Many states are moving to managed long-term services and supports or MLTSS – with 19 states already making the move to managed care for roughly 756,000+ consumers (see Which States Provide Medicaid Long-Term Services & Supports Through Managed Care?: An OPEN MINDS Market Intelligence Report and The Question Of Family Caregivers & Capitated MLTSS Rates). Many states and health plans are also moving to value-based reimbursement for provider organizations (see Medicaid MCO In Your State? There May Be An APM In Your Future and Medicaid Episodes Of Care & Other Weird Arrangements). These concurrent market developments are a “double whammy” for some provider organizations. Services that have never been managed are now moving to managed care at the same time that reimbursement is shifting from volume to value.

A good case in point is Arizona. Earlier this month, Arizona announced that its next Medicaid contracts for MLTSS feature provisions that would link 50% of payments for Arizona Long Term Care Services (ALTCS) contracts to value-based purchasing strategies (see Arizona’s Next MTLSS Contracts To Link 50% Of Payments To Value-Based Strategies). The RFP noted that the ALTCS value-based purchasing provisions call for 35% of all payments to be governed by value-based strategies by the end of calendar year 2018 and the contractors are encouraged to develop a methodology to assign members to those provider organizations participating in value-based initiatives who have demonstrated high value services or improved outcomes. (For a deep dive into Arizona’s Medicaid plan, check out this presentation by Beth Kohler, Deputy Director of the Arizona Health Care Cost Containment System at the mhca National Innovation Incubator session, AHCCCS Update: System Design Matters.)

This move of provider reimbursement to value-based purchasing is glacial – slow, steady, and irreversibly changing everything in its path. In fact, 38 state Medicaid programs use at-risk capitated contracts with managed care organizations to manage their Medicaid populations. The models can include care rates, episodes of care, and population health management risk (see State-By-State Analysis Of Medicaid MCO Requirements For Provider Alternative Payment Reimbursement).

How do you prepare to depart from fee-for-service to some form of value-based purchasing?

Track Your Own Data, Choose A Leading Indicator, & Budget For Possible Failure

To get a perspective from the field on this increased percentage for value decisions in MLTSS, I reached out to John F. Talbot, Ph.D., Vice President, Corporate Strategy, Jefferson Center for Mental Health, who wrote:

For a transition into value-based care, make sure you have the infrastructure and the skill set to manage that. In pay-for-value, there is a target you have to hit and the trick is, you can’t just rely on the payer for tracking that information or it will be too late to fix it if your performance is off. You need to track that yourself and move quickly to fix it. If you wait for those measures from the payer, you will run out of time and lose. That’s failure number one.

The second failure is using the wrong indicator. You want a leading indicator, not a lagging indicator. If you don’t have that, you’re maybe a month behind and that’s too far. And the third failure is when some organizations create budgets, they make the fundamental mistake of assuming they will hit all the targets. But if they don’t, they are in the hole right away. The smart ones don’t do that. Instead, if they do hit the numbers that’s extra money on top of the budget. But they are prepared if they don’t hit the numbers.

Prepare For New Operational, Financial Management & Data Reporting Requirements

Paul Block, Ph.D., OPEN MINDS vice president of consulting, expanded on the challenges provider organization executives must meet based on his experience as a provider, as well as advisor:

Provider organizations must adjust to new demands that are added onto, rather than replacing, existing performance requirements. This means preparing for new operational, financial management, and data reporting requirements. Unfortunately, these requirements will vary by state, service, payment program, and payer (private payers are likely to follow Medicaid in requiring value-based payment contracts). This will present significant challenges to organizations that already struggle to manage and document simpler business arrangements. Value-based purchasing contracts will require information about client needs and how services effectively address them, as well as information about the cost of service components – with detail and accuracy the field has not had to achieve in the past.

More importantly (and more of a challenge), will be the need to ensure that MLTSS (and other services contracted under similar value-based models) actually achieve the necessary effectiveness and financial efficiency. Provider organizations have rarely had to document the effectiveness of their LTSS with the clarity and reliability that will be demanded under such contracts. One result of this previous lack of accountability has been that provider organization’s beliefs about the quality of their services have been vulnerable to their internal priorities and perspectives – something we know from extensive research is biased to exaggerate our effectiveness. Objective standards and consistent measurement requirements to document effectiveness will threaten provider organizations who may have different ideas of what makes their services work or of how well their services meet the needs of their clients.

Decisions about financial management will also be dramatically different. Up to now, provider organizations have figured out how much they can afford to spend on services and done as much for their clients as that funding allowed. Because contracts tended to require a list of services, that meant that cuts reduced the extent of the services offered — reduced available funds meant reduced services. But once value-based purchasing contracts require — and pay for — outcomes, providers will have to figure out what is most necessary to achieve those outcomes and how well the services they select are actually achieving them. This is a different way of thinking and managing, one that CMS and states like Arizona believe will improve the outcomes they purchase with the funds they can afford.

Of course, whether that turns out to be true depends not only on what funders demand for their dollars, but also what provider organizations are able to figure out how to deliver and to manage.

Lead Performance Efforts By Example & Know Your Numbers

OPEN MINDS Senior Associate Jim Gargiulo also offered some great advice for executives of provider organizations that are navigating value-based payment models. He wrote:

From our point of view and regardless of the pending change in presidential administration, the literature tells us 58% of physical health providers are subject to value-based contracts and given the co-morbidity of behavioral health conditions with physical health problems, we expect to see more alternative payments models to traditional fee-for-service programs. My advice to provider organizations:

• Lead efforts to measure performance, not follow a set of standards that may not apply to your programs; this means taking a hard look at what you do well and how this is presented to the payer and consumer communities.
• Identify your “Centers of Excellence,” whether it’s an innovative service that manages autism, a residential program that keeps people integrated with the community, or a crisis service that diverts people away from the legal system into care; knowing what you do best is where you and others will perceive the greatest value.
• Identify and define the measures that show the value of your programs; examples include reductions in involuntary evaluations, symptom reduction (as measured by an accepted instrument), compliance with medications, reductions in emergency room visits, client/family satisfaction with services, and others. This is at the heart of any value-based program and, as a rule, simple is better.
• Measure, measure, measure, starting with a solid baseline; without it, you’ll be hard-pressed to prove value. Payers, consumers and people looking for a service want to see performance year to year, not just at a point in time.
• Sell it… to your internal team, to the community you serve and to payers. Leveraging data to tell the story of how your program changes lives, how it adds value to the community.
• Know your number, especially related to cost, as value-based programs assume a level of risk and strong data systems are essential to managing the margins. They assume a normative level of variance in the people being served; outliers beyond normative levels bring both reward and risk to the process. With good data and predictive analytics, outliers are flagged early and incorporated into overall financial projections.

Key to so much of the advice we give to providers is the importance of a solid IT partner as the health care landscape changes. And, it extends beyond implementing an effective electronic health record (EHR). As value-based initiatives expand, IT partners need to:

• Configure solutions for quality measurement; meaning metrics need to be integrated with the workflows of the organization, not as an afterthought.
• Offer better, less expensive and easier integration with hospital emergency rooms (ERs), the legal system and other health care providers; measuring the value of the care we provide often extends beyond the four walls of the clinical setting.
• Support new payment rules that allow for the bundling and unbundling of services, often by payer source.
• Re-think the traditional EHR as the place where we perform, record and report on all transactions of a person being served and extend it to a population health/care coordination platform that securely captures and reports data about the person wherever they are served, whether it be at my clinic, in the ER, in a school, or in a court of law.

Our IT Partners need to make analytics easier and more affordable so that as a provider, I am working with a single “source of truth” on behalf of the people being served.

How prevalent is this likely to be in coming years? Last February, the National Association of Medicaid Directors’ Executive Director Matt Salo noted that the average Medicaid director has four (or more) value-based purchasing initiatives underway, including managed long-term services and supports (MLTSS) initiatives (see Moving To Value – Easy To Say & Hard To Do). Given that, I’d expect this transition to value-based decisions to continue.

For more, join Brian Wheelan, chief strategy officer and executive vice president of Beacon Health Options, on February 16, 2017, at The 2017 OPEN MINDS Performance Management Institute session, Partnering With Provider Organizations: How To Make Risk-Based Contracting Work.