Arkansas/AMS Leaders Featured in National Article

Medicaid: Docs Cautious About Arkansas Payment Plan

By David Pittman, Washington Correspondent, MedPage Today | Published: October 05, 2012

Doctors in Arkansas who treat Medicaid patients are trying their best to put on a happy face about a program there designed to reward quality and move away from a traditional fee-for-service payment model.

The cost-sharing program, which started this week and involves Medicaid and some of the state’s largest private insurers, will determine if a provider reaches quality and cost targets based on historical models.

The Health Care Payment Improvement Initiative, on which Arkansas Medicaid is partnering with two private insurers — Arkansas Blue Cross and Blue Shield and Arkansas QualChoice — rewards doctors who manage care and costs well but also withholds reimbursement for those who exceed historical cost levels.

“We are not endorsing this plan. We have tried to be very clear about that,” David Wroten, executive vice president of the Arkansas Medical Society, told MedPage Today. “What we are trying to do is to work with the Medicaid people to make sure if they’re going to do this, that it’s done in the least destructive way.”

Physicians in the state already fought successfully against a bundled payment model that was first proposed. Instead, state officials settled with this alternative as they seek to stem the rising costs of Medicaid, which faces a $300 million budget shortfall as early as next year.

State and national Medicaid officials are warning that the payment model is the way reimbursements are going. Arkansas is just the first to take such an aggressive approach.

“It’s the type of thing that everyone is looking at and saying ‘Wow. If that really works there, that emboldens us to do something similar,” Matt Salo, executive director of the National Association of Medicaid Directors, said in an interview.

As in many states, Arkansas’ Medicaid program was hit hard by the 2008 financial crisis. State revenues dropped and enrollment skyrocketed. And now, when the $300 million shortfall that the state faces for its 2013 Medicaid budget is combined with lost federal matching funds, Arkansas stands to lose about $1 billion in Medicaid money for next year.

Rather than cutting provider payments or services, payers in the state decided to take dramatic action and launched the Payment Improvement Initiative.

“What we’re doing is taking the docs who have the highest average cost and telling them, ‘You know your average cost is in the unacceptable range compared to your peers, so you will be at risk for sharing your excessive costs,’ ” Arkansas Medicaid Medical Director William Golden, MD, told MedPage Today.

Under the program, each plan determines the average cost for a condition — everything from hospitalizations to office visits and drug costs — and compares that to what each physician is spending on patients for that disease.

If the doctor falls above a certain pre-defined spending range, they will have part of their reimbursements withheld. If they fall below the spending range, they get a bonus. If the physician’s spending habits are within the range, their reimbursements stay the same.

The plan is starting with pregnancy, attention deficit hyperactivity disorder, and acute upper respiratory infection. “They’re smart enough not to try to bite the whole apple,” Wroten said. “They’re taking a bite of the apple with some episodes they think they can get success on.”

Hip and knee replacements and congestive heart failure are set to come online next year for Medicaid. The program also is eyeing developmental disabilities, Wroten said.

And because the quality rates are based on historical models for that payer, physicians aren’t expected to transform more troublesome Medicaid enrollees into fully compliant patients.

“If bad habits were part of the historical cost structure, then they’re by definition part of the threshold levels that we set up,” Wroten said. “If a Medicaid patient takes two times as many office visits as a regular patient, then two times as many office visits were built into the historical costs.”

“I think a lot of people are in a little bit of a watch-and-wait mode,” Robert Hopkins, Jr., MD, professor of internal medicine and pediatrics at the University of Arkansas for Medical Sciences, said in an interview. “We’ll see what happens as far as expanding the program.”

His spending report from Medicaid, sent to providers this summer to give an idea of where they sit compared to peers, showed his costs were fairly good on heart failures and upper respiratory infections, two common aliments for him.

“I suspect that I will be able to provide the same level of care as I have always done in the past,” Hopkins said.

Like most doctors he knows, Hopkins holds mixed feelings but realizes something must be done because healthcare costs are becoming unsustainable. “I’m going to keep my fingers crossed.”

Private insurers like Blue Cross, which has 70% of the state’s private insurance market, were eager to join the Medicaid initiative.

“Blue Cross was ready. Their capacity to keep raising premiums is very constrained,” Golden said. “They do need to have a different way of paying for care because their business model is challenged just like Medicare and Medicaid.”

State officials invited the Centers for Medicare and Medicaid Services to be part of the process from day one, Golden said. The state, in turn, has been invited to apply for innovation grants from the agency to expand the program.

Arkansas officials have held meetings with Department of Health and Human Services Secretary Kathleen Sebelius and former CMS Administrator Don Berwick, MD. Other states are also keeping a close eye on the Natural State.

Said Salo, “You could argue that Arkansas is the first in the nation to be as comprehensive as this.”