Fillable Printable Payment Modernization Plan Sfy2014
Fillable Printable Payment Modernization Plan Sfy2014
Payment Modernization Plan Sfy2014
AHCCCS Payment Modernization Plan
Arizona Health Care Cost Containment System (AHCCCS), the State’s Medicaid Agency, uses
Federal, state, and county funds to provide health care coverage to the State’s acute and long-
termcare Medicaid populationand other qualifiedlow incomeArizonans. AHCCCS was
established asa mandatory managed care program that makes prospective capitation
payments to contractedhealth plans responsible for the delivery of care. In State Fiscal Year
(SFY) 2014, AHCCCS isexpected to spend approximately $9.5 billion, providing health care
coverage to over 1.3 millionArizonans through contracts with 11 different Managed Care
Organizations that depend on a network of over 55,000 providers.
Payment Modernization is a cornerstone of the Agency’s strategy to bend the upward
trajectory of health care costs. Bybuilding on the established AHCCCS managed care delivery
model,the intent is to reduce growth in per capita expenditures, and to improvemembers’
health outcomes. This Caredelivery and payment systemtransformation will be achieved
throughcollaboration withAgency stakeholders.
The AHCCCS Payment Modernization Planincludes a discussion of the current healthcare
delivery and payment system, the framework for moving payment modernization forward, and
actionsneeded for successful system transformation.
Healthcare Delivery System Assessment
The Institute of Medicine2012 report, “Best Care at Lower Cost”estimated that approximately
$750 billion of United States health care costs are wasted annually.The reasons include
unnecessary services, inefficient care, excessiveadministrative costs, inflated prices, prevention
failures, and fraud. Other health care system shortcomings include inconsistent care outcomes,
payment models which reward quantity instead of quality, and fragmented care transitions
among provider settings. Health care costs are projected to continue to consume an increasing
percentage of the nation’s economic output for the foreseeable future.
There iswidespread agreementthat the current rate of health care spending is not sustainable.
There is alsogeneral consensus (“Partnership for Sustainable Health Care”, Robert Wood
Johnson 2013; “Best Care at Lower Cost”, Institute of Medicine 2012; “National Commission on
Physician Payment Reform”, Society of General Internal Medicine2013)about the changes
which must occur to establish a high value, financially sustainable health delivery system.
In recent years, there have been numerous initiatives attempted bygovernment payers,health
systems, and providers across the country, including Arizona, to address the health care
system’s deficits. Some have been successful, but generally not on a large scale. Most experts
agree that aligning incentives among providers, managed care organizations(MCO’s), and
patients, results in better and less costly care. However, transforming ournation’shealth care
system to be value based rather than transaction based has proven to be extremely
challenging. Medicare has attempted to improve care coordination andreduce cost by
instituting provider structures such as hospital readmission penalties, as well as demonstration
projects for concepts such as accountable care organizations (ACO’s) and bundled provider
payments. Managed care organizations including many in Arizona are developingmodels such
as Patient Centered Medical Homes with similar goals. Many state Medicaid programs are
transitioning to care delivery models similar to the AHCCCSmanaged caremodel, and moving
toward value basedcare delivery models in recognition that fee for service payment methods
arenot sustainable. However, according to Catalyst for Payment Reform, a nationally
recognized independent organization whose mission is to accelerate healthcare payment
reform, currently only 11% ofcommercial health planin network payments to providers
nationwide are value oriented, and not traditional fee for service.
This chart shows a continuum of value based care and payment models. The continuum is
based on the degree of financial risk, integration, and accountability assumed by providers. The
models also vary by the degree to which there is accountability for care outcomes and overall
value. Transitioning from the predominant current Fee for Service model to the models with
greater levels of provider integration and accountability for outcomes is essential to payment
Payment Modernization Mission
To leveragethe AHCCCSmanaged care modeltoward value basedhealth care systems where
patients’ experience and population health are improved, per-capita health care cost is limited
to the rate of general inflation throughaligned incentives with managed care organization and
provider partners, and there is a commitment to continuous qualityimprovement and learning.
Payment Modernization Plan Foundation
AHCCCS has a long history as an innovator. Through the Payment Modernization Plan
the agency iscommitting resources to leverage the State’s successful managed care model to
address inadequacies of the current health care delivery systemsuch as fragmentation, and to
continue to lead efforts to bend the health care cost curve to sustainable levels.
As one of thelargest health care purchasersin the State of Arizona the AHCCCS Payment
Modernization Plan is grounded in three broad based goals.
1.AHCCCS must promote and facilitate a culture of learning and growth around payment
modernizationboth internally and externally
2.AHCCCS must leverage its position among Arizona healthcarepayersto promote more
cost and outcometransparency in the healthcare delivery system.
3.AHCCCS must deploy a variety of strategies that leverage health plans and other
stakeholders resulting in more value based purchasing moving up the payment
The AHCCCS Payment Modernization Plan providesa framework intended to guide policy to:
•Health care that is affordable and financially sustainable for taxpayers and members.
•A delivery system that is accountable for health outcomes and resource use.
•Patients who are informed, empowered, and engaged in their care.
•An environment that fosters a culture of continuous improvement and learning.
•Reliable information that can be used to monitor and transformquality, cost, and
•Patient care that is evidence-based and safe.
•Innovation and improvement through healthy competition based on cost, patient
experience, and health outcomes,with AHCCCS as an essential partner.
Establish aCulture of Learning
•Establish robust stakeholders’ input opportunities for health plans, providers and other
interested parties to identify and implement effective payment modernization
•Establish baseline measurement of current value based medical spendby AHCCCS
contracted MCOsconsistent with the payment modernization continuum presented in
Table 1. Update this measurement annually.
•Participatein, andleverage Catalyst for Payment Reform (CPR) and other organizations
which support and foster new value based payment models and drive payment
•Convenethe AHCCCS Executive Management Team regularly to evaluate Payment
Modernization Plan implementation and to identifynew opportunities.
•Work collaboratively with contracted MCO’s to reward high performing providers, and
support initiatives which move from fee for service payment models.
•Provide incentives for the use of evidence based innovative care models, particularly for
models which focus on paying for care which is proven to work.
•Support and drive data analytics development which enables MCOsto reduce care
fragmentation among providers and care settings.
•Monitor and accelerate MCOs’ use of incentives toproviders such as gain sharing for
meeting benchmarks which improve patient safety, including hospital acquired
conditions, adverse drug events, and surgical site infections.
•Enhance theaccessibilityof information on cost, outcomes, and patient experience
which can be utilized to reward high performing providers and to help drive innovation.
•Make recommendations to the legislature by January 1, 2014 on strategies to improve
hospital charge masterreporting to enhancecharge and costtransparency
•Publish results to providers from episodicpayment modeling to inform clinical
community on variation in reimbursement.
•Compare newly mandated reporting requirements as established by Laws HB2045 ,
Chapter 202 with other published documents like the charge master
•Work to increase the availability of payment, utilization,and cost information on the
AHCCCS website as well as highlight Payment Modernization initiatives.
FY 2013 Key Accomplishments
•The requirement for ALTCS MCOs to enter shared savings agreements with contracted
providerswasexpanded to the Acute Care procurement[Payment Reform Initiative].
Incentive payments are paid to health plans and providers who demonstrate improved
healthoutcomes and reduced costs.
•Contracted MCOs are required to identify how to improve alignment and integration of
care within their networks with identified cost reductions.
•The hospital inpatient reimbursement system is transitioning from a per-diem system to
a new methodology (APR-DRG)effective October 2014which pays based on the
patient’s diagnosis and incentivizeshospitals toprovide care more efficiently.
•The systems integration for the CRS, SMI, and Dual Eligible populations which are
underway will reduce care network fragmentation, align incentives, improve care
outcomes, and improve financial accountability.
•Executive level resourceshave beenadded to drive substantive system payment
FY 2014 Initiatives
Payment Modernization Initiatives Underway
•Determiningthe ongoing structure and methodologiesby which AHCCCS will further
incentivize, support, and prescribe the contractedMCOs’ adoptionof value based
models of care delivery and payment,while continuing to foster MCO and provider
•Analyzingtheshared savings criteria which will be established for future contracting
periods based on resultsof the Contract Year 2014 requirementsforALTCS and Acute
•Implementing an E-prescribing initiative that seeks to leverage significant taxpayer
investment in Electronic Health Records.
•Facilitatingprocess to developa limited set of bundled payment structures to establish
greater reimbursement consistency for episodes of carewithinhealthcare delivery
•Implementingthenew APR-DRG system by October 1, 2014.
•Support for increased development of patient centered care models whichimprove care
access andinvolve patients in their health decisionsand options. Patient centered care
leads to better outcomes, lower costs, and an enhanced care experience.
•Leveraging and developing the Agency’s data analytics capabilities to enable effective
design, development and measurement of new care delivery models
Transforming healthcare delivery and payment models will be a long term process. The
transition from our current model must proceed with the interests of all stakeholders, most
importantly Arizona taxpayers and AHCCCS members, being aligned. Some actions can be
implemented more easily and quickly than others. AHCCCS and its MCO and provider partners
will move quickly with payment modernization where implementation and infrastructure
permits. This includes measures being implemented for the Payment Reform Initiative
beginning October 2013. Other more complex reforms will be undertaken more deliberately to
insure that significant measurable quality improvement and cost reduction progress is
Through ongoing dialoguewith key stakeholders and a commitment to continuous learning and
improvement, the AHCCCS Payment Modernization effort will continue to identify and
implement effective and sustainable initiativeswhich provide the highest possible value for the
Arizonans we serve.