How Have Long-Term Services and Supports Providers Fared in the Transition to Medicaid Managed Care? A Study of Three States - Executive Summary


Jessica Kasten, Paul Saucier and Brian Burwell

Truven Health Analytics


Until recently, state Medicaid programs have generally excluded long-term services and supports (LTSS) and Medicaid enrollees receiving LTSS from their managed care initiatives. However a growing number of states have or soon will expand their managed care programs to encompass LTSS, either on a mandatory or voluntary basis. From 2004 to 2012, the number of states with managed LTSS (MLTSS) programs doubled from eight to 16 and by the end of 2014 ten more states were projected to implement MLTSS.

The transition from fee-for-service (FFS) to MLTSS has significant implications for traditional Medicaid LTSS providers, such as nursing homes, home health/home care agencies, case management services providers, and other small providers. Under FFS, Medicaid LTSS providers contracted directly with state or local governments, received referrals for new clients from these entities, and were paid for services through state Medicaid claims processing systems. Under MLTSS, these providers are now required to negotiate contracts with the managed care entities selected by the state to operate their MLTSS programs, to provide LTSS to the members of each managed care plan in accordance with the terms of those contracts, and to submit claims separately to each managed care entity with whom they contract.

Concerns have been expressed about possible negative consequences for certain types of LTSS providers as a result of the transition of all or large numbers of Medicaid LTSS users from FFS to MLTSS and the impact of this shift on the overall LTSS marketplace. Because of such concerns, the Centers for Medicare and Medicaid Services issued guidance to states in May 2013 directing them to encourage or require managed care organizations (MCOs) via contracting provisions to include all existing LTSS providers as MCO network providers to the extent possible. The guidance also stipulated that states must provide or require MCOs to provide support to traditional LTSS providers to assist them in making the transition, including support in areas such as information technology, billing, and systems operation.

This report is based on an in-depth qualitative study of the impact of MLTSS on traditional FFS LTSS providers in three states: Delaware, Minnesota and Tennessee. The states were chosen to exemplify states that had shorter or longer experience with MLTSS. For example, Minnesota first implemented MLTSS during 1997 and expanded MLTSS to include home and community-based services (HCBS) waiver services in 2005. The other two states had implemented MLTSS much more recently: in 2010 (Tennessee) and in 2012 (Delaware). The study methodology involved site visits of 3-4 days in each state to conduct interviews with LTSS providers and provider associations, MCOs, state officials and other stakeholders specific to each state. The in-person interviews were supplemented with telephone interviews and e-mail correspondence.

Major findings were:

  • Most HCBS providers continued to be viable after the transition to MLTSS, but reported increased administrative costs and cash management pressures. In particular, billing issues were pervasive, especially in the immediate transition period, but continued many years after implementation in Minnesota. A challenge for providers is that each MCO has its own separate billing systems and procedures. Providers reported that they waited longer to get paid and that billing disputes took longer to resolve than when they billed Medicaid directly under FFS. Many smaller providers reported viewing the key to long-term survival as consolidation and provision of services on a larger scale.

  • Initially, MCOs signed contracts with all previous LTSS providers and said they had to do so in order to meet network adequacy requirements. In two of the three states, nursing facilities had acquired "any willing provider" protections via legislation prior to the transition to MLTSS. However, three years post-implementation in Tennessee MCOs had closed their panels for some types of home-based services and some MCOs in Minnesota closed their panels 15 years after implementation.

  • Traditional case management providers became obsolete in states where MCOs decided to perform the function internally (in two of the three case study states, Delaware and Tennessee). The total volume of case management increased in all three states under MLTSS, but for different reasons. In two states (Delaware and Tennessee), the reason was that more Medicaid beneficiaries became eligible for LTSS under MLTSS; in Minnesota, case management was expanded to cover all MLTSS members, not just those receiving HCBS waiver services. Nevertheless, LTSS providers reported that service authorizations took longer in MLTSS than in FFS because there were more bureaucratic levels of approval required in MCOs.

  • The volume of Medicaid nursing home days has decreased in all three states, but it is not clear how much this is due to the transition to MLTSS or other factors. Nursing facility providers reported shifting to a greater emphasis on Medicare skilled nursing facility care. In Minnesota, nursing facilities also diversified into new lines of business such as home care and assisted living.

  • All three states are pursuing payment reform in partnership with MCOs and providers. Minnesota's MLTSS program has always included risk sharing agreements between some MCOs and providers. Minnesota has already spawned multiple Accountable Care Organizations (ACOs) and providers of all types are seeking to be large and diverse enough to become ACOs or participate with them on a shared savings/shared risk basis. Tennessee is developing provider-level quality measures that can be tied to variable payment rates. Delaware has begun working with its' MCOs and providers to develop payment reform initiatives.

  • In both Delaware and Tennessee, the implementation of MLTSS programs has led, deliberately, to the increased use of participant-directed services.