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N.C. Medicaid ACO Program Could Save $1B Over Five Years Via Downside Risk

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For Immediate Release
Tuesday, April 15, 2014
Contact: news@dhhs.nc.gov
              919-855-4840

N.C. Medicaid ACO Program Could Save $1B Over Five Years Via Downside Risk
By Jane Anderson, Editor
ACO Business News (reprinted in AISHealth)
April 15, 2014
http://aishealth.com/archive/nabn0414-01

North Carolina Gov. Pat McCrory (R) hopes to use a combination of existing accountable care organizations and new ACOs to serve most of the state's Medicaid population in a plan he estimates could save $1 billion over five years, in part by requiring the ACOs involved to accept downside risk.

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If approved, the North Carolina Medicaid ACOs would open for business in July 2015, and should cover up to 90% of the state's beneficiaries by year four or five of the program, says Bob Atlas, a Medicaid consultant to North Carolina's Department of Health and Human Services (DHHS). "We'd like to get to 100%, but we need to allow for some pockets of the state to be hard to serve," says Atlas, a former chief operating officer of Avalere Health LLC and longtime CEO of The Lewin Group.

"The number of ACOs will be driven by beneficiary need, provider types, and population size within certain geographic areas," Atlas tells ABN. "It's this kind of flexibility in the ACO model that focuses on putting patients first."


N.C. Medicaid Turns to ACOs

The reform plan's design consists of three components: physical health care, mental health services, and long-term services. Under McCrory's vision, ACOs will direct physical care, while the state will re-evaluate its mental health services and work on long-range solutions for the aged and disabled. The ACOs chosen to participate in the program will share both savings and losses with the state. They also will be responsible for meeting quality benchmarks, according to the proposal.

Assuming the state legislature approves the plan and CMS also gives its OK for the move, DHHS says it plans to solicit applications from ACOs by late 2014 and to begin enrolling Medicaid beneficiaries in ACOs in July 2015.

The department says it hopes to take advantage of the existing ACOs and patient-centered medical home practices in the state.

"There are currently about a dozen Medicare ACOs in North Carolina, including those in the Medicare Shared Savings Program [MSSP], and we hope most of them also will participate in Medicaid," says Atlas. "We know of other provider groups that are interested in forming ACOs to serve the Medicaid population."

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Each ACO will have a benchmark spending level for its assigned beneficiaries each year, and will share both in savings and in overruns, the state proposal says. "Much as this model aims to shift risk and reward to organized provider groups under ACOs, it does not at any point in time impose full risk on those provider groups. In that respect it is quite unlike capitation payment to managed care organizations," it says.


ACOs Risk 10% of Benchmark

The ACOs' savings and loss shares will rise over time, and total awards and penalties will be capped at defined percentages of the benchmark spending amounts. For example, in Year 5 of the program, an ACO that meets all quality goals would be able to earn between 80% and 100% of the total savings it achieves, up to a limit of 15% of its benchmark spending level. Meanwhile, an ACO that exceeds its benchmark spending level would be responsible for paying a penalty that could reach 10% of its benchmark.

The state will pay shared savings directly to the ACOs, and each ACO will be required to establish a method to repay losses to the state.

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Reaction to the plan among provider groups in North Carolina has been positive. Laura Easton, immediate past chair of the North Carolina Hospital Association Board of Trustees and CEO of Caldwell UNC Health Care in Lenoir, N.C., said the ACO model "puts patients first by allowing providers, rather than insurance companies, to manage care and aligns payment incentives both with quality and cost effectiveness."

Meanwhile, the North Carolina Medical Society, the North Carolina Pediatric Society and the North Carolina Academy of Family Physicians also expressed support for the proposal.

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Program Could Save $15 Million in 2016

Savings from the new Medicaid ACO program are expected to accumulate over time, according to DHHS. Next year is designated a "start-up year," in which the federal government and state would spend an estimated $8 million to implement the program. In 2016, overall Medicaid savings could reach $15 million, and that number would grow to $329 million by 2019, according to state budget estimates.

North Carolina currently spends about $13 billion each year on its Medicaid program, which serves approximately 1.7 million beneficiaries.

When the ACOs open for business in July 2015, health care providers won't be required to participate in ACOs in order to participate in Medicaid. However, "it is the state's goal that all, or nearly all, eligible Medicaid beneficiaries will be cared for through ACOs," the DHHS proposal says.

Therefore, if the state eventually concludes that the ACOs aren't caring for enough Medicaid patients, it may reduce fees to non-ACO providers or take other measures to broaden the scope of its ACOs, the proposal says. The state intends to have 40% of beneficiaries enrolled in ACOs by July 2016, 60% by July 2017, 80% by July 2018, and 90% thereafter.

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