Strategies for Payment Reform in States: Which Model(s) to Choose?

Ensuring higher quality and more seamless patient care requires new financial incentives for teamwork between different health care providers and organizations. In the first blog post in this series, we explored components of the policy toolkit available to states for building a more integrated health care delivery system. Perhaps the most important tool available as states strive to promote integration is payment policy. The payment strategies adopted by states and their private sector partners strongly influence the delivery of services.
The Affordable Care Act (ACA) is encouraging the development of new payment models at both the federal and the state level, including medical homes (PCMHs), accountable care organizations, and the State Innovation Models initiative that seeks to help states leverage multi-payer purchasing power to improve the way care is delivered.
Supported by these strong signals from the ACA and building on efforts begun in recent years, states are moving forward with a range of innovative payment reforms aimed at overcoming the current fragmentation of the health care delivery system. In a recent webinar supported by the Kaiser Permanente Community Benefit, NASHP helped states consider where to start with payment reform, and described potential models states may choose. As Michael Bailit laid out, these approaches include:

• Focusing on primary care. Models like the PCMH can use supplemental payments, primary care capitation, pay-for-performance, or shared savings payment strategies to reward primary care providers for performance and to encourage them to collaborate with other providers. Massachusetts’ Medicaid Primary Care Payment Reform couples a capitated payment for primary care services with an annual quality incentive payment for primary care performance and a shared savings payment based on spending for non-primary care services.

• Paying for episodes of care. Episode-based payments offer payment for all of the services needed by a specific patient for a particular condition or treatment for a specified period of time. Under the Arkansas Healthcare Payment Improvement Initiative, Arkansas Medicaid is partnering with private payers to hold providers accountable for the cost and quality of specific episodes of care.

• Paying for the total cost of care (TCOC). Under TCOC arrangements (aka “global payment,” “population-based payment,” or “capitation”), a cost target is established that considers all the costs for a population and providers can share in savings and risk. Oregon has enrolled Medicaid beneficiaries in Coordinated Care Organizations, risk-bearing entities that assume responsibility for care (including coordination and quality of services) under a global budget.

Regardless of the approach chosen by a state, payment reform is challenging. A conversation with state leaders yielded the following lessons:

• States need to offer meaningful incentives for improving efficiency and quality that feel large enough to entice the practices to invest resources in doing things differently.

• Some states have unique systems that prevent Medicaid from effectively leading the market (e.g. a largely separate delivery system for Medicaid beneficiaries), adding to the challenges of implementing large-scale multi-payer payment reform. Each state will have to identify its strengths in bringing payers together and capitalize on them—e.g. a strong employer sector that helps to convene major players, or legislation granting safe harbor from antitrust concerns.

• Data are critical.  Ultimately, any payment model that relies on performance measures to determine the distribution of payments can rely on three sources of data: clinical records systems (e.g. electronic health records or paper records), administrative and utilization data including claims, and survey data.

Read more in the full summary of the conversation held during the webinar on this topic. Tell us about your state’s strategies for payment reform by joining State Refor(u)m’s multi-sector payment reform discussion, or in a comment below.
We’re adding documents, reports, and insights as NASHP’s integrated delivery system project continues. The results of this work, along with additional related resources—including NASHP’sState Accountable Activity map and Multi-Payer Resource Center—can be found on State Refor(u)m in an Integrated Delivery Systems Toolkit. Also check back here for additional blog posts that will distill some of the lessons emerging from our work.