NC DHHS Expands on their Value-Based Payment (VBP) Strategy and Introduces the Medicaid Accountable Care Organization Model

The recently published concept paper, “North Carolina’s VBP Strategy for Standard Plans and Providers in Medicaid Managed Care” provides a lot of detail on strategies NC DHHS will employ to support the expanding use of value-based payment (VBP).  While their support strategies are optional, the paper also details the State’s contractual expectations for Prepaid Health Plans (PHPs) to use VBP and the payment incentives that will be available to payers and providers.  The Value Based Payment paper also introduces a new concept with an old soul—Accountable Care Organizations (ACOs).  ACOs have been a part of the Medicare structure nationally since 2011.  According to the Kaiser Family Foundation, 14 states had instituted Medicaid ACOs as of 2019.  NC DHHS notes that the ACO concept paper is for Standard Plans and that there will be an additional paper produced at a later time on VBP for BH/IDD Tailored Plans.  It can be inferred that many of the constructs in this paper will be used as a springboard for VBP in Tailored Plans.

Comments are due for both papers on February 19^th to Medicaid.Transformation@dhhs.nc.gov.  Generally, NC DHHS is looking for feedback on how they can best support the adoption of innovative payment models around the State. 

Let’s get to the overview of the VBP paper:

• The VBP paper clearly states that NC DHHS intends to start with the “current market readiness for value-based purchasing and existing VBP with an expectation that it will increase over the 5-year contract period with Prepaid Health Plans.” 
• NC DHHS will offer several strategies to support the use of VBP:
  • Incentive payments to Advanced Medical Homes
  • A Medicaid ACO program that will begin around mid-2021.
  • Addition of VBP to existing State priority programs like the Pregnancy Management Program and Local Health Department care management.

Five-Year VBP Strategy:

(Refer to page 5 of the paper for a chart on the VBP categories of payments and a table of targets for NC by contract year)

The federal Centers for Medicaid and Medicare Services (CMS) has been using a chart of categories to help define the levels of sophistication in value-based payments.  It is called the Health Care Payment – Learning and Action Network (HCP-LAN), and NC DHHS has adopted this framework to distinguish the levels of alternative payment methods that are being used.  Within the HCP-LAN there are several categories that range from typical fee-for-service/unit of cost payments to payments built on population management with integrated finance and delivery systems.   This section of the paper spells out the expectations of the State in their contracts with PHPs and the “glide path” to expanded use of value-based payments and higher targets on the level of categories within the HCP-LAN that are used in payments.  Ultimately, measured as the end of the first five-year contract period with PHPs, the expectation is that the majority of payments to providers in the Standard Plan networks will be value-based payments. 

Medicaid Accountable Care Organizations (ACOs) Created to Assist Standard Plan Providers:

NC DHHS followed the Value Based Payment Strategy paper with one that gets into more detail about the Medicaid ACO model for the Standard Plan.  CMS states “ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high-quality care to their Medicare patients.”  NC DHHS is basing its Medicaid ACO model on the success of the Medicare ACO network across the country. 

A Medicaid ACO is composed of tightly integrated networks of Advanced Medical Homes (AMHs), specialists, and other non-AMH providers. This voluntary strategy achieves the NC DHHS vision of “purchasing health” instead of purchasing discrete health care services.  The concept is focused on the Standard Plan that will include those individuals with mild-to-moderate mental health diagnoses and substance use disorders. 

NC DHHS plans to encourage the formation of Medicaid ACOs and begin their use as soon as mid-2021.  NC DHHS will establish criteria for the structure, governance, financial solvency and the minimum number of affiliated members needed for efficiency and solvency. 

The Medicaid ACO model for North Carolina will be broken down into “tracks”.  Track 1 is geared to smaller and rural providers through a shared savings model.  This means that there is upside risk where a provider can receive incentive payments for achieving certain outcomes.  Track 2 is geared to larger hospital-affiliated Medicaid ACOs and to providers with more VBP experience through a two-sided risk model that could include downside risk (see box for risk definitions).  Both models will come with expectations that they have the capacity to increase their AMH payment methods to the HCP-LAN Category 3A (shared savings with upside risk only) for Track 1 and Category 3B (shared savings and downside risk) or higher for Track 2. 

Another new concept that is introduced as a part of the Medicaid ACO strategy is total cost of care, or TCOC, arrangements.  TCOC arrangements include paying for the costs of all areas of services:  physical and behavioral health, long-term including I/DD services, pharmacy and unmet health-related needs.  Further, the total cost of care can include services that were provided outside of the ACO network of providers. 

A few of the key components of the ACO model are:

• The Medicaid ACO will replace AMH Tier 4 and requires certification by NC DHHS.  Contracts will be directly between PHPs and Medicaid ACOs. 
• There will be a link between savings/losses and quality of care/health outcomes.  This is an important guiding principle to understand as it gets to the core of purchasing health and value-based contracting. 
• Data sharing amongst ACO member providers will be a critical function and an indicator of the capacity of the Medicaid ACO. 
• NC DHHS will offer incentives to those ACOs that form earlier in the formation of this model through input opportunities and payment incentives. 
• Medicaid beneficiaries who are affiliated with an AMH Tier 3 practice that belongs to an ACO will be attributed to that ACO.  Therefore, the oversight for their total cost of care and their quality of care will be the responsibility of that ACO. 
• The model dovetails with the Healthy Opportunities pilots that will focus on identifying those unmet health-related needs in the areas of transportation, food security, housing and interpersonal safety.  ACOs will be given greater responsibility in the pilot regions that will be coupled with greater opportunity for funding the unmet health-related needs. 

At several points in the concept papers NC DHHS makes specific requests for feedback.  An important request for feedback as it relates to serving individuals in the Standard Plan with behavioral health issues is “on the optimal approach for ensuring a clear link between payment and performance, and on the measures that should be used to ensure physical-behavioral health integration and behavioral health initiatives.”

These papers are meant to build upon earlier concept papers such as the “PHP Quality Performance and Accountability” paper and its companion, “NC Medicaid Managed Care Quality Strategy) released in March 2018. 

Value-Based Payments Definition:

The federal Centers for Medicaid and Medicare Services currently defines value-based care as paying for health care services in a manner that directly links performance on cost, quality and the patient’s experience of care.

Risk Definitions:

Upside Risk–Providers assume an upside risk, so if they are able to provide appropriate and necessary care for less than the contracted payment, shared savings are divided between payer and provider. However, if providers exceed the bundled payment allocation, payers are not financially penalized.

Downside Risk–In a downside risk model, providers must refund the payer for the incurred losses if they exceed financial benchmarks. 

Two-Sided Risk–Two-sided risk combines both the upside and downside risk models. 

(All above definitions were taken from Health Payer Intelligence, “The Defining Features of Current Value-Based Care Models”, September 23, 2019)