Journal of Health Politics, Policy and Law

Point-Counterpoint

Oregon’s Experiment in Health Care Delivery and Payment Reform: Coordinated Care Organizations Replacing Managed Care Steven W. Howard Saint Louis University Stephanie L. Bernell Jangho Yoon Jeff Luck Oregon State University Claire M. Ranit Columbia Pacific Coordinated Care Organization

Abstract To control Medicaid costs, improve quality, and drive community engagement, the Oregon Health Authority introduced a new system of coordinated care organizations (CCOs). While CCOs resemble traditional Medicaid managed care, they have differences that have been deliberately designed to improve care coordination, increase accountability, and incorporate greater community governance. Reforms include global budgets integrating medical, behavioral, and oral health care and public health functions; risk-adjusted payments rewarding outcomes and evidence-based practice; increased transparency; and greater community engagement. The CCO model faces several implementation challenges. If successful, it will provide improved health care delivery, better health outcomes, and overall savings. Keywords Medicaid, state health reform, managed care, Oregon, coordinated care

organizations

Introduction

Innovations in Oregon’s Medicaid program, the Oregon Health Plan (OHP), have attracted nationwide attention for two decades. Oregon’s explicit rationing through a prioritized list of medical conditions and interventions proved particularly controversial. This approach aims to limit cost and cover more people by reimbursing providers only for certain services deemed cost-effective (Bodenheimer 1997; Oberlander 2007). Since the Journal of Health Politics, Policy and Law, Vol. 40, No. 1, February 2015 DOI 10.1215/03616878-2854919  2015 by Duke University Press

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early years of OHP, the state has also placed nearly all enrollees in locally owned managed care plans. To improve the financial sustainability of the OHP, Oregon has recently transformed how health care is delivered. Although covered services remain ranked based on the prioritized list of services, regional coordinated care organizations (CCOs) now receive global budgets for the integrated provision of medical, behavioral, and oral health services. This article presents key features of the CCO model that are intended to improve health care delivery and health outcomes while reducing cost growth. It highlights how CCOs differ from traditional capitated managed care organizations (MCOs) and outlines several implementation challenges the CCO model faces. Evolution of the CCO Model

In 2009 House Bill 2009 established the Oregon Health Authority (OHA) as an independent agency. It also established the Patient-Centered Primary Care Home (PCPCH) program, to promote adoption of PCPCHs for OHP members. Care teams are led by physicians and heavily utilize midlevel providers. A PCPCH is expected to coordinate care, work proactively with patients to manage chronic diseases, facilitate patient self-management, and promote healthier lifestyles. In 2011 House Bill 3650 established the Oregon Integrated and Coordinated Health Care Delivery System. It required CCOs to have PCPCHs in place for their enrollees (H.R. Res. 2009, 75th Leg., Reg. Sess. (Or. 2009); H.R. Res. 3650, 76th Leg., Reg. Sess. (Or. 2011); Nutting, Crabtree, and McDaniel 2012; S. Res. 1580, 76th Leg., Reg. Sess. (Or. 2012); Takach 2012). In 2012 the Centers for Medicare and Medicaid Services (CMS) approved Oregon’s Medicaid waiver application. By the end of that year, fifteen CCOs had been approved by OHA. To aid in implementing the CCO model, CMS also committed $1.9 billion over five years. State forecasts predict $11 billion in savings over ten years, compared with the status quo (Cooper 2012; Raphael 2012). How a CCO Works

A CCO is a network of physical, mental, and dental health care providers linked to publicly funded health programs, including the local mental health authority (H.R. 3650; OHA 2011b). As required by state law, CCOs

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must make specialist services available to patients and have contracts with all dental care organizations within their service areas no later than July 1, 2014 (H.R. 3650; Health System Transformation Team 2011). The organizational structure of CCOs varies. Some are substantially the same as their OHP MCO predecessors, with a core MCO and contractual relationships with providers. Others, like Health Share of Oregon, are alliances between previously competing MCOs, health systems, dental health organizations, behavioral health groups, and county health departments (OHPB, n.d.). This flexible organizational model helped ensure that 90 percent of OHP enrollees had coverage available from at least one CCO (OHA 2013). Figure 1 shows CCO service areas. The state continues to contract with MCOs in locations not covered by a CCO. Yet by July 2017, Medicaid MCOs must transition to the CCO model to retain their state contracts. Table 1 presents a side-by-side comparison of the CCO model and the previous Medicaid MCO model. Global Payment and Compensation to Providers

Each CCO receives a capitated global budget to deliver comprehensive services to OHP members within its service area. Participating providers share financial risk, and their incomes reflect how well they manage global budgets and population health (OHA 2012). Under the CMS waiver, Oregon committed to reduce OHP’s per capita annual expenditure growth by two percentage points (measured from projected 5.4 percent growth) by 2015. This reduction will severely restrict increases in global budgets, thereby requiring CCOs to achieve savings by delivering care more efficiently, for example, by discouraging defensive medicine and reducing overutilization and preventable emergency room care (OHA 2011a). Thus CCOs have financial incentives to focus on members with high health care needs, mental illness, chemical dependency, and multiple chronic illnesses (H.R. 3650). Nearly all CCOs have plans to identify high-utilizer patients and better coordinate their care. These include use of health navigators, improved electronic data interchange among partners in the CCO, and colocation of behavioral health professionals in PCPCH clinics (CCO Oregon 2013). OHA will adjust future global budgets based on populations served and individual CCOs’ performance on health outcomes. This risk adjustment considers available public health data as well as utilization and cost data

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Figure 1 Geographic Service Areas of Oregon’s Coordinated Care Organizations Source: OHPB, n.d.

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Table 1 Features of Oregon’s New Coordinated Care Organization Model Compared to Historical Managed Care Model Historical Medicaid Managed Care Model

New CCO Model

Capitated by the state Comprehensive health benefits Behavioral health benefits

X X X (carved outa)

Dental health benefits

X (carved outa)

Integration of payer and provider Risk-adjusted payment Outcomes-adjusted payment Primary care focus Evidence-based care Increased role of midlevel providers Public health functions Financial transparency Community engagement on board of directors

X (by some MCOs)

X X X (integrated) X (integrated) X X X X X X X X X

Notes: CCO = coordinated care organization; MCO = managed care organization a ‘‘Carved out’’ benefits were excluded from MCO contracts and provided by networks of specialty providers under separate capitated contracts from the state.

collected by OHA (Health System Transformation Team 2011). Other state Medicaid programs, including Minnesota’s, have implemented similar approaches (Minnesota Department of Human Services 2010). CCOs and providers are required to follow evidence-based guidelines (H.R. 3650), but CCOs may only reimburse providers for services on OHP’s prioritized list. This requirement could generate conflict between CCOs, which receive global budgets, and providers who receive feefor-service reimbursement. Specifically, providers might be compelled to provide some services indicated by guidelines but go unreimbursed because OHP has determined such services are not cost-effective. In part to avoid such potential conflicts, OHA encourages CCOs to utilize alternative payment methods that reimburse providers based on health outcomes and quality measures (H.R. 3650). To ensure accountability for health outcomes, CCOs may terminate providers based on a performance matrix, including failure to report on quality of care, outcomes or financial metrics (H.R. 3650).

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CCO Impact on Providers

The CCO model intends for PCPCHs to provide the majority of care to OHP members. Therefore, PCPCH teams may include primary care physicians, medical assistants, nurses, dietitians, community health workers, personal health navigators, administrative assistants, behavioral health professionals, and other providers depending on patients’ specific needs. This team-oriented environment will be a challenge for some physicians, who must now share decision making and interact with new types of nonphysician providers. These providers, including community health workers and personal health navigators, will soon be certified by their associated state regulatory agencies in coordination with OHA (H.R. 3650). Primary care providers are allowed to participate in multiple CCOs. The CCO model is inclusive, offering all interested providers the opportunity to participate in a CCO. Providers are not permitted to unreasonably refuse to participate if their services are necessary for the CCO to function adequately (H.R. 3650, 7). However, providers may refuse to contract with a CCO if the reimbursement offered is ‘‘below the reasonable cost’’ for providing that service (H.R. 3650, 6). Additionally, CCOs are responsible for the health care—but not the custodial care—of individuals receiving long-term care. This uneasy division of roles poses challenges to CCOs. If long-term care operators shift more medical management tasks to PCPCH teams (Health System Transformation Team 2011), unintended consequences may include physicians refusing to accept OHP patients, difficulty recruiting or retaining primary care physicians in Oregon, and increased burnout or reduced quality as PCPCH teams become overworked. Safeguards, Administration, and Governance

In 2012 Senate Bill 1580, drafted by OHA, provided additional details on the design and regulation of CCOs. It required OHA to report quarterly to the legislature on the implementation status and performance of the CCO model and included additional safeguards regarding patients’ rights and protection against unreasonable denials of care (S. Res. 1580). The governance of CCOs differs fundamentally from the historical MCO model. Each CCO must have a community advisory council (CAC) that includes local government officials, community members, and a majority of ‘‘consumers.’’ The CCO’s board of directors must include individual provider organizations and at least one CAC member. The CCO’s

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organizational decision-making processes must include input from seniors, people with disabilities, individuals using behavioral health services, racially and ethnically diverse populations, and providers (Health System Transformation Team 2011). These requirements reduce the power of payers relative to other stakeholders. Reporting, Transparency, and Accountability

In contrast to the historical MCO model, which provided little transparency below the level of an MCO’s capitation, both CCOs and OHA must now ensure transparency of data including payer costs, provider costs, and provider payments, as well as outcomes and quality measurements (Health System Transformation Team 2011). To ensure transparency, CCOs must track and submit data to OHA, which is required to report progress on CCO quality measures, reduction of health disparities, adherence to evidence-based clinical guidelines, adoption of administrative rules, customer satisfaction, costs, and savings. Reports of these measures are posted online quarterly and submitted to CMS. To encourage greater patient accountability, CCOs use incentive-based systems, patient education, increased access through PCPCHs, and improved patient-provider communication via phone and the Internet (Health System Transformation Team 2011). To succeed, CCOs must communicate effectively with patients, to help them understand their role in producing health and controlling costs. Opportunities and Challenges

Oregon’s CCOs provide a unique opportunity to improve care and control Medicaid cost growth, by integrating physical, behavioral, and oral health services within a framework that aligns payment mechanisms with outcomes for a defined member population. Global budgets and shared savings provide incentives for efficiency, while quality requirements discourage cost reductions that sacrifice patient outcomes. Together the core components incentivize CCOs to promote prevention, evidence-based medicine, and more effective coordinated care. Providers participating in CCOs have increased accountability for the overall cost and quality of care. The transformation from the historical Medicaid MCO model is substantial, and from a population perspective the impact of the CCO model may be greater than the sum of the parts. Several implementation challenges remain.

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Health Information Exchange. Information systems capable of sharing patient data across providers are essential for effective care coordination. The challenges of health information exchange—implementing data standards, building infrastructure, and overcoming provider reluctance to share data—must be confronted. Responsibility for delivering most services as well as coordinating care is borne by PCPCHs, but supporting multidisciplinary care teams and electronic medical records will be a challenge for small practices and in rural areas with low population density. Performance Measurement and Improvement. As part of its waiver, CMS mandated a pay-for-performance system. Rapid design and implementation of this system, which uses encounter data as well as some medical record review, are challenges for the state and for CCOs. Performance measurement strategies must also be refined based on experience from the early measurement and payment years. To guide development and refinement of CCO performance measurement, OHA established the Metrics and Scoring Committee. It has also established the Transformation Center to accelerate performance improvement by fostering the spread of effective practices across CCOs (OHA, n.d.). Governance. The collaborative nature of CCOs and stringent global budgets make organization and governance more challenging than in traditional capitated MCOs, especially where increased spending for care coordination or other nonclinical interventions may yield savings to the CCO but reduce revenue for some providers. Provider Payment Systems. Given the scope of services provided by CCOs, billing and reimbursement will be even more complex than in the historical MCOs, requiring systems and a workforce that can also track performance measures and adjust provider payments. Although PCPCHs have the most regular patient contact and greatest impact on health, most are small practices with limited administrative capabilities. Existing payers (including the OHP MCOs) are therefore likely to retain an important role in managing global payments and reimbursing providers. Behavioral Health. Because OHP members with mental illness often use a large volume of physical and behavioral health services, coordinating their care is crucial for meeting budget targets and achieving quality goals. Each CCO must decide how to contract with local health departments or other behavioral health providers. Some health departments fear that they may face funding reductions as a result.

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Community Engagement. Community stakeholders and OHP members play significantly larger roles in CCOs than in the historical MCOs. Each CCO must collaborate with its CAC to prepare a Community Health Assessment and Community Health Improvement Plan. A challenge to CCOs may be balancing openness to community input against stringent quality and cost requirements. Medicaid Expansion. The dramatic expansion of OHP enrollment under the Affordable Care Act (ACA) will pose access challenges to CCOs. Enrollment increases projected to occur over five years were exceeded in the first five months of expanded eligibility. Despite widely publicized difficulties with Oregon’s online health insurance exchange, OHP outreach efforts helped yield enrollment growth of more than three hundred thousand—over 50 percent—from December 2013 through May 2014 (Hoffman and Clement 2014). Final Thoughts

The CCO model has roots in other successful regional collaborations. For example, the Central Oregon Health Council piloted a similar model in 2009 (Waldroupe 2011). Its initial enrollees consisted of 144 OHP members. During the first half of 2011, they experienced 49 percent fewer emergency department visits, yielding savings of approximately $750,000 (Waldroupe 2011). The ACA provides states with substantial financial subsidies to expand Medicaid eligibility. Nevertheless, even states that expand Medicaid under the ACA will face strong fiscal pressures to work with providers to meet population health goals in a cost-effective manner. Oregon has taken bold steps in this direction, and the results of its experiment will offer important lessons for other states.

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Steven W. Howard is assistant professor in the Department of Health Management and Policy at Saint Louis University. He earned a PhD in public health from Oregon State University. His research focuses on economic and comparative effectiveness of health care delivery model innovations, health reform models, and chronic disease management. He teaches courses on the health system, health care marketing, managed care, and health policy in the residential and the Executive Master of Health Administration programs at Saint Louis University.

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Stephanie L. Bernell is associate professor and coordinator of the health management and policy programs at Oregon State University. She has a PhD in health economics from Johns Hopkins University. She teaches courses on the health system, health policy, and health economics in the bachelor, master, and doctoral programs in the School of Social and Behavioral Health Sciences. The focus of her research is the unintended health-related consequences of policy change. She is finishing a health economics textbook forthcoming from Health Administration Press. Jangho Yoon is assistant professor of health policy at Oregon State University, College of Public Health and Human Sciences. He earned a PhD in health policy from the University of North Carolina at Chapel Hill and received postdoctoral training in mental health economics and policy at the University of California, Berkeley. He uses econometric modeling to evaluate how population health outcomes and costs respond to major health policy and system changes. His current research focuses on behavioral health with a focus on evaluation of mental health policy and systems, health reform with an emphasis on public and private health insurance, evaluation of health care system transformation, and economics of public health. Jeff Luck is associate professor of health management and policy at Oregon State University’s College of Public Health and Human Sciences. His research focuses on quality and performance measurement, population health measurement, operations of public health agencies, and the application of informatics to those topics. He holds a PhD in public policy analysis from the Pardee RAND Graduate School and an MBA from the University of California, Los Angeles. He is a member of the Oregon Metrics and Scoring Committee and the Oregon Public Health Advisory Board. Claire M. Ranit is the transformation specialist for Columbia Pacific Coordinated Care Organization (CPCCO) of CareOregon. She has a bachelor’s of science in public health focusing in health management and policy from Oregon State University. She staffs the Clinical Advisory Panel of CPCCO and is responsible for facilitating program development, execution, and evaluation of transformation-fund-related projects.

References Bodenheimer, Thomas. 1997. ‘‘The Oregon Health Plan—Lessons for the Nation.’’ New England Journal of Medicine 337, no. 9: 651–56. CCO Oregon. 2013. ‘‘ACO vs. CCO Comparison Chart.’’ CCOOregon.com. www .ccooregon.com/documents/acovscco.pdf (accessed February 13, 2013; link inactive). Cooper, Jonathan J. 2012. ‘‘Feds Will Put Up Money for Ore. Health Overhaul.’’ NewsRegister, May 3. Health System Transformation Team. 2011. ‘‘Coordinated Care Organizations (CCO): Strawperson Summary.’’ Salem, OR: Health System Transformation Team. www .oregon.gov/OHA/docs/hlth-sys-trans/2011/strawperson-summary.pdf?ga=t.

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Hoffman, Suzanne, and Leslie Clement. 2014. ‘‘Health System Transformation Update, May 28, 2014.’’ Salem: Oregon Health Authority. www.oregon.gov/oha /legactivity/Health%20System%20Transformation%20Update%20May%2028, %202014.pdf. Minnesota Department of Human Services. 2010. ‘‘Health Care Home Payment Methodology: Structure and Design.’’ St. Paul: Minnesota Department of Human Services. www.health.state.mn.us/healthreform/homes/payment/PaymentMethodology _March2010.pdf. Nutting, Paul A., Benjamin F. Crabtree, and Reuben R. McDaniel. 2012. ‘‘Small Primary Care Practices Face Four Hurdles—Including a Physician-centric MindSet—in Becoming Medical Homes.’’ Health Affairs 31, no. 11: 2417–22. Oberlander, Jonathan. 2007. ‘‘Health Reform Interrupted: The Unraveling of the Oregon Health Plan.’’ Health Affairs 26, no. 1: w96–w105. doi: 10.1377/hlthaff .26.1.w96. OHA (Oregon Health Authority). 2011a. ‘‘Better Health and Lower Costs: Improving Oregon Health Plan Services.’’ Salem: OHA. www.oregon.gov/oha/OHPB/meetings /2011/2011-0712-cco-facts.pdf. OHA (Oregon Health Authority). 2011b. ‘‘Coordinated Care Organizations: Frequently Asked Questions.’’ Salem: OHA. cco.health.oregon.gov/Documents/cco-faq.pdf. OHA (Oregon Health Authority). 2012. ‘‘Timeline: Coordinated Care Organizations.’’ Salem: OHA. www.oregon.gov/oha/legactivity/2012/cco-impl-timeline.pdf. OHA (Oregon Health Authority). 2013. ‘‘Spotlight on Oregon CCOs.’’ cco.health .oregon.gov/Pages/Home.aspx. OHA (Oregon Health Authority). n.d. Transformation Center. transformationcenter .org (accessed February 13, 2013). OHPB (Oregon Health Policy Board). n.d. ‘‘Coordinated Care Organizations: Sixteen Coordinated Care Organizations Approved for Oregon Health Plan.’’ www.oregon .gov/oha/OHPB/Pages/health-reform/certification/index.aspx (accessed February 13, 2013). Raphael, Tim. 2012. ‘‘Oregon Governor John Kitzhaber and Obama Administration Announce Agreement to Improve Care for Oregonians on Medicaid.’’ Press release, May 3. Washington, DC: Oregon Governor’s Office. Takach, Mary. 2012. ‘‘About Half of the States Are Implementing Patient-Centered Medical Homes for Their Medicaid Populations.’’ Health Affairs 31, no. 11: 2432–40. Waldroupe, Amanda. 2011. ‘‘Central Oregon Sees Early Successes in Coordinated Care Model.’’ Lund Report, November 10. www.thelundreport.org/resource /central_oregon_sees_early_successes_in_coordinated_care_model.

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Oregon's experiment in health care delivery and payment reform: coordinated care organizations replacing managed care.

To control Medicaid costs, improve quality, and drive community engagement, the Oregon Health Authority introduced a new system of coordinated care or...
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