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Christopher H. Mathis, JD, MPA, Michael E. Chernew, PhD
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The Arkansas Payment Improvement Initiative: Early Perceptions of Multi-Payer Reform in a Fragmented Provider Landscape
Michael E. Chernew, PhD; William E. Golden, MD; Christopher H. Mathis, JD, MPA; A. Mark Fendrick, MD; Michael W. Motley, MPH; and Joseph W. Thompson, MD, MPH
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Matthew DeCamp, MD, PhD; Jeremy Sugarman, MD, MPH, MA; Scott Adam Berkowitz, MD, MBA

The Arkansas Payment Improvement Initiative: Early Perceptions of Multi-Payer Reform in a Fragmented Provider Landscape

Michael E. Chernew, PhD; William E. Golden, MD; Christopher H. Mathis, JD, MPA; A. Mark Fendrick, MD; Michael W. Motley, MPH; and Joseph W. Thompson, MD, MPH
Arkansas has implemented multi-payer payment reform incorporating both episodic and Patient-Centered Medical Home models. Early perceptions of a sample of stakeholders were largely positive to date.
As efforts to move away from fee-for-service payment have accelerated on both federal and state levels, public and private payers have been experimenting with different payment models. There is tremendous heterogeneity in approaches across states1-3; for example, some of these reforms only focus on Medicaid, while some include additional payers. Some rely on global payments and some on bundled payments for selected episodes.4-11

Arkansas’ approach is novel in several ways. The Arkansas Payment Improvement Initiative (APII) is a multi-payer model combining patient-centered medical homes (PCMHs) with episodic payments for certain acute and chronic conditions.12 Provider participation in the PCMH is voluntary, and the episode payments system is mandatory for most populations and all providers. A health home component for individuals with more complex care needs is planned but not yet implemented.

Viewing the APII through a national lens, the Arkansas model could turn out to be a particularly useful bellwether for other states, especially less populated states with a more fragmented and largely rural provider environment.

Arkansas’ reforms also reflect cooperation between and among providers, insurers, employers, and state government officials. Regular planning and informational meetings in addition to outreach with stakeholders, as well as consensus on a general framework for reform, have been hallmarks of the program’s development.

This paper reports on early perceptions of how the model is working. We interviewed a convenience sample of Arkansas stakeholders; provider perceptions are based on interviews with representatives of the state medical society and hospital association, who have been canvassing their members to get a broad perception of provider reaction, and providers in 3 Arkansas practices, both urban and rural. We also interviewed representatives from 2 private insurers that collectively cover almost 90% of the commercially insured population, as well as large employers in the state. Our interviews were unstructured; they focused on reaction to the APII, whether or not providers are changing practice as a result of the new approach, and if so, how and for whom? Because health homes have not yet been implemented, we focus here on episodes and medical homes.


Episodes of Care

Arkansas has implemented episodic payment for certain conditions.13 The initial 5 episodes, launched at the end of 2012, were: upper respiratory infections (URIs), attention deficit/hyperactivity disorder (ADHD), hip and knee replacement, perinatal (pregnancy), and congestive heart failure (CHF). Three more—colonoscopy, cholecystectomy (gallbladder removal), and tonsillectomy—were designed and implemented in 2013. An additional 2—coronary artery bypass grafting (CABG) and asthma—were introduced in 2014, and 5 more—including oppositional defiant disorder (ODD), percutaneous coronary intervention, chronic obstructive pulmonary disease, and ADHD/ODD comorbidity—will likely launch in 2015.

For each episode of care, a Principal Accountable Provider (PAP) is assigned by payers based on analysis of claims data. The PAP is typically the primary decision maker for most of the care delivered within an episode and often has the greatest ability to influence and improve patient care. For example, in the perinatal episode, the PAP is the delivering physician. Only 1 PAP is assigned for each episode and held accountable for all care delivered within that episode over a predetermined time period. Most, but not all, episodes involve acute conditions that have clear triggering events, such as birth or surgery. In the case of a chronic illness, such as ADHD, the PAP is retrospectively assigned based on provision of the majority of services over the episode’s duration.

PAPs may be rewarded, penalized, or remain financially neutral based on how the average costs for their episodes compare with thresholds predetermined by payers. Specifically, for each episode, there are thresholds for “acceptable,” “commendable,” and “gain sharing limit” expenditures. These thresholds are determined separately by each payer in order to adhere to anti-trust regulations, and they are communicated to providers prior to the start of an episode performance period based on a retrospective review of Arkansas expenditures for each episode over a predetermined performance period (generally 12 months). Services within the episode for all providers are reimbursed through each payer’s fee-for-service fee schedule.

At the conclusion of a performance period, an episode profile, which includes all costs and quality targets, is calculated for each PAP. PAPs with average costs above the acceptable threshold for an episode are assessed a penalty payment. PAPs with average costs between the acceptable and commendable thresholds neither pay a penalty nor receive gain sharing. PAPs with average costs below the commendable threshold are eligible for gain sharing—those with average costs below the gain sharing limit are still eligible for gain sharing if they meet quality metrics, but derive no additional financial benefit for savings beyond the limit.

Guidelines for each episode also require that certain quality measures be passed in order to qualify for gain sharing, and that additional associated quality measures be tracked and reported to PAPs. Operationally, all providers involved in the patient’s care (including the PAP) continue to be paid on a fee-for-service basis during the episodes, but it is the practice employing the PAP that settles up at the end of the performance period and bears the risk of high total spending (or shares the gain of lower spending).

Patient-Centered Medical Homes

In addition to these episodic payment reforms, all Arkansas practices that serve as primary care provider to at least 300 Medicaid patients are eligible to participate as a PCMH as of January 1, 2014.14 Participating practices receive a per member per month (PMPM) medical home support payment to facilitate care coordination and practice transformation.

In order to receive these monthly PMPMs, practices must demonstrate that they have implemented and are performing numerous activities integral to building a medical home structure. These activities include providing 24/7 live voice access to a health professional, identification of and formulation of care plans for high-risk patients, flexible same-day scheduling, installment of meaningful use certified electronic health records, assessment of operations and opportunities for improvement, and other practice enhancements related to a PCMH framework.

An average $4 PMPM payment ($7 for adults and $3 for children) is paid by Arkansas Medicaid directly to practices to be used for new investments in clinical operations that achieve effective care coordination, patient engagement, and improved outcomes. As one example, a practice with a Medicaid-eligible panel of 3000 patients could receive an average of $144,000 in additional prospective practice support payments from Medicaid over a 12-month period.

To supplement these ongoing care coordination payments, Medicaid pays an additional $1 PMPM payment directly to a technical support vendor on behalf of practices that have chosen to participate in supplemental training. These payments are for a limited duration of 24 months and are designed to catalyze PCMH transformation. Technical support includes 30 hours of individual coaching, drafting of a PCMH needs assessment and implementation plan, access to online training, and peer-to-peer networking sessions. In 2014, the state certified Qualis Health as a PCMH technical support vendor. A second vendor, the Arkansas Foundation for Medical Care (AFMC), was added in 2015.

The PCMH program offers practices an opportunity to receive shared savings (adjusted to avoid double counting with the episode payment shared savings) if certain requirements are met. Specifically, the PCMH model is upside-only and practices are eligible to retain up to 50% of savings by spending below either a preset statewide threshold or a threshold based on improvement over their own performance in previous years. To be eligible to receive shared savings, a practice must have 5000 Medicaid patients who have been attributed for at least 6 months. As many practice sites lack a sufficient number of patients and doctors to reach this threshold, Arkansas Medicaid initially permitted 2 practices or multiple providers with the same tax identification number to pool their patients to achieve the 5000-patient minimum enrollment. These pooled practices must comply with combined quality metrics and possess the required attributes of a medical home. Starting in 2015, more than 2 practices will be allowed to pool and there will also be a statewide default pool, which will provide another means for practice eligibility for shared savings under the Medicaid program. A shared savings component involving participating private payers is scheduled to begin in 2016.

Who Is Participating?

Arkansas’ approach to both the APII’s episodic payment and PCMH reforms has achieved participatory support from multiple payers. For episodes, in addition to Medicaid, QualChoice of Arkansas and Arkansas Blue Cross and Blue Shield (the state’s largest commercial insurer with over 80% of the private market) are participating. While participating payers have agreed on the design of each episode, the private insurers do not participate in all episodes. For example, neither Blue Cross nor QualChoice is using episodic payment for URI or ADHD, though Medicaid does, and Blue Cross and Medicaid use episodic payment for CHF, tonsillectomy, coronary artery bypass graft surgery, and asthma, while QualChoice does not. Another of the top 3 commercial payers, UnitedHealthcare, is not yet directly involved in episodes.

Among self-insured employers, the largest private employer, Walmart, and the 2 largest public plans, the State Employee Plan and Public School Employee Plan, actively participate in episodic payment. In 2015, Blue Cross Blue Shield extended episodes to their fully insured products and all self-insured contracts. In all, roughly three-fourths of commercially covered Arkansas lives are subject to the episodic payment component of the APII.

With respect to the PCMH component, multiple payers initiated participation in the Comprehensive Primary Care (CPC) Initiative medical home program in 2013, including QualChoice, Blue Cross Blue Shield, Humana, Medicaid, and Medicare. Self-insured payers Blue Cross Blue Shield (for its own employee plan) and Walmart, as well as the State Employee Plan and Public School Employee Plan, joined CPC through participation with PMPM care coordination fees for their covered populations in 2014. Medicaid has expanded this primary care participation by establishing its own PCMH model, building on CPC with extended requirements for transformational milestones and incorporating its shared savings strategy through a legislatively approved rule. Initiated in 2014, PCMH participation has exceeded primary care enrollment targets.

Copyright AJMC 2006-2019 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
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