Medicaid ACOs in New Jersey: At the Starting Line at Last

By Kate Greenwood

Cross-Posted at Health Reform Watch

Nearly three years ago, in July of 2011, Tara Adams Ragone wrote a blog post for Seton Hall Law’s Health Reform Watch blog entitled “Community Based Medicaid ACOs in New Jersey: A Signature Away”. As Professor Ragone explained, a month earlier the New Jersey legislature had passed Senate Bill 2443, which established a Medicaid accountable care organization (ACO) demonstration project, but Governor Chris Christie had not yet signed it. “It’s an exciting time for growth and innovation in the Garden State,” Professor Ragone wrote, “if we just get that signature.”

Governor Christie did go on to sign Senate Bill 2443 into law, in August of 2011, but the implementation process has been protracted. The act required the Department of Human Services to “adopt rules and regulations” that provided for oversight of the quality of care delivered to Medicaid recipients in the ACOs’ designated geographic areas and set standards for the gainsharing plans that participating ACOs must develop. The deadline for adopting the regulations was in June of 2012, but they were first issued, in draft form, in May of 2013. The final regulations were not adopted until earlier this week, one day before the proposed regulations were due to expire.

As Andrew Kitchenman reports here, with the regulations in place, the three community-based organizations that have been preparing to launch Medicaid ACOs, one in Camden, one in Trenton, and one in Newark, can finally get started. Unlike the State, they will have to move quickly; the deadline for applying to participate in the three-year demonstration is July 7th.

There is, in Kitchenman’s words, “a final piece to the puzzle”—the participation of managed care organizations (MCOs). In 2011, when New Jersey’s Medicaid ACO statute was passed, many of the State’s Medicaid beneficiaries were covered on a fee-for-service basis. The expectation was that ACOs’ efforts to coordinate care and reduce waste would be rewarded with a share of any resulting savings to the State. In 2014, however, the landscape has changed.  Nearly all of New Jersey’s Medicaid beneficiaries are now enrolled in Medicaid MCOs, and it is uncertain whether Medicaid MCOs will be willing to enter into shared savings arrangements with Medicaid ACOs.

Recently-released data from the second year of operations of Colorado’s Accountable Care Collaborative Program suggest that, if New Jersey’s MCOs can be persuaded, incentivized, or required to work with its nascent ACOs, there are both cost savings and quality gains to be had. Colorado has not yet enrolled individuals with disabilities or those who are dually eligible for Medicaid and Medicare in its Program, but the Program nonetheless achieved gross savings of $30 per member per month in its second year, adding up to $44 million. The State’s net savings were $6 million, after paying the Program’s regional ACOs and participating primary care providers for care coordination and other services, as well as a contractor charged with providing “actionable data at both the population level and the client level”.

The quality gains Colorado achieved in the Program’s second year were substantial, including a 20% reduction in hospital readmissions, a 22% reduction in hospital admissions among members with chronic obstructive pulmonary disease, and “[l]ower rates of exacerbated chronic health conditions such as hypertension (5%) and diabetes (9%)[.]” Emergency room utilization, on the other hand, increased, albeit at a slower rate than for Medicaid enrollees not participating in the Program.

As Diana Rodin and Sharon Silow-Carroll explained in a March 2013 report on Colorado’s approach to Medicaid accountable care, the State wanted to move away from fee-for-service but did not want to return to traditional capitated managed care, which had led to “nearly all Medicaid managed care plans [leaving] the state as a result of conflict over rates.” Colorado currently makes a portion of the payments it makes to the regional ACOs and to participating providers contingent on the achievement of certain quality improvements. Eventually, the State intends “to increase the portion of the monthly fee that is at risk, as well to pilot payment reforms that test alternatives to the fee-for-service component.”

It will be interesting to see if Colorado succeeds at moving away from fee-for-service without returning to traditional capitated managed care, and if New Jersey succeeds at moving towards accountable care within a managed care environment.

Be Sociable, Share!