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Maximize Value June 29, 2015

Proposed Rules for Managed Medicaid Organizations: The Provider Impact

Partner, Health Services, Oliver Wyman
Global Head, Provider, Health and Life Sciences, Oliver Wyman
Partner, Health and Life Sciences, Oliver Wyman

The Centers for Medicare & Medicaid Services (CMS) proposed last month a new set of rules for Managed Medicaid with the intent to alleviate some of the coverage and access challenges that face the States and their Medicaid populations, as well as align Managed Medicaid to Medicare Advantage and market standards. In an earlier post, our government programs experts explored how health plans might respond to the regulations. Here, Oliver Wyman’s Jim Fields, Dan Shellenbarger, and Parie Garg look at how healthcare providers may be affected:

The varying and extensive needs of the Medicaid population, coupled with insufficient resources to serve them, often create a struggle among provider systems: How can they adequately serve the transient, low income, and often chronically ill population, while ensuring they don’t leach money in the process?

This quandary may soon be resolved. As States look to implement health innovation models, extend Medicare’s accountable care models to the Medicaid population, and shift more high risk members into Managed Medicaid, there are expanding opportunities to use innovative care and reimbursement models to serve the Medicaid population.

Commercial health plans are increasingly playing a larger role in Medicaid (through Medicaid managed care) and providers are likely to be pulled into the fray as well. Here’s a breakdown of the potential provider impact:

The ok news: Insight regarding what is covered and how much is being paid to MCOs

  • Actuarial soundness provisions: Going forward, states will be required to set actuarially sound rates for Medicaid managed care programs. Not only will these prevent unplanned fluctuations from year to year, they will provide greater clarity on what is being covered and how much MCOs are being paid. In other words, MCO reimbursements are likely to fluctuate less going forward, enabling greater provider payment stability (state budget challenges notwithstanding).
With population health and Medicaid managed care becoming the norm rather than the exception, Medicaid offers providers an opportunity to play a role in managing a complex population and taking on risk. – Oliver Wyman’s government programs team

The good news: Potential for increased bargaining power

  • Network adequacy requirements: In acknowledgment of access difficulties for the Medicaid population, the proposed rules advocate for MCO network adequacy requirements (e.g. time and distance standards). If these do go into effect, MCOs may find themselves stuck between a rock and a hard place, balancing adequacy requirements with provider reimbursement expectations, potentially giving providers additional bargaining power when it comes to negotiating rates. This rule may also incent providers to expand their networks to provide additional coverage and capture share.
  • Support of value-based care and performance initiatives: The proposed rules will now allow states to require MCO adoption of value-based purchasing models for provider reimbursement. Providers that are already down the path of value-based care will benefit from this proposal, and may even find themselves at an advantage when it comes to the Medicaid population.

The bad news: It all comes with greater administrative burden

  • Setting of State monitoring standards: Per the proposed rules’ new provider monitoring standards, states must enroll and monitor all MCO network providers that are not currently enrolled with the state. This rule will likely result in an increased administrative burden for providers that are either (a) part of MCO Medicaid networks or (b) looking to provide Medicaid focused services.
  • Stars for Medicaid: The new rules propose a Medicaid stars rating system, similar to Medicare. MCOs acknowledge that achieving high star ratings requires provider participation, so providers may be asked to participate in the monitoring of cost, quality, and performance in pursuit of a higher star rating.

With population health and Medicaid managed care becoming the norm rather than the exception, Medicaid offers providers an opportunity to play a role in managing a complex population and taking on risk. As Medicaid becomes a more viable and attractive market, it will be important for providers to understand the unique needs of the various covered populations and the differences in program design and coverage within each state.

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