Medicaid medical homes saved $1 billion in North Carolina

However, sicker enrollees and those eligible for both Medicare and Medicaid have posed more challenges for the program.

By Doug Trapp — Posted Jan. 23, 2012

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North Carolina's Medicaid medical home program saved nearly $1 billion in state and federal spending over four years, largely by reducing hospitalizations and emergency department visits.

The state's Medicaid care management program -- called Community Care of North Carolina -- covered about two-thirds of the state's 1.5 million Medicaid enrollees in 2010. Some beneficiaries, such as those living in nursing homes, are excluded from the care management program, which formally launched in 1998.

Community Care of North Carolina encourages local care delivery innovations but still tracks the performances of those providing the care. CCNC's 14 nonprofit, physician-directed regional networks have the authority to develop quality improvement goals based on local patients' needs and locally available resources. Physicians receive regular reports on the results of their care compared with other physicians in the region and state. Doctors and the networks also are paid a per-member, per-month care coordination fee.

The strategy produced a combined $984 million in net savings from fiscal years 2007 to 2010, according to estimates released in mid-December by Milliman, a consultant hired by the state's Medicaid agency to review the medical home program's effectiveness. Total savings increased each year and were calculated by comparing actual spending to the expected spending for the same population had it remained in traditional Medicaid. Risk-adjusted spending for program participants in fiscal 2010 was about 15% lower than for others in Medicaid.

"Not only is the program good at saving money, but it's getting better at it," said Robert W. Monteiro, MD, the North Carolina Medical Society's president.

"The approach we take has really good physician support. I think that's one of the secrets as to why it's been effective," said L. Allen Dobson Jr., MD, Community Care of North Carolina's president and CEO.

Most of the savings came from reduced hospital care for adults and children, according to the Milliman report. Results were less consistent for aged, blind and disabled enrollees, including Medicaid beneficiaries who also were eligible for Medicare. A majority of CCNC enrollees are youths 20 years old and younger, according to the report.

At times the state has spent more on care for dual eligibles enrolled in the medical home program than for those outside the program, according to the report. Coordinating care for enrollees eligible for Medicare and Medicaid is more difficult than for the majority of Medicaid enrollees, according to Denise Levis Hewson, RN, MSPH, director of clinical programs and quality improvement for Community Care of North Carolina. Care managers spend more time with these enrollees, many of whom have multiple conditions and do not have the social and family support that other enrollees do. But Hewson said the program has made progress with this population.

Also, actual health care savings stemming from the program likely were greater when considering the medical homes' effects on patients outside of Medicaid, Dr. Monteiro said. "You apply these principles to all the patients in your practice," he added. This probably reduced private pay patients' need for hospital care as well.

CCNC is engaged in about a dozen pilot programs addressing a wide range of issues, Dr. Dobson said, including improving palliative care, managing children's use of antipsychotic drugs and creating wraparound care for expectant mothers.

"We're engaging our OBs to become more like medical homes for pregnant ladies," Dr. Dobson said.

CCNC also has improved its information-sharing between clinicians, Dr. Monteiro said. For example, if one of his patients visits an emergency department, he will receive a fax about the encounter from the hospital. If the patient is admitted, he'll receive a fax about the admission history. In recent years, the program also has implemented a portal allowing him to see the patient's tests and other care received. This used to require a phone call and a written release, Dr. Monteiro said.

While CCNC is well regarded by Medicaid policy experts, many states instead have sought to control costs by expanding their contracts with private managed care plans.

Dr. Dobson suggested that the reason more states haven't copied the CCNC system is because it looks complicated. "While they like what we do, they don't see a clear path to getting it done, even through there is a clear path," he said. But Dr. Dobson said Medicaid medical homes -- which took North Carolina a decade to develop and refine -- could be implemented in another state in as few as four years, provided physicians are willing to take on the effort.

Physician leadership and local flexibility are key reasons behind the success in North Carolina, Dr. Dobson said. Many physicians are striving to improve Medicaid care.

"But we allow enough flexibility, because every health care community is different," he said. "That's the secret sauce in getting these savings."

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Savings through medical homes

Overall savings for North Carolina's Medicaid medical home program have increased each year. Estimates are based on comparing claims data from enrollees in Community Care of North Carolina with those in traditional Medicaid.

Fiscal year Enrollees Savings per
enrollee per month
Annual savings Percent of
total spending
2007 983,356 $8.73 $103 million 1.9%
2008 1,083,636 $15.69 $204 million 3.4%
2009 1,176,778 $20.89 $295 million 4.6%
2010 1,253,292 $25.40 $382 million 5.8%

Source: "Analysis of Community Care of North Carolina Cost Savings," Milliman, December 2011

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Inconsistent savings

North Carolina's Medicaid medical home program has not achieved consistent savings for elderly and disabled enrollees. Estimates are based on comparing claims data from enrollees in Community Care of North Carolina with those in traditional Medicaid. Dollar figures in parentheses represent additional spending instead of savings.

Fiscal year Aged, blind, and disabled
Medicaid enrollees
Aged, blind and disabled
dual eligibles
Youth 20 and under Adults
2007 ($82 million) ($14 million) $177 million $22 million
2008 ($34 million) ($9 million) $202 million $45 million
2009 ($13 million) ($11 million) $261 million $58 million
2010 $53 million ($6 million) $238 million $97 million

Source: "Analysis of Community Care of North Carolina Cost Savings," Milliman, December 2011

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