Emtiro’s Take on NC DHHS’s Latest Medicaid Transformation Policy Papers: Part Two

This article is Part Two of a two-part series on NC DHHS’ recent policy papers on value-based payment and Medicaid Accountable Care Organizations.

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On February 10, 2020, we presented our high level concerns about the North Carolina Department of Health and Human Services’ (Department) recent policy papers on value based payment and Accountable Care Organizations as components of Medicaid Transformation.

This second part to our two-part series about the policy papers aims to provide more detailed feedback for the Department on both its value-based payment strategy and its proposed accountable care organization model.

Achieving Value in Prepaid Health Plan (PHP) and Provider Payment

As explained in Part 1, in general terms, our concerns are categorized as follows:

1. 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.

2. 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. 

3. 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.

4. The Department’s unrealistic strategy framework may have the inadvertent effect of further fueling provider consolidation and exacerbating existing disparities in access and quality.

In Part 2, we provide detailed recommendations on how specific components of the VBP strategy and ACO model may be amended are included. For ease of reference, we follow the headings used in each of the policy papers to structure our feedback.

Contract Years 3-5: VBP Targets and Framework

We appreciate the Department’s proposal to impose targets on PHPs for the proportion of expenditures that should be in VBP arrangements. Clear communication of expectations and measurable targets can be motivating and provide focus. However, setting targets can also, and often does, have the unintended consequence of driving a narrow vision that ultimately results in everyone missing the point of the actual target. This is the so-called problem of “teaching to the test.” The danger presented here is that in focusing on a narrow, measurable outcome, the Department will align incentives and build a system that missed the desired impact: improved health outcomes and a sustainable program.

We strongly support the Department’s decision to use the HCP-LAN framework in its VBP strategy, as it provides a clear, standardized structure that everyone can understand. We think it is important to acknowledge that the HCP-LAN framework should not necessarily be viewed as a continuum that all providers will move along with time and experience, ultimately achieving the highest levels of advanced payment. Instead, the HCP-LAN should be viewed as a genuine framework that provides a standardized language that guides discussions among stakeholders. We must acknowledge that there are providers that will never achieve certain levels of advanced payment. We strongly encourage the Department to carefully balance its transformation objectives with the realities of the provider community in order to assure continued provider participation in the Medicaid program. If patients do not have access to providers, none of the Department’s efforts will matter.

To that end, we have significant concerns that the Department does not discuss a clear plan for how it will support providers in achieving readiness and necessary capabilities to take on advanced payment and increasing levels of risk. We assume that the Department expects PHPs to make necessary investments to prepare providers. Our experience in negotiating provider agreements with PHPs does not bear that out. Further, states that have engaged in similar efforts to introduce greater amounts of VBP into Medicaid have committed to infrastructure and other investments. While the Department references incentives and requirements, we do not see such incentives described in the Policy Paper. Instead, we see requirements and potential financial penalties imposed on the PHPs for failure to meet the specified targets. We encourage the Department to reevaluate this approach and to work with the provider community to better understand their true level of readiness and what support and resources they need. The Department should take an active role in supporting providers, rather than delegating this to the PHPs.

Finally, based on evaluation of its importance in implementation in other states, we recommend that the Department make available funding that providers can obtain. This could perhaps be through a grant application process, in the form of grants that can be used to acquire the technical assistance and other support providers need to make important operational changes that will help them to succeed in this new Medicaid environment. We recommend this approach so that providers are able to select the support services they need from the organization they prefer to work with, rather than the Department making such funds available to an organization that then delivers the services to the providers. This approach ends up creating a one-size-fits-all set of technical assistance that does not work for providers. Instead, allowing the providers to access funds and then work with their preferred vendor will assure that the provider gets the services they need, in the way they need it.

Definition of VBP

As discussed above, we recommend that the Department be more precise in what it is proposing in order to ensure that providers receive the support they need, that the drive to value aligns with actual readiness in the market, and that PHPs are clear on expectations.

We appreciate that the Department desires to see more advanced levels of VBP starting in Year 3, which we, again, assume means Year 3 after the eventual launch of managed care, and not 2021. However, without the necessary infrastructure payments and technical assistance in the early years, providers will not be ready to make this leap.

We understand that the Department views the AMH Tier 3 payments as VBP. We assume that the Department qualifies these as HCP-LAN 2A. However, contract negotiations with PHPs in 2019 demonstrated an unwillingness on the part of PHPs to make the investment in AMH Tier 3. It was not until the Department issued its guidance on what the Department expected AMH Tier 3 providers to be paid that the negotiations with PHPs shifted. But even then, PHPs were not overly willing to make the investment that would allow providers enough payment to invest in the infrastructure, personnel, and capabilities needed to implement the AMH model.

If this experience serves as an indication of how negotiations with PHPs will go in the future, we strongly recommend that the Department be more precise in what is expected. This includes a recommendation that the Department explicitly state that it expects the PHPs to make the necessary investments, through HCP-LAN 2A payments, to providers that will allow them to acquire care management staff and HIT infrastructure. Investments like these will be necessary for providers to move from AMH Tier 1 and 2 to AMH Tier 3.

In our experience assessing practices for AMH Tier 3 readiness, many practices reported the need to purchase additional modules within their current EHR to meet certain care management, risk stratification, or reporting requirements. The current AMH payment methodology does not account for these needed investments. While Tier 1 and Tier 2 providers will continue to receive medical home fees, it is erroneous to assume that providers will use those payments, which have already become central to their operating budget, to hire new staff and/or purchase new HIT capabilities.

We agree with the Department’s approach to recognizing improvement in the percentage of expenditures in VBP. We find that this approach identifies the key objective, which is to, over time, move payments into VBP. We strongly recommend that the Department include an improvement score in all years and not just in the early years, as does Washington State which includes an improvement and achievement score in all years of its VBP strategy.

Target Calculation

We note that the Department intends to exclude investments in Healthy Opportunities from expenditures. Below, we provide further comment on the role of Healthy Opportunities, particularly in the context of VBP and ACOs. In general, though, we applaud this carve out as recognizing the need for investment to support the development of an infrastructure to support purchasing health and not just health care. We note, however, a concern that if the Department allows the exclusion in the early years, but then includes such investments later, it will have the effect of reducing PHP interest in making such investments.

Target Levels

We strongly encourage the Department to reevaluate the timing of the imposed target levels as well as the targets themselves. Our assessment of the Department’s proposed targets is that they are unreasonable and unachievable on the proposed timeline.

We recommend that PHPs, providers, and patients have three full contract years operating in a managed Medicaid environment with time to test and develop the AMH model before imposing targets that involve more advanced levels of payment. As explained above, there is significant need to focus on investment in 2A payments, in particular HIT infrastructure and data analytics personnel, to truly enable providers to deliver the services and achieve the outcomes that the Department requires.

We appreciate the Department’s reference to other states that have set similar targets in their Medicaid programs. However, as described previously, these states are in a very different situation than North Carolina and we strongly recommend that the Department not expect that the same level of readiness exists in North Carolina.

Further, these states have made significant investments in preparing the provider community to move to VBP and are making significant investments throughout implementation of the VBP strategy. Washington State also has a different context than North Carolina, as the VBP strategy is inclusive of, but not limited to, Medicaid. In Washington, the state has set targets for Medicaid, for state and school employee benefit programs, and for the commercial market. This overlap across different programs and alignment behind a shared strategy, along with significant oversight and investment by the State, make it much more likely that success will be achieved despite aggressive targets.

Enforcement of Targets

Core to the success of the Department’s vision is its capacity to provide effective oversight of its delegated responsibilities. In this context, that includes enforcement of targets but is not and should not be limited to that. The Department’s goal of allowing PHPs flexibility in tailoring VBP programs to specific populations and needs is laudable but will not be sufficient to ensure the desired impacts. We note with concern that the Department seems to rely exclusively on an annual report from PHPs as the sole means of evaluating the effectiveness and impact of its VBP strategy.

We understand that under the Carolina ACCESS program, the Department delegated much of the oversight of providers and of the local care management organizations to its contracted vendor. We believe that the Department is taking a similar oversight approach in the VBP, AMH, and ACO contexts. Based on our direct experience, we strongly recommend that the Department take a more significant and meaningful oversight role.

The importance of anticipating and assuming an active oversight and enforcement role is a key lesson, as outlined in a recent publication outlining successful strategies for promoting PHP accountability and performance by the National Academy for State Health Policy, a non-partisan forum for state health policy leaders. It reads:

“Managing Medicaid managed care programs requires continued state agency focus and vendor management. Even states that have successfully implemented managed care evolve to increase program effectiveness over time and improve the state’s partnership with their plans.”

This active engagement is particularly true as the Department moves towards VBP, increasing the complexity of the system and relationships of all stakeholders. Ensuring fidelity to the Department’s model by providers and PHPs and accountability for outcomes requires the establishment of clear goals and that those goals be actively and substantively enforced by a robust and evolving oversight mechanism.

As one example of the degree of active oversight required, consider Washington State Health Care Authority (WA HCA). WA HCA carries out an annual survey of MCOs, commercial/Medicare health plans, and providers. This survey is noteworthy because it not only provides important direct quantitative data, but also qualitative data. Through this approach, WA HCA is better able to assure attainment of transformational goals and not just meeting target numbers.

In Washington’s most recent survey, lack of interoperable data systems continues to be the top-rated barrier to VBP. Other areas in need of improvement include:

• Timeliness and comprehensiveness of data shared to providers;

• Alignment of quality measures and incentives;

• Collaboration and trusting relationships;

• Provider technical assistance; and,

• Role clarity among stakeholders

We recommend that the Department institute a similar process in North Carolina rather than rely on an annual report submitted by the PHPs. Further, we seek commitment from the Department to use that annual survey and reporting process to identify the technical assistance, infrastructure investments, and regulatory and legislative advocacy that is needed to further the objectives of VBP. We strongly encourage the Department to issue a policy paper that outlines what role the Department will play in terms of oversight, investment, and providing needed technical assistance and technical capabilities to achieve success in its VBP strategy.

Furthermore, WA HCA has a comprehensive statewide Value-Based Purchasing Roadmap and a Medicaid specific VBP roadmap that distinctly outlines the roles and responsibilities of all parties and clearly articulates the investments that the State will make in the coming years to advance capabilities and sustain progress-to-date in transformation and APMs. While recognizing the need for flexibility, iteration, and evolution within a complex system, this level of precision and clarity as it relates to respective roles and goals is indispensable. We note with concern the absence of a detailed, interdisciplinary strategy to proactively monitor and enforce model fidelity.

Secondly, this focus on targets while seemingly delegating all responsibility for achieving alternative payment models to the PHP, without providing direct guidance and guardrails, is also a point of concern. Leaving PHPs the autonomy to “fill in the blanks” as to how it reaches specified targets combined with the proposed punitive withholds re-enforces the perception that this transition to VBP is restricted to cost control, as opposed to instituting a true change in how we perceive and purchase health as a state.

Consistent with our above stated concerns regarding the timeline for the Strategies implementation, we strongly recommend that the Department forego instituting withholds until later years. Rollout of withholds in Contract Year 3 is simply too soon. All stakeholders need time to adjust to the managed Medicaid model and to actually implement the AMH model.

Furthermore, the target of 90% of total Medicaid expenditure in a five-year timeline is, as noted previously, stringent even for states that have already undergone Medicaid Managed Care transition and have experience in its administration. Five years is not enough time to meet the defined targets.

Statewide Value-Based Payment Initiatives

We agree with the Department’s stated objective that PHPs and providers should build from the foundational infrastructure and delivery reform underway through the AMH model. However, to do this the Department must allow time for the AMH model to become foundational and truly operational. Based on our work with providers implementing and operationalizing the Patient Centered Medical Home (PCMH), Patient Centered Specialty Practice (PCSP), behavioral health integration, and Medicare Accountable Care Organization model, this kind of operational and cultural change will take at least two to three years. 

A perfect example of this type of slow change in provider practices is illustrated by our experience with the community health center integrating behavioral health pursuant to our Collaborative Care Model in primary care. This work required many months of assessment, training, updates to policies and practices, as well as coaching stakeholders to develop buy-in prior to implementation. While some of the clinical and operational changes on paper appear to be simple and straightforward, translating that into routine practice is a complex process, particularly when operating in a fast-paced environment with many competing priorities. We are currently in year three of full implementation and it is only now that these programs are operating at capacity. 

Secondly, as referenced in previous sections, our own observations regarding the PHP-Provider contracting for AMH Tier 3 care management in 2019 underscores the active role the Department must play as a good-faith arbitrator in order to ensure that its model of care delivery is respected and implemented. More specifically, in our experience, PHPs were largely unwilling to contract for care management fees that would allow AMHs to operationalize the AMH model. It was only after the State issued its guidance on expectations of care management delegation that PHPs were willing to re-engage with providers in negotiations on terms that more closely reflected the Department’s expectations. While the Department laudably wishes to rely on the flexibility and potential efficiency of the free market, it would be a mistake to ignore market force realities. We wish to remind the State of that experience, and to stress that the VBP strategy here proposed will require even greater Department oversight.

VBP Data Infrastructure

The Department has failed to address and plan for the integral role of data and the necessary data infrastructure for both providers and PHPs to operationalize VBP. The lack of structure outlined here suggests that a collective data strategy may only be addressed in an ad hoc manner, which is of concern. The impression is that this will be “a plane being built while in flight” and that will be catastrophic given the central role of effective data exchange in making every part of the Department’s transformation effort succeed.

The ability to operationalize VBP is dependent upon reliable, timely, and interactive access to patient data on both an individual and population level. As described above, the Washington State experience demonstrates the central role that interoperability and frequent, reliable, comprehensive data sharing have in successful VBP.

As an additional example, a recent evaluation of Pediatric ACOs by the American Academy of Pediatrics identified data sharing as a particular operational deficit across all surveyed states, noting that, “all sites experienced major difficulties with Medicaid encounter data, even where the State Medicaid agency had a strong commitment to provide such data.” This resulted in significant barriers to practice change, demonstrating the centrality of a strong standardized data strategy. This is a role that can only be addressed by the Department. While the Department has invested a lot of time and resources over the past few years in its design for the data exchange and interoperability as part of Medicaid Transformation, this is not sufficient for the projected future state here anticipated.

The Department has also significantly over-estimated North Carolina providers’ collective VBP data infrastructure, as reflected by our experience working with the TAG Data Subcommittee as well as a range of providers. While 1,500 providers initially attested to AMH Tier 3 status, only a small portion of those can currently run analytics that are sufficient to sustain themselves under VBP arrangements. In addition to technical capacity and interoperability–two domains that are currently lacking for most providers–effective VBP analytics also requires additional expertise and staff capacity to provide systemic analysis on contract, financial, and data operations.

In our experience, providers have engaged consultants specifically to navigate existing quality recognitions or P4P programs in the absence of this capacity within their own clinics. The greatest area of deficiency most often involves quality reporting functionalities at a most basic level within practice management systems and EHRs. As such, the only providers in a position to meaningfully participate will be large hospital systems or large multi-specialty groups that already have this experience, or have staff dedicated to managing quality and analytics. We have serious concerns that this will further accelerate system consolidation and the rural health crisis in access, as well as lead to stakeholder disengagement.

While the Department has invested significant resources in planning Data Infrastructure for Medicaid Transformation, it should be noted that this infrastructure has not been implemented or evaluated yet. It is also unclear from the strategy proposed the degree to which the existing infrastructure, specifically the administrative structure as represented by the AMH TAG Subcommittee, will be utilized and iterated upon in this new phase of transformation. Greater clarity on the intended role, if any, of the AMH TAG Data Subcommittee would be helpful.

Continued, focused attention to and investment in data infrastructure is important not least as the Department seeks to integrate disparate parts of the health system in order to provide more holistic care for patients. To this point, we encourage the Department to consider the position of Behavioral Health providers vis-a-vis data capacity and infrastructure.

Behavioral Health providers are significantly behind primary care when it comes to the use of data and IT systems. Many independent behavioral health providers are still using paper records and/or very rudimentary EMR’s that do not have the capacity to integrate data. While some of the larger Behavioral Health providers have, in recent years, invested in more sophisticated electronic record systems, this remains the exception rather than the rule of the industry in the state. Small, independent behavioral health providers tend to lack the resources required for these systems.

This raises an important concern in the coming transformation: Will smaller, independent practices, which tend to offer vital services such as individual therapy, be lost in the transition? Behavioral Health providers generally, and independent behavioral health providers specifically have a critical role to play in shifting our health delivery and outcomes paradigm. For them to assume this role effectively, it will require focused attention and support, especially in relation to data adoption, integration, and technical assistance.

In addition to these general concerns, we also offer the following recommendations:

• We encourage the Department to continue to utilize the AMH TAG Data Subcommittee as a center-point for the development, implementation, and evaluation of data strategy and infrastructure.

• In order to facilitate the development of an appropriate data strategy and goal setting, we recommend that the Department provide greater precision as to its expectations around reliance on VBP arrangements that would be used to invest in appropriate HIT infrastructure by providers. More specifically, we recommend defining an estimate of the proportion of Category 2A VBP targeting HIT development, implementation, and use. Clarity on this point is important as, currently, we identify this as the only type of direct investment available to providers.

• We recommend greater detail regarding the Department’s expectations of PHPs on the substance, frequency, and format of VBP reports with participating organizations. On this point, it is imperative that the Department understand that, without standardization and intentionality, this will likely result in up to five PHPs distributing performance reports by various hardcopy methods–faxing, emailing, mailing, or dropping off–or through online PHP portals. At present, providers are expected to access and monitor performance within portals for some private payer populations, with payers having staff in the field to assist and ensure providers are doing so. Providers will need similar support to navigate additional portals. However, the concern remains that despite this support, providers will struggle to effectively manage and respond to numerous portals and reports across different payer populations, resulting in workload paralysis and a lack of engagement in quality improvement.

Advanced Medical Homes

We whole heartedly agree with the Department’s assertion that the population health management work undertaken by the AMH is “foundational to driving value in Medicaid, preparing practices to be successful under VBP models.” It is for this reason that it is essential to allow the AMH model enough time to be (1) fully implemented, (2) tested, and (3) evaluated.

We believe strongly that the AMH model reflects a truly innovative and empowering model for care delivery. We are, however, deeply concerned that the progressive and aggressive new targets here could confound the smooth implementation and evaluation of this foundational program. It is important that we get this foundational program “right” and establish it as a validated model for efficient, patient-centered care. Change fatigue and disengagement in the face of overwhelming change is, we believe, a real and substantive danger to the Department’s proposed strategy that could completely undermine the success of the AMH model.

In addition to the confounding factor this strategy may play in the implementation, success, and validation of the AMH model, we also note with concern the need to demonstrate the success of any foundational model or principle before committing further necessary resources to it. The proposed strategy is completely dependent upon the solidity of a foundational program that has not been validated. The Department does not appear to provide any contingency plan.

In addition to these general concerns, we also identify the following questions and recommendations:

• The Department notes that, because all AMH Tier 3 practices are eligible to receive performance incentive payments, that they will therefore qualify as VBP arrangements under the State’s definition. Further clarity on this point is needed. Specifically, HCP-LAN identifies investments in care coordination fees and investments in HIT as 2A APMs. However, there is not a required link to quality performance. The Department’s reference to performance incentive payments could be read to mean that in order to receive some or all the AMH Tier 3 payment, certain performance levels must be met. This may impact providers’ willingness to contract as an AMH Tier 3 from the outset.

• Further modifications of the AMH program are here anticipated beginning in PHP contract year three. Given our previous explanation of a reasonable timeline to implement and evaluate a new delivery model, we recommend that the Department not view year three as the year that new or different AMH Tier 3 requirements are implemented. Again, the Department risks undermining the fidelity and integrity of the program through change fatigue.

• We are concerned that moving PCPs into VBP models on this timeline may have the result of perpetuating the bifurcation of our health system between “medical” care and behavioral health. Specifically, we believe that these aggressive timelines and targets will motivate providers to focus on the existing medical model, an area of practice with which they are more comfortable, as opposed to shifting how they evaluate care delivery more holistically. We have spent many years working with primary care, behavioral health agencies, and LME/MCO’s on improving referral pathways, communication of shared patients, and implementing innovated delivery systems with some success. But these factors are all prove to be significant barriers to providers and patients. Launch of the Tailored Plans, which will partly address these difficulties, is essential in order to address the continuing problems of referrals and integration that we experience today. We note that the launch of Tailored Plans is expected to occur in contract year three, which is the time frame that the Department’s proposal expects an acceleration of more advanced payment models.

Accountable Care Organizations

We provide detailed input on the proposed ACO model below. However, as a preliminary matter, we have significant concerns regarding the statement by the Department which reads, “We note that in setting contract year three through five VBP targets and sub-targets for arrangements in Categories three and higher, the Department has assumed widespread participation in the Medicaid ACO program.”

First and foremost, we believe that the Department’s assumption of market participation is mistaken and overly optimistic. We explain our reasoning on this point above. Therefore, if this is at the foundation of the proposed targets for years three through five, we must strongly advocate for the Department to revise its proposed targets.

We understand that in other states existing Medicare ACOs opted to participate in Medicaid ACOs. However, we note important differences in those environments that the Department should take into consideration when determining whether Medicare ACOs in North Carolina will voluntarily participate in a Medicaid ACO.

For example, in Massachusetts (MA), nine of the 16 certified Medicaid ACOs are also Medicare ACOs. However, these ACOs opted to become Medicaid ACOs during a time when the Medicare ACO program was relatively stable and not undergoing the significant change currently at hand. Further, MA implemented ACOs within a well-established managed Medicaid environment, having had Medicaid MCOs since the late 1990s and MA has invested significantly in Medicaid ACOs using DSRIP funding.

Importantly, of the 16 ACOs in MA, 13 are arranged in Model A, which requires them to partner with a single ACO and then they are paid a capitated rate from MassHealth. The other three are contracted directly with MassHealth under a fee-for-service model with shared savings or losses. In the instance where an ACO could decide to contract with MCOs directly, only one such ACO formed. But even then, the ACO had a maximum of two MCOs with which to contract.

All of this considered, from the outset the administrative complexity in MA was considerably less than what is proposed in NC where an ACO will need to negotiate and contract with up to five different PHPs. Additionally, the entities that are Medicare and Medicaid ACOs in MA have considerable experience in APM contracts across multiple payers. In recent comments, JD (Jeff) Syrek, Vice President of System Contracting and Contract Finance at New England Quality Care Alliance (Tufts Medical Center), noted how important it is to build from a true foundation of experience in value-based arrangements rather than going from fee-for-service one day to a VBP the next.

Finally, the Medicaid population in MA is not predominantly children, as is the case in NC. There is more opportunity within the adult population to manage total cost of care and to affect outcomes than there is with a pediatric population. As explained by the Children’s Hospital Association, “Most children are generally healthy and require only routine medical care and preventive services to avoid the expensive conditions of adulthood.” Therefore, efforts in childhood are more fruitful when aimed at chronic disease avoidance as a means of early intervention with lasting impacts for lifetime health costs.

The Association goes on to explain further limitations in cost containment opportunity in that the rate of hospitalization among adults ages 65-84 is 15 times that of children ages 1-17, with pneumonia being the only frequent diagnosis shared between age groups. Beyond utilization measures, the Association introduces an additional obstacle for pediatric populations as compared with adults in the lack of reputable, nationally endorsed quality measures to serve as focal points of pediatric accountable care.

Adding VBP to Other State Delivery Models

We appreciate the Department’s request for input regarding the feasibility of adding a VBP component to the Pregnancy Management Program, Care Management for High Risk Pregnancies, and Care Management for At-Risk Children. We strongly recommend that the Department not subject the Care Management for High Risk Pregnancies and At-Risk Children programs to VBP. Simply put, the local health departments that administer the care management programs are not in any way prepared to engage in VBP at any level. They do not have the funding, experience, or infrastructure to even begin to engage in VBP.

The Pregnancy Management Program provides enhanced fees to providers that meet certain requirements and provide specific services to pregnant women. This program has long been a quality improvement initiative for pregnant women in North Carolina. We understand that the Department desires to greatly improve the outcomes for pregnant women and newborns. We support this goal and we cautiously support the idea of linking the current PMP payments to identified quality metrics.

However, we recommend, as we have above, that the Department be certain of the availability of meaningful and actionable data for providers, give providers time to adjust to the managed care environment, and assure that providers have adequate support and technical assistance before imposing VBP to this program. Given the important role this program plays in improving the outcomes of pregnancies, we think the Department must be cautious and not disincentivize providers from participating.

Aligning VBP Arrangements with Key Medicaid Populations and Services

Pediatrics

The North Carolina Medicaid population is at least 70% pediatrics. The complexity of developing and implementing pediatric value-based payments should not be underestimated. Unlike the adult population, the pediatric population has significant heterogeneity of health care needs and conditions, with a wide range of prevention, acute, and specialty care needs. The pediatric population consists of healthy children, children who are medically chronic and complex, children in socially complex environments, and children with behavioral health complexities.

In many cases, children with complex and chronic medical conditions have relatively high cost needs that will always be high cost. This is particularly true for children in Medicaid. However, most children have relatively low costs because they are healthy children who need prevention and episodic acute care.

In either case, focusing on total cost of care is unlikely to provide the incentives that are needed to drive the improvement in outcomes for children, making pediatric ACOs and VBP arrangements complicated. Partners For Kids, one of the largest and oldest exclusively pediatric ACOs in the U.S. found that hinging VBP arrangements on quality is minimally impactful for a few key reasons, including the lack of clinically meaningful quality measures to demonstrate change, a relatively healthy population lacking specialty conditions to reliably measure, and the fact that changes in quality require a longer duration than cost savings.

Recognizing the complexity of pediatric APMs, the Centers for Medicare and Medicaid Services (CMS) developed the Integrated Kids Care demonstration, with an objective to develop, test, and evaluate meaningful, sustainable pediatric APMs. North Carolina is one of eight states selected to test an integrated model of care with pediatric APMs. North Carolina will conduct this demonstration project starting in January 2020, with two years of planning, before it is implemented. We strongly recommend that the Department carry out this demonstration and receive the benefits of the planning and learning before imposing requirements and targets on PHPs given that most of the enrollees in Medicaid and Health Choice are children.

As pediatric VBPs are developed, we recommend the following guiding principles:

1. A focus on pediatric-specific health and health-related social measures, rather than decreasing absolute cost.

2. Recognition of structural and regulatory barriers that prevent or limit information sharing across relevant stakeholders (ex. ability of the education system to share information with health care providers).

3. Investment in infrastructure, education, and technical assistance to improve readiness and capabilities of pediatricians and other pediatric providers, a group that has largely not had experience with such payment models, to succeed in VBP.

Maternity Care

Medicaid is the single largest payer for Maternity Care in North Carolina, comprising 68.7% of all births. Despite progress made in the past year, as evidenced by a three year decline in infant mortality, North Carolina’s maternal care outcomes remain poor compared to national standards. NC Child, a non-profit organization that issues an annual “report card” tracking statewide performance on key determinants for child safety, health, and education, consistently assigns the state a failing grade in birth outcomes.

Medicaid’s structure, including its generally low rate of reimbursement, presents challenges to the successful implementation of VBP programs that effectively balance cost containment against health outcomes. Similar to the pediatric population, to obtain improvement we must invest more. We believe that maternal care in Medicaid provides a stark and specific example of the challenges and barriers to successful implementation of VBP across Medicaid, as nowhere else do we see such a significant impact from the fragmented care system There are two big barriers to successful VBP implementation in Medicaid maternal care: adequate data exchange and analytics and patient attribution and continuity in care across providers.

More specifically, researchers in maternal health outcomes have long asserted the importance of treating maternal care, encompassing as it does: prenatal care, labor and birth, and postpartum care, as component parts of a single episode of care, as opposed to three distinct episodes. However, there are significant barriers currently existing to implementation of this comprehensive approach to care delivery which the Department fails to proactively address.  This includes the absence of a collective data exchange or high-level care management strategy. Instead, it appears to be broadly, if not wholly, deferred to the discretion of the PHPs. While flexibility in care delivery is an important component in successful VBP program initiatives, we suggest that such flexibility is only valuable and effective insofar as it operates within clearly defined guardrails.

Finally, adequate predictive analytics are necessary to ensure that global payments are “sufficient to cover the cost of care, and that service enhancements and payment incentives are meaningful.” Given the State’s poor performance in maternal care outcomes nationally, we would suggest that it is important that the State take a more proactive role in evaluating the baseline that it needs to establish in order to reap the kind of outcomes it seeks to achieve.

Pharmacy

We encourage the Department and PHPs to incentivize pharmacies to enroll patients in medication adherence, polypharmacy, and medication review programs designed to maximize appropriate use of medications, recommend cost-effective alternatives, reduce adverse drug events, and reduce waste. This could be achieved through payments for enhanced medication management services. We note, though, that patient barriers to medications such as copays, prescription refill limits, and other administrative utilization management controls directly affect a patient’s adherence with medication regimens. Therefore, in order to improve medication adherence, VBP or other incentive programs will not be sufficient on their own. There is additional work that must be done to assure that these barriers to patient access are addressed.

We address inclusion of pharmacy expenditures in ACO total cost of care calculations below.

Healthy Opportunities

We agree that investments in Healthy Opportunities resources and increases in capacity of community-based organizations that provide such resources should improve outcomes, if enrollees are appropriately identified, connected, and engaged with these resources. We also agree that more advanced forms of VBP could give providers sources of revenue that can be invested in such resources. However, we caution the Department not to have unreasonable expectations about such investments, as it will take time for providers to gain the necessary experience with more advanced payment models, such as capitation or global payments, before these kinds of investments will likely be made.

As an example, consider in MA where ACOs are required to make investments in social determinant of health services. The vast majority of those ACOs are in global payment arrangements and have greater ability to plan for and make such investments. While the Department references the ACO model, which would be a shared savings and/or risk model, it is unlikely that if ACOs are formed and if they generate savings that those savings would be of sufficient size to warrant investment outside of the functions and performance of the ACO in the early years.

Further, we have concerns about the general structure of Healthy Opportunities and expectations that PHP and/or ACO investments will be made, absent any clear expectations or direction from the Department. In the current context, PHPs can use contributions to Healthy Opportunities against the MLR requirements. However, absent that, there is no clear direction from the Department about what investments are expected. Without this direction, these investments are essentially philanthropy, and philanthropic investment will only go so far.

Further, because the Healthy Opportunities pilots will occur in specific Medicaid regions and not throughout the state, it may not be possible for ACOs that do not operate in a Medicaid region to make such investments. If the Department does not mean to limit such investments to the regions that have Healthy Opportunities pilots, then we ask the Department to provide that clarity. We also caution the Department that absent clear expectations, it is unlikely that the outcomes the Department hopes for will occur. Providers have been making investments in health-related services organizations for many years. Yet, the integration, increased capacity, and sustainability that the Department appears to expect has not been achieved.

To achieve the outcome that the Department claims to want, it will take more than increased funding for CBOs. There must be intentional effort to build the connections, relationships, and integrations among the provider and CBO communities. CBOs need technical assistance and support to prepare for additional responsibilities. Providers need technical assistance and support in developing referral relationships with organizations in their communities.  

We encourage the Department to evaluate programs in Connecticut and New York to learn more about the level of technical assistance provided to CBOs to prepare them for this new way of doing business. For example, in those states there are expectations that providers will contract with CBOs and pay for services. This furthers the sustainability of the CBOs and drives integration among these provider types. However, this cannot be done without significant support for both.

Medicaid Accountable Care Organizations (ACOs) for Standard Plans and Providers: Building on the Advanced Medical Home Program to Drive Value-Based Payment

Introduction and Background

We appreciate the Department’s desire to drive not just payment reform, but delivery system reform that achieves greater levels of integration. We understand that the Department’s intent to structure the AMH Tier 4 model as an Accountable Care Organization (ACO) is a component of that overall goal. The ACO model has great potential to align providers along the continuum of care to achieve better outcomes and to collectively work toward cost growth control. However, experience in the Medicare program and in states that have implemented Medicaid ACOs clearly demonstrates that it takes a significant amount of time to get to improved cost and quality and in many cases, those goals are not achieved.   

While we support the ACO model and understand the difference such a model can make in changing the way health care is delivered and paid for, we cannot, at this time, support the Department’s intent to launch a voluntary ACO program in Medicaid in 2021. The timeline and framework that the Department has outlined in this Policy Paper fails to honor a deliberate and phased approach to system change.

Specifically, by failing to address and adapt to the Medicaid Transformation’s current indefinite suspension, the Department appears to abandon its deliberate commitment to phased implementation. This compounds the complexity of change that will be encountered and the near certainty of the chaos and confusion that will result. We note that, as drafted, the Policy Paper appears to assume the launch of Medicaid Managed care as scheduled, if stakeholders have had more than a year’s experience in Managed Care under their belts before expanding program goals to include an ACO model.

Even if the Department, instead, means that the voluntary ACO model will launch in the 3rd year after launch of managed care, we still argue that the timeline is too fast. It unnecessarily adds significant additional complexity to what is already a complex, compounded system change.

We have additional concerns about the potential duplication of effort and confusion about roles and responsibilities among the ACOs and PHPs as many of the functions that each would be responsible is often the same as the roles and responsibilities of the other, including care management, data management, utilization management, and risk management. The likelihood of this confusion and duplication is greater in the early years as the PHPs and providers are still gaining experience in a managed Medicaid environment in North Carolina.

Further, we have concerns about the Department’s expectation that it can easily build an ACO model on the foundation of the AMH model. First, we will need to give the AMH model time to be implemented and evaluated before we layer further complexity on top of it. Also, the Department cannot assume that experience in the AMH model necessarily prepares a provider to participate in or serve as an ACO. The AMH functions (i.e., risk stratification, care plan development, transitional care management, ADT data, and claims data acceptance) do not directly translate to having the skills, capacity, and systems for managing clinical, financial, and operational performance and risk needed to successfully operate as an ACO.

Design Principles

Again, we agree, generally, with the Department’s design principals, but refer to our comments in the beginning that apply here regarding our concerns overall about the proposed approach for VBP and ACOs.

ACO Program Overview

We understand the Department’s intent behind requiring PHPs to enter into contracts with all ACOs certified by the Department. However, given last years’ experience with AMH, in which a number of providers attested to Tier 3 AMH capabilities only to determine that they were, in fact, not ready to take on those functions, we recommend that the Department not impose requirements on PHPs to enter into agreements with ACOs. This only creates a difficult market dynamic that drives unintended consequences. Instead, we encourage the Department to allow for voluntary PHP contracting with ACOs under mutually agreeable terms.

We appreciate that the Department has proposed two tracks: one for smaller providers that is upside only and a second that is intended for larger providers that moves from upside only to downside risk within two years. However, within the Medicaid population, we do not believe that the provider community–even large academic medical systems–are prepared to engage in downside risk for the Medicaid population within that time frame. We believe this especially given that this timing overlaps with requirements within the Medicare program for ACOs to shift from upside only to upside and downside risk arrangements. Later in our comments we address the experience in other states regarding financial risk as the state shifted to ACOs. Providers in North Carolina should be aware of these experiences and view them as a cautionary tale.

Provider Eligibility, Attribution, and ACO Organizational Requirements 

Primary Care Provider Eligibility and the ACO Care Delivery Model

The Department states that it envisions ACOs as tightly integrated networks of AMH-certified PCPs working closely together as well as with other provider types. We agree that primary care plays a central role in an ACO model. However, experience with the ACO model to date demonstrates that there is only so much that can be done with an ACO model built on primary care only.

We strongly recommend that the Department take the time to allow the AMH model to be implemented and evaluated during the first three years of transformation. During this time, we recommend that the Department engage meaningfully with stakeholders to better understand the role of specialists, especially pediatric subspecialists, in providing care for Medicaid enrollees and how specialists and primary care work together (or don’t) to care for Medicaid enrollees. North Carolina has the opportunity to carefully plan and structure an ACO that doesn’t just have primary care at its core, but that truly involves the full spectrum of care providers.

Attribution

Patient attribution is critically important to the success of an ACO, for many reasons, but especially for managing financial risk. Attribution—otherwise known as assignment— is a key ACO program methodology used to identify the beneficiaries associated with an ACO and define the population for which the ACO is held accountable.

The Department proposes attributing Medicaid members to an ACO based on their PCP assignment under managed care. It is important that the Department engage with providers to understand the administrative burden that this imposes, given the necessity to manage patient rosters. It will also require a process with PHPs and/or the Department that allows for easy reassignment of PCPs. In our experience, this is not an easy process in the current NCTracks system in Medicaid and is a constant source of frustration for providers. This is because, often, patient assignment is not accurate.

As an example, we worked with a pediatric practice in Western North Carolina who, according to NCTracks, had an assigned patient population of 6,400 patients. But according to the providers own data, the practice only had 5,800 Medicaid patients. This is a difference of 600 patients that, in an ACO model, the provider would be held accountable for, but not actively be caring for, as the patients were not actually part of the providers panel.

There are two approaches to ACO attribution: prospective and retrospective. The decision on which approach to employ should be informed by assessing the pros and cons of the options with a deep understanding of the quality metrics that will assess performance and impact payment and data. The Department does not clearly state whether it intends to use prospective or retrospective assignment or whether it will allow the ACO to choose which approach it prefers. We assume, however, that the Department intends to use prospective assignment.

There is value as well as drawbacks to each approach, and which approach is preferred will depend on the circumstances of the individual ACO. The prospective methodology ensures that ACOs know who their patients are at the beginning of the year and enables them to track and monitor utilization and care needs. While it seems logical that PCP assignment would predict utilization, this approach does not necessarily offer the most accurate accounting of utilization. This is due to the fact that some enrollees will be auto-assigned and utilization and care patterns may change over time as a result of changes in need or other factors.

A retrospective review of claims uses actual utilization data to determine attribution; ensuring only the members that utilized an ACO’s services will be attributed to it. However, retrospective attribution does not enable the ACO to know their population and proactively assess and engage it over the course of the year. It does, however, encourage providers to treat all patients the same.

These are just some of the pros/cons that should be considered when setting the attribution policy. While evaluations of ACO programs suggest there is no-one-size-fits-all solution regarding attribution, it is important for every ACO to understand how each method impacts their financial and quality outcomes. It would, therefore, benefit stakeholders who are assessing the program, if the Department would provide a detailed rationale for proposing a prospective methodology.

ACO Organizational Requirements

We appreciate the Department’s intent to align Medicaid ACO requirements with Medicare ACO requirements to the greatest extent possible, as this will allow providers with experience in Medicare ACOs to build on that experience. We also appreciate that the Department will require Medicaid ACOs to meet North Carolina specific requirements in order to meet the needs of the population and to achieve the Department’s objectives. We note the solvency requirements for Track 2 ACOs and think that, even for large health systems, this will be a barrier to interest and ability to participate. We strongly encourage the Department to engage in a meaningful and open dialogue with providers of all sizes and circumstances to determine actual feasibility of this model under the current health system changes across other payers.

We applaud the Department’s stated desire to make the ACO model accessible to independent providers and/or smaller hospitals. We believe that this focus is important in order to ensure equity in access and distribution. However, we have significant concerns that the contemplated thresholds for Track 1 may not support this objective.

The number of patients attributed to an ACO is an important factor in managing the associated financial risk of a shared savings arrangement. An individual’s health care needs fluctuate throughout the year, often randomly, and if an ACO has too few members, those variations can cause differences between actual and baseline costs that have nothing to do with the efforts of the ACO. Larger ACO populations help spread risk across a broader group of attributed patients and reduce uncertainty in future medical costs. Based on our experience working with existing Medicare ACOs, while Medicare sets a minimum attributed population of 5,000 patients, we know that the preferred patient attribution level for best risk management is at or above 8,000 patients.

Within the model proposed by the Department, we seek clarity regarding patient attribution thresholds. The Department is not clear whether the 1,000 or 5,000 is at the ACO level or at the individual PHP level; this is an important point requiring consideration.

To illustrate this, if ACO 1 has 1,000 attributed patients, but has contracts with five PHPs with even distribution, that is 200 patients at each PHP. Based on the graphic on page 14 of the Policy Paper and the explanation in Payment Parameters section, this is our interpretation of the Department’s model. In this case, the variability among such small numbers is too risky to be a feasible model.

 The problem applies even if the population is 5,000. In Massachusetts, where the vast majority of the ACOs have one contract with one MCO, they have not effectively budgeted and managed to predict expenditures and risk on significantly larger patient populations. This has resulted in the Medicaid ACO system to be “pretty heavily underwater,” since its launch in 2018, as publicly reported by one of the ACO leaders and attributed in part, to the challenges of predictive management.

We, therefore, recommend that the Department reconsider its patient attribution thresholds for each of the levels. We think that based on Medicare experience and other state Medicaid experience, these threshold levels pose too much risk to be either attractive to providers or feasible in operation.

Healthy Opportunities Requirements

We applaud the Department’s continued commitment to the integration of Social Determinants of Health through the Healthy Opportunities requirement. We agree with the Department that improving the environments and conditions in which individuals live is key to improved outcomes and value. While it is true that to accomplish this all initiatives will need to be locally tailored and driven, that does not remove the necessity for strong central leadership of this paradigm-shift. It is, therefore, imperative that the Department continue to establish explicit parameters in which providers will operate.

This is important, not least, because providers and community-based organizations need help as they figure out their respective roles and how they can work together to best serve patients and the community. This isn’t an issue of committing money or resources to community-based organizations; many already do that. This is really about creating pathways to work together and integrate workflows. This is a new way of operation. It requires transformative, central leadership.

More specifically, a recent case study by the National Academy of Medicine highlights the importance of considerable due diligence when identifying what social determinants to target and how. This is a role that the Department can and should fill. In all frankness, there are reasons for the divide between providers and community-based organizations. Bridging this divide structurally and culturally would represent one of the biggest contributions the Department can make. Community-wide health disparities tend to illuminate a community’s direst needs. These disparities are evident from a macro level. The Department, informed by this data, can better guide local providers, community organizations, and other leaders in creatively confronting difficult conversations and encouraging people to step outside of their traditional, functional roles within a silo-ed system.

To this point, we refer the Department to our detailed comments on Health Opportunities in the context of the Value Based Payment Strategy Proposal, as found in a preceding section.

Track Eligibility

Once again, we appreciate the Department’s intent to align “percent control over total cost of care” methodology with that used by Medicare, modified to the specific concerns of Medicaid North Carolina. It is important that the Department’s methodology acknowledges that ACOs may differ in the degree to which they capture attributed patients’ total cost of care (TCoC) within their network of participating providers. While we appreciate that the Department wants to establish a threshold that takes into consideration the circumstances of independent providers and small rural hospitals, we note that the greatest likelihood of participation is among metropolitan hospital systems. We strongly encourage the Department to engage with these providers to fully understand their circumstances.

Data Strategy

Reliable access to complete, accurate, interpretable data is foundational to the successful operation of innovative payment mechanisms in healthcare. The development and successful deployment of a rigorous data strategy by the Department to support Medicaid ACOs is therefore essential to the success of this model. Managing the data required by such a program is a “substantial undertaking, and one that is likely beyond the reach and readiness of the vast majority of most NC providers, including those that already operate in a clinically integrated network, in the absence of direct support from the State.”

Further, lack of interoperability and timely access to meaningful, usable data is the most frequently cited concern by stakeholders in VBP and integrated models of care, including ACOs. The fact that the Department has not spent the time necessary to propose a robust data strategy at the time that it also proposes the model raises significant concerns for us.

We have a robust, unified data platform that we have spent the last two years designing and implementing, investing millions of dollars to do so. This was just to meet the needs of the Medicaid AMH program. We cannot caution the Department enough in underestimating the significance of a data strategy for an ACO model that takes into consideration all stakeholders needs, capabilities, and limitations–including the Department’s. We strongly recommend that the Department take into consideration the following:

• Operationalizing VBP analytics is a substantial undertaking from both a cost and resource utilization standpoint. Additionally, winning on VBP initiatives requires identifying opportunities to improve clinical care, variation in service delivery and quality, and patient outcomes. To do this, providers must have well trained analytics staff and the right tools to do the job. Under the current Medicaid Transformation AMH Tier 3 Model, NC DHHS does not make considerations for the costs associated with standing up or maintaining data analytics capabilities. The Department must make this consideration under this ACO model.

• Effective patient population identification is critical for implementing interventions that can impact healthcare cost and utilization. NC DHHS should consider publishing patient identification strategies and recommendations for the use of provider organizations interested in this ACO model. These should be more robust than those of the Medicaid Transformation AMH Tier 3 program, which suggests even clinical judgment alone is sufficient.

• Related to the bullet above, the Department must make available its proposed patient attribution logic for stakeholder review and feedback. There are many different attribution logics that should be up for consideration based on the goals of the program and the uniqueness of the NC Medicaid patient population. If the appropriate logic is not chosen, providers will find it difficult to achieve cost savings and thus appropriate revenues under at-risk contracts.

• Data delivery from the Department or Payer stakeholders must be timely. Under the Medicaid Transformation data strategy, the Department was doing well to achieve this requirement post-go-live in the incremental files. However, the Department did not provide stakeholders an adequate runway to establish data exchange. It takes significant time to set up connectivity, map, ingest, confirm quality, and analyze, and make use of healthcare claims, assignment, and clinical data. For this reason, the Department should consider delivering these data sources to VBP program stakeholders 8-12 weeks prior to program go-live if possible (as compared to 3-4 weeks prior to go-live under the AMH Tier 3 model).

• The Department must consider the role of clinical data in a provider’s ability to achieve success in VBP initiatives. Currently, only Clinically Integrated Networks and large hospital systems have clinical data systems that capture care provided to patients across the healthcare continuum. The Department must consider how provider organizations without these capabilities will be able to participate in this program without enduring an incredible administrative burden.

In the absence of a data strategy to assess, we look to the experience in other states for the Department’s consideration. Massachusetts provides robust and regular data support to participating ACOs. This includes monthly extracts of claims data, risk stratification, identification of top 15% of users by cost, and identification of member-related condition categories and evaluation of performance on quality measures on a quarterly basis.

Minnesota’s Integrated Health Partnership (IHP), which includes a Medicaid ACO model, is another example of a state investing not only in substantive data support, but also subsidization of ACO’s data analytics capacity and infrastructure. Here, the Minnesota Department of Health and Human Services extended grants to 11 of the 16 participating ACOs from 2015-2017, awarding a total of $4 million dollars, with typical amounts averaging between $300,000-$500,000 per grantee. This relatively small appropriation was identified by program evaluators and stakeholders as “absolutely essential” to progress made on meeting key data interoperability and integration outcomes. This is important as grants were not only used to subsidize the data infrastructure and automation of access points necessary to operate as a Medicaid ACO, but also to develop the deep knowledge in interpreting the data on an institutional level. Minnesota’s experience on the importance of developing not only a state level strategy, infrastructure, and technical support, but also directly subsidizing (albeit in a limited manner) as was the case here, is a lesson that the Department should keep in mind as it develops its own strategy and thinks about the outcomes and impacts it wishes to have.

We also strongly caution the Department from assuming that providers will be able to rely on the existing infrastructure within Clinically Integration Networks (CINs) or ACOs. Our experience with CINs in the state is that their data infrastructure and reporting capabilities are limited and do not include integration of claims and EHR data. The existing infrastructure, in most cases, is focused on Medicare. Based on our experience, the Department should not assume that it is an easy or affordable lift for CINs, ACOs, or other provider aggregating entities to simply “add on” Medicaid specific requirements to their existing data infrastructure. That simply is not the case.

Further, by not taking the lead in setting clear goals and expectations with a shared vision within a comprehensive data strategy, the Department is missing a tremendous opportunity to direct the implementation with an eye towards a shared goal. This apparent exclusive reliance on existing provider resources and networks represents a disproportionate burden shift that is, as demonstrated in other states, unsustainable. We wish to, again, reference Iowa as an example of the danger of delegating design, operations, and oversight to a contracting relationship between providers and Managed Care Organizations.

ACO Payment Model

Total Cost of Care and Spending Benchmark

The Department states that it will establish and calculate a uniform, risk-adjusted measure of total cost of care (TCoC). Risk adjustment is critical, and we appreciate that the Department indicates that TCoC will be risk adjusted. However, the details here are critical.

The Department’s vague commitment does not give providers enough information to assess the viability of the program. We strongly encourage the Department to engage with providers to determine a viable risk-adjustment methodology. Further, the Department does not address whether it will use an efficiency factor. We strongly recommend that the Department do so, otherwise over time, the program will not be sustainable, as the ACOs will reach a point at which continued cost savings will not be achievable.

With respect to the methodology used to calculate the benchmark, we strongly recommend that the Department release greater detail on how the benchmark will be calculated. For example, what period of time will be used to determine historical spending and how often will the Department reset the baseline? We recommend that the Department utilize a regional approach to determine average spending, rather than a statewide approach. This is the approach taken by the Department when setting PHP capitation rates. If an average benchmark is applied despite regional variations, there will be winners and losers from day one of the ACO program and will have no reflection of the actual effort of the ACO.

Total Cost of Care Exclusions and Adjustments

We appreciate that the Department acknowledges that providers have limited control over drug pricing, which could affect the providers ability to manage a patient’s total cost of care. While we appreciate the steps the Department proposes to take to address this, we strongly recommend that pharmacy not be included in total cost of care in early years. As examples, the Medicare ACO program does not include Medicare Part D expenditures and the Vermont All-Payer ACO also does not include pharmacy. We also recommend that the Department not include long term services and supports in total cost of care. Vermont’s All-Payer ACO model and Massachusetts Medicaid ACOs do not include long-term services and supports.

Linking Payment to Quality and Health Outcomes

We appreciate the Department’s commitment to linking quality and cost, as we would not want to have the unintended consequences of reducing patient access to appropriate care and services in the interest of reducing costs. We agree that alternative payment models should be linked to quality. However, given that most of the covered population in Medicaid and Health Choice are children at or under 18, we have serious concerns about the viability of the Department’s proposals.

For the adult population, quality measurement and payment for performance is generally well established, serving as a foundation for Medicare and commercial ACOs. However, there is much fewer available and widely accepted pediatric measures, posing a limitation for qualitative payment within this population. Existing pediatric measures are mostly sporadic and age-specific instead of targeting outcomes and interventions that span the pediatric population.

This is illustrated among the 2020 Core Set of Children’s Health Care Quality Measures for Medicaid and CHIP (Child Core Set) released by CMS. Of the nine access and preventive care measures, the largest age group encompassed in a single measure are 3-17 year olds, evaluated in the Weight Assessment and Counseling for Nutrition and Physical Activity for Children/Adolescents measure. The other eight measures evaluate children at specific ages; for example, well-child visits in the first fifteen months of life, developmental screening in the first three years of life, and childhood immunization screening at two years of age. Further limited are the acute and chronic condition measures, with only two available in the Child Core Set as compared with the nine available in CMS’s Adult Core Set, and behavioral health measures offering 12 for adults and only 4 in pediatrics. Additionally, variation in state Medicaid programs limits reliable benchmarking at a national level, as states are not mandated to report the pediatric core set.

Furthermore, the findings of other pediatric ACOs in the nation indicate that arrangements hinged on quality will not be meaningful until there are reputable pediatric measures established, as there are with Medicare. Specifically, Partnership for Kids, a long-standing, exclusively pediatric ACO said:

“It is disappointing that we did not identify a greater improvement in the quality of care. We believe there are several reasons for this outcome. First, the lack of widely accepted, clinically meaningful quality measures for pediatric ACOs limits the ability to demonstrate changes in quality. Second, the relative scarcity of many specialty pediatric conditions even in a population this size prevents reliable measurement of change in outcomes over time. Third, the AHRQ Pediatric Quality Indicators have serious limitations in terms of their ability to accurately measure preventable complications and admissions. In fact, a recent multicenter study recommended that they not be used as a comparative tool but rather as a screening tool to target more in-depth chart review. In addition, the PFK claims database contains a limited number of diagnosis and procedure codes with which to calculate the AHRQ Pediatric Quality Indicators. Finally, the experience in PFK is that quality changes require more time than cost savings in a large network. PFK administrators and clinicians have been able to rapidly identify cost reduction targets such as rapid repeat admissions, inappropriate use of high-cost drugs or procedures, and patients in need of specialty care coordination that had not been detected by MC organizations without pediatric expertise. However, quality improvement activities require building large-scale clinician quality collaborative projects with external partner agencies, educating patients over time, launching shared quality improvement databases, tracking outcomes, and, often, new leadership.”

Knowing that pediatric providers are at a measurement disadvantage, it would not be equitable to include them in a group subject to gateway measures that could exclude participants from sharing in savings, despite significant investment and effort to improve care and control cost growth.

We strongly encourage the Department to look at the experience of pediatric ACOs in other parts of the country and allow time for the Integrated Care for Kids (InCK) model to be implemented in North Carolina. The learnings from the InCK model and others outside of NC should be carefully evaluated and incorporated into any ACO model, which necessarily means that the Department will not implement an ACO model within Medicaid Transformation within the next five years.

Payment Parameters & Distribution of Savings and Losses

Payment parameters and financial distribution of savings and losses are vitally important to the success of a Medicaid ACO program. We, therefore, encourage the Department to intensively engage with current MSSP ACO leaders in North Carolina, as well as leaders of Medicaid ACOs in other states in order to effectively and prospectively address this issue.

Incentives/Requirements for Participation in the ACO Program

Provider Incentives 

Perhaps our primary concern with the \Medicaid ACO strategy proposed here is that it does not include adequate, precisely articulated incentives to not only drive provider participation but to set providers up for success in this model. The Department proposes an “Early Innovators” program to encourage participation in the ACO initiative. Participation in the Early Innovators program provides the following benefits:

1. Membership on a state-led advisory group dedicated to making recommendations as to implementation and the development of policy of the administration of the program.

2. Access to state-led technical assistance on key implementation issues.

3. Participation in Department-led collaboration workgroups for the exchange and dissemination of best practices.

4. Access to enhanced data at the organizational level.

5. Reduced administrative requirements for ACOs assuming downside risk.

While these are identified by the Department as provider incentives, we view these not as incentives, but as ways that the Department will carry out certain core components of successful ACO models, including: 

1. Two-way communication between ACOs and the State;

2. Collaboration across ACOs; and,

3. Technical and administrative support.

 We encourage the Department to consider other state’s experience in establishing Medicaid ACO programs, which have included significant subsidies and inventive measures. As in other states, it will take significant investment by the Department–outside of the PHP-Provider contracting arrangement–to assure financial sustainability of the Medicaid ACO model.

Comparison to Other State’s ACO Program Design and Implementation

To date, twelve states have adopted some form of a Medicaid ACO or Accountable Care Collaborative program. Of these, all were instituted either (1) as part of a federally funded statewide initiative providing direct subsidies and additional financial incentives; or (2) in an environment where Medicaid managed care had already been implemented and iterated upon. The vast majority of states meet both conditions. Furthermore, at present we found evidence of only four states with ACOs that have assumed any downside risk in the Medicaid space: Iowa, Massachusetts, Oregon, and Vermont. It is notable that these state’s arrangements follow multi-year program redesigns, including significant direct investment and subsidies to ACOs.

The importance of investing in and creating the space to develop these “engines for innovation” cannot be underestimated. This is reflected both in the substance of financial support accorded to providers in these states, research and evaluation studies identifying this support as a primary driver for success, as well as the fact that in spite of such significant incentives and intentional design that the Medicaid ACO experience in many states is mixed, at best, in terms of its scope, cost, and quality measures. As one example, we encourage the state to consider Massachusetts’ recent experience launching a Medicaid ACO program through a federal Delivery System Reform Incentive Payment (DSRIP) grant.

MassHealth

In August 2017, MassHealth secured the participation of 17 health care organizations, including three existing ACOs, eight Health Plans, an organization representing 13 FQHCs, and various health systems in the institution of a Medicaid program across the state. MassHealth subsequently secured $1.8 billion dollars in DSRIP funding to support this initiative. Of this, 60% ($1 billion) of the funding will be invested in these ACOs, with the remaining being earmarked for community-based organizations and building out state-wide infrastructure to support these delivery innovations. Despite this substantial financial support, the Medicaid ACO experiment has not been a financial success for ACO-participants so far. In the last two quarters of 2019, all Model A ACOs experienced a collective loss of $150 million dollars, a “staggering sum of money” as one Medicaid ACO executive phased it. Jeff Syrek, Vice President of System Contracting and Contract Finance at New England Quality Care Alliance at Tufts Medical Center, and one of the ACO participants, attributes this largely to the challenge of accurately setting capitation rates, but also notes the challenge that even these leading health systems have experienced in predicting expenses and effectively managing patients.

In referencing the experience in Massachusetts here, we wish to underscore the challenges associated with designing, implementing, and maintaining an ACO initiative in the Medicaid population. This is despite the relative sophistication of Massachusetts provider market, years of concerted stakeholder engagement and program design, as well as substantial additional funding to seed this initiative, none of which are conditions that apply to North Carolina in this moment. We have, as one Massachusetts Medicaid ACO executive summarized, “a lot more to build.”

Iowa

Evaluation of the Department’s proposed ACO strategy appears to align most closely with Iowa’s ACO model. Iowa mandates that all Managed Care Organizations contract with the state’s recognized Medicaid ACOs on a risk-basis. Iowa largely delegates the substance and terms of those contracts to the ACOs and the MCOs. Iowa’s experience transitioning to Medicaid Managed care and the expansion of the Medicaid ACO model has been controversial, and is likely not a model that the Department would wish to pursue in the context of access, impact to community infrastructures, and outcomes. However, as the purpose of this section is restricted to the design and deployment of incentives to encourage robust provider participation, it is worth noting that Iowa’s model still has had the advantage of significant federal funding and program design and participant buy in upfront.  

Iowa’s ACO program was launched in 2014 and was seeded, in part, with a $43 million-dollar CMS grant through Round 2 of the State Innovation Model program. Prior to launching the program, Iowa secured buy-in from two large existing ACOs. Participation has since grown to include five ACO participants. In addition to capitation rates and shared savings payments (Value Index Scoring (VIS)), ACO participants have also had access to three significant supplemental sources of revenue. This includes an additional:

• $10 per member per year (PMPY) tied to discrete process outcome (i.e.: where 50% Medicaid patients receive annual physical exam);

• $4 per member per month (PMPM) in year 1, and increasing to $5 in subsequent years aligned with meeting VIS; and,

• $4 PMPM for meeting selected health outcomes.

 Periodic incentive payments were also included at the provider level, such as $25 per member fee for each beneficiary integrating into the State’s health risk assessment tool (Assess my Health) as well as “treat and refer” payments. Despite these incentives, participants in the Iowa ACO program have raised concerns regarding its long-term feasibility.

It is important for the Department to understand that it cannot rely on the PHPs to make the necessary investment in the provider community to allow them to prepare for and successfully operate in an ACO model. During 2019, as providers negotiated with PHPs, providers had little to no success in obtaining reimbursement rates that were above 100% of Medicaid fee schedule and struggled with AMH Tier 3 payment levels. The PHPs stated, unequivocally, that it was not financially viable for them to pay higher rates or to make other payments that would allow providers to invest in infrastructure, personnel, and other needs in order to successfully operate within a managed care program. Never mind VBP or advanced, integrated models of care delivery because the Department set the PHP capitation rates at 100% of current Medicaid fees. This means that the Department has not allocated any funds for investments that PHPs or providers can use to prepare for and successfully carry out many elements of transformation.

The Department should not underestimate the investment that providers must make in order to shift from a fee-for-service environment to a managed care environment. The expense of this change alone is immense.

As an example, evaluation of the cost associated with the transition to managed care in Iowa for the University of Iowa Hospitals and Clinics, an 811 bed teaching hospital and trauma center based in Iowa City, and Medicaid ACO participant, estimated that the direct annual administrative cost associated with managed care to be between $2,149,618-$3,000,000 a year. In North Carolina, the Department is not only expecting providers to make this shift, with no financial support to do so, but also expects the vast majority of primary care providers to make significant investments in data infrastructure and staffing in order to implement the AMH model. Now the Department expects that providers will be able to take on VBP shortly after managed care implementation and is also layering on an ACO model, which comes with its own significant investment.

PHP Contracting Requirements

While we are pleased at the active role the Department anticipates in negotiating the relationship and contracts between ACOs and PHPs, additional details as to the expectations of the substance of these contracts is needed. Other states that have instituted similar programs (we identify Iowa as the closest corollary) did so where there were additional reimbursements and incentives available. There is no indication that such incentives are here envisioned. We are concerned that the ACO model presented here does not represent a viable business case for either PHPs or providers. Understood thus, the State, with the best of intentions as a good faith arbitrator and referee, will be unable to establish or enforce “payment parameters that ensure…reasonable payment…for both parties.”

Secondly, we note that there are few providers that can currently demonstrate capacity for AMH Tier 3 certification, one of the requirements for ACO certification. This is particularly true as it relates to providers in rural and underserved communities. We identify care management rates as the single source of (known) revenue to finance ACO administration at this time. More specifically, we understand that the care management rates were initially intended as a “pass through” to providers, meaning that providers, regardless of their size or membership as part of a large system, could control the direction of these funds, improving efficiency and equity on a localized level. The AMH model was revolutionary and progressive not least for this insistence on putting individual providers “in the driver seat” and limiting or correcting prevailing market forces. However, given the lack of other incentives and supports proposed as part of the ACO program, we anticipate that the primary, if not sole, incentive for participation in the ACO experiment is the ability to negotiate more equitable AMH care management rates. We are concerned, therefore, that the ACO strategy represents a pivot from the AMH model, where all providers have the opportunity to participate in transformation, to one where only those providers with existing access to significant capital (both to invest in the necessary infrastructure and management as well as ensure solvency) will have the capacity to take advantage of revenues that were initially intended to be more equitably distributed. This will have the effect not only of undermining the Departments stated vision for health transformation but will also have the unintended effect of further accelerating disparity in contracting power among providers. We expect this to further drive provider consolidation as well as regional disparities in access and quality.

Oversight of the ACO Program

State Oversight

The importance of active Departmental oversight of the administration of delegated Medicaid responsibilities cannot be overstated, particularly in the context of value based payment innovations and delivery system changes. In a managed care environment, the most important function of the Department is in its oversight of program administration. This is not a nominal or passive role, but one that requires constant vigilance as well as the development of new institutional resources and skill sets.

The Department recently recognized the importance of this role as well as the existence of current deficits in its oversight of the more limited Local Management Entities/Managed Care Organizations, which manage mental and behavioral health services in North Carolina. In an audit released in May 2019, the State Auditor concluded that the Department failed to monitor the private LME/MCOs, resulting in failure to detect issues prior to escalation, ensure that services were performed as required, enforce corrective actions in the event of identified deficiencies by LMEs, or pursue internal corrective action as identified by an external quality review contractor. As a result, the Department was unable to ensure services were provided, that costs were reasonable, and quality metrics met.

The Department acknowledged the reported deficits in its current administration of LME contract performance, and assured that it would expand capacity, including development of a contract management plan with increased staff and an automated tracking system. While we appreciate the Department’s intended effort to increase capacity and capabilities to conduct necessary oversight of the LMEs, we are deeply concerned that the Department’s approach to PHP oversight, and its intent to delegate oversight of AMHs and ACOs to the PHPs, demonstrates that the Department is not willing to take on the level of oversight that is required to ensure the effective and appropriate administration of the Medicaid program. As discussed previously in context of the Carolina ACCESS program, delegating oversight of significant Medicaid programs to a delegated vendor and then providing little oversight of that vendor will not result in positive outcomes for Medicaid Transformation.

It is important to note that the deficiencies identified in this audit, and which are experienced in other states as well, are not those that can be adequately addressed by doing “more of the same.” The May 2019 audit of LME oversight was not simply an issue of failure of resources, but, arguably, a complete lack of adherence to any system of oversight.

As demonstrated by the experience of managed care and the transition to value-based programs in other states, the first and most crucial step in developing a meaningful oversight mechanism is the development and dissemination of clear goals. This is outlined in the conclusion of a recent issue brief by the National Academy for State Health Policy:

“VBP begins with a set of clear incentivized goals. Priorities should be clearly communicated through the contracting process from the Medicaid agency to vendors and regularly assessed to ensure that contracts are being utilized to their fullest.”

The Department has not articulated any meaningful and discretely measurable goals in this strategy, other than that of volume as it relates to VBP arrangements generally, and proportion of shared revenues between the PHP and an ACO. While flexibility is an integral component in the development and deployment of effective innovative payment models, wholesale delegation to the free market imperils both the feasibility of implementation as well as the possibility of evaluating performance.

We strongly recommend that the Department reevaluate its approach to oversight. We seek a strong commitment to oversight of all programs, including PHPs and AMHs, including a clear explanation of the increased staffing and expertise that the Department will bring on, thoroughly articulated requirements and mechanisms for oversight, as well as explanation of the required technologies and other capabilities central to oversight of managed care and advance payment and delivery models.  

PHP Oversight

The PHPs have significant oversight obligations, including, among other things, monitoring for and addressing issues related to waste, fraud, and abuse. They must also assure that providers in the network comply with state and federal law regarding issues such as having an accessible building and ensuring that providers do not discriminate on the basis of coverage or race, ethnicity, religion, or gender.

In certain cases, the PHPs have vast experience and capabilities, particularly in the waste, fraud, and abuse areas, to rely on and often have strong oversight programs. However, oversight and enforcement of requirements around the way in which the provider network conducts itself is often more difficult for PHPs, as it is an intensive oversight process that requires actions like secret shopper phone calls, site visits, and careful monitoring and trending of enrollee grievances and complaints. In these areas, it is considerably more difficult for PHPs to assure provider network compliance with requirements.

As a result, we are greatly concerned about the Department’s intent to place PHPs in charge of AMH and ACO oversight. We are concerned that the PHPs do not have the experience, capabilities, or capacities to provide this form of oversight, which will lead to either no meaningful oversight or to uneven oversight across the state.

For example, in 2019, we saw wildly different approaches among PHPs to determine AMH level of readiness. As an entity that was subject to these readiness reviews, we can speak directly to that experience. In some cases, the readiness assessments provided by the PHPs had no relationship at all to the AMH requirements. We invested multiple weeks and considerable staff time and other expense responding to the readiness assessment, only to learn many weeks later that we would have to undergo yet a different readiness assessment because the PHP determined that its other delegated vendor readiness assessment did not meet AMH requirements. Other PHPs imposed requirements on the AMH model that the Department had never contemplated would be imposed. It wasn’t until the Department weighed in and advised the plans that they could not take this approach that the PHPs opted for a different approach, but even then, the readiness assessments will be conducted in different ways. While the PHPs certainly have a role to play in oversight of AMH and ACO performance, we strongly recommend that the Department take a more meaningful role in providing oversight of these programs with the goal of assuring consistency in oversight approach and actual achievement of the Department’s goals and objectives.

We encourage all stakeholders in North Carolina to continue to monitor the Department’s progress in Medicaid Transformation. While implementation of managed Medicaid and other programs under suspended, the Department is continuing with implementation activities to the extent that they are able. The Department continues to engage with stakeholders and seek their input. We recommend that all stakeholders take the opportunity to provide constructive feedback to the Department in order to assure that North Carolina Medicaid continues to meet the needs of its enrollees and enjoy high provider participation.