Texas Senate passes Medicaid reform, shared savings bills

The measures would use financial incentives to encourage physicians and hospitals to improve the quality and efficiency of their care.

By Doug Trapp — Posted May 2, 2011

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Two bills approved by the Texas Senate would allow the state to apply pay-for-performance to Medicaid and set the stage for hospitals, physicians and other health professionals to establish collaboratives similar to the accountable care organizations outlined in the health system reform law.

The measures are Texas' attempt to give doctors and others more financial incentives to improve the care they provide. Texas Sen. Jane Nelson, sponsor of both bills, said taxpayers should not pay for preventable hospital readmissions and other questionable health spending.

"Our health care payment system should not be based on the number of tests and treatments that are performed on a patient, but on the quality of care that keeps a patient healthy," Nelson said.

The Texas Medical Assn. and the Texas Hospital Assn. support the bills, which the Senate adopted on April 19. Gov. Rick Perry believes the bills are a step in the right direction on health care, said spokeswoman Lucy Nashed. The measures move to the Texas House next.

"There's no question that Texas Medicaid needs a radical overhaul," said TMA President Susan Bailey, MD. More than 3.2 million residents were enrolled in Medicaid in April.

The Medicaid bill seeks to penalize doctors and hospitals for preventable readmissions and complications. It also calls for new measures that would let physicians and hospitals share savings from improved health care quality and efficiency.

The task of reforming Medicaid would be given to an advisory board appointed by the chief of the state's Medicaid agency. The board would face a Sept. 1, 2012, deadline to begin tracking physician and hospital performance and a Sept. 1, 2013, deadline for starting Medicaid pay reforms.

Hospitals are bracing for Medicaid pay cuts that have nothing to do with performance, said Charles Bailey, THA senior vice president and general counsel. Texas is facing a $4.3 billion budget deficit for the fiscal year ending Aug. 31 and a much larger deficit next year, and it could reduce Medicaid hospital fees by up to 30%.

The measure on health care collaboratives has the potential to affect even more physicians and hospitals than the Medicaid bill, Dr. Bailey said. It would allow new cooperative agreements between hospitals and physicians, with bundled payment and shared savings.

Despite her association's support, Dr. Bailey said many doctors are cautious about both bills. The TMA worked with Nelson to ensure that physicians will have a seat on the board of health care collaboratives and a say on Medicaid pay reforms.

House members could be skeptical of the health care collaboratives bill if the efforts are called ACOs, given the negative view by many in Texas of the health reform law, said the hospital association's Bailey.

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Paying for performance

Two bills adopted by the Texas Senate on April 19 would link doctor payment to quality and efficiency. The bills would:

  • Create an advisory committee to revise Medicaid pay on a budget-neutral basis. The new formulas would include incentives for physicians, hospitals and health plans to improve care and reduce preventable hospital readmissions. The provision also would require co-pays for Medicaid enrollees who use emergency departments unnecessarily.
  • Develop a plan to improve the quality and transparency of care, requiring reporting of preventable hospital readmissions and complications.
  • Allow collaborative arrangements, similar to accountable care organizations, between hospitals, physicians and other health professionals. These groups would accept alternative payments, such as bundled or global payments. The provision would maintain the state's ban on hospitals employing physicians and permit doctors to participate in more than one collaborative.

Source: Texas Medical Assn.

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