Massachusetts Delivery Model Advisory Committee

1. Massachusetts Delivery Model Advisory Committee April 10, 2013

2. Agenda

3. Section 1 Introduction

4. Introduction Today’s discussion corresponds to these tasks from Navigant’s scope of work: • Model the fiscal impact to the Commonwealth for different delivery of care models, taking into consideration cost drivers and trends, utilization, case mix, and potential for adverse selection. • Analyze the experience of other entities and states in initiating and implementing innovative care delivery models Today’s discussion addresses these items from the Committee’s vision statement: • Describing the desired features of payment and delivery system models going forward including financial analysis of different delivery models • Identifying the implementation and support tools and resources needed for an effective model, including information technology/data needs, and practice supports, and financing.

5. Introduction Completed tasks from Navigant’s scope of work: • Identify individuals or organizations with expertise in Medicaid delivery of care models. • Conduct research on Medicaid delivery of care models, including lessons learned from innovation in the MCO and PCC plans in Massachusetts and implications for the future. • Analyze the experience of other entities and states in initiating and implementing innovative care delivery models. Ongoing work: • Model the fiscal impact to the Commonwealth for different delivery of care models, taking into consideration cost drivers and trends, utilization, case mix, and potential for adverse selection

6. Introduction Ongoing work (continued) • Describe the strengths and weaknesses of the MCO and PCC models to inform the state’s vision for health care payment and delivery moving forward, including the impact on patients and providers and long-term sustainability (updating initial draft based on Committee feedback). • Describe the resources that would be needed to support the desired care delivery system(s), including information technology/data needs, practice supports and financing (updating initial draft based on Committee feedback) • Draft the Advisory Committee’s report of findings and recommendations, including development of an implementation strategy. • Meeting support for the Committee

7. Section 2 Financial Model Background and Approach Baseline Cost Analysis MCO and PCC Program Per Member Per Month Expenditures by Risk Group, Age Group and Rating Category

8. Background and Approach Page

9. What Does the Analysis Include? Part 1 • Calculate risk-adjusted baseline costs for MCO and PCC programs by Risk Group, Age Group and Rating Category: • Identified all claims for 2010 and 2011 associated with PCC and MCO members • Aligned covered services by removing claims associated with “wrap” services • Analyzed PMPMs based on paid claims • Calculated DxCG risk scores for population • Assigned risk groupings based on concurrent DxCG risk scores • Analyzed PMPMs based on demographics • Identify and Define Potential Savings Opportunities that May be Achieved with ACO and PCMH Models • Compare risk-adjusted baseline MCO PMPM costs to risk-adjusted baseline PCC PMPM costs • Compare MCO and PCC utilization patterns by risk group to identify potential drivers of PMPM cost differences Part 2 Part 3

10. What Doesn’t the Analysis Include? Detailed service line-specific PMPM comparisons between PCC and MCO programs. • PCC and MCO Program differences complicate service line level analyses: • Differences in reimbursement methodology between PCC and MCOs • Sub-capitation arrangements (e.g., BH, physician) • Acute inpatient for PCC paid based on Standard Payment at Discharge (SPAD) • Acute Outpatient hospital for PCC paid based on Payment Amount Per Episode (PAPE) • Some outpatient services are bundled including Lab, ER, Radiology, etc • Differences in member enrollment and provider participation in existing alternative payment and care delivery models • PCC plan claims have an enhanced fee paid for specific office and clinic visit services whereas any similar fees paid by MCOs are not captured separately • Coding variations and provider contracting differences • Claims incorrectly categorizing claims in the “Other” service category

11. What Doesn’t the Analysis Include? (cont'd) Detailed estimates of the magnitude of utilization reductions and cost savings achievable under ACO and PCMH initiatives. • Detailed claims data is required to conduct utilization analysis at the level of a specific claim, provider or individual member for the PCC and MCO programs in order to identify and quantify savings opportunities* • This analysis is only for directional purposes and does not include baseline innovations in the MCO and PCC plans approach to provider contracting and utilization management or the on-going payment and delivery model changes at MassHealth through the MCO program or the PCC Plan . Therefore, these percentages cannot be applied to the MassHealth program or budget. *Navigant requested detailed claim-level medical encounter data for MCO and PCC plan enrollees.  Due to time constraints and confidentiality concerns Navigant worked closely with MassHealth to revise the data request to include aggregate data grouped by rating category, 5-point risk score, age group, gender, member counts, claims counts, and expenditures by plan diagnosis, provider type, and other variables. While this provided a more timely pathway for the analysis in order to meet specified timelines, facilitated some comparisons between PCC and MCO programs and complied with State and federal laws regarding the protection of member privacy, it did not provide the level of detail required to conduct detailed savings analytics.

12. Baseline Cost Analysis

13. Membership Summary –Policy Changes on Affecting Member Mix Auto-Assignment – Policies for auto-assigning members to the PCC and MCO programs have changed over time. In general, auto-assignees are more likely to be “healthier” than other members. Accordingly, changes in auto-assignment policies will result in changes in the mix of members between the PCC and MCO programs. Auto-Assignment Policy Changes • Prior to July 1, 2010 – RC1 (disabled) and RC5 (Basic) were auto assigned only to MCOs • July 1, 2010 – RC-2 (disabled) members auto-assigned to MCOs for first time • July 1, 2010 – February 28, 2011 – Auto-assignment distribution was spread evenly over each of the 5 MCOs and the PCC plan resulting in an average distribution of 83% MCO and 17% PCC • March 1, 2011 – September 30, 2012 – Auto-assignment to the MCOs was stopped resulting in 100% of auto-assignees to the PCC plan • October 1, 2012 – Present – Auto-assignment to the MCOs was reinstituted with the distribution going back to the 50/50 MCO/PCC split that was in place prior to July 1, 2010 Risk adjusting the data controls for some of the differences in membership composition between the MCO and PCC Programs.

14. Membership Summary –Policy Changes on Affecting Member Mix (cont’d) • July 1, 2010 – RC-7 “Essential” members (long-term unemployed) were able to enroll in MCO plans for the first time. Prior to this date, RC-7 members could only enroll in PCC. • July 1, 2010 – Retroactive eligibility implemented, primarily affecting RC-1 and RC-2 populations.

15. Membership Summary –Member Months Female  Male Risk Group assignment is based on Verisk’sDxCG concurrent Medicaid Managed Care model #76. Individual member risk scores are classified into five ordinal risk groups, where members with the lowest risk scores are classified to the “Very Low” Risk Group and members with the highest scores are classified to the “Very High” risk group. A member is assigned to one risk group for the entire calendar year.

16. Membership SummarY(cont'd) Differences exist between the MCO and PCC plan’s membership composition 57% of the MCO members are female versus 50% of the PCC members The MCO members tend to be younger than the PCC plan members with about 60% of member being under the age of 18. While 60% of the PCC plan members are over the age of 18. More of the PCC members are disabled and in higher risk groups than the MCO members. However, member distribution is shifting. From 2010 to 2011: MCO share of RC-2 (Disabled) members increased from 38 percent to 41 percent MCO share of RC-7 (Essential) members increased from 8 percent to 32 percent MCO share of members in the High Risk Group increased from 46 percent to 50 percent MCO share of members in the Very High Risk Group has increased from 37 percent to 41 percent

17. MCO and PCC Program Per Member Per Month Expenditures by Risk Group

18. Member Months by Risk Group

19. Risk-Adjusted MCO PMPMs Indexed to PCC PMPMby Risk Group (PCC = 1.0)

20. Risk Group Analysis Observations –Very Low Risk Group • MCO PMPMs lower than PCC PMPMs for the Very Low Risk Group • 70 percent of PCC PMPM in 2010 • 73 percent of PCC PMPM in 2011 • Prescription drug utilization lower in MCO program for the Very Low Risk Group • 20.5 percent lower than PCC in 2010 • 14 percent lower than PCC in 2011

21. Drill Down – Very Low Risk Group Indexed PMPMs by Age Group (MCO)

22. Risk Group Analysis Observations –Very High Risk Group • MCO PMPMs higher than PCC PMPMs for the Very High Risk Group • 138 percent of PCC PMPM in 2010 • 135 percent of PCC PMPM in 2011 • Inpatient utilization higher in MCO program for the Very High Risk Group • 15.3 percent higher than PCC in 2010 • 21 percent higher than PCC in 2011 • Prescription drug utilization lower in MCO program for the Very High Risk Group • 20.6 percent lower than PCC in 2010 • 21 percent lower than PCC in 2011

23. Drill Down – Very High Risk Group Indexed PMPMs by Age Group (MCO)

24. Mass Medicaid Per Member Per Month Expenditures by Age Group

25. Member Months by Age Group

26. Risk-Adjusted MCO PMPMs Indexed to PCC PMPMBy Age Group (PCC = 1.0)

27. Drill Down – 4-12 Age Group Indexed PMPMs by Risk Group (MCO)

28. Drill Down – 13-18 Age Group Indexed PMPMs by Risk Group (MCO)

29. Drill Down – 19-64 Age Group Indexed PMPMs by Risk Group (MCO)

30. Mass Medicaid Per Member Per Month Expenditures by Rating Category

31. Member Months by Rating Category

32. Risk-Adjusted MCO PMPMs Indexed to PCC PMPM by Rating Category (PCC = 1.0)

33. Drill Down – Rating Category 2 (Disabled)Indexed PMPMs by Age Group and Risk Group (MCO)

34. Drill Down – Rating Category 5 (Basic)Indexed PMPMs by Risk Group (MCO)

35. Drill Down – Rating Category 7 (Essential)Indexed PMPMs by Risk Group (MCO)

36. Potential Savings Opportunities from ACO and PCMH Initiatives

37. Considerations • The savings opportunities presented in this section are intended only to provide information regarding potential savings opportunities available through PCMH and ACO programs. Other savings opportunities may be available to MassHealth outside of these programs. In fact, MassHealth has undertaken numerous efforts through the Patient-Centered Medical Home Initiative (PCMHI), Primacy Care Payment Reform (PCPR) initiative and other programs and initiatives to address potentially avoidable service utilization in the MCO and PCC programs. • The information presented in this section is directional in nature and not a guarantee of future savings opportunity. The analysis cannot answer the questions regarding the specific fiscal impacts of program design features with absolute certainty under any study design, because of the inability (within the constraints of this project) to control for variables including, population demographics, practice conventions, benefit designs, individual incentives, the availability of health care resources, program differences and numerous other variables. • Like many of our other payer and provider clients, the Commonwealth’s ACO and PCMH programs are in their early stages of implementation. The populations, programs, resources, etc. will continue to evolve over the next few years.

38. Where May Savings Come From?Inpatient Services

39. One-Day Surgical and Medical Admissions Industry Experience with ACO and/or PCMH Initiatives* Occurrence in MassHealth Programs Opportunity • Estimated potential savings up to between 3% and 15% of Inpatient PMPM Costs for one-day admissions • MCO Program Potentially Avoidable Claims – 3,485 (3%) in CY 2010 and 4,063 (4%) CY 2011. • PCC Program Potentially Avoidable Claims – 1,001 (2%) CY 2010 and 898 (2%) CY 2011 Certain one day surgical and medical admissions may have been medically unnecessary or could have been performed in an ambulatory surgical center. These admissions may potentially have been avoided through improved access or improved inpatient coordination. Potentially avoidable one day admissions can be identified based on certain DRGs. *Based on Navigant industry experience and evidence-based research.

40. Inpatient Re-Admissions Industry Experience with ACO and/or PCMH Initiatives* Occurrence in MassHealth Programs Opportunity • Estimated potential savings of up to between 3% and 25% of Inpatient PMPM Costs for re-admissions • Summary-level claims data did not allow for detailed analysis of inpatient re-admissions. • MCO Program – MA should analyze detailed claims data to identify patients with frequent readmissions. MA should work with the MCOs to monitor utilization patterns of patients with frequent readmissions. • PCC Program – MA should analyze detailed claims data to identify patients with frequent readmissions. Interventions can be directed at avoiding frequent readmissions. Some readmissions may be avoided if patients receive and comply with discharge instructions and follow-up care. Critically important is setting up a follow‐up appointment for patients with their PCP within a week of discharge for a home-based medication compliance review. *Based on Navigant industry experience and evidence-based research.

41. Behavioral Health Industry Experience with ACO and/or PCMH Initiatives* Occurrence in MassHealth Programs Opportunity • Summary-level claims data did not allow for detailed analysis of inpatient re-admissions. • MA should conduct detailed claims analyses to monitor utilization patterns of patients with behavioral health and substance abuse related inpatient admissions to identify opportunities to reduce admissions. Estimated potential savings of up to 5% of Inpatient Behavioral Health Costs Some inpatient mental health and substance abuse admissions may be avoided if patients comply with all treatment recommendations including living situations, therapy and medication compliance. PCP training can reduce admissions due to Behavioral Health episodes. *Based on Navigant industry experience and evidence-based research.

42. Where May Savings Come From? Non-Inpatient Services

43. Emergency Department Industry Experience with ACO and/or PCMH Initiatives* Occurrence in MassHealth Programs Opportunity • MCO Program Potentially Avoidable Claims –249,725 (40%) in CY 2010 and 262,996 (39%) in CY 2011 • PCC Program Potentially Avoidable Claims – 245,255 (36%) CY 2010 and 238,380 (37%) CY 2011 • On average 10% reduction in potentially avoidable ED visits • Estimated potential savings up to between 15% and 30% of potentially avoidable Emergency Department PMPM Costs Patients may be seeking care in the Emergency Department (ED) that is not medically necessary for that setting and could potentially be treated in the office setting or with a physician phone consultation. Potentially avoidable Emergency Department visits can be identified based on certain diagnosis codes (e.g., headache, cough, nausea with vomiting. *Based on Navigant industry experience and evidence-based research.

44. Laboratory Industry Experience with ACO and/or PCMH Initiatives* Occurrence in MassHealth Programs Opportunity • Summary-level claims data did not allow for detailed analysis of Laboratory Services. • The MCOs and the PCC plan have a broad array of UM strategies and claims edits in place focused on avoiding excessive lab testing and work is underway in both programs to further enhance these efforts. Physician participation in alternative payment models in both programs will further enhance the effectiveness of these efforts. • On average 10% reduction in avoidable utilization • Estimated potential savings up to between 8% and18% of Laboratory PMPM Costs Some specific and general ambulatory lab testing may be over utilized or unnecessarily duplicated. *Based on Navigant industry experience and evidence-based research.

45. Hi-Tech Imaging Industry Experience with ACO and/or PCMH Initiatives* Occurrence in MassHealth Programs Opportunity • Summary-level claims data did not allow for detailed analysis of Hi –Tech Imaging Services. • The MCOs have robust high tech imaging UM programs in place, and the PCC plan is in the process of enhancing its high tech imaging UM program. Physician participation in alternative payment models in both programs will further enhance the effectiveness of these efforts. • Estimated potential savings up to between 8% and 15% of Hi-Tech Imaging PMPM Costs High tech imaging programs such as CT, MRI, and PET are often inappropriately utilized and duplicated, upwards of 30%. And while some physicians qualify out of prior authorization programs they often slip back to previous levels. *Based on Navigant industry experience and evidence-based research.

46. Pharmacy Industry Experience with ACO and/or PCMH Initiatives* Occurrence in MassHealth Programs Opportunity • MCO Program Claims – 6% of 2010 and 5% of 2011 pharmacy claims were for brand drugs when a generic equivalent was available. • PCC Program Claims – 6% of all 2010 and 5% of 2011 pharmacy claims were for brand drugs when a generic equivalent was available. • Estimated potential savings up to between 2% to 4% of Pharmacy PMPM Costs Patients may be prescribed brand name drugs when generic equivalents are available. *Based on Navigant industry experience and evidence-based research.

47. Section 3 State Interviews

48. State Interviews • This summary provides an overview of interviews conducted in October 2012 with representatives from Medicaid programs that have innovative payment and delivery system models and features. • States were selected for interview through discussion with ANF, EOHHS and the Committee based on one or more of the following conditions: • The state has a well-regarded program or delivery model with relevance to the Commonwealth’s payment and delivery system reform goals. • The state has recently developed or implemented innovative program features or models. • The state has changed delivery models, e.g., from a risk-based managed care (RBMC) using managed care organizations (MCOs) or Primary Care Case Management (PCCM) model to another model, or included elements of another model into their program

49. State Interviews • Navigant interviewed Medicaid representatives from the following states: • Arkansas • Connecticut • Minnesota • New York • Ohio • Oklahoma • Oregon • Pennsylvania

50. National Medicaid Landscape • Recent trend toward expanding Risked-Based Managed Care (i.e., capitated managed care) to include new geographic areas and more complex, high-cost populations. • Many states that previously maintained both PCCM and RBMC are shifting to RBMC (Texas, Pennsylvania, New York, Florida, Virginia). • In contrast, Connecticut and Oregon have shifted away from RBMC, while Oklahoma and North Carolina have maintained well-regarded statewide PCCM programs. • States are encouraging innovative, value-based payment models, such as shared shavings/shared losses and encouraging more coordinated delivery models (e.g., ACOs and medical homes).