In June 2013, Alabama’s governor signed Act 2013-261 into law, approving a strategy to develop risk-bearing Regional Care Organizations (RCOs) that will manage a continuum of health care services for Medicaid beneficiaries under a single capitated rate. RCOs are defined as organizations of health care providers that contract with the state Medicaid agency to provide a comprehensive package of Medicaid benefits to Medicaid beneficiaries within a defined region of the state. They will coordinate care for the majority of the Medicaid population and manage Medicaid benefits including physical, behavioral, and pharmacy services.
The initiative aims to build on four existing regional pilots (Patient Care Networks of Alabama) that better enable primary medical providers to function as a medical or health home by providing care management and other health care services for chronically ill Medicaid enrollees. The RCO strategy stems from recommendations finalized in January 2013 by a multi-stakeholder Medicaid Advisory Commission that was convened by the governor in October 2012. The Alabama Medicaid Agency submitted an 1115 Waiver Concept Paper in early 2013 and has plans to work with Centers for Medicare and Medicaid Services (CMS) regarding the development of an application for a Section 1115 Demonstration Waiver.
The Alabama Medicaid Agency plans to establish geographic Medicaid regions and designate RCOs or alternate care providers to operate in each region. Subject to approval of the CMS, the Medicaid Agency shall enter into a contract in each Medicaid region for at least one fully certified RCO to provide medical care to the Medicaid beneficiaries.
The implementation timeline for RCOs released by the state Medicaid agency is as follows:
  • October 1, 2013: RCO regions established
  • October 1, 2014: RCO governing boards approved by Medicaid
  • April 1, 2015: RCO provider networks in place
  • October 1, 2015: RCOs must meet solvency requirements
  • October 1, 2016: RCO accepts capitation payments from Medicaid

Last updated: November 2013.

Project Scope
Eligible Patient Population: Alabama Medicaid plans to directly contract with regional care organizations (RCOs) for the majority of the Medicaid population (approximately 800,000 beneficiaries). The state would continue and/or expand the existing enhanced primary care case management program (the Patient Care Networks of Alabama program) while the RCOs are under development. Most Medicaid beneficiaries would be included while dual eligibles, those in long term care facilities or utilizing home and community-based waiver services, and the developmentally disabled would be excluded from the initiative.
Scope of services: Community-led RCOs would manage and coordinate care for the majority of the non-dually eligible Medicaid population. Through a capitated payment, RCOs would manage the full scope of Medicaid benefits, including physical, behavioral, pharmacy and long-term care services.
The state’s 1115 Waiver Concept Paper envisions building the RCOs over time, potentially by phasing them in as pilots across the state. Regions may first opt to develop a PCNA program to serve as the foundation for a future RCO. RCOs would initially manage and be at risk for primary, acute and post-acute care services. As they build capacity, they would be expected to integrate and fully manage behavioral health services for the population served. RCOs will be required to design care coordination programs to ensure these beneficiaries have access to adequate physical and behavioral health care in addition to connecting them with social services.
Provider Population A RCO may contract with any willing hospital, doctor or provider to provide services in a Medicaid region if the provider is willing to accept the payments and terms offered to comparable providers. Providers should meet licensing requirements set by law and have a Medicaid provider number. As stated in the initiative’s Planning Principles, any willing provider who chooses to apply does so not only within his or her region, but also across regional lines. Mental health and substance abuse providers currently certified by the Alabama Department of Mental Health (ADMH) and functioning as approved Medicaid providers are expected to be critical participants in RCO and PCNA networks.
Federally Qualified Health Centers (FQHCs) are also expected to play a role in the development of both the RCOs and PCNAs as critical primary care providers.

In June 2013, Alabama’s Medicaid agency divided the state into 5 RCO regions. All affected beneficiaries would be required to enroll in an RCO or PCNA based on geographic location.  To the extent there is more than one RCO in a region, beneficiaries would retain the right to choose between RCOs; beneficiaries who do not choose will be auto-assigned. Beneficiaries will also retain their choice of medical provider and medical/health home within network.

Act 2013-261 became law in June 2013. This legislation calls for Alabama to be divided into regions and that a community-led network coordinates the health care of Medicaid patients in each region, with networks ultimately bearing the risks of contracting with the state of Alabama.
Alabama’s Medicaid agency is seeking an 1115 Waiver from CMS to allow for the implementation of the Regional Care Organizations.
The Alabama Medicaid Agency is responsible for the development and oversight of the Regional Care Organization (RCO) program. RCOs would be largely governed by provider organizations that agree to share in the risk in a particular region of the state. Because they are provider-based organizations, the state would establish criteria and oversight procedures that will be managed within the Medicaid Agency (separate and apart from traditional insurers). The state will have the power to approve governing board members and to approve the selection process for RCO advisory committees.
Act 2013-261 requires that RCOs have a governing board of directors which includes 12 members will represent risk-bearing participants in the RCO (i.e. via contributing cash, capital, or other assets to the RCO) and 8 members representing other stakeholders. Of these eight members there will be:
  • 5 medical professionals who provide care to Medicaid beneficiaries in a region served by a RCO (consisting of 3 Primary Care physicians, 1 Optometrist, 1 Pharmacist)
  • 3 Community representatives, including
    • The chair of citizens advisory committee
    • An elected citizens' advisory committee member
    • A business executive nominated by Chamber of Commerce in the region

Each RCO will have a Citizens' Advisory Committee (at least 20% of members must be Medicaid beneficiaries).

Criteria for Participation
Act 2013-261 requires the Medicaid agency to establish by rule the criteria for certification of Regional Care Organizations (RCOs).
Since RCOs will provide Medicaid services to Medicaid enrollees directly or by contract with other providers, the certification standards will include service delivery network requirements: each RCO will be required to establish an adequate medical service delivery network as determined by the Medicaid agency. An alternate care provider contracting with Medicaid shall also establish such a network.
As described in the 1115 Waiver Concept Paper, this initiative would utilize a payment model that includes capitation with care management payments (the transition period could include fee-for-service).
The state will reform its payment methodologies to implement value-based purchasing strategies (the state offers the example of transitioning hospitals from per diem payments to All Patient Refined Diagnosis Related Groups). RCOs would be expected to use this methodology in establishing contracts with providers.
The state also proposes to enhance coverage or modify reimbursement for a number of services to encourage capacity development, potentially including care coordination fees to providers to cover necessary care coordination services that are not directly reimbursable under the current benefit structure. 
As stated in the initiative’s Planning Principles, Medicaid will establish a floor for applicable provider payments for all regions, including out-of-region contracts.
Support for Infrastructure
Regional Care Organizations (RCOs) and Alabama’s Patient Care Networks would be required to leverage the health information exchange (HIE) infrastructure under development in Alabama, One Health Record™. To ensure better integration of the Medicaid providers into the larger health care marketplace, the health information exchange (HIE) would be the primary vehicle through which Medicaid providers share and access clinical information.
Providers affiliated with RCOs would be expected to use the standardized continuity of care record (CCD), which is currently under development and will be a component of the providers’ electronic health records. HIE will provide real-time access to data that will support providers in predicting, planning for, and intervening when necessary in a beneficiary’s care management plan. In the interim, the state has approved other web-based tools to facilitate the efficient exchange of medical information between physician offices and health care facilities.
In the state’s 1115 Waiver Concept paper, it proposes that RCOs would be eligible to receive reimbursement for certain upfront development and implementation costs, such as:
  • Joint governance models to support the ability for multiple providers to oversee and have responsibility for the RCO services provided to its members.
  • Initial staff required to manage enrollment and rosters, connect patients with providers, process provider reimbursements, undertake quality management and finances, hire care managers and train staff.
  • Information technology (e.g., electronic health records, interoperability, referral management systems, patient tracking, metric reporting, and disease registries), including incentives for behavioral health and long-term care providers who have not qualified for meaningful use incentives.
  • Care management tools and protocols, including 24-hour nurse hotlines, care planning infrastructure, intervention services, etc.
  • Incentives for medical and health home models, including costs associated with care managers.
Measurement and Evaluation
The Medicaid Agency will create a quality assurance committee appointed by the Medicaid commissioner. Members of the committee will serve two year terms. At least 60 percent of the committee must be physicians who provide care to Medicaid beneficiaries served by Regional Care Organizations (RCOs).
In accordance with Act 2013-261, the committee will identify objective outcome and quality measures for ambulatory care, inpatient care, chemical dependency and mental health treatment, oral health care and all other services provided by RCOs. The quality measures must be consistent with existing state/national measures. The Medicaid Commission will incorporate these measures into RCO contracts.  The committee will adopt outcome and quality measures annually and adjust measures to reflect:
  1. The amount of the global budget for a RCO
  2. Changes in membership of the organization
  3. The organization’s cost for implementing outcome and quality measures
  4. The community health assessment and the costs of the community health assessments conducted by the organization
The Medicaid Agency will evaluate the outcome/quality measures adopted by committee and will publish information by RCO on quality, cost, outcome and as well as other relevant information.
The Medicaid agency will publish aggregate-level public reports by RCO on:
  1. Quality measures
  2. Costs
  3. Outcomes
  4. Other information specified in the RCO contract that is necessary to evaluate the value of health services delivered by the RCO.


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