Oregon’s Bridge to Value-Based Payments for Community Health Centers: A Win for Medicaid, Providers, & Patients

States are developing new ways to pay Medicaid providers based on quality and efficiency over number of visits. However, these payment options can present challenges for states in integrating safety net providers into their efforts. In Oregon, Medicaid and the state’s Primary Care Association (PCA) have embarked on an alternative payment model that is breaking new ground.

Federal law passed decades ago (OBRA 1989) required Medicaid agencies to pay cost-based reimbursement to health centers and set minimum payments at 100 percent of reasonable cost. These payments covered not just the time and resources of the provider, but operational costs as well. A decade later, federal law (BIPA 2000) changed and required Medicaid to pay prospectively (prospective payment system (PPS)) to better control costs. PPS payments were based on the previous cost-based reimbursement methodology and triggered at each patient visit and therefore notably higher than payments to other primary care providers. States also have the option of using an alternative payment methodology (APM) if agreed upon with the health centers, but the payment rate overall cannot be lower than what would be paid under the PPS, and APMs often result in Medicaid paying more than it would under PPS.

Under both of these scenarios—PPS and APM—the objective to contain Medicaid costs has not been realized, largely due to the volume-driven nature of the payment methods. Therefore, the dilemma: how can states transition essential Medicaid providers to payment models that pay for value of care and not volume of visits? The alternative payment model underway in Oregon may provide an answer.

Why did Oregon change health center payment?

The answer may surprise you. The health centers wanted change. According to Craig Hostetler, executive director of the Oregon Primary Care Association (OPCA) during a recent NASHP webinar, they wanted “something better,” and more consistent with medical home approaches that include care coordination, team-based care, electronic communication, and the ability to improve the workplace environment to better recruit and retain staff. Hostetler explained that participation from OPCA and health centers in the Safety Net Medical Home Initiative, a Commonwealth Fund project, helped spur conversations with health centers about the need for a payment model that was more aligned with achieving goals to improve health outcomes while also addressing physician satisfaction, recruitment, and retention.

The collaboration in Oregon began with an agreement that any new APM would not result in a payment model that would be more than the PPS, and therefore would be cost neutral for Medicaid. The state’s Medicaid agency found that collaboration with the OPCA and health centers on the new APM enabled them to comply with a legislative mandate to adopt non-fee for service payment methodologies as part of Oregon’s health care reform efforts. These efforts also included the launch of Coordinated Care Organizations (CCO).

The CCOs are locally based health entities that accept financial responsibility and risk for administering care for Medicaid enrollees and work closely with Medicaid providers to ensure that health system costs, quality, and satisfaction goals are being met. —The new APM pilot dovetailed well with the work of the CCOs.

How was it done?
In 2012 Oregon Medicaid received approval from the Centers for Medicare and Medicaid Services (CMS) on a State Plan Amendment to implement its APM demonstration. In March 2013, the state began a pilot with three large health centers; additional health centers and a rural health clinic were later phased-in. There are currently 10 health centers and a rural health clinic receiving the APM; these account for more than 50 percent of health center patients in the state.

What is the approach?
Under the new APM, health centers can choose to receive a Per Member Per Month (PMPM) rate rather than the traditional visit-based rate. The new APM is based on the historical utilization for an assigned population and converted to a clinic-specific monthly PMPM. Reconciliation is done at the end of the year so if the new APM payments total less than what the health center would have received in total payments under the PPS, Medicaid pays the difference.

For Medicaid, the “win” is to have the health centers focus on the non- billable services such as care coordination, that may drive better outcomes at the patient and population level, as well as to report and track how those services are being provided. For the health centers, the “win” is the minimal downside risk due to end-of-year reconciliation to what clinics would have received with the PPS. However, if the health centers’ cost to implement non-billable, non-reimbursable services (services not covered in a PPS payment, such as hiring staff) is more than the PPS at the end of the year, the health center absorbs those non-direct services costs.

Hostetler noted during a NASHP webinar billable patient visits to the health centers have actually gone down as other means of patient communication not typically paid for (email, phone calls, etc.) and interactions with an expanded team that may not generate billable encounters (e.g., behaviorist, pharmacist, community health worker) have increased.

It was important for Oregon Medicaid, the OPCA, and providers to be able to analyze patient engagement efforts, including what care coordination is effective and who is doing the coordination. Under the new APM, the health centers will have less encounter data to track services, therefore, Oregon developed an “Engagement Touches” tracking tool which runs from the health centers’ electronic health record system. In developing the tool it was important for all parties to define the enabling services or “touches”.

The health centers are required to progress toward meeting the new APM Metrics and Accountability strategy. As part of the budget neutral requirement from Medicaid, no additional payments are received for meeting targets, but health centers also do not lose money for not meeting targets. However, according to Hostetler, Medicaid’s support in continuing the program would likely discontinue if targets weren’t met or at least significant progress made.

The targets include:

  1. Data: 17 clinical, Uniform Data Systems ,and patient experience measures, some of which are also CCO quality measures, are tracked. The health centers should annually focus on two clinical measures with the intent to improve their measure results by 3 percent.
  2. Costs of care: The health center should maintain or reduce adjusted per capita costs
  3. Meaningful engagement: The health center should document visits or “engagement touches” with at least 70 percent of assigned patients annually.
  4. Severity adjustment methods: Data are being collected to establish tools for potential use to risk adjust payment based on socio-economic status including housing status, food security, and more. How this will effect the payment model has not been determined.

Does it work?
An independent evaluator’s first year preliminary quantitative analysis of the three pilot health centers showed the following trends:

  • Aggregate decrease in Emergency Room utilization trend of 5.6%;
  • Aggregate decrease in inpatient utilization trend of 20.3% compared to the prior two years
  • 100% tobacco screening rate;
  • 115% increase in childhood immunization rates;
  • Weight control for children increased by 145%
  • 50% increase in patient satisfaction with their care team

Budget neutrality, a flexible payment model, and promising outcomes are winning combinations for payers, providers, and patients. A new APM model for health centers designed for value not volume can be done under existing federal requirements. Oregon’s new APM began with a Medicaid agency, a PCA, and health centers that were ready to change the way care is delivered by changing the payment model. Their collaboration offers an example to other states and PCAs on reforming primary care delivery.

This blog is supported by Kaiser Permanente.

Note: For state Medicaid agencies and PCAs looking to develop value-based APMs in their states, with HRSA funding, NASHP will be offering a learning collaborative to support this work in 2016.