John Selig, Arkansas DHS Director, addresses providers at a meeting May 26.
Targeted Approach to High-value Areas Proposed
The state Department of Human Services is adopting a more targeted approach to Medicaid reform than the one described to medical providers earlier this year, but many in the medical community still have serious reservations about the proposed changes.
In an attempt to slow Medicaid’s seven percent annual cost increases and create a more efficient system, DHS earlier this year sought and received a waiver from Kathleen Sebelius, the secretary of health and human services, to experiment with a payment model based on bundled payments for episodic care – meaning that a patient’s medical events would be classified as “episodes” paid for by one “bundled” payment to be divided by all the providers involved in the care.
Doctors and medical providers have said such a system would be an administrative nightmare and have asserted that they weren’t adequately consulted before the system was proposed.
DHS leaders originally described a complete change in Medicaid as part of an effort called the Arkansas Health Transformation Initiative, which also involves Medicare and private insurance providers.
While transformation is still the goal, DHS Director John Selig, Medicaid Director Joe Thompson, MD, and Medicaid Medical Director Bill Golden, MD, told hundreds of providers in a meeting May 26 that the state will begin the reform process by addressing certain high-value areas rather than taking an all-encompassing approach.
Golden said one potential target will be labor and deliveries. Medicaid pays for 60 percent of all deliveries in Arkansas. He said 25 percent of early deliveries between 37-39 weeks are elective despite the risks and costs, while the amount of caesarian sections performed statewide vary widely, indicating some may be unnecessary.
The department will form workgroups involving stakeholders starting in July that will look for opportunities and areas of agreement, with implementation beginning in July 2012. It has already had numerous meetings with stakeholder groups since announcing the initiative.
After the meeting, Selig said in an interview that DHS would “like to overhaul the entire Arkansas healthcare system. What we’re not going to do is force and take huge chunks all at once. Instead, we’re going to focus on some key areas that look like they’re really high value in terms of the volume, the cost, the promise for being able to make substantive reform, and take those first, but then ultimately roll into other areas.”
Bo Ryall, president and CEO of the Arkansas Hospital Association, said he was glad to hear that DHS seemed to be backing away from its more ambitious earlier plans.
“It did make us feel better, whether they’re listening to us, or whether they came to that realization that they’re trying to do too much,” he said. “After the initial letter to Sebelius, that’s kind of what I heard all Medicaid healthcare providers saying is that’s too much too quick. Why don’t you look at what your high-cost areas are and try to reduce costs there?”
But Ryall said the plan still involved too many unknowns and worried about the financial consequences for hospitals that already are reimbursed below cost for Medicaid patients. Moreover, hospitals might be unfairly penalized for patients’ actions they cannot control. When treating diabetics, for example, “What happens when that patient does not follow, does not do the right things and they end up in the emergency room? Does that risk now shift to the hospital? Are we the ones who are going to take the hit on that because the bundled payment went elsewhere?”
About three-quarters of a million Arkansans receive Medicaid – mostly children in low-income families, adults with disabilities, and low-income senior citizens. Seventy-eight percent of the program is funded by the federal government, with the rest paid for by the state.
In a March interview, Selig pointed out that most states’ Medicaid programs are in financial distress and that Arkansas will see a $200 million shortfall in 2013. He said he didn’t want Arkansas to be forced to cut rates, drop clients and eliminate services. “What we’re trying to do now is really transform the Medicaid system and the broader healthcare system so we don’t find ourselves in the position to make the same kind of reduction that other states are making,” he said.
Thompson pointed out in the May meeting that saving five percent of the $4.3 billion program through increasing efficiencies would net $200 million – enough to make up the shortfall, although more money will be needed as costs rise.
Steve Spaulding, vice president of enterprise networks for Arkansas Blue Cross and Blue Shield, told attendees that his company wants to be involved in the process so it won’t be at cross purposes with the state. “The whole idea is to share information and find ways that we can both push on the same side of the rock,” he said.
But Ryall said that the inclusion of Medicare and private health insurance companies was worrisome because it would disrupt the current system, which relies on higher private insurance payments to make up the difference for lower Medicaid payments that do not cover the cost of recipients’ care.
Others in the medical community also are concerned about the proposals. David Wroten, executive vice president of the Arkansas Medical Society, said in an interview that the rising costs of Medicaid aren’t the fault of physicians, particularly considering that Medicaid only reimburses at a rate of 55 percent what private insurance pays and that physician fees are only a small percentage of the Medicaid budget. He said that the plans produced by the Department of Human Services don’t provide substantial cost savings and would turn Arkansas into “one big science project” that would force it to tear down the existing infrastructure in favor of a proposal that might not work.
“We don’t think it’s a good idea for providers to have to sit in a room and argue over who’s going to get what slice of the apple,” Wroten said. “Medicaid should be doing that. They’re doing it now. If we were looking at substantial cost savings, it might be one thing, but they really can’t even tell you whether it’s going to save costs. The idea is that it would cut out some of the inefficiencies, but there’s not really a good handle on what those inefficiencies are that we’re trying to cut out.”
Omar Atiq, MD, a Pine Bluff oncologist and the chairman of the Arkansas Medical Society board of trustees, said doctors believe that any kind of bundled payment system would be unworkably complicated. He questioned how well such a system would serve patients, particularly those in rural areas.
“As it stands, these terms have been used by DHS and by others,” he said. “We want to see what is it exactly that they mean by it in terms of concrete proposals. There has been a lot of back and forth in terms of what they mean by it, and so, our position is, tell us how would it affect our patients. Tell us how are we going to use whatever program that you devise, not just in Little Rock and Fort Smith and Pine Bluff and Jonesboro but in Pocahontas, Dumas, McGehee, Warren and elsewhere in the state.”
Anthony Johnson, MD, a Little Rock pediatrician, expressed concerns during an interview that children on Medicaid wouldn’t fit well into a bundled payment system. He said that while children make up most of Medicaid’s recipients, they only account for a small percentage of its costs, and their often chronic ailments don’t necessarily fit neatly into an episode, such as a heart attack. Johnson said as a pediatrician he has relationships with many providers rather than a single hospital, further complicating such a system. “The bureaucracy that would have to be developed to in some way try to coordinate that is basically going to suck all the money out of it,” he said.
Selig emphasized in March that the plan still has a long way to go to being implemented. “We have not by any means thought through everything or have some two-inch-thick document somewhere that says how we’re going to do it,” he said. “We are simply putting on the table, this is the direction we want to go. We now need you to join us and help us figure it out, working with the private sector, hopefully working with Medicare, and seeing if we can get there and seeing if we can come up with a transformed healthcare system rather than finding ourselves a year or so from now really making some deep cuts in Medicaid.”