can communicate and coordinate better, officials said. Other approaches might be based on the same concepts as accountable care organizations.

HHS and Centers for Medicare and Medicaid Services (CMS) officials said that states are meant to work on fresh ideas with other local entities including employers, insurers, community leaders, service organizations, doctors and hospitals, consumers and tribal governments. "The goal is to create multipayer models with a broad mission to raise community health status and reduce long-term health risks for beneficiaries of Medicare, Medicaid, and the Children's Health Insurance Program," CMS says in a fact sheet.

States that already are developing systems can apply for "model testing" awards, and the Innovation Center will provide grants to five states in its first round. Some states may need Medicaid waivers or other regulatory changes to move forward as well, CMS said. Another 25 states can be chosen in the first round for "model design" awards to create "transformative" changes in their payment and delivery systems.

Applications for the first round are due Sept. 17. A second round of funding is targeted for the spring of 2013. Only one application per state will be allowed and the application must be endorsed by the governor.

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