Here’s what happens when states become testing grounds for healthcare payment reform

Instead of rolling out change on a grand scale, why not test and build it out in stages? That’s part of what the CMS is doing with its State Innovation Models initiative, and growing evidence suggests that this approach holds promise for accelerating the nationwide shift to paying for healthcare on the basis of quality over quantity. Still, its impact on health and healthcare spending remains to be seen.

The CMS recently released a 579-page independent evaluation (PDF) for one cohort of states in the multi-part SIM Initiative. It was the second annual report for the six states—Arkansas, Massachusetts, Maine, Minnesota, Oregon and Vermont—that in 2013 were awarded between $20 million and $60 million each to test models of healthcare innovation.

Those models were aimed at expanding primary and integrated care, improving health IT, and developing other aspects of healthcare delivery to improve care coordination, patient engagement and quality of care.

“The test states are using a range of payment reforms to move their healthcare systems from FFS [fee-for-service] to value-based care,” the report said. The states faced common challenges, such as getting stakeholder buy-in and multi-payer participation, but they also found ways to address those issues and others.

All six states “have adapted their payment reform strategies to respond to issues that include provider fatigue, difficulties reaching stakeholder consensus, political climate, and lack of multi-payer participation (including Medicare),” the report noted. “As implementation progresses, states are remaining responsive to stakeholders—making continual updates to the payment models that support their delivery system transformation goals.”

Despite being in the same cohort, states used a wide range of strategies as they experimented with new healthcare delivery and payment models.

“Payment reform models are diverse—varying in target populations and providers, payment structure, financial risk to providers, quality metrics, and performance targets,” the report noted. Their accountable care organizations, for instance, used “a variety of shared savings and shared risk models.”

Although it was too soon to determine the impact of these models on health outcomes and spending, the models tested in these states are reaching greater swathes of the population, Medicaid beneficiaries among them, Dr. Patrick Conway, CMS’ principal deputy administrator and chief medical officer, wrote Wednesday in a blog post announcing the release of the evaluation.

Accountable care organizations in Vermont, for instance, “officer services to nearly all residents statewide,” Conway wrote, and a “significant majority” of primary care providers participate in both Medicaid and commercial ACOs.

The payers involved varied by state. In Massachusetts, Minnesota and Maine, Medicaid was the only participant. It was also involved in the three other states, where commercial payers’ participation varied.

Arkansas had the state’s dominant commercial insurer, Arkansas Blue Cross and Blue Shield, as well QualChoice and several self-insured employer groups. Blue Cross and Blue Shield of Vermont, was the only payer in that state’s commercial ACO. And in Oregon, the initiative also included commercial insurers that cover state employees and Medicaid beneficiaries.

Future evaluations “will provide more detail on … whether and how the SIM Initiative is affecting and accelerating trends in health outcomes and spending,” Conway added.

In the State Innovation Models initiative, states serve as building blocks as well as laboratories. Supplying states with funding and technical support, the initiative aims to help them develop and test “state-led, multi-payer healthcare payment and service delivery models” to improve healthcare quality, efficiency and costs for everyone, according to the official program description. It also tests how state governments can use policy and regulation to speed the shift to value-based payment.

The first round of awards to design or test new healthcare models dispensed nearly $300 million to 25 states. The second doled out over $665 million to 28 states, three territories and Washington, D.C.

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