Editor’s note: This post is part of a periodic Health Affairs Blog series, which will run over the next year, looking at payment and delivery reforms in Arkansas and Oregon. The posts will be based on evaluations of these reforms performed with the support of the Robert Wood Johnson Foundation. The authors of this post are part of the team evaluating the Arkansas model.

In 2011, Arkansas embarked on a multi-payer comprehensive payment reform to convert a majority of private and public payments to a value-based purchasing model. An underlying goal of this effort, the Arkansas Payment Improvement Initiative (APII), is to incentivize quality and cost-effective care delivery rather than volume of services provided.

In our previous blog post, we described the design and implementation of the episode-based component of Arkansas’ system. This episodic approach focuses mostly on acute conditions and rewards providers who meet quality targets and provide lower average risk-adjusted spending per episode. Chronic care patients are more difficult to fit into an episode-based system due to the longitudinal nature of service delivery and the presence of multiple comorbidities. It would be challenging to design chronic care management episodes to account for simultaneous presentations in one patient, such as diabetes, hypertension and congestive heart failure.

Given these issues, Arkansas has also developed a Patient Centered Medical Home (PCMH) payment model to work in tandem with its episodic payment reforms. (A third component of the APII, the health home, for populations with the most complex care needs, is still being developed.) In this post, we outline the state’s PCMH approach.

Developing the PCMH Model

Like many largely rural states, Arkansas has geographic areas served only by small medical practices with modest infrastructure. Most of these practices have three or fewer physicians. High rates of uninsured patients and a reliance on Medicare and Medicaid reimbursements make it a challenge to sustain robust primary care practices.

Arkansas’ PCMH payment structure was designed against this backdrop to support primary care transformation by helping practices which are often dependent on a high volume of acute care visits to focus on team-based strategies, chronic care coordination and healthier patient outcomes. For this transformation to take place, primary care practices generally need up-front financial support.

During the PCMH planning process in 2013, Arkansas Medicaid conducted twice monthly, early morning conference calls with a large number of primary care practitioners to test concepts and shape final regulations. In addition, program leaders conducted multiple town halls, webinars and other outreach activities throughout the last half of 2013.

Arkansas has a diversity of practice sites, including both highly efficient primary care providers as well as clinics with high rates of ambulatory sensitive admissions and avoidable emergency room visits. An incentive system that rewarded only spending reduction could have penalized existing efficient practices and benefited those starting with higher than average per-member per-year spending.

Instead, the Arkansas PCMH model benefits providers that hit a targeted, risk-adjusted per-member per-year spending level regardless of spending reduction and gives smaller, graduated rewards to less efficient practices that achieve spending reduction in pursuit of the threshold for risk-adjusted per-member per-year expenditures.

Payments to Practices

All practices serving as primary care provider to at least 300 Medicaid patients are eligible to enroll as a PCMH. Practices must also participate in a primary care case management program.

Providers receive a per-member per-month (PMPM) medical home support payment to facilitate the transformation of their practice’s operating model. Arkansas Medicaid characterizes this payment as a prospective investment to a clinical site for which there must be verifiable evidence of progress in medical home functionality.

To this end, practices must attest to a variety of medical home attributes, subject to validation. Support payments are tied to these attributes including: identification of and care plans for high-risk patients, 24/7 live voice access to a health professional, flexible same-day scheduling, installment of meaningful use certified electronic health records, use of E-prescribing and other structural enhancements.

Arkansas Medicaid’s average $4 PMPM payment is paid directly to the practice and designed to be used for new investments in clinical operations which achieve effective care coordination, patient engagement and improved outcomes. As one example, a practice with a Medicaid eligible panel of 2,000 patients could receive an average of $96,000 in additional prospective practice support payments over 12 months.

In addition to these ongoing PMPM payments for care coordination, another $1 PMPM payment is paid by Arkansas Medicaid directly to a technical support vendor to promote practice transformation for those PCMH practices that choose to participate. This payment is intended to catalyze practice transformation for the first 24 months.

Shared Savings

Due to actuarial requirements, shared savings eligibility requires 5,000 Medicaid patients who have been attributed for at least six months. Since few practice sites have sufficient numbers of patients and doctors to reach this threshold, Arkansas Medicaid allows two practices or multiple providers with the same tax I.D. number to pool their patients to achieve a 5,000 patient enrollment as long as the pooled practices are accountable for their combined quality metrics and attributes of a medical home as outlined in program specifications. In 2015, a statewide default pool will provide another means of practice entry into shared savings.

While physicians were initially uncomfortable with the potential exposure their practices faced from an unaffiliated colleague’s outcomes and sharing clinical performance data with peers, some providers have now formed collaborative, voluntary pool arrangements based on geographic proximity, practice similarities, shared electronic medical record systems and personal relationships.

The shared savings model is upside-only and practices can earn payments in one of two ways. Providers receive the greater of the two shared savings calculation methods:

In Method A, providers are assessed on absolute performance and eligible for 50 percent of shared savings if they achieve risk-adjusted average per beneficiary spending below the preset statewide threshold. For performance year 2014, the medium spending threshold is set at $2,032 per beneficiary. In Method B, providers are placed in one of three strata based on their own performance in the previous year (high, medium-to-high or below medium spending) and then assessed based on improvement.

If the practice meets at least a two percent minimum savings rate during the performance year compared to a preset practice benchmark (set using historical practice costs projected forward), they can share 10 percent, 30 percent or 50 percent of the savings, depending in which strata they started. Figure 1 provides an example of how a practice could benefit from Method B’s performance improvement shared savings model.

Figure 1


Quality Metrics

In addition to meeting practice transformation targets, PCMHs that are eligible for shared savings must achieve quality metrics intended both to measure performance and help guide improvement. Arkansas’ quality targets are state-specific, adjusted annually and evaluated as a portfolio. They include such measures as the percentage of a panel that get well-child visits, diabetic monitoring and follow-up for ADHD care. The state plans to add metrics based on clinical data measures, such as blood pressure control and diabetic management, when usage of electronic medical records and the statewide health information exchange are more fully developed.

Quarterly report profiles are provided to the practices. Detailed report cards display data including the risk profile of a practice’s patient population, utilization profiles for a variety of ancillary services, per- member per-year expenditures on a rolling quarterly basis and achievement of administrative quality metrics. Arkansas Medicaid hopes to expand data reporting to provide greater transparency with respect to the performance of specialty referral options.

CPC and Multi-Payer Involvement

Prior to the design and implementation of the PCMH model, the state was selected, beginning in October 2012, as one of seven markets in the United States to take part in Medicare’s Comprehensive Primary Care (CPC) initiative, which featured medical home support and incentives from Medicare, Medicaid and private payers. The state coordinated its CPC application with its two largest commercial health insurance carriers, Arkansas Blue Cross and Blue Shield and QualChoice. Arkansas Blue Cross and Blue Shield is now actively developing its own PCMH initiative based on the Medicaid PCMH framework.

Arkansas has 69 practice sites participating in the CPC initiative. These practices were not eligible for the new PCMH per-member per-month payments that began in January 2014 as they were already supported by the CPC initiative. However, CPC practices can still enroll in the PCMH program to receive regular report cards on their practice and are still eligible for shared savings if they maintain the required 5,000 patient enrollment.

Self-insured plans such as Walmart, the state and public school employees and the state university system are also planning participation in the PCMH model and state efforts are actively underway to secure additional self-insured participation. Over time, Arkansas hopes to create a shared data arrangement to create a common practice report card that makes it easier for individual practices to achieve 5,000 enrolled patients through aggregation across payers rather than the current stratification of patients for each individual payer.

Legislative and Regulatory Alignment

Arkansas’ Health Care Independence Act, the legislation which enables Arkansas Medicaid to use federal Medicaid funding to purchase private insurance coverage for individuals with incomes below 138 percent of the federal poverty level—often referred to as the “private option”—also requires participation in the APII. Qualified health plans that are part of the private option must support the APII medical home program in 2015. Current insurance carrier guidance under development will seek to integrate PCMH requirements and achieve mandatory participation within the private marketplace.

Provider Participation

PCMH enrollment, which opened in fall 2013 and closed in late December, exceeded Arkansas Medicaid’s expectations. More than 600 providers have signed up to participate in the initiative and 14 pools applied to be eligible for shared savings. These clinical sites represent more than 250,000, or 72 percent, of full benefit Medicaid patients throughout the state. We hope that the APII’s incentives will further motivate providers to accept Medicaid patients and attract new medical graduates into primary care in both rural and urban settings.