Value-Based Payment Methodology Development
The National Academy for State Health Policy (NASHP) designed this toolkit to support states interested in developing value-based payment (VBP) methodologies for federally qualified health centers (FQHCs). The following section on VBP methodology development and implementation discusses key considerations and promising strategies based on lessons learned from states during NASHP’s Value-Based Payment Reform Academy.
Key for VBP methodology development and implementation include:
- • Adhere to specific federal requirements when implementing a VBP methodology under FQHC state plan authority;
- • Identify opportunities for additional flexibility using other state Medicaid authorities;
- • Leverage Medicaid managed care contracts to support VBP methodologies;
- • Design a VBP methodology based on state-specific context, capacity, and alignment with other Medicaid initiatives;
- • Consider how to manage and adjust for risk under the VBP methodology; and
- • Develop an accurate attribution methodology that aligns with the goals of the selected VBP methodology.
|Prospective Payment System Requirements
Section 1902(bb) of the Social Security Act requires that state Medicaid programs reimburse FQHCs through the Prospective Payment System (PPS), which sets minimum per visit rates for each FQHC, inclusive of all sites. PPS rates vary among FQHCs and are based on each FQHC’s average cost per visit rate.
States can pursue value-based APMs with FQHCs within federal parameters as long as individual FQHCs agree to the APM and each clinic’s total payments are equivalent to or higher than the total payments they would receive through PPS.
For more information on PPS, please see http://www.nachc.com/client//IB69%20PPS%20Complete.pdf.
States are increasingly demonstrating that VBP reform for FQHCs is not only possible, but can be beneficial for both state Medicaid agencies and FQHCs. However, VBP methodologies vary widely, and can have different implications for both providers and payers. The CMS Health Care Payment Learning and Action Network (HCP LAN) developed a useful framework for understanding VBP methodologies, organized by increasing clinical and financial risk.[i] The framework categorizes payment methodologies across four categories, from lowest to highest risk:
- • Category 1: Fee for service (FFS) with no link to quality/value;[ii]
- • Category 2: FFS with a link to quality/value (e.g., pay for reporting/performance, supplemental payments for care coordination);
- • Category 3: FFS with potential for upside shared savings and/or downside risk (based on performance on key cost and quality benchmarks); and
- • Category 4: Population-based payments (e.g., per member per month (PMPM) payments for a defined set of services linked to quality outcomes).[iii]
Table 1 describes how states are using diverse Medicaid authorities to implement VBP methodologies in alignment with the HCP LAN framework. Regardless of the Medicaid authority, state policymakers report that early engagement with the Centers for Medicare & Medicaid Services (CMS) during the planning process can help troubleshoot concerns related to federal requirements for FQHC reimbursement.
|Payment and Quality Incentives||Impact on Service Delivery|
|Washington, DC: Pay for Performance through FQHC State Plan Amendment (SPA)[iv]|
|FQHCs can elect to be reimbursed for FQHC services through PPS or through an alternative payment methodology (APM) that pays at least PPS on a per encounter basis.
FQHCs that opt into the APM can also earn supplemental performance-based payments (P4P) drawn from a bonus funding pool.[v]
|Retrospective: at least one visit during the performance period.||To receive supplemental payments, FQHCs must achieve performance in the 75th percentile or greater, or significantly improve from previous year on nine quality measures, including expanded after-hours care, all-cause readmissions, and preventable hospitalizations.||Performance measures emphasize access to care, care coordination, and reducing unnecessary admissions.
|Ohio Comprehensive Primary Care (CPC) Program: Supplemental PMPM and Shared Savings through a Primary Care Case Management SPA[vi],[vii]|
|Underlying reimbursement for FQHC services does not change.
FQHCs participating in CPC receive supplemental PMPM payments tiered based on patient acuity.
FQHCs with at least 60,000 attributed member months per calendar year are eligible for shared savings conditional on meeting cost and quality targets. Practices can share in up to 65 percent of savings.
|Supplemental PMPM payment: Patient attribution is prospective, based on patient choice, plurality of visits in past 24 months, and other factors (e.g., location).
Shared Savings: Attribution is retrospective.
|To receive supplemental PMPM payments and shared savings, practices must meet “Activity Requirements” and ”pass” 50 percent of the 25 clinical quality and efficiency measures.[viii],[ix]
Additionally, to receive shared savings, FQHCs must meet total cost of care (TCoC) targets or improve their performance on TCoC targets from the baseline year. TCoC excludes some services (waiver services, oral health, vision, transportation; long-term care costs after 90 days).
|“Activity Requirements” focus on service delivery changes, such as supporting 24/7 access to care, risk stratification, population health management, and use of team-based care models.[x]
|Minnesota Integrated Health Partnerships (IHP): Shared Savings through a Primary Care Case Management SPA[xi],[xii]|
|Underlying reimbursement for FQHC services does not change.
Through Minnesota’s accountable care organizations (ACOs) initiative, IHPs can choose upside risk only, and share in savings if TCoC and quality targets are achieved, or upside and downside risk.
The FQHC Urban Health Network (FUHN), an IHP consisting of 10 FQHCs, takes on upside risk only.
|Retrospective: At least one visit during the performance period; if multiple providers, patient is attributed based on the preponderance of claims for specific services, such as primary care or Behavioral Health Home.||IHPs report on 40 quality measures in the following areas:
TCoC includes primary care, some mental health, chemical dependency, vision, and inpatient and outpatient hospital services.[xiv]
|Quality measures emphasize prevention, access to care, behavioral health, and patient-centered care.
|Massachusetts MassHealth Statewide ACO Program: Shared Savings/Shared Risk through 1115 Delivery System Reform Incentive Payment (DSRIP) Waiver[xv],[xvi]|
|There are three different ACO organizational models.
Community Care Cooperative (C3), made up of 15 FQHCs, is a Primary Care ACO that contracts directly with the state. Under this model, underlying reimbursement for FQHC services does not change.
Primary Care ACOs are eligible for shared savings or shared losses based on their performance on TCoC and quality measures.
|MassHealth members are assigned through one of two ways:
1. If a MassHealth member selects a primary care provider (PCP), (s)he will be attributed to the PCP’s ACO; or
2. If a MassHealth member does not select a PCP, MassHealth will assign him/her, through a process known as special assignment, based on existing primary care relationships as of October 2017.[xvii]
|Primary Care ACOs must report on 38 quality measures in the following areas:
TCoC includes all services in the Massachusetts Medicaid managed care program, including physical and behavioral health. Long-term services and supports will be included starting in Year 2. TCoC excludes home and community based services.
|ACOs commit to a number of practice transformation activities, including prevention and wellness initiatives, disease management and care coordination, and improved use of health information technology and health information exchange, among other provisions.
|Washington State: PMPM through Medicaid Managed Care[xviii],[xix]|
|PMPM payment rate, known in the state as APM4, is calculated based on a clinic’s APM3rate and encounters in a 12-month look-back period.
PMPM includes all FQHC services that are carved into Apple Health. Services include medical and some behavioral health and maternity support services.
Only managed care beneficiaries are included.
|Prospective: Based on beneficiaries’ assigned or chosen primary care providers.||FQHCs report on seven measures[xx] that align with those used in Apple Health, the states managed care program.
After a baseline year, participating clinics that do not meet quality targets on the seven measures may have their PMPM rates decreased in future years. However, total FQHC reimbursement will never drop below what the clinic would have received under PPS, in adherence with federal regulations.
|Quality measures emphasize prevention and chronic disease management.
Practices are encouraged to focus on team-based care and population health management.
Adhere to specific federal requirements when implementing a VBP methodology under FQHC state plan authority.
Any VBP methodology developed under the FQHC state plan authority must continue to meet federal PPS requirements. Payments made through a Medicaid FQHC SPA must be tied to the delivery of FQHC services. While states can incentivize quality, a state may not pay FQHCs less than what they would have earned under PPS. Arrangements that put clinics at risk to receive less revenue than under PPS are inconsistent with Section 1902(bb) of the Social Security Act.[xxi]
Washington, DC’s pay for performance methodology for FQHCs was approved by CMS in September 2017 through a FQHC SPA.[xxii] FQHCs that elect to participate in the APM are eligible to receive a supplemental performance-based payment if they perform at or above a target threshold, or if they improve their performance from the baseline year on nine required measures.[xxiii]
Identify opportunities for additional flexibility using other state Medicaid authorities.
As Table 1 illustrates, states are engaging FQHCs in VBP methodologies through a number of authorities, including SPAs for primary care case management (PCCM) and health homes, as well as 1115 Demonstration waivers:
- • Minnesota implemented its Integrated Health Partnerships (IHP), a Medicaid ACO initiative, through an approved PCCM SPA. The SPA describes how TCoC, quality targets, and shared savings are calculated, and outlines provider participation criteria. The IHP model was developed to give independent or smaller practices, as well as FQHCs, the opportunity to participate in VBP methodologies by offering the option to take on upside risk only.[xxiv]
- • Massachusetts began its statewide ACO program in March 2018 as part of its five-year 1115 Medicaid Demonstration waiver.[xxv] The ACO program has three different organizational structures; one of which is a Primary Care ACO. Primary Care ACOs are eligible for shared savings or shared losses based on their performance on TCoC and quality measures. The state has contracted with 17 ACOs to participate in the initiative, including Community Care Cooperative, a Primary Care ACO formed by 15 FQHCs. Massachusetts’ ACO program is designed to improve care quality and patient experience, while reducing costs through better integration and coordination of physical health, behavioral health and long term care.[xxvi]
States may also combine multiple VBP methodologies. FQHCs in Ohio, for example, are eligible to participate in Ohio Medicaid’s Comprehensive Primary Care (CPC) Program, authorized under an approved PCCM SPA.[xxvii] Through CPC, FQHCs receive supplemental PMPM payments for meeting activity requirements and other clinical quality and efficiency measures. Large FQHCs are eligible to receive shared savings if they also achieve cost thresholds. PMPM payments and any shared savings payments are in addition to reimbursement for FQHC services.[xxviii]
Leverage Medicaid managed care contracts to support VBP methodologies.
Washington State implemented a PMPM VBP methodology in July of 2017 for Medicaid managed care beneficiaries, and included FQHCs in its Paying for Value strategy. The state retains the responsibility for managing attribution (based on beneficiary assignment to managed care plans), calculating FQHC performance on quality measures, and calculating PMPM rates for individual FQHCs.[xxix] If states do not currently require managed care plans to pay FQHCs their full PPS rates, Medicaid agencies need to continue to make wrap-around payments[xxx] to ensure FQHCs are reimbursed at their full PPS rate per encounter.
Design a VBP methodology based on state-specific context, capacity, and alignment with other Medicaid initiatives. No single VBP methodology will be appropriate for every state’s goals. Factors to consider when designing and implementing a VBP methodology include:
- • Small and/or rural FQHCs: It may be challenging to reliably calculate payment rates or performance on cost and quality measures for small or rural clinics with small numbers of Medicaid patients. States may want to set minimum Medicaid patient requirements for practice participation, or develop tiered VBP options to accommodate smaller clinics.
- • State staff and infrastructure capacity: Medicaid agencies need capacity to attribute patients to practices, calculate payments, and collect and analyze data to determine practice performance on quality and cost measures. States may need additional capacity to support provider transformation, including providing data to participating practices. Anticipating internal staff and infrastructure needs to perform these and other functions can help ensure a smoother development and implementation process.
- • State resources: VBP methodologies, such as performance-based supplemental payments, can require states to make payments above PPS rates in order to create incentives for providers to focus on quality improvement and practice change. States will need to consider the impact of these upfront investments, calculating the return on investment in primary care, and any opportunities to leverage additional funds, such as through Medicaid Section 1115 Delivery System Reform Incentive Payment (DSRIP) waivers.
- • Alignment with other initiatives: FQHCs participate in delivery system transformation efforts, such as patient-centered medical homes (PCMHs), health homes, and ACOs. Policymakers will want to review how FQHC-specific reforms align with current initiatives in order to minimize additional burdens–both on state staff administering these initiatives and FQHCs participating in multiple efforts.
Consider how to manage and adjust for risk under VBP methodologies.
VBP methodologies can be designed to allow practices to share in savings (upside risk), to shoulder some part of costs if cost targets are exceeded (downside risk), or both. PPS statutory requirements do not permit FQHC payment methodologies that include downside risk under the FQHC state plan authority . At least one state—Massachusetts—is implementing payment methodologies with downside risk through an 1115 Demonstration waiver.
Policymakers should consider the readiness of FQHCs to take on and manage risk, given the challenges of undercapitalization, limited data capacity, and the impact of smaller patient panels especially in rural areas.[xxxi] TCoC calculations in downside risk models frequently include services delivered outside of FQHCs (e.g., emergency department and hospital utilization). Some FQHC representatives who participated in the Academy expressed concern about the extent to which their clinics could influence the cost and quality of care delivered outside the clinic walls. States noted the importance of developing TCoC methodologies and quality measures that present clear opportunities to impact cost and quality of care leveraging the unique strengths of FQHCs.
States may also want to consider risk adjustment when structuring VBP methodologies to account for differences between participating providers that can influence cost and quality outcomes, such as patient acuity. FQHC representatives in the Academy expressed a particular interest in adjusting for social determinants of health due to their populations’ complex socioeconomic needs. Risk adjustment that takes these kinds of factors into account is just emerging, but could present an alternative way to assess acuity among complex populations that FQHCs commonly serve.[xxxii]
Develop an accurate attribution methodology that aligns with the goals of the selected VBP methodology.
Attribution, the process of assigning patients to a participating FQHC for the purposes of tracking both payment and quality measurement can be complex.[xxxiii] States must decide whether to attribute patients to practices retrospectively, prospectively, or a hybrid of both:
- • Retrospective attribution assigns patients to providers or practices by looking back at claims and utilization during a defined performance period, enabling state policymakers to identify improvements across the attributed population during a specific performance period.
- • Prospective attribution uses historic claims data, patient choice, and other factors to assign patients prior to a performance period. Prospective attribution can be used to create a “day one” list of patients, with additional patients attributed on a rolling or monthly basis going forward based on a qualifying claim or event.
Developing criteria for patient attribution is methodology-dependent. VBP methodologies that include hospitals and larger health systems can incorporate factors such as hospital and emergency department use, health home enrollment, and plurality of primary care visits in the attribution process or algorithm. For FQHC-specific methodologies, attribution can be tied more closely to primary care and clinic-related utilization. If states include only managed care beneficiaries in their methodologies, they can consider using the chosen or assigned primary care provider on managed care plan rosters to attribute patients to FQHCs.
The attribution model can affect aspects of measurement and payment. Retrospective attribution can involve data lags due to claims run-out periods, affecting payment for savings tied to cost and outcomes. Prospective attribution models riskmaking payments to practices for patients no longer on a practice panel during the performance period. Reconciliation of patient rosters may be needed.[xxxiv]
For more resources about designing VBP methodologies for FQHCs, see the resources tab. To view additional information about stakeholder engagement, measurement and reporting, or FQHC readiness, return to the toolkit home.
[i] The Health Care Payment Learning and Action Network uses the term “alternative payment methodology (APM)” to define types of value-based reimbursement models; however, because the term “APM” has a different context when describing FQHC reimbursement, NASHP refers to reimbursement models defined in the HCP-LAN as value-based payment methodologies.
[ii] Category 1, or fee-for-service payments with no link to quality and value, are not value-based and will not be discussed further in this toolkit.
[iii] For more information on the HCP LAN framework, please visit: http://hcp-lan.org/workproducts/apm-framework-onepager.pdf.
[iv] Medicaid.gov. District of Columbia State Plan Amendment # 16-009. Approved September 20, 2017. Accessed May 3, 2018. https://www.medicaid.gov/State-resource-center/Medicaid-State-Plan-Amendments/Downloads/DC/DC-16-009.pdf.
[v] District of Columbia Department of Health Care Finance. Notice of Emergency and Proposed Rulemaking, Governing Medicaid Reimbursement for Federally Qualified Health Centers. October 6, 2017. Accessed May 3, 2018. https://www.dcregs.dc.gov/Common/DCMR/SectionList.aspx?SectionNumber=29-4502.
[vi] Medicaid.gov. Ohio State Plan Amendment # 17-043 (supersedes sections of SPA # 17-015). Approved March 8, 2018. Accessed May 3, 2018. https://www.medicaid.gov/State-resource-center/Medicaid-State-Plan-Amendments/Downloads/OH/OH-17-043.pdf.
[vii] Ohio Department of Medicaid. “Comprehensive Primary Care (CPC) Program.” Accessed May 3, 2018. http://medicaid.ohio.gov/provider/PaymentInnovation/CPC.
[viii] Ohio Department of Medicaid. “Overview of CPC Efficiency Metrics.” Accessed November 20, 2017. http://www.medicaid.ohio.gov/Portals/0/Providers/PaymentInnovation/CPC/efficiencyMetricSpecs.pdf.
[ix] Ohio Department of Medicaid. “Clinical Quality Requirements.” Accessed November 20, 2017. http://www.medicaid.ohio.gov/Portals/0/Providers/PaymentInnovation/CPC/qualityMetricSpecs.pdf.
[x] Ohio Department of Medicaid. “Overview of CPC Activity Requirements.” Accessed November 20, 2017. http://www.medicaid.ohio.gov/Portals/0/Providers/PaymentInnovation/CPC/ActivityRequirements.pdf.
[xi] Medicaid.gov. Minnesota State Plan Amendment #15-0015. Approved July 6, 2016. Accessed May 3, 2018. https://www.medicaid.gov/State-resource-center/Medicaid-State-Plan-Amendments/Downloads/MN/MN-15-15.pdf.
[xii] Minnesota Department of Human Services. “Integrated Health Partnerships (IHP).” Accessed May 3, 2018. https://mn.gov/dhs/partners-and-providers/news-initiatives-reports-workgroups/minnesota-health-care-programs/integrated-health-partnerships/.
[xiii] Minnesota Department of Human Services. “Appendix F: Quality Measures.” Accessed May 3, 2018. https://mn.gov/dhs/assets/2017-ihp-rfp-appendix-f_tcm1053-294449.pdf.
[xiv] Minnesota Department of Human Services. Sample Integrated Health Partnerships Contract. Accessed May 3, 2018. https://mn.gov/dhs/assets/2018-ihp-track-2-contract-template_tcm1053-327867.pdf.
[xv] Centers for Medicare & Medicaid Services. MassHealth 1115 Demonstration Waiver Special Terms and Conditions. Approved November 4, 2016. https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ma/MassHealth/ma-masshealth-stcs-11042016.pdf.
[xvi] Mass.gov. “MassHealth Accountable Care Organization (ACO) Models: Questions and Answers.” September 30, 2016. https://www.mass.gov/files/documents/2016/09/pn/aco-models-questions-and-answers.pdf.
[xvii] Mass.gov. “Guide: Payment & Care Delivery Innovation (PCDI) for Providers.” Accessed May 3, 2018. https://www.mass.gov/guides/guide-payment-care-delivery-innovation-pcdi-for-providers.
[xviii] Washington State Health Care Authority. Washington Apple Health 2015-18 Managed Care Contract. Accessed May 3, 2018. https://www.hca.wa.gov/assets/billers-and-providers/model_contract_ahmc.pdf.
[xix] Healthier Washington. “Clinics transition to new, value-based payment model (Olympia, WA: Washington State Health Care Authority, September 2017). https://www.hca.wa.gov/assets/program/APM4-fact-sheet.pdf.
[xx] Healthier Washington. “Clinics transition to new, value-based payment model (Olympia, WA: Washington State Health Care Authority, September 2017). https://www.hca.wa.gov/assets/program/APM4-fact-sheet.pdf.
[xxi] Personal communication between authors and Mary Cieslicki, Centers for Medicare and Medicaid Services. April 25, 2018.
[xxii] Medicaid.gov. District of Columbia State Plan Amendment # 16-009. Approved September 20, 2017. Accessed May 3, 2018. https://www.medicaid.gov/State-resource-center/Medicaid-State-Plan-Amendments/Downloads/DC/DC-16-009.pdf.
[xxiii] District of Columbia Department of Health Care Finance. Notice of Emergency and Proposed Rulemaking, Governing Medicaid Reimbursement for Federally Qualified Health Centers. October 6, 2017. Accessed May 3, 2018. https://www.dcregs.dc.gov/Common/DCMR/SectionList.aspx?SectionNumber=29-4502.
[xxiv] Medicaid.gov. Minnesota State Plan Amendment #15-0015. Approved July 6, 2016. Accessed May 3, 2018. https://www.medicaid.gov/State-resource-center/Medicaid-State-Plan-Amendments/Downloads/MN/MN-15-15.pdf.
[xxv] Centers for Medicare & Medicaid Services. MassHealth 1115 Demonstration Waiver Special Terms and Conditions. Approved November 4, 2016. https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ma/MassHealth/ma-masshealth-stcs-11042016.pdf.
[xxvi] Mass.gov. “MassHealth Partners with 17 Health Care Organizations to Improve Health Care Outcomes for Members” [press release]. August 17, 2017. http://www.mass.gov/eohhs/gov/newsroom/press-releases/eohhs/masshealth-partners-with-17-health-care-organizations.html.
[xxvii] Medicaid.gov. Ohio State Plan Amendment # 17-043 (supersedes sections of SPA # 17-015). Approved March 8, 2018. Accessed May 3, 2018. https://www.medicaid.gov/State-resource-center/Medicaid-State-Plan-Amendments/Downloads/OH/OH-17-043.pdf.
[xxviii] Ohio Department of Medicaid. “Comprehensive Primary Care (CPC) Program.” Accessed November 20, 2017. http://www.medicaid.ohio.gov/PROVIDERS/PaymentInnovation/CPC.aspx.
[xxix] Gary Swan. “Healthier Washington and Washington’s FQHC APM” [PowerPoint Presentation]. July 24, 2017. https://nashp.org/wp-content/uploads/2017/11/WA-HCA-FQHC-VBP-Alignment_2017.pdf.
[xxx] Rachel Donlon. “The Kentucky ‘Wrap’: Decreasing Administrative Costs for Medicaid and FQHCs in MCO Payment Reconciliation.” NASHP State Health Policy Blog. January 12, 2016. http://www.nashp.org/15032/.
[xxxi] Michael Bailit and Beth Waldman. Safety-Net Provider ACOs: Considerations for State Medicaid Purchasers (Princeton, NJ: Robert Wood Johnson Foundation, 2016). https://www.shvs.org/wp-content/uploads/2016/01/SHVS-Bailit-Safety-Net-Provider-ACOs-Considerations-for-State-Medicaid-Purchasers-January-2016.pdf.
[xxxii] For more information on risk adjustment please review the webinar and slides from John Meerschaert of Milliman, https://nashp.org/wp-content/uploads/2017/11/VB-PRLA-Webinar-3_5.1.17_FINAL.pdf. For more information on incorporating social determinants of health into value-based payment models, review the webinar and slides featuring the work of Dr. Dan Polsky of the University of Pennsylvania and Virginia’s Health Opportunity Index, https://nashp.org/wp-content/uploads/2017/11/VB-Payment-Reform-Academy_Group-Webinar-1_Slides.pdf.
[xxxiii] Rachel Donlon, Barbara Wirth, and Mary Takach. Matching Patients with Their Providers: Lessons on Attribution and Enrollment from Four Multi-Payer Patient-Centered Medical Home Initiatives (Portland, ME: National Academy for State Health Policy, 2014). http://www.nashp.org/wp-content/uploads/sites/default/files/PCMH_Attribution_and_Enrollment.pdf.