More States Require Value-Based Reimbursement in Medicaid

October 23, 2019 - The number of states with Medicaid managed care requiring value-based reimbursement as part of the public healthcare program increased from 22 out of 39 states in 2017 to 28 out of 40 states by 2019, a new report showed. 

The new market intelligence report from OPEN MINDS addressed several topics related to understanding value-based reimbursement in Medicaid, including six states that recently implemented alternative payment models (APMs) in the past year and a half. According to the report, the states include California, Colorado, Kansas, Louisiana, and Wisconsin, as well as Washington DC.

The report highlighted Washington and New York. Both states have notable APM requirements and value-based roadmaps that intend to drive changes in financing in delivery, researchers stated.

For example, New York plans to have 80 to 90 percent of payments in value-based reimbursement (VBR) arrangements by the end of 2020, while Washington plans to have 75 percent of payment tied to value by the end of this year and 90 percent in 2021. 

Although Arizona, Pennsylvania, and New Mexico do not have requirements to move such a high percentage of payments to APMs in the near term, these states have specific requirements around the inclusion of behavioral health provider organizations in APMs, the report pointed out.

“The increase in the number of states requiring APMs as well as the increasing percentage of payments in APMs is indicative of the trend that VBR is reshaping the health and human service landscape. The pressure from the VBR is not only coming from the state and government, but also from the private sector as health plans to work to implement these initiatives with or without a mandate,” Athena Mandros, OPEN MINDS market intelligence director, explained in an executive briefing accompanying the report. 

“Provider organizations regardless of the state they operate in need to at a minimum begin readying their organizations for VBR,” she emphasized.

The transition to value-based reimbursement has been slow and steady for providers. But public as well as private payers are actively linking more provider pay to value.

In Medicare, for example, there are currently 518 ACOs serving 10.9 million beneficiaries. CMS has set the tone for value-based reimbursement and the public payer has been a big driver in the shift to value. The agency also operates dozens of other alternative payment models through its Innovation Center.

States are also actively implementing value-based contracts with local providers. As of early 2019, 48 states have implemented value-based reimbursement or care programs, representing a seven-fold increase compared to five years ago, a new Change Healthcare shows. 

The second national study of state healthcare payment programs also found that about one-half of the value-based reimbursement initiatives were multi-payer in scope, and only four states had little to no value-based payment (VBP) initiatives underway. 

“Based on the report, it’s obvious that managed Medicaid programs are actively exploring numerous VBP models, and that states implementing more advanced strategies around healthcare payment transformation will ultimately drive the commercial markets,” Carolyn Wukitch, senior vice president and general manager of network and financial management at Change Healthcare, stated in a press release. 

The increase in the number of states offering these arrangements and the rising percentage of payments in APMs is indicative of the trend that value-based reimbursement is reshaping the health and human service landscape. It is clear that value-based reimbursement arrangements will become more common throughout the healthcare industry and providers will need to familiarize themselves and ready their organizations for the shift.