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Implementing Health Reform: Appellate Decisions Split On Tax Credits In ACA Federal Exchange


July 23rd, 2014

July 22, 2014 was arguably the most important day in the history of the implementation of the Affordable Care Act since the Supreme Court issued its ruling in the National Federation of Independent Business case in June of 2012. As no doubt most readers of this blog know by now, shortly after 10 a.m. the United States Court of Appeals for the District of Columbia Circuit handed down its decision in Halbig v. Burwell. Two judges ruled over a strong dissent that an Internal Revenue Service rule allowing federally facilitated exchanges to issue premium tax credits to low and moderate income Americans is invalid.

Approximately two hours later the Fourth Circuit Court of Appeals in Richmond, Virginia, unanimously upheld the IRS rule in King v. Burwell. Combined, the cases contain five judicial opinions, three in the Halbig case and two in King. Four of the six judges voted to uphold the rule, two to strike it down.

The Controversy

The issue in the cases is this: The ACA authorizes the IRS to provide premium tax credits to individuals with household incomes between 100 and 400 percent of the federal poverty level who are not eligible for other minimum essential coverage (such as affordable and adequate employer coverage, Medicaid, or Medicare). Premium tax credits are, however, only available to individuals who purchase coverage through the exchanges.

The ACA requests that the states establish exchanges, and sixteen states and the District of Columbia have done so. The ACA also, however, authorizes the federal government to establish exchanges in states that fail to set up their own exchanges. The federal government has done so in 34 states and is operating the individual exchange for two more. The IRS regulation allows premium tax credits to be awarded to eligible individuals in both states with state-operated exchanges and states with federal exchanges.

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The Alternative Payment Methodology In Oregon Community Health Centers: Empowering New Ways Of Providing Care


July 21st, 2014

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 Oregon model.

The Alternative Payment Methodology (APM) demonstration project enables participating Oregon community health centers to receive a monthly payment based on the size and composition of their patient population. This payment replaces the model of earning revenue based on the number of individual patients seen, shifting the paradigm from the number of doctor visits to the provision of high-quality, team-based, patient-centered care.

So what are the real changes physicians are seeing on the ground in clinics where APM is being implemented?

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The Medicaid Boom And State Budgets: How Federal Waivers Are Advancing State Flexibility


July 18th, 2014

Note: The authors would like to thank Erica Socker, Senior Research Associate, and Michelle Shaljian, Associate Director of Communications, for their review and editorial assistance.

According to data released by the Department of Health and Human Services, one in five Americans now receive their health insurance through a state Medicaid program. Despite this increase in enrollment, it is estimated that 6 million Americans will likely remain uninsured because 20 states have decided not to expand Medicaid as the Affordable Care Act (ACA) envisioned. There are at least four states that are considering expanding Medicaid but have yet to do so.

Medicaid expansion continues to be one of the most politically charged directives of the health care law, mainly because the Supreme Court decision left the choice to states. This decision has generated an ongoing debate about whether and how states should expand their Medicaid programs. For example, an intense debate has been underway in Virginia, over the decision to include Medicaid expansion in the state budget; putting Democratic Governor Terry McAuliffe at odds with the Republican State Legislature. Similar debates are occurring in states across the country, and are further complicated by states’ option to pursue alternative expansion approaches under a Medicaid waiver. For states that have not yet expanded the program, the success of these alternative expansion models may influence whether they can find a politically feasible path forward.

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Asking The Wrong Question About Health Professionals


July 15th, 2014

I spent a significant part of my professional career pursuing “rational” policies to guide the numbers of health workers needed. I now understand that most of these moves on the policy side were fool’s errands, when measured against the powerful corrective forces of the labor and education markets.

In fact, the elasticity of these markets has been generally unanticipated by most of the workforce models. For instance, few recognized the shrinkage of incoming nursing classes in the waning years of the twentieth century. It was only in 2001, when the number of nurses passing the licensing exam fell to 28 percent, less than it had been just six years before, that alarm bells went off. New policies spurred the creation of schools, existing programs were expanded, and a raft of workplace changes were put in place to make nursing more attractive and sustainable. By 2005, more candidates passed the exam than in 1995, the previous high water mark. By 2009, the number had increased by 38 percent.

Similar unexpected market responses have been reflected in such trends as the growth of osteopathic medical colleges, expansion of proprietary allied health education, delayed retirement by many professionals, and a host of second-career entries into health professional work.

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A Health Reform Framework: Breaking Out Of The Medicaid Model


July 10th, 2014

Editor’s note: This post is coauthored by Joseph Antos and James Capretta.

A primary aim of the Patient Protection and Affordable Care Act (ACA) is to expand insurance coverage, especially among households with lower incomes. The Congressional Budget Office (CBO) projects that about one-third of the additional insurance coverage expected to occur because of the law will come from expansion of the existing, unreformed Medicaid program. The rest of the coverage expansion will come from enrolling millions of people into subsidized insurance offerings on the ACA exchanges — offerings that have strong similarities to Medicaid insurance.

Unfortunately, ample evidence demonstrates that this kind of insurance model leaves the poor and lower-income households with inadequate access to health care. The networks of physicians and hospitals willing to serve large numbers of Medicaid patients have been very constrained for many years, meaning access problems will only worsen when more people enroll and begin using the same overburdened networks of clinics and physician practices.

It does not have to be this way. It is possible to expand insurance coverage for the poor and lower-income households without reliance on the flawed Medicaid insurance model. Opponents of the ACA should embrace plans to replace the current law with reforms that would give the poor real choices among a variety of competing insurance offerings, including the same insurance plans that middle-class families enroll in today. Specifically, we propose a three-part plan that includes a flexible, uniform tax credit for all those who lack employer-based coverage; deregulation of Medicaid; and improved safety-net primary and preventive care.

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The Payment Reform Landscape: Bundled Payment


July 2nd, 2014

Getting a good deal for a package price is something we’re all familiar with as consumers.  In health care, that might mean creating incentives for health care providers to improve the continuity and coordination of care, leading to better patient outcomes and lower costs. Paying for a set of services, not “per unit of care delivered’ under the fee-for-service model, is typically called bundled or episode- based payment.

Bundled payment is a single payment to providers or health care facilities (or jointly to both) for all services to treat a given condition or provide a given treatment. Unlike some of the other payment reform models I’ve discussed on Health Affairs Blog, such as pay-for-performance, bundled payment asks providers to assume financial risk for the cost of services for a particular treatment or condition, as well as costs associated with preventable complications.

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Happy Birthday HCPF


July 1st, 2014

Today marks the 20th birthday of the Colorado Department of Health Care Policy and Financing.  The story of its creation provides an important reminder of how our thinking about health care has evolved over the past few decades – and how it continues to evolve today.

Back in the bad old days, Medicaid was just another social service.  Housed within a broader social services agency, Colorado Medicaid – as was the case in most states – grew up with a typical welfare mentality.  Program enrollees were beneficiaries.  If they did not enroll, we assumed it meant they did not need or want our services.  Eligibility was a cumbersome, rule-bound process with inscrutable results and unintelligible notices to applicants of what was missing from their file.

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Cancelled Non-Group Plans: What We Know Now That We Did Not Know In October


June 17th, 2014

In October of 2013 President Obama faced a political firestorm over the cancellation of millions of individual insurance plans — plans not compliant with the requirements of the Affordable Care Act (ACA). The Associated Press (AP) estimated that 4.8 million persons with non-group coverage had their policies cancelled, and this estimate was widely quoted in the media and the Congress. In headline stories, the media also reported that policyholders of the canceled plans were now offered alternative plans, often at premiums more than double of their current plans.

When the controversy over cancelled policies broke, no surveys were available to estimate the number and the cost of cancelled policies. In October, HealthCare.gov and many state-based marketplace websites were virtually non-functional, so assessing comparative cost and benefits of cancelled and Marketplace plans largely was precluded. In this post I highlight information from subsequent surveys and analyses conducted in late 2013 and 2014 that measure the number of cancelled plans and the comparative cost of coverage in the pre-ACA and post ACA-Markets. The next two paragraphs summarize findings.

Recent survey data indicates the number of persons affected by cancelled policies was about 1.9 million persons, less than the often cited 4.8 million estimate. When persons with group health insurance are included in the denominator, these cancellations affected less than one percent of persons holding comprehensive private insurance. The number of people with non-group policies who became uninsured following last October’s cancellation of policies is similar to what occurs in the normal churn of the non-group market.

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Changing Provider Networks In Marketplace Health Plans: Balancing Affordability And Access To Quality Care


June 11th, 2014

Editor’s note: In addition to Sabrina Corlette, JoAnn Volk, Robert Berenson, and Judy Feder coauthored this post. 

Twelve percent of the complaints to California’s Department of Managed Health Care this year relate to access to care problems. In New Hampshire, consumers were upset to learn that their local hospital had been excluded from the network of the sole insurance company participating on the state’s health insurance marketplace. In reaction to concerns about narrowing networks, legislators in Mississippi and North Dakota considered “any willing provider” legislation this year.

But at the same time, the Congressional Budget Office expects narrow networks to help reduce marketplace costs by billions of dollars. Network configurations clearly offer consumers a cost-access trade-off. Narrowing networks is by no means a new trend – using network design to constrain providers’ price demands has long predated the Affordable Care Act (ACA). In the new marketplaces, insurers are using narrow networks to help keep premiums low for price-sensitive purchasers. But if a plan’s low premium reflects limited network access, its policyholders might not only face compromised quality care but unanticipated and potentially crippling financial liabilities.

Regulators are recognizing this trade-off and reconsidering network standards at the state and federal level. But regulators face a challenge: If they overly constrain insurers’ ability to negotiate with providers, consumers could face significant premium increases. On the other hand, if they ignore provider participation issues, consumers will lack confidence that there is a sufficient network to deliver the benefits promised without posing financial or quality risks.

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Implementing Health Reform: SHOP Employee Choice State Opt-Outs And Navigator Grants (Updated)


June 10th, 2014

On June 10, 2014, the Centers for Medicare and Medicaid Services released the list of federal exchange states where employee choice will not be available for the SHOP exchange for 2015. CMS had provided that the federal exchange would, beginning in 2015, permit employers in the SHOP exchange to either 1) choose a single plan for their employees, or 2) choose a metal tier (bronze, silver, gold, or platinum) and then allow employees to choose any plan offered within that tier, with the exchange aggregating premiums from the various plans chosen by employees and allowing the employer to pay a single premium. In the 2015 exchange final rule, however, CMS permitted state insurance commissioners in federal exchange states to ask that their states be allowed to opt out of employee choice for 2015 if they concluded that employee choice would cause adverse selection within their small group insurance markets.

Apparently, 18 state insurance commissioners asked that their states be allowed to opt out and all requests were granted. Federal exchange states that will not offer employee choice in 2015 include Alabama, Alaska, Arizona, Delaware, Illinois, Kansas, Louisiana, Maine, Michigan, Montana, New Hampshire, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, and West Virginia. Employers in these states will be able to offer their employees a single health and a single dental plan through the SHOP exchange.

Employee choice will be available in 14 states: Arkansas, Florida, Georgia, Indiana, Iowa, Missouri, Nebraska, North Dakota, Ohio, Tennessee, Texas, Virginia, Wisconsin, and Wyoming. Employers in these states will be able to either offer their employees a single health and dental plan, or offer them a choice of health plans within a single metal level and dental plans within a single coverage level.

Barring a further change in policy, employee choice will be available in all federal exchange states in 2016. Employee choice was already available in most of the state exchange states for 2014, and presumably will continue to be so in 2015

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The Payment Reform Landscape: Capitation With Quality


June 6th, 2014

When I began this blog series in February, I explained how Catalyst for Payment Reform (CPR) views different payment reform models along a continuum of financial risk. Thus far, we have used this series to explore the evidence behind “upside only” models that give providers the chance for a financial upside, but no added financial risk, or downside. We’ve looked at the evidence behind pay-for-performance and per-member per-month payments to support patient-centered medical homes. This month, we move across the risk spectrum to examine a model that offers both upside and downside financial risk for providers—capitation.

What is Capitation? Is It Widespread?

Capitation is nothing new when it comes to paying for health care. It had its heyday in the HMO era of the 1990 s, but something was seriously lacking in the capitation arrangements of the past that led to a strong backlash from consumers. Consumers feared their health plans were more interested in saving money than providing them with the quality care they needed; in a Kaiser Family Foundation Survey at the time, most reported they or someone they knew had a problem with their plan. Some of these fears proved to be warranted. Fortunately, since the 90s, payers and providers have worked to put quality safeguards in place.

When tracking value-oriented payment, CPR only examines capitation arrangements with a quality measurement and incentive component — what we call “capitation with quality.” CPR defines capitation with quality as “a fixed dollar payment to providers for the care that patients may receive in a given time period, such as a month or year, with payment adjustments based on measured performance and patient risk.”

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Implementing Health Reform: Medicaid And CHIP Enrollment; Data Verification (Updated)


June 5th, 2014

Throughout the spring of 2014, the Department of Health and Human Services (HHS) has issued monthly reports on enrollment in the federal and state exchanges (marketplaces) and on applications, eligibility determinations, and enrollment in the Medicaid program.

With the close of the 2014 exchange open enrollment period, HHS has ceased issuing exchange enrollment reports, even though exchange enrollment continues to fluctuate as new enrollees join through special enrollment periods and current enrollees terminate their plans or are terminated, for example, for nonpayment. The Centers for Medicare and Medicaid Services (CMS), however, continue to issue Medicaid reports.

On June 4, 2014, CMS released the April 2014 Medicaid and CHIP Monthly Applications, Eligibility Determinations and Enrollment Report. As has been the case with earlier reports, the data are subject to so many qualifications as to offer only a rough approximation of current Medicaid enrollment or activity.

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Implementing Health Reform: State Opt-Outs From Employee Choice In SHOP And Other Developments


June 4th, 2014

If any further evidence were needed that the release of Affordable Care Act regulations has largely ceased for the immediate future, the Office of Management and Budget Spring Unified Agenda of Regulatory and Deregulatory Actions provides it. The Regulatory Agenda reveals that the Department of Health and Human Services (HHS) is currently working on final rules governing third party payments of qualified health plan (QHP) premiums and fair hearing and appeal procedures for Medicaid and exchange enrollment, as well as proposed rules for accepted benefit plans and, eventually, the 2016 notice of benefit and payment parameters; however, nothing seems likely to be released very soon.

The Internal Revenue Services (IRS) is drafting proposed rules on reporting of minimum essential coverage and final regulations on reporting of information for health insurance exchanges, defining minimum value for employer coverage, and determining whether employment-related health insurance is affordable for the family of an employee (the family glitch). It is also working on further regulations addressing the small employer premium tax credit, minimum essential coverage and other individual responsibility requirement issues. Most of these are topics on which the IRS has already provided partial rules, interim final rules, or other guidance, and no major new developments are anticipated imminently.

State opt-outs from employee choice in the 2015 SHOP exchange. Despite the lull in rulemaking, HHS continues to be very active at the subregulatory level as it prepares for 2015. In particular, Centers for Medicare & Medicaid Services (CMS) has been very focused on getting the SHOP exchange operational. CMS failed to implement many elements of the SHOP exchange program for the 2014 open enrollment period, including employee plan choice and aggregation of premiums. These elements were to be implemented for 2015.

Under the 2015 Exchange Rule, however, state insurance commissioners were allowed to ask that their states be excused from employee choice in the SHOP exchanges by submitting to CMS a written recommendation “adequately explaining that it is the State Insurance Commissioner’s expert judgment, based on a documented assessment of the full landscape of the small group market in his or her State, that not implementing employee choice would be in the best interests of small employers and their employees and dependents.”

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Making Markets Work In Health Care: What Does That Mean?


June 3rd, 2014

Editor’s note: See Robert Berenson’s post on consolidation and market power in health care, also published today, and watch for more on these subjects in Health Affairs Blog.

Health Affairs last week posted a set of papers that represent several perspectives on Provider Consolidation in Health Care: Challenges and Solutions. To provide a context for these papers and for the broader discussion of how to make markets work in health care, I suggest a couple of thoughts.

There are two types of markets in health care: the market for health services and the market for health coverage—these markets are interrelated, and both of them are broken.

The historical correlation between provider concentration and both higher prices and lower quality is well-documented. With the increased focus under health reform on collaboration across providers and settings, and the increase in physician and hospital consolidation and the purchase of physician practices by hospitals, the concern is that this trend may lead to adverse consequences for the health system.

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Acknowledging The Elephant: Moving Market Power And Prices To The Center Of Health Policy


June 3rd, 2014

Editor’s note: See Stuart Guterman’s post on consolidation and market power in health care, also published today, and watch for more on these subjects in Health Affairs Blog.

Health Affairs recently published a set of papers addressing the problem of provider consolidation and consequent increased prices. Perhaps even more striking than the specific arguments made in these papers is the very fact that smart and busy people other than antitrust economists and lawyers now are actually spending a great deal of their professional time thinking about this problem. High prices and the distortions in markets resulting from differential pricing power have been the unacknowledged elephant in the policy room for decades, even as the policy community and policy makers have wrung their hands over what to do about rising health care costs. More than 40 years ago, President Nixon declared that health care spending increases were “unsustainable.” And here we still are grappling with health care spending.

Over the decades I have been told by smart health economists that the main culprit behind increasing health spending is technology, although the definition of technology turns out to be pretty flexible — new ways of providing care are considered new technology, not just machines and drugs. And nominees for the reason our baseline spending exceeds other countries’ by so much have included administrative complexity in our multi-payer, crazy quilt organization of health care; defensive medicine caused by malpractice concerns; and fraud and abuse. Jack Wennberg and colleagues at Dartmouth have argued that variations in service use that do not increase quality explain spending variations, at least in Medicare where payment (price) variations are not permitted other than to reflect differences in input costs.

All of these explanations have merit, but for non-government payers, prices have actually been the main source of high spending and variations in spending, at least in the recent past and probably for much longer. Prices for commercial and self-funded insurance products result from market negotiations between insurers and providers; the balance of power in these negotiations has sometimes shifted, most recently toward many providers, but certainly not all of them — the relatively few remaining independent hospitals and the solo and small physician practices have become “price takers,” even as other providers are able to negotiate payment rates far higher than Medicare benchmarks.

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Bundled Payments: Moving From Pilots To Programs


June 2nd, 2014

Sometimes myths take way too long to die. A case in point was last month’s Health Affairs Entry Point by Rob Cunningham on the “Payment Reform Paradox.” In it, he cites years-old information about the then difficulties of engaging providers in risk-based contracts for bundles. The myth that has surrounded the paper Cunningham references has been astonishingly difficult to dispel despite the significant factual evidence that proves it wrong.

A new report, to be released tomorrow, might help change the perception that bundled payments are either ineffective for private sector payers, or too complex to administer, or both. In their third annual review of bundled payments in the United States, Michael Bailit and his colleague Margaret Houy make the point that we have moved from pilots to full-blown implementations, with private and public sector payers.

There are now thousands of contracted bundles in force between providers and payers, most with downside financial risk — not just for the usual suspects of joint replacement or cardiac procedures, but also for chronic and acute conditions. In New Jersey, Horizon Blue Cross Blue Shield is administering hundreds of bundled payment contracts per year, covering pregnancies and deliveries, joint replacements and breast cancer. Remedy Partners, one of the largest convener-awardees in the Medicare Bundled Payment for Care Improvement program, is working with hundreds of providers covering well over $1 billion in total bundled payments per year today, increasing to over $15 billion in a few months.

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For Telehealth Patient Safety Insists Upon An Evolution In Policy


May 29th, 2014

Editor’s note: For more on this topic, see the February issue of Health Affairs, which features a series of articles on connected health. 

The nation’s ongoing battle to strike a delicate balance between increasing access to quality health care for all Americans and reducing overall health care spending just scored one of its most substantial victories. In late April, after several months of thoughtful and robust collaboration, the Federation of State Medical Boards (FSMB) ratified a new model national policy – the Appropriate Use of Telemedicine in the Practice of Medicineat its annual meeting in Denver. This marks the first time the medical community has unilaterally acknowledged the impact technology has had on the practice of medicine, and the ability telemedicine — or connected health — has to facilitate and improve the delivery of health care.

Let us first put this in perspective. We all know health care is at a critical juncture. The implementation of the Affordable Care Act means millions of newly eligible Americans will seek access to an already over-burdened health care system.  The nation faces a serious shortage of primary care providers, specialty care is becoming more diversified, and access to care in rural areas is an ongoing challenge. All of these issues are on the rise.

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Halbig And King: A Simple Case Of IRS Overreach


May 22nd, 2014

On March 25, a three-judge panel of the D.C. Circuit heard oral arguments in Halbig v. Sebelius, one of four lawsuits challenging the legality of implementing certain ACA provisions in the 34 states with federally established health insurance Exchanges. On May 14, a panel of the Fourth Circuit heard arguments in a related case, King v. Sebelius. Rulings in these cases could come at any time.

Washington & Lee University law professor Timothy Jost recently provided commentary on Halbig, King, and two similar cases. Since our research helped to generate these lawsuits, Health Affairs Blog invited us to respond, as we have responded to Jost’s previous commentary on this issue.

The ACA Authorizes Certain Provisions Only in States that Establish Exchanges

The Halbig cases, as we will call them, are simple and straightforward.

Prof. Jost has written, and we agree, that the statutory eligibility rules for the ACA’s premium-assistance tax credits “clearly say” that eligibility “depends on the applicant being enrolled in a qualified health plan ‘through an Exchange established by the State.’” The rules employ that restrictive phrase nine times, without deviation. Since the Act explicitly ties its cost-sharing subsidies, employer-mandate penalties, and (in many cases) individual-mandate penalties to the availability of these tax credits, it therefore also authorizes those provisions only in states that establish Exchanges. Congress simply did not authorize those spending and revenue measures in the 34 states that opted for a federal Exchange.

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Patient-Centered Medical Home Evaluations: Let’s Keep Them All In Context


May 21st, 2014

Editor’s note: This post is authored by eleven participating leaders of the Pennsylvania Chronic Care Initiative; the full list is included at the end.

Since the American Academy of Pediatrics (AAP), American Academy of Family Physicians (AAFP), American College of Physicians (ACP) and American Osteopathic Association (AOA) issued their Joint Principles of the Patient-Centered Medical Home in 2007, there has been an explosion in medical home transformation activity in the United States. According to National Committee for Quality Assurance (NCQA), which offers one of multiple medical home recognition programs in the U.S., 5739 practices representing 27,820 clinicians had received NCQA medical home recognition status as of May 2013.

Medical homes have represented a promising approach to improving care for patients, reducing avoidable utilization, and improving professional satisfaction for clinicians. Extensive research by Ed Wagner and colleagues provided an evidence-supported basis for optimism, but only over the last several years has the model been implemented broadly.

Taking concepts tested in small application to broader context is challenging, as experience has shown. The state of Pennsylvania, along with its community of primary care practices and insurers, has been committed to testing and adopting the medical home model. A key catalyzing effort was the Pennsylvania Chronic Care Initiative.

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Patient-Centered Medical Homes In Arkansas


May 20th, 2014

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.

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