Arkansas looks at bundling Medicaid pay

The state hopes to avoid cuts to Medicaid payment, eligibility and services by implementing episode-based rates and improving care coordination.

By Doug Trapp — Posted June 16, 2011

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Arkansas Medicaid Director Eugene Gessow is aiming to transform the state's Medicaid program, starting by re-evaluating the costs to physicians and hospitals of providing quality health care.

Gessow wants to examine not just Medicaid spending but all health care spending in the state -- public and private -- to find a benchmark for Medicaid payment. He envisions paying teams of physicians and other health professionals based on patients' episodes of care and allowing doctors to keep any savings they might generate. These partnerships would be similar to the health system reform law's accountable care organizations but would not be defined as specifically as ACOs.

"In order to have a patient-centered approach, you need a team approach," Gessow said.

Arkansas Gov. Mike Beebe has directed Gessow to move Medicaid away from fee-for-service payment. The current system won't allow the state to improve quality and control costs as needed, he said. "We need to stop paying fees for the process of treatment and instead reward the successful results of that treatment."

The Arkansas Medicaid program is not facing the same budget pressures as programs in other states because Arkansas has a Medicaid trust fund. But the state has months, not years, to devise a cost-containment strategy before starting to face deficits, Gessow said. Beebe wants to avoid cutting pay, eligibility and services.

"We have some time to be thoughtful about a solution," the Medicaid director said.

Gessow sees some opportunity for modest savings through these Medicaid reforms. Studies by the Dartmouth Atlas of Health Care have estimated that up to a third of health spending may not improve patient outcomes. "I don't believe that 30% is a realistic number," he said. "It's probably a little more than 5%."

Gessow hopes that private health insurance companies will join in the payment overhaul.

Many details must be worked out. Gessow wants to begin making the first of these bundled payments by mid-2012, but the reform would require approval from the U.S. Dept. of Health and Human Services and significant cooperation by physicians, hospitals and private insurers in the state.

Gessow said this type of payment transformation has "probably not been done anywhere on a statewide basis on the scale we're talking about."

The Arkansas Medical Society reacted coolly to the proposal. AMS Executive Vice President David Wroten said the society is concerned that the state is taking on more than it can handle and is not convinced payment bundling is the best way to improve quality and control costs. For example, he said, how would the state bundle payments for Medicaid patients when they often leave and re-enter the state's health system? Quality improvement should be the top agenda item, with incentives driving these changes, he said.

The Arkansas Dept. of Human Services heard these and other concerns during a May 26 meeting with Medicaid stakeholders. Gessow had hoped to transition to the new model within a year for most Medicaid payments. But the department decided to narrow its focus to several areas of care deemed to have gaps or inefficiencies. These include hospital readmissions, elective deliveries of babies before the 39th week and neonatal intensive care.

"All of these are good subjects," Wroten said, but he added that the department may be moving too quickly.

Gessow's tentative road map for the Medicaid overhaul also would create a single form that physicians would use to submit claims to Medicaid, private plans and other entities. Doctors and hospitals would be able to access patient records electronically throughout the state. The success of the reforms would depend heavily on electronic medical records, said Paul Cunningham, executive vice president of the Arkansas Hospital Assn. The state hopes to rely heavily on existing electronic systems.

Gessow's plan would require the state to help small physician practices with care coordination. Health care partnerships would not assume full risk for their Medicaid patients. "We're not trying to play 'gotcha' with the providers," Gessow said. He expects to rely on existing clinical definitions for episodes of care.

The Arkansas Dept. of Human Services wants more input from physicians and others about the Medicaid plan. The department is conducting a survey about the reform proposal until June 30. It can be accessed online (link).

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