Some Early Results and Optimism for Medicaid ACOs

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

Accountable care organizations (ACOs) are primarily associated with Medicare or commercial payer-led arrangements. However, the Affordable Care Act (ACA) also authorized limited demonstrations that allow states to test Pediatric ACOs from 2012-2016. In addition, the Centers for Medicare and Medicaid Services (CMS) has provided guidance letters to several state Medicaid directors on how to implement integrated care models, which may include ACOs, in their Medicaid programs.

With this encouragement from CMS and the need to rein in Medicaid spending—which is generally increasing due to the ACA and is shared by the federal government and states—it is estimated that about half of the states are at some stage of planning Medicaid ACOs.

This emerging trend runs counter to a couple of the conventional caveats about ACOs—they won’t scale to handle large populations, and they won’t work with patients who are economically disadvantaged.

However, these caveats are being challenged by the experiences of Colorado, Utah and Oregon, respectively, as well as the plans for North Carolina’s Medicaid ACO program.

Colorado’s Accountable Care Collaborative (ACC) has been in existence since 2011 and today has more than 350,000 members, almost half of the state’s Medicaid population. The ACC has focused on connecting members with their primary care physicians, using care coordinators, and leveraging analytics extensively.

According to the report on the ACC’s most recent fiscal year, which ended in June 2013, the program generated gross savings of $44 million, returning $6 million to the state after expenses. It accomplished this in part by reducing hospital re-admissions by between 15 percent and 20 percent and decreasing the use of high-cost imaging services by 25 percent versus a comparison population prior to implementation of the program. In addition, relative to clients not enrolled in the ACC program, it slowed the growth of emergency department utilization, lowered rates of exacerbated chronic health conditions (e.g., hypertension by 5 percent and diabetes by 9 percent), and reduced hospital admissions for chronic obstructive pulmonary disease patients by 22 percent. Most importantly, Colorado has seen improved health for the ACC member population.

Neighboring Utah has four Medicaid ACOs, which launched on Jan. 1, 2013, and have responsibility for managing the healthcare needs of 85 percent of the state’s Medicaid population. While they have been less publicized than Colorado’s ACC, they may turn out to be even more successful. Based on their performance to date, Utah’s Medicaid ACOs are on track to save the state’s taxpayers more than $2.5 billion over the next seven years.

Launched in August 2012, Oregon’s statewide accountable care pilot involves 16 coordinated care organizations (CCOs) providing health services to 627,000, or 93 percent of the state’s Medicaid population. The five-year pilot features capitated payments and the use of a patient-centered medical home (PCMH) model, with a particular focus on improving the health of high-cost Medicaid patients with chronic health conditions, including those with dual eligibility for Medicaid and Medicare.

The program’s most recent quarterly progress report, published in February 2014, compares January-September 2013 with the baseline year of 2011. The report shows that Oregon’s Medicaid ACO program was able to decrease cost of care for 19 out of the 21 financial measures monitored. Notably, and as intended by the program, spending for primary care rose by more than 18 percent.

Emergency department (ED) visits decreased by 13 percent, while ED costs fell by 19 percent on a per member per month basis.

The CCOs decreased hospital admissions for chronic conditions, trimming hospital admissions for congestive heart failure by 32 percent, chronic obstructive pulmonary disease by 36 percent, and adult asthma by 18 percent.

All-cause readmission, the percentage of adults who had a hospital stay and were readmitted for any reason within 30 days of discharge, dropped from the baseline year’s 12.3 percent to 11.3 percent in the first nine months of 2013, a reduction of 8 percent.

By slowing Oregon’s Medicaid per capita spending growth to below the national average, while also maintaining healthcare quality, the CCOs are slated to save the state $3 billion over the program’s first five years and $11 billion for the federal and state government combined over a decade.

North Carolina is another state that hopes to save a significant amount of money by employing the ACO model to its Medicaid population. Gov. Pat McCrory (R) hopes to use a combination of some existing Medicare ACOs and new ACOs to provide care for the majority of the state’s Medicaid population. If approved by North Carolina’s legislature, Medicaid ACOs will begin operating in July 2015 and in four to five years should cover as much as 90 percent of the state’s Medicaid beneficiaries. McCrory’s proposal has the support of the North Carolina Medical Society, the North Carolina Pediatric Society, and the North Carolina Academy of Family Physicians. Per state budget estimates, the program’s overall savings to Medicaid could reach $15 million in 2016 and grow to $329 million by 2019, totaling over $1 billion for its first five years.

Though certainly not as well-known as Medicare or commercial ACOs, Medicaid accountable care initiatives in Colorado, Utah and Oregon have achieved some success and have set the pace for other aspiring states, such as North Carolina, to reduce healthcare costs while also improving health outcomes for our nation’s Medicaid beneficiaries.

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