Report: Arkansas medical pay system needs more ‘well-proven’ models

The Arkansas Payment Improvement Initiative has produced some savings, but the state should consider looking at other, more proven strategies, legislators were told Thursday.

The Health Care Reform Legislative Task Force, a group of legislators looking at overall health care reform in Arkansas, heard from officials with the Department of Human Services and from The Stephen Group, the task force’s consultant.

Asked by Dr. Greg Bledsoe, Arkansas’ surgeon general and a non-voting member of the task force, if the state is generally moving in the right direction with its cost-saving efforts, John Stephen of the Stephen Group said, “We felt as a group that this state is embarking on something that’s very complex, nationally recognized. At the same time, wow, there’s already well-proven methodologies out there that other states are using to control those costs.

“And that’s kind of it in a nutshell. We’re not saying it’s a bad thing. It’s just that it’s a lot of time and effort. It’s a lot of design work. It’s a lot of new-new-new versus – and innovative, I want to give them a lot of credit … versus what surrounding states and other states have been doing for a number of years that you’re not doing in addressing some of the high-cost areas.”

Legislators discussed the initiatives’ primary efforts: its episodes of care model, which financially rewards providers who treat cases cost-effectively, and its patient-centered medical home model, which compensates primary care physicians to coordinate care among providers and follow up with patients.

In the episodes of care model, providers who treat patients more cost-effectively can receive a financial reward from Medicaid and other providers, while those who fail to save on costs can face financial penalties. So far, 14 episodes of care categories are included in the model, with 15 more planned for the future, said Dawn Stehle, director, Division of Medical Services, Dr. Bill Golden, division of Medical Services medical director. They told legislators that the Medicaid C-section rate has been reduced from 39% to 34%, while total joint replacements dropped from 141 to 101 across the state.

The model drew questions from three legislators who are doctors’ wives: Sen. Missy Irvin, R-Mountain View; Sen. Cecile Bledsoe, R-Rogers; and Rep. Michelle Gray, R-Melbourne. Gray called the episodes of care model “punitive” and said it could exacerbate the doctor shortage, while Bledsoe questioned if it would encourage doctors to avoid potentially more costly patients.

Major implementation costs for the episodes of care model equal $62.6 million, with each episode category costing $4.5 million and producing annual savings of $1 million to $1.7 million each.

Stephen and his fellow consultants with The Stephen Group, Stephen Palmer and Bob Chin, estimated the savings produced so far at between $6.9 million and $28.2 million. They said the episodes of care model was thoughtfully designed and included considerations for both costs and quality of care, but the savings have not been huge.

David Wroten, executive vice president of the Arkansas Medical Society, and Bo Ryall, president and CEO of the Arkansas Hospital Association, said their organizations preferred the episodes of care model to potential alternatives like across-the-board cuts or managed care, where an outside organization would enforce cost-saving mechanisms.

But Ryall said hospitals already are facing financial hardships for treating Medicaid patients. A study of Arkansas hospitals aside from very rural hospitals, Arkansas Children’s Hospital and UAMS found they were being paid only 82% of costs and lost $83 million treating those patients. On an inpatient visit, hospitals initially are paid 53% of costs and are paid 36% of costs, with supplemental payments increasing it to 82% of the costs. Those payments are paid quarterly, but it’s often six months before the hospital sees the money.

Wroten told legislators that other portions of the Medicaid budget – outside of the 30% spent by doctors and hospitals – should be participating in bending the cost curve.

The patient-centered medical home model, where the primary care physician coordinates care, drew more universal praise. Stehle and Golden told legislators that the program had helped Medicaid avoid $19.7 million in direct costs, that it serves 295,000 beneficiaries, and that it had improved care quality, including providing 100% of enrolled beneficiaries with 24-7 phone access to their primary care physicians.

Practices in 2014 involved in the program had lower cost growth than those not involved.