Emtiro’s Take on NC DHHS’s Latest Medicaid Transformation Policy Papers: Part One
This article is Part One of a two-part series on NC DHHS’ recent policy papers on value-based payment and Medicaid Accountable Care Organizations.
On January 8, 2020, the North Carolina Department of Health and Human Services (Department) issued two significant Medicaid Transformation policy papers. In these papers, the Department explains its value-based payment strategy for standard prepaid health plans and its related Medicaid Accountable Care Organization (ACO) model. Review of the timeline and targets outlined in these policy papers raised concern for us at Emtiro Health, in regard to its feasibility, implementation fidelity, and the potential of unintended consequences, particularly as it relates to provider consolidation and the current rural health care crisis.
The Department seeks comment on its proposals by February 19, 2020. We strongly encourage stakeholders to provide comment on these papers to help the Department understand true level of readiness for the proposed approaches and what is needed in order to assure a smooth transition to these new payment and delivery models.
Emtiro Health is a company committed to achieving our vision of strong individuals, families, and communities emboldened to achieve better health, total wellbeing, and brighter futures. To that end, we strongly support the Department in achieving its vision for Medicaid Transformation. In fact, Emtiro Health was specifically founded to support patients and providers through transformation in North Carolina.
As champions of Medicaid Transformation, and in the spirit of fostering productive dialogue on these proposals, this article provides our initial assessment of these proposals.
Achieving Value in Medicaid
The Department has outlined five (5) overall objectives for its Value-Based Payment (VBP) Strategy and its proposed ACO model, which include:
Ensuring NC Medicaid “purchases health” and is a good steward of state resources;
Establishing ambitious, but achievable, VBP goals;
Recognizing market readiness for VBP and align across payers when feasible;
Allowing PHPs and providers flexibility to tailor VBP models to their specific populations and needs; and,
Building from and leveraging state programs focused on improving high-value care.
We fully support these stated objectives and agree that these five goals are the correct navigational guideposts to direct the strategy for developing and implementing the Department’s VBP strategy and ACO model. However, we are concerned, based on our experience in supporting the provider community and Medicaid providers in particular, that the implementation framework and proposed timeline and targets directly undermine these objectives.
In general terms, our concerns are categorized as follows:
The Department’s strategy and timeline fails to integrate important change management principles, which are essential to the reform and renovation of any complex system.
The Department fails to define “value” with adequate precision. Value encompasses many different objectives and definitions, of which quality and cost play varying and competing roles. Precision is important in evaluating the feasibility of the proposed strategy as the Department relies on assumptions regarding market readiness for risk-based value products which are not present extensively in the Medicare or commercial insurance markets and are not present at all in the Medicaid market.
Based on the experience of other states implementing complex system change of this type, the targets and timelines are not feasible given the actual level of readiness across the state, both in Medicaid and other payer programs.
The Department’s unrealistic strategy framework may have the inadvertent effect of further fueling provider consolidation and exacerbating existing disparities in access and quality.
These four categories represent the areas where we believe that the Department’s strategy for this important work may derail its actual objectives.
The Department fails to integrate necessary change management principles into its strategy for adoption of VBP and ACOs in Medicaid Managed Care.
As an organization with a guiding principle of boldness, we can appreciate the Department’s desire to pursue bold solutions with a goal of enhancing health outcomes. North Carolina has proposed a significant transformation to the Medicaid program that includes changes in administration, payment, and delivery of care and services. It introduces multiple new stakeholders into the program, including prepaid health plans and an enrollment broker. This transition also places a new emphasis on addressing health related social needs.
Individually, each of these are substantial transitions within and across a complex system, and combined, they represent revolutionary change. A system change of this size and consequence requires careful management and an appreciation for stakeholders’ level of readiness and capacity for change. It is critical that the Department effectively manage the timeline of activities and avoid the primary reason for large system change failure – change fatigue. Change fatigue occurs when too many transitions happen at once. As currently proposed, the Department will roll out too many changes at once within Medicaid, very likely dooming much of the transformation to failure. Simply put, it is too much too fast.
It is an accepted maxim in quality improvement and change management research that change is, ideally, implemented as a discrete, staged, and iterative process. This is particularly important when instituting changes to complex systems – a common lesson in case studies of Medicaid transformation in other states.
Where incremental and iterative change is not possible, it is all the more important that there be a strong, foundational background that system users can fall back on when adapting to the imposed change and reacting to the confusion that results.
Medicaid is highly complex, representing over $14.6 billion in total expenditures and impacting nearly 2.1 million North Carolinians. In addition, the smooth operation of Medicaid is of high importance, with narrow margins for error or disruption. The continuous operation of Medicaid services is, simply put, highly consequential, both for enrollees and the providers that serve them.
We appreciate the Department’s desire to move the Medicaid system to one that purchases health and not just health care. We understand that the Department views VBP as a method of achieving that objective. However, introducing targets for VBP at the outset of managed care unnecessarily introduces further complexity to an already compounded system change. This approach will not allow the necessary time for providers, patients, and other stakeholders to adapt to changing circumstances and master new (and necessary) process skills before requiring further iteration.
While we assume that the Department’s timeline of contract years does not begin with the initial contract year of 2019, but instead refers to the years when managed care is ultimately implemented, this important point is never unequivocally addressed. We, therefore, strongly recommend that the Department provide clarity on this point. However, even with this point of clarity, we still believe that the multiple transitions that will occur at once will result in change fatigue – further exasperating the provider burnout that exists throughout the provider community.
Based on our own experience in change management, and our observations of the experiences in other states, this is setting up the system for failure. (Kentucky, Michigan, CHCS 2004 Study.)
Greater precision is needed when defining the goal of value.
There are multiple definitions of value in the context of value-based purchasing. It is evident from the timelines and targets outlined in this Policy Paper that the Department is focused on cost growth control through implementation of greater risk levels at the provider level. This is clear from the rapid transition of risk beginning as soon as contract year 4 and the implementation of the ACO model as soon as 2021. We understand that cost growth control is a priority for the Department and the General Assembly and is an important component of assuring a sustainable program. However, cost growth control on its own does not result in value. Therefore, we note the need for great precision here. Failure to acknowledge this narrower objective may lead the Department to rely upon mistaken assumptions, particularly when drawing analogies to demonstrate market readiness across the State.
From our perspective, the Department is, instead, focused on establishing Alternative Payment Models (APMs). We encourage the Department to use the term Alternative Payment Models, rather than value-based payments, as a mechanism to align intentions, actions, and messaging for stakeholders. This alignment is critical to successful change management.
We support and applaud the Department’s objective of “purchasing health” while serving as a good steward of finite state resources. In meeting that goal, we acknowledge the necessity of moving from a fee-for-service program (incentivizing quantity of care delivered) to one where incentives are aligned with outcomes. However, the experience of other states and systems in transitioning towards risk-based programs, again, reflects the need for a staged approach.
North Carolina consistently ranks in the bottom half of the nation in regard to health quality and outcomes. Regional and racial disparities persist in both access to care and quality of care delivered. These disparities are perhaps best illustrated in the high infant and maternal mortality rates of black women compared to non-Hispanic white women in the state. Despite recent progress made by the Department and the Maternal Mortality Committee, North Carolina tends to be in the bottom third of the nation for infant and maternal mortality rates. Therefore, to truly improve outcomes and to purchase health and not only healthcare, we have a long way to go as a state.
A shift in payment models is a component of driving improvement, but it will not be the only driver of improvement. We are not aware of any APM model that has demonstrated meaningful, consistent, and sustained population health improvement, even though there is evidence of improvement in discrete and specific quality measures. Instead, to improve outcomes there is a need for more investment, improved access and utilization of appropriate care and services, and access to more kinds of interventions. This is particularly true when we are talking about a primarily pediatric population, as is the case in North Carolina Medicaid. This increased investment and utilization may not result in lower costs but may lead to improved outcomes. The Department’s VBP strategy, however, does not reflect this reality.
Targets and timelines are not feasible given the actual level of readiness across the state, both in Medicaid and other payer programs.
The Department cites its intention to build upon both “existing trends in the North Carolina healthcare landscape” as well as “existing state programs” in meeting its goal of transitioning to risk-based purchasing programs. The Department makes critical assumptions about the level of readiness among North Carolina providers to participate in value-based payments and integrated delivery models.
Our experience in the market does not support the Department’s assumptions about level of readiness, particularly in the Medicaid program. Underestimating levels of readiness and overestimating extent of required skills, resources, and experience are other reasons that large system changes fail. We strongly caution the Department from making these assumptions.
VBP, Managed Care, and other Experience in NC Medicaid Program
A primary concern centers on the fact that the Department appears to assume the successful launch, implementation, and iteration of managed care in North Carolina before the proposed strategies take effect.
Substantive Medicaid Transformation programs, such as Advanced Medical Homes and Healthy Opportunities, lauded as the most innovative in the nation, have yet to be implemented or evaluated. Even if we assume that VBP targets begin upon implementation of managed Medicaid (rather than in 2019 which is the first year of the 1115 Waiver and could be viewed as Contract Year 1), this is still insufficient time for providers to adapt to a managed care environment, launch Advance Medical Homes, and take on greater responsibility for identifying and addressing the health-related resource needs of their patients before the VBP targets and ACOs begin.
The Department cannot underestimate the significant transitions that patients and providers will undergo when managed Medicaid begins, nor should the Department assume that decades of experience under the Carolina ACCESS program have prepared providers to effectively implement the AMH model. While North Carolina has operated with a form of managed primary care for Medicaid recipients through the Carolina ACCESS program, the scope, impact, and intensity of this program is in no way comparable to the changes contemplated by Medicaid Transformation. The Carolina ACCESS program, while recognized nationally, largely represented an ancillary impact on provider organization and delivery. For example, providers participating in Carolina ACCESS II only have to:
Perform primary care services that includes certain preventive and ancillary services;
Create and maintain a patient/doctor relationship;
Provide direct patient care a minimum of 30 office hours per week;
Provide access to medical advice and services twenty-four (24) hours per day, seven (7) days per week;
Refer to other providers when the service cannot be provided by the PCP; and,
Provide oral interpretation for all non-English proficient beneficiaries at no cost.
Further, the data, data infrastructure, and reporting are conducted by a single, statewide nonprofit organization, meaning that providers have had no need to invest in technologies that allow for care management documentation, reporting of metrics, or risk stratifying the patient population.
Finally, all care management activities have been conducted by local community-based organizations with no requirement for provider involvement or participation in the care management process. As such, providers experience with this existing program cannot reasonably be expected to prepare them, structurally or culturally, for the simultaneous implementation of managed Medicaid, delivery of primary care management, and an immediate VBP component.
Engaging in VBP and ACOs requires key elements of data and data sharing, including, specifically Admission, Discharge, and Transfer (ADT) data. In North Carolina, the NC Health Information Exchange Authority (NC HIE) is expected to play a central role in data exchange and is intended to be a predominant source of ADT data. Currently, the NC HIE is not adequately functioning and cannot be viewed as a reliable source of data exchange. This, then, requires providers and payers to invest in very expensive data feeds that, for many providers, is prohibitive.
Analogies between North Carolina market readiness for an aggressive VBP strategy and Medicaid ACOs and other States with decades of experience and investment in managed Medicaid administration are also misplaced. Most states, including the ones identified by the Department as examples with similar VBP targets and timelines, have had managed Medicaid for multiple decades before they initiated such significant payment and delivery system changes. On this point it is important to recognize two things:
These targets and timelines are recognized as ambitious even for states with decades of experience in managed care and who are operating from a “steady state of administration.”
The three states referenced (Washington, New York, and Massachusetts) also made significant investments through State Innovation Model (SIM) and/or Delivery System Reform Incentive Payments (DSRIP) leading up to and then as part of the launch of VBP targets.
North Carolina has neither condition in its favor and therefore cannot expect to replicate the experience of these states without significant investment of time and resources, neither of which are anticipated in this framework.
Instead, we caution the Department to learn from the experience of Iowa: a state much more similarly positioned to North Carolina when it launched its Medicaid transformation activities a few years ago. Iowa launched managed care, delivery system reforms, and value-based payment targets simultaneously. Iowa’s initiative encountered significant problems from the beginning with CMS intervening and delaying implementation because the state did not demonstrate readiness. In the few years since, multiple plans left the program and at least one of the last remaining plans is facing significant financial penalties for failure to appropriately pay providers.
Other NC VBP Experience with other Payers
NC Medicare Shared Savings Program (MSSP) Experience
The Department references the number of Medicare Shared Savings Programs (MSSP) in North Carolina as an indicator of market readiness and deep experience with VBP. In fact, the Department acknowledges that a foundational reason that it has set such aggressive VBP targets is an assumption that there will be large update in the Medicaid ACO model. This is, in part, because there are so many Medicare ACOs in North Carolina and because of the Department’s alignment of the Medicaid model with the Medicare SSP model. For reasons explained here, this assumption is not correct.
Of the 27 MSSP ACOs in NC, only nine achieved savings and met quality benchmarks in 2018, the most recent year with data available. This demonstrates the challenges North Carolina providers, including sophisticated health systems, have had with designing and implementing population health value-based programs across a population that does not present the same medical, social, and coverage complexities that the Medicaid population presents.
Secondly, and equally as important, the Medicare ACO program is undergoing fundamental changes in requirements that will require significant time and resources from existing ACOs. It is expected that these changes will lead to existing ACOs exiting the program. These changes will necessarily impact both the long-term sustainability of these established ACOs and their ability or willingness to transfer or expand operations to Medicaid populations.
VBP in Commercial Contracts
Recent media articles have identified North Carolina as a state taking great strides in the realm of value based payment and delivery system reform. However, while Blue Cross Blue Shield of NC has offered discrete pay for performance and other bonus payment programs for a few years, this cannot be assumed to be a widespread practice.
We are also concerned that the Department assumes that because one plan has engaged in innovative contracts with a select number of large health systems, that there is a level of readiness in the market to enter in VBP for the Medicaid population, including, specifically, downside risk. Given the proprietary nature of the agreements between providers and payers, and the lack of widespread reporting on the presence of VBP arrangements in the commercial market in NC, we look to available national data as a proxy for what is likely the case in North Carolina.
Nationally, the APM Measurement: Methodology and Results Report provides the best insight into adoption of VBP programs across commercial payers. Pursuant to its 2019 report, which purports to capture 61% of the commercial market nationally, the majority of commercial products (55.7%) remain traditional fee-for-service, with another 14.2% in Category 2 arrangements, reflecting fee-for-service plus supplemental payments based on reporting or performance. Over two-thirds (69.9%) of the commercial market surveyed nationally remains in non-risk based or traditional fee for service arrangements.
In the absence of reliable metrics on the penetration of VBP programs in the MSSP and commercial space, the best indicator of market readiness is providers own assessment of their ability to assume the administrative, clinical, and operational burdens associated with the proposed Advanced Medical Home model, as evidenced by the rate of actual AMH Tier 3 participation.
Attestation, contracting, readiness demonstration, and then actual operation of an AMH are all very different things. While the Department references the 1,500 practices across the state that initially attested to AMH Tier 3, the actual rate of commitment is significantly lower. In our direct experience, and based on a plethora of anecdotal evidence, we know that many providers who attested to AMH Tier 3 subsequently elected to drop down to lower tiers following contracting and readiness review, noting that they were not prepared to perform the basic AMH Tier 3 functions. It bears noting that AMH Tier 3 functions are vastly different from and lesser to the commitments and risks associated with performing within an ACO and VBP contract.
Lessons Learned from the 2019 PHP-Provider Contracting Cycle
While we appreciate the Department’s flexibility to have PHPs and providers determine the best path forward engaging in VBP arrangements, in navigating systems change we have observed the need for the Department to serve as an active good-faith referee.
Implementing something new – removed from the status quo – is always an exercise in negotiation. In order to ensure that the vision of Medicaid Transformation is achieved and we move towards purchasing health and not just healthcare, the Department will need to invest substantial political capital and resources to ensure the execution of its vision within the parameters it has set out. This is particularly true if the Department’s vision includes returning authority to Primary Care Providers.
The Department cannot ignore the realities of market forces. In this case, the Department has proposed setting aggressive VBP targets for PHPs and imposing financial penalties for failure to achieve those targets. That is a significant market force that cannot be underestimated.
More specifically, in the Policy Paper the Department notes that “providers without VBP experience may experiment with incentive payments and steadily increase their use…” (p. 2). Again, while we appreciate this flexibility and desire to meet providers where they are, it assumes the availability of provider contracts with unique, customizable terms between PHPs and providers. This simply is not the case, as we have observed based on our direct experience supporting providers in PHP contract negotiations.
PHPs presented providers with very standard contract templates and presented a “take-it-or-leave-it” posture and, in many instances, exhibited an unwillingness to enter into good-faith negotiation with providers in response to reasonable requests. This rigidity was observed even when engaging with hospitals and more sophisticated practices, who were able to draw upon resources not available to individual practices.
Given the common lack of experience in VBP experience across providers, but particularly in some of the more underserved regions of the state, experimentation with incentive payments tied to infrastructure development and process improvement is crucial. We recommend that the Department more clearly articulate its intent regarding “experimenting with incentive payments” and also provide definitive contracting guidance for PHPs and providers.
Also, specific to individualized contracts, the required timeframe to negotiate and execute this many VBP contracts prior to going live will be considerably longer than initially allowed in 2019.
In our experience, the level of value-based payment, particularly given that many providers opted to change their AMH attestation level, may not be achieved given that contracts negotiated were primarily fee-for-service. This may complicate factors, as providers may have negotiated agreements with PHPs that do not include any VBP arranges for the first three years of the term, if not longer.
Unintended Consequences: Aggravating Disparities in access and quality in North Carolina
Finally, we have significant concerns about the exasperation of the rural health access crisis in the state. During 2019, we worked with one small, rural health care system. This provider is characteristic of many throughout the state with no experience in any level of VBP in any payer program. In fact, the electronic health record system this provider utilizes is, at this time, not capable of producing reliable reports for basic quality reporting programs.
While the Department has imposed the requirements on the PHPs to meet requirements, it cannot underestimate the pressure that the PHPs will exert on providers – regardless of situation or experience – to engage in VBP arrangements. Many providers in North Carolina, particularly rural providers, simply are not prepared to do so – especially with the Medicaid population.
Emtiro Health will submit detailed comments to the Department to inform its continued development of the VBP and ACO strategies. As strong supporters of Medicaid Transformation, it is our goal to keep stakeholders informed of the Department’s activities while providing the benefit of our experience working with patients and providers in Medicaid to the Department.