At The 2018 OPEN MINDS Strategy & Innovation Institute, I had the chance to participate in the session, The Return On Investment On Medical and Health Homes, featuring David Wawrzynek, Chief Financial Officer, Spectrum Human Services; and Alyssa Brown, Deputy Director, Planning Administration, Office of Health Care Financing, Maryland Department of Health and Mental Hygiene. The presentation featured two distinct perspectives. Ms. Brown focused on the state policy perspective, while Mr. Wawrzynek focused on the nuts and bolts of transitioning his organization to a health home model (stay tuned for Ms. Brown’s perspective in the next couple of days).
Mr. Wawrzynek’s presentation left me thinking about rates and how the “sustainability” of a model is dependent on those rates, volume, and service levels. Like many Medicaid-financed health home initiatives, Spectrum started with relatively high care coordination rates and has had to adjust their model to remain financially sustainable as the rates dropped over time. Prior to joining the New York health home program, Spectrum created an LLC with three other organizations that is responsible for health home management while Spectrum and the other two organizations provide the actual care coordination services. Overall Spectrum is budgeted to provide health home services to 50,000 consumers and has billed $10 million in services for 2018. 7% of that revenue is withheld to support the functions of the LLC.
When New York first instituted their health home program, the state used variable rates for each enrollee based on their risk score and those rates were adjusted each month. In 2016, when the state moved health home services to managed care, the state established a tiered rate based on member acuity and geography (see New York Moving Medicaid Health Home Program To Managed Care). Then the state dropped the rate for outreach and engagement and made the allowable billable activities more difficult. As a result, Spectrum went from $125,000 in reimbursement for outreach and engagement per month to $6,200.
Fluctuations in rates and reimbursement can be difficult to manage. Mr. Wawrzynek presented how Spectrum transformed their organization to be a successful health home through financial modelling, adjusting staffing models, and investing in technology.
New health home financial model – In order to ensure that the health home program was sustainable, Spectrum ran detailed financial models that took into account caseloads, reimbursement, and uncertainty related to volume and growth. Spectrum has had to rework the model a couple of times. When the program was first implemented, rates for services were based on consumer risk scores and those risk scores were adjusted each month. This made it nearly impossible to accurately estimate an individual’s average cost.
New staffing models – Under targeted case management, Spectrum operated an intensive case management program that used a 1:12 staffing model, and a supportive case management model that used a 1:20 staffing model. Under the health home model, Spectrum initially moved to caseloads of 1:40. In order to make the move possible, Spectrum gradually increased caseloads over a 12-month period to allow case managers to orient themselves to the new way of delivering case management. Spectrum also provided intensive staff training and worked on shifting organizational culture as this was a large change.
New technology – Mr. Wawrzynek explained that population health management software is crucial to managing the health home program. The organization also connected to the regional health information exchange, which allows staff to see real-time emergency room admissions and inpatient hospitalizations. Investment in population health management software required a substantial investment of $1.6 million. The cost of the software was in part financed through the $4.2 million in start-up funds received from the state.
I think there are a couple of key lessons here. The first is the importance of financial modeling for new services in order to determine break-even rates and achieve sustainability (see Structuring (& Budgeting For) Analytics, Diversifying Your Revenue Streams: How To Successfully Launch A New Service Line, and Best Practice Service Line Development: An OPEN MINDS Seminar On New Service Line, Design, Development, & Launch). The second is the importance of investing in the technologies that allow for interoperability, real-time reporting, care coordination capabilities, and population health management capabilities. And those technologies should enable both process automation and metrics-based management (see How To Prepare For Value-Based Reimbursement: Four Key Competencies For Success, Why Your Performance Reporting Should Include ‘Episodes Of Care’, and Consumer Transparency & VBR Changing Best Practice EHR Functionality). The ability to use technology to manage health home programs (and any program with VBR reimbursement) is becoming a management team “must have” skill set. The question for the leadership of provider organizations is how to get your team there.
To learn more about the skillsets and culture change needed to move to value-based reimbursement, join us at The 2018 OPEN MINDS Executive Leadership Retreat for the session, “The New Leadership Challenge: Culture & Change Management In A Value Based Market,” featuring John F. Talbot, Ph.D., Chief Strategy Officer, Jefferson Center for Mental Health, & Advisory Board Member, OPEN MINDS.