Implementing Social Determinants of Health Interventions in Medicaid Managed Care: How to Leverage Existing Authorities and Shift to Value-Based Purchasing

Insights Results

Overview of article

• Numerous efforts are underway at national, state and local levels to implement cost-effective social determinants of health (SDOH) strategies. These include, but are not limited to: 1) Using staff like community health workers (CHW) to reach at-risk individuals in the community; 2) Accountable communities of health and the Center for Medicare and Medicaid Innovation’s (CMMI) Accountable Health Communities Model; 3) The Pathways Community HUB model; and 4) Healthcare organization and community based organization (CBO) partnerships
• Several state Medicaid agencies are pursuing a range of these SDOH strategies, including: California, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New York, Oregon, Rhode Island, and Washington. A wide range of funding mechanisms are used, including: 1) CMMI funding opportunities; 2) Federal 1115 waivers including Delivery System Reform Incentive Payment (DSRIP); 3) Managed care capitation payments; 4) Foundation funding; 5) Social impact investing; and 6) Grants and operational funding from healthcare providers, such as hospital community benefit spending
• This brief aims to help states and Medicaid managed care plans: 1) Understand the existing authorities states have under the Medicaid managed care regulations to cover what we refer to as “value-added services” and the coordination/referral of such services; and 2) Align payment approaches for such services with the broader shift to VBP, in which providers are rewarded for improved outcomes and lower costs

Key takeaways/implications

• SDOH intervention payment mechanisms could align with the principles of VBP (Value-Based Price) used to reimburse healthcare providers, where payment is at least partially contingent upon achieving specified levels of quality or outcomes. Using VBP principles, MCOs might consider 4 basic approaches: 1) Pay for performance; 2) Shared savings/risk; 3) Pay for success; and 4) Capitated payments
• Under a pay for performance (P4P) approach, the MCO could reward the partner organization for achieving a set of mutually-desired outcomes that are largely within the control of the partnering organization. Such payments could be made in addition to payment for services delivered. One way to create a financial win-win for both organizations may be to thoughtfully pair payment to specific outcomes that cut across 2 or more of the outcomes categories that are relevant to the project at hand. In the Bridges to Health program, for example, payment for the pregnancy pathway is made upon successful delivery of all recommended prenatal services, as well as a potential bonus for delivery of a healthy birthweight baby
• MCOs might also consider a shared savings payment model. Just as with healthcare providers, some portion of the CBO’s compensation for SDOH interventions would depend upon the MCO achieving cost savings for the patient population served, while realizing specific health outcomes or quality improvement. If savings are attained, the partner organization would receive a portion of the savings. However, this may only be a viable option if: 1) Savings are anticipated to accrue over a one year time frame due to annual managed care rate setting cycles; and 2) The program has sufficient participant volume to measure “actual” cost savings. Additionally, under a shared savings arrangement, a portion of the payment should be tied to deliverables other than cost savings — covering a portion of the services successfully delivered, for example — to ensure that CBOs are not at full financial risk for outcomes that are not entirely under their control
• Pay for Success (PFS) is an approach to funding SDOH interventions that attaches payment to the desired outcomes rather than the underlying services. The financial vehicle — the “social impact bond”— typically has two components: 1) An outcome-based payment; and 2) Upfront working capital for the CBO, usually provided by investors. Each project has expected outcomes; if the project does not achieve its expected outcomes, no payment is made
• Finally, MCOs might consider using capitated or bundled payments to cover a portion of an SDOH intervention. For example, MCOs could pay an upfront per-member, per-month lump sum payment to a CBO to cover community care coordination activities and pair that with fee-for-service reimbursement for delivered value-added services, subject to prior authorization. The partner would be financially accountable if costs exceeded the payment. However, this payment model should also be linked to quality of service delivery or outcomes achieved, in line with the principles of VBP wherein payment is connected to quality or outcomes
• The findings of this brief demonstrate that state Medicaid agencies and Medicaid MCOs have substantial flexibility in how interventions that address SDOH may be covered and paid for within Medicaid managed care. There are clear opportunities to cover such interventions using MCO capitation payments and to structure funding to take advantage of the different treatments that community care coordination and value-added services receive under the managed care regulations