Medicaid reform in NC has health care systems juggling best path for services

NCMedicalAssistanceThe state’s largest health care systems have been caught in a logistical tug-of-war after legislators proposed a hybrid strategy for handling the biggest piece of Medicaid reform.

Do the systems pursue a statewide Medicaid coverage role, whether individually or collaboratively, which carries both revenue opportunities and risk, or do they focus on serving their own markets?

Medicaid covers about 1.84 million North Carolina residents and costs $14 billion a year.

The reform compromise, approved in September, culminates legislative leaders’ pursuit of coordinating physical, behavioral, dental, pharmaceutical and long-term health services through the oversight of not-for-profit, provider-led entities (PLEs) and for-profit managed care organizations (MCOs).

The PLEs could include participation from Cone Health, Novant Health Inc., UNC Hospitals and Wake Forest Baptist Medical Center in the Triad.

Both PLEs and MCOs will contract to provide all care and would absorb budget shortfalls. The reform law requires the groups to dedicate 88 percent of financing to patient care and 12 percent to administrative costs and profit.

Senate Republican leaders pushed for Medicaid reform in part because they said that having a capitated system, where a flat fee is paid to cover all care services for most recipients, will provide “better budget predictability and sustainability.” The system currently operates on a fee-per-service format.

Legislators and state officials hope the reform strategy will gain federal regulatory approval by early 2018 and be in place by mid-2019, although it could take one or two years to accomplish each goal.

Gov. Pat McCrory and legislative leaders touted the compromise for its potential to provide financial stability and predictability to a program that has lacked both for decades.

“Under the current system, we wait until people get sick to provide care and pay for tests — not outcomes,” McCrory said in September. “This new system will focus on keeping people healthy and delivering care where it makes the most sense for patients.”

The heart of the strategy is establishing three entities, projected to be insurers, to provide statewide coverage.

Rick Brajer, the state’s health secretary, said Tuesday that Department of Health and Human Services is in talks with Blue Cross Blue Shield of N.C., Aetna and United Healthcare about the statewide coverage.

Lew Borman, a spokesman for Blue Cross, said the insurer continues to evaluate the statewide coverage opportunity.

“At this early time, we have not made a decision on whether or not we will be participating,” he said.

Aetna spokesman Walt Cherniak said the insurer “had no comment at this time.”

There also would be 10 to 12 PLEs serving six proposed Medicaid regions, which could only come from not-for-profit systems. Brajer said at least 11 systems have expressed interest in establishing a PLE.

Both sets of entities would provide what is known as prepaid health plans (PHP). DHHS’ plan is to have its PHP review team in place by October, for entities to submit their PHP proposal by April 2018, and groups chosen by September 2018.

Each Medicaid participant can choose a PHP, or have one assigned. Each PHP would be responsible for administrative services.

“Regulations will be developed by the Department of Insurance, which will monitor these new plans,” said Rep. Donny Lambeth, R-Forsyth, and a key architect of the legislative compromise. Lambeth served as president of N.C. Baptist Hospital.

Health systems collaborate

In December, 11 systems — including Cone, Novant and Wake Forest Baptist — said they are collaborating on Provider-Led, Patient-Centered Care LLC, a PHP that would be owned and led by providers.

The systems said the collaboration “would not preclude any of these health systems from participating in, organizing or contracting with PLEs” or other groups.

On Thursday, the coalition said they have chosen to work with Presbyterian Health Plan of New Mexico on developing a PHP strategy that it plans to unveil later this year.

Presbyterian is the only plan in New Mexico to have served continuously as a Medicaid managed-care plan since the program began in 1997. It currently serves more than 30 percent of the state’s Medicaid members.

“This collaboration of North Carolina’s prominent health care systems recognizes that serving Medicaid patients is a core part of their collective mission,” the coalition said in a statement.

“Forming a provider-led plan is a concrete demonstration of their commitment to the long-term health of Medicaid patients, and to the long-term stability of the Medicaid program in the state.”

Chad Eckes, chief financial officer at Wake Forest Baptist, said in December that the coalition “is about offering high-quality solutions to our Medicaid patients and empowering them with choices for their care.”

“We believe that patients should have a choice in where they access their care and benefits. The choices available for patients are going to depend upon implementation of a program that is workable, transparent and actuarially sound.”

Jeff Jones, Cone’s chief financial officer, said last week Cone “is very interested in providing good care and community health at the right cost for Medicaid recipients.”

“We remain committed to doing that through our partnership with other health care systems through Provider-Led and Patient-Centered Care.”

Novant said in a statement that it is pleased that the strategy “recognized the critical role providers play in managing Medicaid beneficiaries’ health care by giving provider-led entities the opportunity to compete.

“Novant Health looks forward to continuing to partner with the DHHS, as well as members of the General Assembly, to meet the aggressive timeline for a sustainable and effective Medicaid program that will benefit the children and families in the communities we serve.”

Medicaid patients targeted

Lambeth said he believes the law will provide balance between the number of providers and PHPs.

“While not every provider or insurer looks at the Medicaid population as that beneficial to their services offerings, most actually are,” he said.

“I believe there will be a high level of interest by providers to form statewide alliances and to offer their services across the state,” Lambeth said. “I suspect some PLEs will also offer services across multiple regions.”

Lambeth said his confidence in believing the state will be successful in attracting insurers and PLEs is the trend toward “validation and risk models that manage the health of populations, not just the illness.

“I personally will work to move the state health plan into a population health model. Medicare is certainly moving in that direction.

“So while some view this as reform of Medicaid, it is actually much more than that,” Lambeth said. “It is reform of our health system as it currently exists and providers want to be the solution to reform and advance their skills into other patient groups.

“In my opinion, within five years we could see up to 50 percent of all patients in some form of a capitated-risk model.”

Sen. Joyce Krawiec, R-Forsyth, said she expects the systems “to pursue all viable options. I think their priority will be providing the best health care services at the lowest cost.”

N.C. Medicaid Choice, a right-leaning advocacy group, praised the hybrid nature of the reform plan.

“By including both managed care and provider-led plans in Medicaid reform, beneficiaries will enjoy greater choice and the state will have more options to ensure quality of care and budget predictability,” the group said.

“The plan recognizes the importance of providing Medicaid beneficiaries with a choice of plans. To accomplish this, it will be critical to design standards that allow both provider-led and traditional managed care plans to compete on a level playing field.

“We are committed to working with the state to ensure the successful implementation of sustainable, fiscally sound Medicaid reforms that protect taxpayers and provide high-quality care to patients.”

New path

Julie Henry, a spokeswoman with the N.C. Hospital Association, said part of the challenge with the hybrid strategy is that no other state has pursued this path.

“Our members are trying to figure out if statewide coverage makes sense, particularly those with a major presence in more than one of the six regions,” Henry said.

For example, Novant has large hospitals in the Triad and Charlotte markets, while UNC Hospitals is in the Triangle and Triad and Carolinas HealthCare is in Charlotte and the Triad.

When asked if members, individual or through the coalition, would want to bear the financial risk of a statewide system, Henry said they already handle risk from patients with behavioral health issues, those who use the emergency department as a primary care option, those without insurance and those who have the ability to pay their bills but choose not to.

“The current vagueness is uncomfortable and the reason you haven’t had any outright claims of having a stake in forming a PLE,” Henry said. “We want to be a major part of the solution and are best equipped to make this reform as successful as it can be.”

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