California Proposes To Expand Incentive Pay for Some Medi-Cal Providers

California officials are negotiating with the federal government over an ambitious proposal that would expand an incentive pay program for hospitals and introduce shared savings and other performance pay to Medi-Cal managed care plans.

The proposal is part of California’s Section 1115 Medicaid Waiver renewal process. The state’s current five-year $10 billion waiver, which began in November, 2010, expires on Oct. 1.

The new waiver proposal would build on the existing one, state and interest group representatives said.

“This is the second half of the 10-year process to expand Medi-Cal and provide better health outcomes,” said Mari Cantwell, chief deputy director of health care programs at the California Department of Health Care Services, which administers Medi-Cal, the state’s Medicaid program.

The current waiver requires the state to achieve three main objectives in exchange for federal Medicaid funding: 

  • Expand Medi-Cal to an estimated 4.5 million Californians;
  • Move 380,000 seniors and disabled into managed care; and
  • Conduct an incentive-based payment system for safety net hospitals to improve care quality and access.

These objectives have largely been achieved, stakeholders said. Medi-Cal’s rolls have swelled by an additional three million people in the past 18 months alone, to a total of 12 million enrollees. California is one of 23 states that chose to expand Medicaid eligibility under the Affordable Care Act. 

The proposed waiver, presented last month to federal officials, includes a bevy of programs that will increasingly hold Medi-Cal providers accountable for patient outcomes and spur collaboration across specialties and among systems in order to receive funding.

“We are really looking at all of these programs as things where we can push change and do things that are not typical today,” Cantwell said. “We want providers working together and earning incentive payments to be the norm.”

An important component of the soon-to-expire Medicaid waiver is the Delivery System Reform Incentive Program, DSRIP, which since 2010 has required 21 public hospitals and academic medical centers statewide to meet pre-set milestones on patient safety, quality, access and population health improvements in exchange for up to $3.3 billion in total Medicaid funding. California was first in the nation to implement a DSRIP program, and other states including New York and Texas have since followed suit.

Under the new proposed waiver, this DSRIP program would be re-branded and expanded to include another 42 hospitals run by health districts statewide. Milestones would also change. Hospitals would have to meet similar milestones on projects in five domains. These are:

  • System redesign, such as care transitions and ambulatory care;
  • Care coordination for high-risk and high-utilizer patients, focused on complex care management and health homes;
  • Resource utilization efficiency, such as imaging, pharmaceuticals and antibiotics;
  • Prevention, including obesity, cancer and cardiovascular care; and
  • Patient safety in ambulatory care, including medication management.

Erica Murray, president and CEO of the California Association of Public Hospitals and Health Systems, said the new waiver is more ambitious.

“Public healthcare systems recognize that they have to become truly integrated systems of choice by 2020,” Murray said. “They are evolving from reactive to proactive systems that emphasize primary and preventative care. It is a huge paradigm shift that needs another five years of continued, meaningful work in every setting within each system to really succeed.”

Hospitals would have to show measurable progress in improving the health of patients, Murray said. Cost controls are currently not part of the new waiver proposal and they were part of the last waiver. “We are thinking hard about how cost effectiveness can be included,” Murray said.

The new proposed waiver also would tie Medi-Cal payments to patient outcomes in other ways. For instance, hospital pay for uninsured patients would transition to a global payment system where facilities would have to meet service thresholds to receive global budget amounts.

Additionally, under the proposed waiver, Medi-Cal payments for dental care and for the care of pregnant women would move from fee-for-service to pay-for-performance to create incentives for preventative care. And workforce incentives in the proposal include expanding the number of providers who will treat Medi-Cal patients and cross-training providers in primary and behavioral health.

Medi-Cal managed care plans would also undergo significant payment reform under the waiver proposal. Some 80% of Medi-Cal enrollees are in managed care, up from 50% in 2010. Under the proposal, managed care plans could partner with providers to receive shared savings incentive payments if they meet cost and quality thresholds. These partnerships would be similar to accountable care organizations, according to the waiver proposal, though the details of the costs and savings have yet to be calculated.  Medi-Cal managed care plans could also participate in a pay-for-performance program, according to the proposal.

Similarly, the proposal includes a program aimed to spur regional partnerships. Counties, managed care plans and local partners such as law enforcement and social service agencies could work together on “whole person care” initiatives for high needs patients.

Cantwell said the waiver proposal could change significantly as negotiations continue with federal officials from the Centers for Medicare and Medicaid Services.

The state Legislature must also approve a bill authorizing the waiver’s implementation, which could happen in tandem with federal approval because of the tight timeframe, Murray said.

“In the next couple of months we will be heavily focused on this,” Cantwell said.

Related Topics

Capitol Desk Medi-Cal