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New Jersey’s P.L. 2011, Ch. 114 was signed into law in August 2011 creating the New Jersey Medicaid Accountable Care Organization (ACO) Demonstration Project. Regulations for the demonstration were released in eraly 2013. The Camden Coalition of Healthcare Providers, a coalition of business, hospital, health care provider, and consumer stakeholders, proposed the creation of Medicaid ACOs in New Jersey and supported the legislation authorizing the state’s pilot project.
 
Under the 3-year demonstration program, accountable care organizations (ACOs) will assume responsibility for Medicaid populations within a designated area (defined as “a municipality or defined geographic area in which no fewer than 5,000 Medicaid recipients reside”). The statute requires that organizations applying to serve as Medicaid ACOs under the demonstration be “nonprofit corporations organized with the voluntary support and participation of local general hospitals, clinics, pharmacies, health centers, qualified primary care and behavioral health care providers, and public health and social services agencies.”
 
To learn more about New Jersey’s medical home initiatives, visit the New Jersey page of NASHP’s medical homes map.
 
Last updated November 2013.
 
Project Scope
Patient Population: Each organization applying for certification as an Accountable Care Organization (ACO) must cover “a municipality or defined geographic area in which no fewer than 5,000 Medicaid recipients reside.” All Medicaid beneficiaries within an ACO’s defined geographic range are eligible to receive services from the ACO, though Medicaid beneficiaries may seek care outside of the ACO.
 
Scope of Services: P.L. 2011, Ch. 114 does not identify a scope of services that ACOs must include. However, the state’s approved 1115 waiver request to CMS specifies that ACOs will provide access to all services available under the State Plan. ACOs are expected to be integrated into their communities so that they can assist in coordinating community-based services for enrollees. Regulations issued in 2013 specify that the demonstration’s objectives include increasing access to primary care, behavioral health care, pharmaceuticals and dental care.
 
Provider population: ACOs are required to obtain the support of all general hospitals in the designated area, at least 75 percent of the primary care providers in the designated area, and at least four qualified behavioral health providers in the designated area (including at least one Department of Human Services-licensed mental health program and one Department-licensed substance abuse program).
Authority
The New Jersey Medicaid Accountable Care Organization (ACO) Demonstration Project was authorized by the passage of P.L. 2011, Ch. 114. The statute specifies that the New Jersey Department of Human Services will establish the demonstration in consultation with the state’s Department of Health and Senior Services.
 
In the authorizing legislation, New Jersey’s legislature announced its intent to “exempt activities undertaken pursuant to the Medicaid ACO Demonstration Project that might otherwise be constrained by State antitrust laws and to provide immunity for such activities from federal antitrust laws through the state action immunity doctrine.”
 
In early October 2012, the Centers for Medicare & Medicaid Services approved New Jersey’s Comprehensive Medicaid Waiver, an 1115 demonstration waiver. The delivery system reforms covered in the waiver include the Medicaid Accountable Care Organization Demonstration Project. 
Governance
The authorizing legislation, P.L. 2011, Ch. 114, states that any organization applying for certification as an Accountable Care Organization (ACO) must have a governing board which includes:
 
  • “Individuals representing the interests of: health care providers, including, but not limited to, general hospitals, clinics, private practice offices, physicians, behavioral health care providers, and dentists; patients; and other social service agencies or organizations located in the designated area; and
  • “Voting representation from at least two consumer organizations capable of advocating on behalf of patients residing within the designated area of the ACO. At least one of the organizations shall have extensive leadership involvement by individuals residing within the designated area of the ACO, and shall have a physical location within the designated area. Additionally, at least one of the individuals representing a consumer organization shall be an individual who resides within the designated area served by the ACO.”
 
Organizations that apply for certification as ACOs are required to have board representation that includes representatives of local hospitals, physicians, behavioral health care providers, and dentists.
 
Statute requires that organizations applying to act as ACOs be “organized with the voluntary support of local general hospitals, clinics, pharmacies, health centers, qualified primary care and behavioral health care providers, and public health and social services agencies.”
Criteria for Participation P.L. 2011, Ch. 114 defines minimum standards for Accountable Care Organization (ACO) demonstration applicants:
  • Applicants must be formed as a nonprofit corporation pursuant to New Jersey state law;
  • Applicants must have a governing board that includes a range of provider, social service, and consumer advocacy representatives (see Governance, above);
  • Applicants must have the support of all general hospitals located in the designated area served by the ACO, no fewer than 75% of the qualified primary care providers located in the designated area, and at least four qualified behavioral health care providers in the designated area;
  • Applicants must have a process for receipt of gainsharing payments from the state and any voluntarily participating Medicaid MCOs;
  • Applicants must have a process for engaging members of the community and for receiving public comments with respect to gainsharing plans;
  • Applicants must have a commitment to become accountable for the health outcomes, quality, cost, and access to care of Medicaid recipients residing in the designated area for a period of at least three years; and
  • Applicants must have a commitment to ensuring the use of electronic prescribing and electronic medical records by health care providers in the designated area.
Payment
The New Jersey Department of Human Services will approve gainsharing plans submitted by applicant Accountable Care Organizations (ACOs) with input from the state’s Department of Health and Senior Services and assistance from Rutgers Center for State Health Policy. Gainsharing plans must promote “improvements in health outcomes and quality of care, as measured by objective benchmarks as well as patient experience of care; expanded access to primary and behavioral health care services; and the reduction of unnecessary and inefficient costs associated with care rendered to Medicaid recipients residing in the ACO’s designated area.”
 
Under the gainsharing plan, a percentage of the cost savings achieved by an ACO will be distributed to the ACO. P.L. 2011, Ch. 114 establishes that “Savings shall be calculated in accordance with a methodology that:
 
  1. Identifies expenditures per recipient by the Medicaid fee-for-service program during the benchmark period, adjusted for characteristics of recipients and local conditions that predict future Medicaid spending but are not amenable to the care coordination or management activities of an ACO which shall serve as the benchmark payment calculation;
  2. Compares the benchmark payment calculation to amounts paid by the Medicaid fee- for-service program for all such resident recipients during subsequent periods; and
  3. Provides that the benchmark payment calculation shall remain fixed for a period of three years following approval of the gainsharing plan.”
 
The state’s legislation indicates that data analysis will be performed by the Rutgers Center for State Health Policy. The Center’s proposed methodology for calculating savings was released in May 2012, with a final recommended methodology published in July 2012.
 
Managed care organizations in the state may also choose to contract and establish a plan for gainsharing with ACOs participating in the Medicaid ACO pilot. Regulations issued by the Department of Human Services in April 2013 anticipate that ACOs may negotiate different savings allocations with different managed care organizations.
 
The 2013 regulations clarified that ACOs may seek to pursue shared savings in phases. They may focus the shared savings on a specific spending area (e.g. diabetes treatment) in the first year of the project, but by the end of the demonstration period the ACO’s gainsharing plan must identify savings for all Medicaid costs within the designated geographical area.
Support for Infrastructure Infrastructure supports have not been detailed by the state at this time.
Measurement and Evaluation
Section 9 of P.L. 2011, Ch. 114 states that the state’s Department of Human Services “shall evaluate the demonstration project annually to assess whether: cost savings, including, but not limited to, savings in administrative costs and savings due to improved health outcomes, are achieved through implementation of the demonstration project” and “to assess whether there is improvement in the rates of health screening, the outcomes and hospitalization rates for persons with chronic illnesses, and the hospitalization and readmission rates for patients residing in the designated areas served by the ACOs.” The Rutgers Center for State Health Policy will provide outcome evaluation data.
 
New Jersey specified in its 1115 waiver request that evaluation criteria for ACOs would align with the state’s Section 2703 health homes initiative, including measures for rates of health screening, outcomes of hospitalization rates for persons with chronic illnesses and the hospitalization and readmission rates for patients residing within the ACO service area.
 
In regulations issued in April 2013, the Department of Human Services established that ACO gainsharing plans must select at least five quality measures related to chronic conditions that each participating practice will use and report on, as well as one prevention measure. These include a mix of preventive, at-risk population, appropriate use of providers, and access to care measures. The list of quality metrics produced by the state also includes mandatory measures.

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