Emerging Practices in Medicaid Primary Care Case Management Programs. Chapter 6: Finance

Early PCCM programs were implemented when Medicaid reimbursement rates to physicians were extremely low compared to the rates of other payers. Many Medicaid agencies were concerned about retaining sufficient provider participation to offer adequate access to primary and preventive care. As a result, contracted PCPs were not asked to accept any financial risk for provision of care. Until recently there were only two major forms of reimbursement among state PCCM programs.

• Fee-for-service payment for all services provided to members, plus a case management fee. In 1998, 26 of the 29 states (90 percent) with PCCM programs used this method.²⁸
• Fee-for-service payment for all services, including an enhanced rate for routine office visits by PCPs, with no care coordination fee. In 1998, 4 of the 29 states (14 percent) used this method. ²⁹

It was thought that continuing fee-for-service payments would create an incentive for PCPs to see their members on a regular basis. The 1998 data also showed that two states (California and New York) shared any savings generated by the PCCM program with contracted PCPs, in addition to one of the standard forms of reimbursement, to create an incentive for PCPs to closely manage referrals and specialty care. Recently, some states have begun applying such financial strategies as capitation or bonus payments, used by MCOs, to their PCCM programs.

• Case Management Fees

  • Paying a case management fee plus fee-for-service is the dominant payment method among the eight case-study states. Only one, Oklahoma, did not use this reimbursement method, since it pays a capitated rate. (This system is detailed later in this section.)

    Among the seven case-study states that pay case management fees, $3 per person per month is the most common fee.

    • Alabama, Florida, Maine (Maine PrimeCare), Texas (both Texas Health Network and STAR+PLUS), and Virginia all pay $3 per person per month.
    • Iowa pays $2 per person per month.
    • North Carolina pays
      • all PCPs $3 per person per month for the first 250 members and then $2.50 per person per month for the remainder; and
      • the sponsor network an additional $2.50 per person per month for each member in the ACCESS II and III programs
    • Maine pays all PCPs in its MaineNET program $5 per person per month. If the member is also a member of the Partnership program, the practice to which the PCP belongs receives a $20 per person per month case management fee (instead of $5).

    Three PCCM programs in two case-study states (ACCESS II and III in North Carolina and MaineNET/Partnership in Maine) have begun to extend the case management fee method of payment to providers other than the PCCM provider. All three programs serve people with disabilities and the elderly.³⁰ In all three programs, this method of payment is extended to other entities that play a large role in providing the type of care that PCCM members need.

    All three programs pay an additional fee to an organization that supports the PCP's ability to practice.

    • In North Carolina's ACCESS II and III programs the case management fee is extended to the network to which the PCP belongs. The networks use this fee to perform care management activities, including conducting risk assessments to identify members at greatest risk, operating targeted disease management initiatives, and hiring care managers who work with the PCP to coordinate care delivered to individual members. (Please see the Service Management section for more information on these positions.)
    • Physicians participating in the MaineNET/Partnership receive a $5 case management fee for MaineNET members and a $20 case management fee for Partnership members. This fee is to compensate the practice for the time needed to coordinate the care of members, all of whom have very complex needs.

    The MaineNET/Partnership is a separate contract between the Medicaid agency and a contractor that manages the care of all beneficiaries in the state who need community long-term care services. This contractor is paid $100 per member per month for eligible beneficiaries who are receiving Home and Community Based Services (HCBS) waiver services (regardless of their participation in Partnership). Care coordinators arrange, but do not pay, for the long-term care services a member needs to remain in the community. This contract is discussed here because the Partnership must co-locate one of their care coordinators at each MaineNET/Partnership physician's practice. The co-location of care coordinators enables the member to have both medical and long-term care needs addressed at a single location and often in a single visit. This arrangement is also an advantage for the physician, who gains the expertise of the care coordinator to help provide better care for patients with the most complex needs.

• Capitation

  • The BBA's definition of a PCCM provider³¹ does not exclude providers who are capitated for providing services, thus creating a new class of capitated PCCM programs. HCFA(now known as CMS), however, also considers PCPs in capitated PCCM programs to be either PHPs or MCOs (depending on the package of capitated services) and regulates them as such.

    Among the case-study states only Oklahoma pays PCPs using capitation. The capitation rates ($15.90 for TANF and $23.26 for ABD) cover primary, preventive, and case management services (including lab and X-ray services). Oklahoma Medicaid representatives reported taking this approach for two reasons.

    • They believe paying a capitation for primary, preventive, and case management services emphasizes the medical home concept; and
    • The state legislature mandated the use of capitated models to assure greater budget predictability. Creating a capitated PCCM was a means of achieving that goal in areas where sufficient MCO participation might not occur.

    At first, some providers expressed concern with a capitated approach. The Medicaid agency, therefore, piloted the program for a few months in three counties. Providers in those counties successfully managed the primary and preventive services under the budget imposed by the capitation. Word of this success encouraged other providers to join the program.

    Oklahoma also requires PCPs to serve those with complex needs, such as the aged and those with disabilities. Providers were concerned about taking on the additional risk of serving those populations under a capitated arrangement. The Medicaid agency successfully allayed those concerns by instituting a bridge payment under which the agency agreed to pay any difference in cost between the capitation payment and the cost, in the fee-for-service system, of serving those with complex needs. This payment was retroactively calculated based on the fee-for-service cost of all capitated services (as reported in encounter data) actually provided to the member.

• Financial Incentives for Performance

  • As reported in other National Academy for State Health Policy work,³² states have begun to create financial incentives for good MCO performance. Two case-study states have extended this concept to their PCCM programs. Both use bonus payments to enhance the medical home concept by rewarding PCPs who provide the best access to key primary care services.

    • Maine established a $3 million per year fund for bonus payments to the Maine PrimeCare PCPs who show the best performance on a series of measures related to access, emergency room utilization, and prevention/quality. (See the Quality Improvement section of this report for more details on these measures).
    • Oklahoma offers a bonus payment to PCCM providers who exceed expected performance in provision of EPSDT screens to members. The bonus amount increases in proportion to performance.

    Maine's system is the more extensive of the two, and has been in place since July 1998. For purposes of calculating this payment, PCPs are grouped by specialty and panel size so that physicians compete only with their closest peers. Those providers whose performance is in the top 20 percent of their group receive a bonus payment. Those who perform better receive larger bonuses. The specific amount of an individual provider's bonus payment depends on provider specialty and overall performance.

    Maine Medicaid staff report satisfaction with this system. Based on calls from physicians regarding their performances, state staff also believe that this system does encourage physicians to improve their performances, although it is not always clear how much of the concern with improving performance results from simply knowing where they rank against other practices versus from the potential bonus payment. Some physicians in group practices may not realize that they receive a bonus payment, as it may go directly to the practice's business office. Maine Medicaid staff are working to develop a way to make the physicians aware of the payment without creating accounting problems within the billing office.

• Savings

  • All of the case-study states reported that their PCCM programs produce savings when compared to fee-for-service programs. Some concern was expressed, however, about what impact the BBA requirements for emergency room usage would have on future savings. As discussed in the Evolution of PCCM section, the BBA requires Medicaid agencies to pay hospitals and physicians for emergency room visits using the prudent layperson standard. All but one of the case-study states (Virginia) indicated that they believed this new language essentially required them to pay for all emergency room visits. Some case-study states reported that PCPs also believed that the new language hampered their ability to manage their patients' emergency room usage. Given that much of the savings from PCCM programs results from improved state and PCP management to prevent inappropriate emergency room visits, they felt this new language would reduce the amount of cost savings that PCCM programs produce.

• Endnotes

  • 28. See Note 2 for source of all 1998 information.

    29. California reported using both methods and is, therefore, counted twice in these statistics.

    30. In the case of MaineNET/Partnership, the program serves only those Medicaid beneficiaries who also receive Medicare, live in the community, and require a level of care that would normally require placement in a nursing home, effectively limiting the program to serving those elderly who have the most complex needs. The complex needs of the populations enrolled also account for the higher than standard case management fee paid to PCPs for MaineNET/Partnership members.

    31. Please refer to the Evolution of PCCM section for the full BBA definition.

    32. Neva Kaye and Michael Bailit, Innovations in Payment Strategies to Improve Plan Performance (Portland, ME: National Academy for State Health Policy, 1999).

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