Ohio begins value-based measure for Medicaid

State will be first to pay for more effective treatment.

In this March 4, 2011 file photo Dr. George Rizk, D.O. takes notes during a physical exam of the Stump children of Medway in the background.

Staff photo by Photo by Jim Witmer In this March 4, 2011 file photo Dr. George Rizk, D.O. takes notes during a physical exam of the Stump children of Medway in the background.

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By Ben Sutherly, Staff Writer Updated 1:17 PM Monday, January 9, 2012

The state of Ohio today launches a formal effort to shift the health care industry’s business model from one based on volume to one based on value.

When the state’s Medicaid program rebids contracts this year for 2013, it will base a greater portion of its payments to managed care plans such as Dayton-based CareSource on how effectively patients are treated. The Medicaid program also will require that managed care plans develop incentives for health care providers to improve enrollees’ health.

The new contracts will be based on language developed by Catalyst for Payment Reform, a San Francisco-based nonprofit that uses the collective purchasing power of large employers and groups such as General Electric Co., Walmart Corp. and California Public Employees’ Retirement System to push for greater value in health care.

Ohio’s Medicaid program is the first in the nation to participate in Catalyst’s efforts, officials said.

The partnership with Catalyst will not cost the state money, officials said. State officials said they do not yet have quality and savings goals in place to measure success.

Greg Moody, who heads Gov. John Kasich’s Office of Health Care Transformation, said Ohio spends more per person on health care than 36 other states, but 41 states are healthier overall.

“If the payers start lining up their expectations, it becomes much more powerful to change the delivery of health care,” Moody told the Dayton Daily News in an exclusive interview. State government alone spends more than $17 billion per year to provide health care for more than 2.7 million people, with Medicaid accounting for $14 billion of that cost.

State purchasing officials in November met to discuss aligning the expectations of Medicaid, the Public Employee Retirement System, Administrative Services, Workers Compensation, and Rehabilitation and Corrections. State officials want input from businesses, health insurers, hospitals, other health care providers and others on what would be fair ways to reimburse hospitals.

“We don’t want to misfire with our leverage,” Moody said.

Large southwest Ohio companies such as Kroger, Procter & Gamble, and GE have sought to improve health system performance, Moody said. He said other businesses will increasingly realize that health care is not merely a “cost of doing business,” but a cost over which they can exert more control.

Efforts to transform health care’s business model in Ohio also will mean more transparency, Moody said.

“I think for too long in Ohio folks have hidden behind the inability to share information — or questioning whether or not it was appropriate to share information — as a way to not confront poor quality,” he said. “I think that is now tipping. High-quality providers want people to see they are high-quality providers.”

The state’s efforts likely are to generate keen interest at hospitals, particularly in Dayton, where Medicaid accounted for nearly 19 percent of all days patients spend hospitalized.

Bryan Bucklew, president and CEO of the Greater Dayton Area Hospital Association, commended the state for initiating discussions with stakeholders, and said he hopes they’re as inclusive as possible.

“It’s a different business model,” Bucklew said. “You can’t support and cost shift as easily in that pay-for-performance model. ... In practice, this (pay-for-performance) stuff makes a lot of sense. In practice, it’s incumbent on a lot of moving parts,” including patients assuming greater responsibility for their health and health care finances.

CareSource is very receptive to the idea of payment reform, said Janet Grant, executive vice president of external affairs at CareSource, Ohio’s largest Medicaid managed care provider. The state will, however, require that CareSource develop incentives for all health care providers with whom it works to improve health outcomes for Medicaid enrollees.

Grant noted that 1 percent of the payments that CareSource currently receives for overseeing the care of Medicaid patients hinges on health outcomes. That adds up to $35 million, she said.

“That’s a pretty big incentive for us to be very focused on ... health outcomes,” she said.

Dr. Richard Shonk, health insurer UnitedHealthcare’s market medical director in southwest Ohio, said the state is making a good move that should benefit taxpayers and patients.

Bringing Medicaid’s expectations in line with those of large employers should help simplify the lives of physicians and other health care providers, Shonk said. But when payers gain more clout, he added, physicians are “more at the mercy of that particular approach.”

The partnership with Catalyst will not cost the state money, officials said. State officials said they do not yet have quality and savings goals in place to measure success.

The Ohio Public Employees Retirement System also is partnering with Catalyst.

Suzanne Delbanco, executive director of San Francisco-based Catalyst, said Friday that the contract language the state of Ohio will be using is not yet completed but should be next week.

“Ohio Medicaid is basically indicating that they want to be very careful stewards of taxpayer money by making sure that increasingly their payments to providers are value-based,” Delbanco said. “Today, we pay the same for care, whether it’s good or bad, free of mistakes or full of mistakes.

“We want to have a payment system that’s more connected to the care that people receive.”

Contact this reporter at  (937) 225-7457 or bsutherly @DaytonDailyNews.com.

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