Value-based purchasing

Provider Payment

State Medicaid programs are increasingly implementing a variety of value-based payment models that aim to drive system change towards greater efficiency and improved health outcomes. In contrast to traditional fee-for-service payment models that are based on the volume of care provided, value-based payment models reward providers based on achievement of quality goals and, in some cases, cost savings. Although states have long had the authority to implement many types of value-based payment models in Medicaid, their use has increased in recent years as a result of new options for states created through the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) and a desire to align with the efforts of other payers. MACPAC has been working to better understand use of these value-based payment models through a variety of research projects.

Advanced Payment Models

MACPAC is tracking the progress of seven states that implemented various approaches (e.g., shared savings, episode-based payments, and global budgeting) aimed at improving quality of care and reducing costs. The purpose of this project is to better understand specifics of different state approaches to Medicaid payment and delivery system reform, to monitor state progress in advancing these reforms, and to identify common themes across states. Case studies provide additional detail on programs in four states (Arkansas, Minnesota, Oregon, and Pennsylvania) and a report describes the key themes related to state Medicaid payment and delivery system reforms.

Delivery System Reform Incentive Payments (DSRIP)

DSRIPs are a type of Medicaid supplemental payment approved under Section 1115 waiver authority that support provider-led efforts to change the delivery of care, improve quality of care, and promote population health. A total of $3.6 billion in federal funds was available in fiscal year 2015 to implement DSRIP programs in California, Kansas, Massachusetts, New Jersey, New York, and Texas. The payments are tied to the achievement of specific planning, implementation, reporting, and health outcome milestones and have enabled providers to invest in a variety of infrastructure and care redesign projects. MACPAC examined several state DSRIP programs in detail and found that they have the potential to drive value and improved health outcomes in Medicaid, but could benefit from more clarity and consistency in federal guidance. These findings are included in a chapter on DSRIP programs in the March 2015 report to Congress. MACPAC has also published a report with additional detail on the genesis, design, financing, and monitoring of DSRIP programs.

Accountable Care Organizations

Safety-net providers are increasingly forming accountable care organizations (ACOs): groups of doctors, hospitals, and other health care providers who come together voluntarily to provide coordinated high-quality care to their patients. While there have been extensive ACO demonstrations in Medicare, limited information exists about how these ACOs function within Medicaid. In 2014 and 2015, MACPAC conducted a series of site visits to safety-net ACOs to better understand the conditions that drove their formation, their strategies to improve the quality of health care, and the challenges they face.

A summary report on the site visits notes that providers believe adopting this new payment model is necessary for long-term sustainability but face significant challenges, including limited resources to address the poverty and illness that people with Medicaid face. Hospital-based ACOs also must reconcile their financial need to keep hospital beds full but at the same time reduce readmissions and emergency room visits as a measure of quality of care.