Conducting the Orchestra of Multi-Payer Payment Reform: Achieving Harmony in Arkansas and Vermont

Imagine an orchestra filled with providers and plans each playing its own tune to move towards value-based payment to incentivize better care and health. Alone, each tune is recognizable. But without working together, cacophony abounds. Enter the state as conductor and participant in aligned multi-payer payment reform, and sweet sounds emerge. If it only happened that easily, it would be done. In reality, states need to use their many levers to achieve multi-payer reform. Their efforts appear promising, and early lessons are emerging for other states to emulate, as showcased by Arkansas and Vermont in NASHP’s recent webinar: The Promise and Pitfalls of State-Based Payment Reform.

In this blog, we profile these two very different states, which both have major innovative reform initiatives underway. Both are leaders, but one is in the south, and the other in the northeast. One has a Republican governor, one a Democratic governor. A dominant health plan and employer in one, and a more diverse insurance market in the other. Both have a history of reform, but the tales are unique, as are their models.

History of Reform in Arkansas and Vermont

In 2011, the Arkansas Payment Improvement Initiative (APII) was born through a voluntary partnership between the Medicaid agency, Department of Human Services, and the state’s two largest payers, Arkansas Blue Cross and Blue Shield and QualChoice of Arkansas. Through a robust stakeholder process, APII has evolved to include implementation of episodes of care, patient centered medical homes (PCMHs), and health homes for individuals with complex healthcare needs. Arkansas’s federal Comprehensive Primary Care Initiative (CPCI) and State Innovation Model (SIM) grants have catalyzed these efforts. Further, in 2013, Arkansas’s legislature passed the Health Care Independence Act, which requires all insurance carriers offering plans through the Health Insurance Marketplace to participate in components of APII.

Vermont, too, achieved voluntary buy-in for their multi-payer reform from the majority of payers and health plans in the state. Vermont’s initiative was strengthened by the 2007 Blueprint for Health legislation, which requires insurance carriers with a commercial market share above 5% to participate in reform. By 2011, the Blueprint had established PCMHs and corresponding Community Health Teams (CHTs) statewide to provide patients with wrap around services. Vermont received a Round 1 SIM Model Test grant to build infrastructure, expand access to community resources, and implement innovative payment mechanisms such as episodes of care and an accountable care model. 

Examining Arkansas and Vermont’s Models: What Sets them Apart

Arkansas is at the nation’s forefront of episode development and implementation as an innovative health care payment strategy. The state has launched 15 retrospective episodes, each of which treats a specific acute condition within a designated time period. For each individual episode, the payer uses claims data to identify a Principal Accountable Provider (PAP)—often referred to as the ‘quarterback’—that is most accountable for the episode’s cost and quality of care. PAPs, typically a hospital or physician practice, leads and coordinates the larger care team. Multiple payers participate in the episode model, and all providers must partake in the initiative if a participating payer covers their patient.

how-episode-payment-model-worksAs noted in Figure 1, Arkansas calculates average risk-adjusted episode cost to determine if 1) the PAP’s average cost is lower than the ‘commendable’ cost target and, thus, receives a supplemental payment from the state (shared savings) after required quality targets are assured, 2) the PAP’s average cost is in the acceptable cost range so no payment adjustments are made (savings/cost neutral), or 3) the PAP’s average cost is higher than the ‘acceptable’ cost target, causing the payer to draw back some of the payment to the PAP in order to meet the acceptable cost target (shared cost). To avoid anti-trust violations, each payer sets its own threshold of ‘acceptable’ and ‘commendable’ cost targets.

Vermont plans to implement episodes of care, as well, but the heart of its model is the PCMHs and CHTs. As shown in Figure 2, Vermont has 124 medical homes across the state, serving over 80% of the state’s population. The PCMH model helps patients to receive access to coordinated primary care: CHTs provide patients with access to social supports, chronic care management, community based prevention activities, and behavioral health services. Each PCMH receives per-member per-month (PMPM) payments ranging from $1.20-2.39 on top of the fee-for-service system depending on their National Committee for Quality Assurance (NCQA) PCMH Recognition level. The $350,000 cost of the CHTs is shared between Medicaid, Medicare, and the state’s three primary private insurers. A recent report to the legislature included recommendations to increase the payments to PCMHs to $4-5 PMPM and adjust each payer’s share of the CHT costs based on their market share.

medical-homes-across-the-stateIn 2014, Vermont also launched three Accountable Care Organizations (ACOs), which partake in Medicare, Medicaid, and commercial shared savings. The ACOs are aligning with the Blueprint model, and the state is working to advance toward a more unified community health system. For example, each ACO is affiliated with mental health providers to help integration of care for consumers with behavioral health issues.

Building on the success of Medicare’s CPCI implemented in Arkansas in 2012, Arkansas instituted a PCMH shared savings program, as well. More than half of the state’s primary care providers, serving approximately 80 percent of eligible Medicaid beneficiaries, are now participating. Anecdotal practice-level successes have been recognized across the state, including reductions in hospital admissions and emergency room costs, decreases in total cost of care, and increases in prescribing of generic drugs.



Making it Work: Leadership, Early Wins, and Local Innovation

Joseph Thompson, Director of Arkansas Center for Health Improvement, and Robin Lunge, Director of Healthcare Reform at Vermont’s Agency of Administration underscored the necessity of strong leadership to maintain momentum and drive transformation. In reform efforts of this size, states often face challenges such as provider resistance, change fatigue, and administration transition. Commitment to long-term systemic change with measureable financial accountability is critical. Also important is continued engagment with stakeholders to encourage and maintain their participation. In addition, demonstrating positive outcomes is an effective method to overcome resistance among providers or a leadership transition. “It always comes back to momentum; having a trajectory underway and early wins is necessary to withstand challenges to change,” said Dr. Thompson.

While Arkansas and Vermont both have influential leadership teams, their models are grounded in local innovation. Vermont emphasizes regional collaboration and prevention efforts through its CHTs and through a new sub-grant program, funded by SIM, to test provider innovation at the provider level. “Providers need resources to try new things, respond to local needs, and change how they deliver care,” said Ms. Lunge. In addition, Vermont implemented a care management learning collaborative to identify local duplication of efforts and gaps in coverage. Arkansas has aligned its PCMH model with local public health department initiatives that manage diabetes, hypertension, and obesity through the state’s SIM Population Health Plan.

The Harmony of Multi-Payer Payment Reform

Arkansas and Vermont’s efforts demonstrate that multiple payers and health plans can play together in a harmonious orchestra. Each instrument may have a slightly different role to display its strengths: the cellists want to play in one manner and the percussionists another, just as each health plan strives to maintain its competitive edge over the others. Yet, the state as conductor works with each to align melodies and show how their tunes can come together in one ensemble with common goals.

This blog is supported by Kaiser Permanente.