Oregon’s Medicaid Reform And Transition To Global Budgets Were Associated With Reductions In Expenditures

McConnell KJ, Renfro S, Lindrooth RC, Cohen DJ, Wallace NT, Chernew ME
Source: Health Affairs
Publication Year: 2017
Population Focus: Medicaid beneficiaries
Intervention Type: Service redesign
Study Design: Pre-post with Comparison Group
Type of Literature: White

In 2012 Oregon initiated an ambitious delivery system reform, moving the majority of its Medicaid enrollees into sixteen coordinated care organizations, a type of Medicaid accountable care organization. Using claims data, we assessed measures of access, appropriateness of care, utilization, and expenditures for five service areas (evaluation and management, imaging, procedures, tests, and inpatient facility care), comparing Oregon to the neighboring state of Washington. Overall, the transformation into coordinated care organizations was associated with a 7 % relative reduction in expenditures across the sum of these services, attributable primarily to reductions in inpatient utilization. The change to coordinated care organizations also demonstrated reductions in avoidable emergency department visits and improvements in some measures of appropriateness of care, but also exhibited reductions in primary care visits, a potential area of concern. Oregon’s coordinated care organizations could provide lessons for controlling healthcare spending for other state Medicaid programs.

Insights Results

Overview of article/programs

  • This report seeks to more explicitly identify the effects of Oregon’s coordinated care organizations (CCO) model on spending and quality through a comparison with Washington State’s Medicaid population
  • In 2012, Oregon created 16 CCOs to care for 90% of its Medicaid enrollees. Oregon’s CCO model differentiates itself from most ACO models in several ways: 1) Financing is closer to a Medicaid managed care organization than a traditional ACO; 2) CCOs include an administrative layer that accepts payments from the state, manages claims, pays providers and carries financial risk; 3) CCOs have unique governance structures that include healthcare providers, community members, and stakeholders in the local health system; 4) CCOs manage a broad range of services, including physical health, dental care, mental health, and addiction treatment, and are responsible for coordinating these health services as well as the broader social service needs of their Medicaid populations; and 5) CCOs face upside and downside risk through a global budget. CCO global budgets are risk-adjusted, prospective payments made by the state to the CCO

    Methods of article

    • Using claims data, authors assessed measures of access, appropriateness of care, utilization, and expenditures for 5 service areas (evaluation and management, imaging, procedures, tests, and inpatient facility care), comparing Oregon to the neighboring state of Washington
    • Authors used a difference-in-differences approach to isolate the effect of Oregon’s CCO transformation
    • Key outcomes of evaluation include expenditure and access to care (i.e., children’s access to preventive or ambulatory health services and percentage of adults ages 20-44 who had an ambulatory or preventive care visit during the year)


    • Overall, Oregon reduced expenditure (by 7%), largely attributable to differential trends in the use of inpatient care in Oregon after the CCO intervention. Also, access to care decreased in Oregon. The largest reductions were seen in the use of inpatient hospitalization
    • Interestingly, primary care visits increased in Washington but declined in Oregon, despite the CCO’s emphasis on enrollment in a primary care home. This differential may reflect tightening primary care capacity in Oregon, exacerbated by Oregon’s Medicaid expansion. Primary care should be monitored closely
    • Savings attributable to the CCO transformation were concentrated in adults and in patients with risk scores in the highest quartile
    • There was no marked difference across CCOs serving in urban areas versus those in rural areas
    • CCOs substantially increased use of community health workers, social workers, and care coordinators to engage Medicaid enrollees outside of the clinic setting

    Key takeaways/implications

    • Overall, the decrease in standardized expenditures associated with the Oregon transformation suggests that the CCOs may have been effective in slowing healthcare spending relative to a neighboring state used as a control for this study
    • CCOs have more flexibility to spend on services that aren’t a part of the traditional “medically necessary” system, potentially allowing CCOs to identify mechanisms to improve care and reduce spending even if office visits for primary care decrease
    • An important task for state and federal policy makers will be to identify the relative effectiveness of consumer-based versus delivery system approaches in reforming state Medicaid programs
    • Limitations to the study include use of a relatively narrow set of services for expenditure evaluation due to use of standardized expenditures, use of one comparison group in 1 state, non analysis of bonus payment reception for meeting certain quality metrics, and inability of measures to capture all aspects of quality or the patient experience