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 Medicaid ACOs on the Rise, but Differ Greatly Amongst States

Among the many evolving payment models and provider-payer structures long term and post-acute care providers need to understand is the trend for states to establish Medicaid accountable care organizations (ACOs) with the goal of cutting costs and improving quality. A new report by Leavitt Partners looks at the rise of these ACOs and how they differ from state to state, as well as how they are not as easy to grasp as Medicare ACOs.
Currently, 13 states have implemented Medicaid ACO programs, covering 3.6 million beneficiaries, and at least 10 more are exploring such accountable care initiatives.
Because the ACOs differ widely depending on which state they are initiated, Leavitt said they developed a framework that explains four approaches states take to establish ACO programs, which is intended to help stakeholders manage their priorities in each model.
“The framework considers the level of state engagement with the ACO based on whether a Medicaid managed care organization (MCO) exists in the state and the MCO’s degree of involvement,” the report said.
Leavitt said a variety of factors influence why states choose different approaches, including a state’s desired amount of control and ownership, a state’s willingness to accept additional administrative burden, and the state’s managed care and regulatory environments.
The four different types of Medicaid ACOs as described in the report as Approaches A through D, start with Approach A in which the state contracts directly with the ACO providers. This distinguishes it from the other Medicaid ACO structures that include an MCO or other health care organization contracted to pay for beneficiaries’ Medicaid health services.
Leavitt said this style of ACO gives the state “the most control and flexibility to determine the model parameters that best align with its goals,” such as payment methods, quality measurement, provider eligibility/participation requirements, and risk levels.
The state, however, also bears the significant operational and administrative responsibilities associated with facilitating the program, including design, roll out, evaluation, and maintenance. Leavitt cited Oregon, Minnesota, Vermont, Colorado, and Maine as a few examples of states that have implemented this structure.
In approach B, the state may remain highly involved in developing the model—even selecting the ACO’s participants—but the contract is between the MCO and ACO, not the state itself. But, in some cases, the state may mandate that its Medicaid MCOs contract with an ACO or the state may certify the ACOs with which an MCO may contract. States that incorporate this structure include Rhode Island, Michigan, and New Jersey.
Under approach C, the state contracts with the MCO, and the MCO independently chooses to contract with an ACO. Levitt said state involvement ends with the capitated payment to the MCO.
“The state is not involved in deciding whether to contract with an ACO but rather the MCO has determined it is advantageous to pursue an alternative payment model with an ACO,” the report said. California, Missouri, and Massachusetts use Approach C.
Finally, for Approach D, the MCO and the provider organization partner to create an ACO as a joint entity.
“The payer and the providers continue to split responsibilities appropriate to their expertise but work together toward common goals. The state contracts with the joint entity and is generally involved in determining the payment model and program components,” the report said. Massachusetts and Utah use this partnership approach.
Leavitt said there are also instances where Medicaid ACOs exist even in states with no Medicaid ACO model. In these states, the provider or payer rather than the state drives the formation of the ACO. Ohio and Tennessee are some of the states in which this trend has occurred.
Read the full report at
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