A new, 50-state analysis of Medicaid managed care programs by the National Academy for State Health Policy (NASHP) shows that in the past three years, state Medicaid managed care (MMC) programs have:
- Enrolled more children and youth with special health care needs (CYSHCN);
- Provided more services to them through managed care; and
- Launched more specialized initiatives serving CYSHCN in managed care.
These trends deviate from past approaches as, historically CYSHCN have often been exempt from MMC due to the complexity of their needs. CYSHCN represent nearly 20 percent of children younger than age 19 and have chronic and/or complex care needs that require physical and behavioral health care services beyond what children normally require. As states become more proficient in developing MMC programs, they are increasingly incorporating CYSHCN into their program designs in an effort to improve quality and reduce costs.
NASHP has updated a 50-state chart and map, originally published in 2017, highlighting new developments in states’ MMC programs that serve CYSHCN. The 2017 analysis found that 47 states use some form of MMC (risk-based, primary care case management, and prepaid health plans) to serve CYSHCN, a figure that remains true in 2020, with the same number of states and Washington, DC continuing to use MMC to serve some or all CYSHCN.
NASHP’s new analysis found a downward trend in traditional fee-for-service (FFS) models and a shift toward innovative delivery systems. Given that 47 percent of CYSHCN are covered by Medicaid, this analysis provides important insight into how states are designing services to meet the unique needs of CYSHCN.
The use of managed care delivery systems is widespread, with states contracting with managed care organizations (MCOs), which are paid on a per-member, per-month basis, to provide services for people enrolled in Medicaid. Thirty-eight states use a risk-based model to serve CYSHCN, in which the MCO assumes the financial risk. Ten states use a primary care case management (PCCM) model in which states contract directly with primary care providers and pay them a case management fee for each enrollee’s care coordination, and three states have a prepaid health plan (PHP) through which health plans are paid per-member, per-month for a limited set of services.
In this new analysis, NASHP identified several key trends among the 47 states and Washington, DC that use MMC to serve CYSHCN, such as the use of specialized MMC plans, MMC enrollment policies for CYSHCN, behavioral health service delivery systems, and quality assessment standards for CYSHCN.
MMC Contract Language for CYSHCN
Since 2017, six states have added a specific definition of CYSHCN to their managed care contracts – 29 states now clearly describe this population of children within their MMC program. Including a definition of CYSHCN in a managed care contract can support identification of CYSHCN and can be used to determine eligibility for specific services and supports. Some states align their definitions with the federal Maternal and Child Health Bureau, Health Resources and Services Administration definition, while others are based on specific health conditions or Medicaid enrollment categories (e.g., children enrolled in Medicaid through the aged, blind, and disabled eligibility category).
More states are also evaluating the quality of care that MCOs provide to CYSHCN using measures that account for their unique needs, as compared to 2017. States are required by federal Medicaid regulations to develop a quality assessment and improvement strategy and to contract with an external organization to evaluate the quality of care provided by their MCOs. In addition to meeting these regulations, 39 states now include specific language in their contract regarding measuring quality of care provided to CYSHCN through MMC delivery systems, an increase of seven states since 2017.
MMC Enrollment Policies for CYSHCN
CYSHCN may be eligible for Medicaid coverage through specific pathways to coverage, including those who are eligible for Medicaid’s aged, blind, and disabled (ABD) category, those receiving Social Security Income (SSI), and those who are enrolled in foster care or who are receiving adoption assistance. Additional subcategories of CYSHCN who may be enrolled in Medicaid include American Indian/Alaskan Native (AI/AN) children, those enrolled in Medicaid home- and community-based service 1915(c) waiver programs, and those enrolled in state Title V CYSHCN programs. States are increasingly mandatorily and voluntarily enrolling these subpopulations into MMC. The majority of states continue to enroll children that are eligible for Medicaid through ABD, SSI and youth in foster care or receiving adoption assistance in managed care. Over the past three years, the number of states that enroll AI/AN children and those enrolled in 1915(c) waiver programs has increased by more than 10 for each subgroup. Together, these trends may point to an increased understanding among state Medicaid programs of the diverse needs among CYSHCN subgroups.
Specialized MMC Plans for CYSHCN
Several states have developed specialized managed care plans to meet the unique needs of CYSHCN or subgroups. These plans typically offer tailored benefits that are often not available through their standard MMC plan. The number of states that have specialized MMC plans for CYSHCN has nearly doubled over the last three years.
- Thirteen states (DC, FL, GA, IL, IN, ND, TN, TX, UT, VA, WA, WI, and WV) operate 12 specialized health care plans to serve some or all CYSHCN, an increase of six states since 2017.
- Nine states’ (DC, GA, IL, IN, TN, TX, WA, WI, and WV) specialized plans serve youth in foster care and/or receiving adoption assistance, representing over half of the specialized MMC plans. In 2017, only two such plans existed.
- Six states (DC, IN, ND, TX, UT, and VA) have specialized plans that serve children who are eligible for Medicaid through the ABD category.
- Five states (ND, TN, TX, VA, and WV) enroll children who are enrolled in 1915(c) waiver programs in their specialized plans.
Behavioral Health Service Delivery for CYSHCN
States have historically been more likely to carve behavioral health services out of their MMC plans and deliver these services through distinct behavioral health organizations (BHO) or through FFS arrangements. As more states are shifting to integrate behavioral health and primary care services, they are increasingly providing behavioral health services through their MCOs. As of 2020, 41 states provide behavioral health services through MMC, an increase of eight states since 2017. Six states continue to provide behavioral health services through carve-out FFS and BHO arrangements.
Table 1: States’ MMC Program Design: 2017 – 2020
The table below summarizes key trends across states’ Medicaid managed care programs that serve CYSHCN, such as increases in the number of states that enroll CYSHCN in MMC, offer specialized health care plans that serve CYSHCN, and integrate behavioral health services with primary care for CYSHCN. These and other insights can be found in NASHP’s updated 50-State Chart and Map.
|Feature||Number of States – 2017||Trend||Number of States – 2020|
|Contract provides a clear definition of CYSHCN||23||↑||29|
|Specific quality measures for CYSHCN||32||↑||39|
|Subpopulation enrollment in MMC (mandatory or voluntary for at least one plan)|
|Aged, blind, and disabled||40||↑||42|
|American Indian/Alaskan Native||22||↑||36|
|Foster care youth/adoption assistance||39||↑||46|
|Social Security Income (SSI)||20||↑||33|
|Title V CYSHCN||14||↑||17|
|Specialized plans for CYSHCN*|
|Total states with specialized plans||7||↑||13|
|Includes aged, blind, and disabled||3||↑||6|
|Includes youth in foster care/adoption assistance||2||↑||9|
|Includes Social Security Income||2||↑||3|
|Includes Title V CYSHCN||1||↓||0|
|Behavioral health service delivery system for CYSHCN**|
|MCO provides behavioral health services||33||↑||41|
|Behavioral health services are carved-out into FFS||7||↓||6|
|Behavioral health services are carved-out of managed care and provided by a behavioral health organization||8||↓||6|
*Specialized plans may include more than one subpopulation.
**Some states use more than one approach to provide behavioral health services.
 Children with Special Health Care Needs.” Maternal and Child Health Bureau, December 17, 2019. https://mchb.hrsa.gov/maternal-child-health-topics/children-and-youth-special-health-needs.
 See NASHP’s 2017 chart and map here: https://www.nashp.org/state-medicaid-managed-care-program-design-for-children-and-youth-with-special-health-care-needs/
 MaryBeth Musumeci and Priya Chidambaram, How Do Medicaid/CHIP Children with Special Health Care Needs Differ from Those with Private Insurance? (Menlo Park, CA: Kaiser Family Foundation, June 2019). https://www.kff.org/medicaid/issue-brief/how-do-medicaid-chip-children-with-special-health-care-needs-differ-from-those-with-private-insurance/
 Children with Special Health Care Needs.” Maternal and Child Health Bureau, December 17, 2019. https://mchb.hrsa.gov/maternal-child-health-topics/children-and-youth-special-health-needs
While billions in COVID-19 federal relief funds have been distributed to health care providers, the funding has primarily gone to large hospital systems, leaving many independent providers to suffer reductions in patient visits and revenues, making them vulnerable to acquisition by large hospital systems – known as vertical consolidation in health care. This report explores the increased financial pressure for vertical consolidation, its financial impact on states and consumers, and what policies states can implement to address the coming wave of vertical health care consolidations.
Independent physician practices are struggling to remain financially solvent in the midst of the COVID-19 pandemic. Although $175 billion has been allocated to health care providers in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and other pandemic response legislation, this funding has largely gone to larger hospital systems or to direct costs of COVID-19 testing and services, and many physician practices and independent community providers have suffered significant reductions in their patient visits and revenues during widespread stay-at-home orders. One foreseeable consequence will be a further acceleration of physician practice acquisitions by large hospital systems and private equity firms, also known as vertical consolidation in health care.
This white paper discusses the increased financial pressure for vertical health care consolidation in the wake of the COVID-19 pandemic; the risks such vertical consolidation pose to states and consumers in the form of higher prices, increased spending, and reduced choice; and explores policies states may pursue to address the coming wave of vertical health care consolidation.
Rising Pressure for Vertical Health Care Consolidation and Its Risks
A. Vertical Consolidation in Health Care is Accelerating
Consolidation of independent physician practices — whether acquired by health systems or venture-backed staffing firms — has been increasing for years. Vertical acquisitions of physician groups by hospitals has increased dramatically in recent years. From 2012-2018, hospital ownership of physician practices grew 128 percent. In 2012 about 25 percent of physicians were employed by hospitals, and by 2018 that figure had grown to 44 percent. Over the 18-months from July 2016 to December 2018, hospitals acquired over 8,000 physician practices, employing 14,000 physicians. In 2018, for the first time, more physicians were employees than owners of their medical practice.
Private equity-backed staffing firms are also gobbling up physician practices. Between 2013 and 2016, private equity firms acquired 355 physician practices, targeting an array of specialties including emergency medicine and anesthesiology (who can engage in out-of-network billing strategies because patients do not select these providers), primary care physicians (who may be sources of lucrative referrals), and dermatology and ophthalmology (with significant income from elective procedures).
Layered atop these existing trends, the COVID-19 pandemic is accelerating pressure for vertical consolidation in health care. Remaining independent physician practices are under dire financial strain due to COVID-19, and even those who previously resisted acquisition face new pressure to sell to large health care systems or private equity investors for financial stability and survival.
B. Risks of Vertical Consolidation: Increased Costs, Loss of Choice, No Improvement in Quality
Evidence suggests that vertical health care consolidation leads to higher health care prices—including higher hospital prices, 14 percent higher physician prices, and 10-20 percent higher total expenditures per patient. Despite promised efficiencies, there are several ways vertical consolidation can increase health care costs. First are the addition of facility fees (described further below) that hospitals can charge for outpatient services provided by acquired physicians. Second, the consolidated entity can leverage its market power to engage in all-of-nothing bargaining and insist on anticompetitive contract terms with health insurance plans, allowing a large system to demand higher prices for all its providers. Third, acquisitions allow hospital systems to direct the referrals of captive physician practices to a greater extent than independent physicians, which increases referrals to for higher-cost (lower value) providers and services. Finally, private equity-backed staffing companies have used a strategy of going out-of-network and charging higher prices to health plans and balance bills to patients to maximize their revenues.
Increasing facility fees are an outgrowth of vertical consolidation of hospitals and physicians. The ability of a consolidated system to charge more for identical outpatient services than can be charged by independent physician practices manifests as facility fees and is a significant factor in the price increases driven by hospital-physician consolidation. When hospitals acquire physician practices, they can tack on an additional outpatient facility fee to the professional service fee that physician practice previously charged. Fees for services at physician’s offices usually include both the professional and overhead costs of the service in a single charge. By contrast, hospital outpatient departments are traditionally paid more than physicians’ offices for performing the same type of service because hospital outpatient settings receive a facility fee to compensate them for the expenses of maintaining standby capacity to service acute care needs that may present at any time in addition to the physician’s professional service fee. But there is nothing to justify a facility fee that is simply the result of the hospital’s acquisition of the physician’s practice—nothing has changed in terms of the location, supplies, technology, staffing, duration or intensity of the care, and the patients are no sicker and do not need more services than when their physician practice was characterized as a freestanding community setting. The higher price is merely the result of a change in corporate ownership, which allows the hospital to charge a facility fee for the acquired physician’s services as though it were rendered in an outpatient department of the hospital. The ability to charge facility fees is one of the main financial incentives driving hospital-physician consolidation.
Increased vertical consolidation in health care reduces consumer choice by creating larger, exclusive networks and driving patients and health plans to pay higher prices. These higher costs and reductions in choice among independent providers is not offset by higher quality or efficiency from improved care coordination. Thus, states are increasingly searching for ways to curb the rising costs and loss of choices driven by vertical health care consolidation.
State Policies to Address Vertical Consolidation in Health Care
The pressure for vertical consolidation created by the COVID-19 pandemic for the survival of physician practices means that, in many cases, states will be unable to prevent this consolidation from occurring. Rather, states must explore policies to provide robust oversight over the consolidated entities to mitigate the risks posed by vertical consolidation. Moreover, state oversight is critical because these vertical mergers fly under the radar of federal antitrust agencies because they tend to be too small in size to be reported under the Hart-Scott-Rodino (HSR) Act.
The following table lists a range of policy tools states can deploy to monitor and oversee vertical health care consolidation:
|A. Data gathering||· All-payer claims databases|
|B. Pre-transaction review and approval||· Notice of proposed transactions
· Prior review, approval, and conditions
|C. Oversight of vertically consolidated entities||· Attorney general enforcement against anticompetitive conduct
· Independent health commission
· Certificates of need authority
|D. Controlling outpatient costs||· Restrictions on facility fees
· Counteracting private equity-backed consolidation
· Global budgets
A. Data: the foundation for any policy
Policymakers need information about the drivers of health care costs, utilization patterns, and transactions to guide policies and target enforcement. States with all-payer claims databases (APCDs) have a rich source of data to inform their policies. APCDs are comprehensive databases of health care claims and data from a variety of payers, including private insurers, Medicaid, Medicare, Children’s Health Insurance Program (CHIP), state employee health plans, and others. Currently 19 states have established APCDs, and an additional four states are in the process implementation.
All of the policies described here would be guided by data — whether studying the price, utilization, or referral effects of vertical transactions; detecting targets for enforcement; providing oversight of vertically integrated entities; planning and assessing the need for new or additional services; quantifying the amount of facility fees charged; enforcing compliance with surprise out-of-network billing rules; or implementing global budgets. In states with APCDs, the data underpinning the policies would come from the APCD. In states without an APCD, each policy described here could include a data reporting requirement to facilitate implementation, such as a data submission requirement for pre-transaction review, CON applications, facility fee reporting, or as part of the global budget process. In addition, states can use data from APCDs or work with payers (e.g., the state employee health plan) to establish consumer transparency tools to help consumers choose high-value providers and to drive a range of other health care policies to improve patient care and control costs.
B. Notice, review, and approval for health care transactions
States could take a more active role monitoring or preventing vertical health care consolidation that poses risks to competition. State attorneys general (AGs), the Federal Trade Commission, and the US Department of Justice can use their parallel antitrust enforcement authority to prevent and regulate anticompetitive mergers or conduct by health care entities.
State AGs can challenge anticompetitive mergers and conduct and bring enforcement actions both independently and in conjunction with a federal action. Although historically reluctant to pursue enforcement against vertical mergers, the federal antitrust enforcement agencies have recently issued draft vertical merger guidelines in a signal that they are looking to develop tools to go after such mergers. But most physician acquisitions go unexamined by federal authorities because the dollar value of these deals is too small to be reported to federal antitrust agencies under HSR thresholds. Thus, state AGs can assume a larger role policing these mergers.
1. Notice of proposed transactions
To further antitrust enforcement and state oversight over vertical health care transactions, states may pass legislation requiring hospitals, health systems, physician groups, and private investment firms to notify the state of any significant proposed merger or contractual affiliation. Specifically, states can require reporting of transactions with dollar values less than the federal HSR thresholds. Transactions should be reported to the state AG and to a state health agency, such as an independent health care commission or the state’s certificate of need authority.
Although many states already require hospitals to notify state officials of proposed mergers or acquisitions, states could expand the requirement to transactions involving physicians. Existing state examples include Washington State, which passed a law in 2019 to require notification to the state AG of health care transactions, including those involving “provider organizations,” below the HSR (Hart-Scott-Rodino Antitrust Improvements Act) threshold. Connecticut requires 30-days’ notice to the AG and the head of the Office of Health Strategy (Connecticut’s CON authority) of any proposed transaction involving a physician practice of eight or more physicians. Massachusetts requires all provider organizations to provide the AG, the Health Policy Commission, and the Center for Health Information Analysis with 60 days’ notice of any mergers, acquisitions, or affiliations.
In 2020, lawmakers in California proposed legislation (S.B. 977) that would require health systems, private equity groups, and hedge funds to provide notice to, and obtain the consent of, the AG prior to an acquisition of or affiliation with a health system or health care provider. There is an exception for transactions between health care systems and facilities or providers valued at less than $500,000 (but not those involving private equity groups or hedge funds) or a transaction of any value involving an academic medical center, which only need to provide 30 days’ notice and need not obtain the AG’s consent. The California bill goes beyond the notice requirements in other states by specifically including transactions involving private equity and hedge fund investors, not just other health care entities.
|Recommendations on notice of health care transactions:|
2. Pre-transaction review, approval, and conditions
Although state AGs already possess the authority to challenge anticompetitive mergers under federal and state antitrust laws, state policymakers can augment the AGs’ ability to address the risks of consolidation by requiring transactions to be reviewed and approved by the AG, and allow the AG to condition approval on the parties’ competitive conduct. Although a state AG is typically the primary official tasked with approving health care transactions, states can distribute the responsibility for conducting review to other state entities, such as a health care commission or state certificate of need authority.
Waiting periods, subpoena-power. After notice of proposed health care transactions has been given, state regulators require time and the ability to gather information to review the transaction and assess its market impact. Thus, legislation should also include mandatory waiting periods to enable pre-transaction review and the authority to subpoena and obtain economic, market, and competitive information about the proposed transaction.
Review criteria. To guide review, policymakers may specify statutory review criteria to assess health care transactions, such as the extent the transaction will (1) harm health care markets and competition; (2) increase prices; (3) reduce access to health care services; (4) violate fiduciary duty requirements, especially through self-dealing or conflicts of interest; or (5) harm the public interest. Additional review criteria can be applied to specific types of transactions, such as those involving physicians, nonprofit hospitals, or for-profit entities.
Independent review. For transactions that raise competitive concerns, the state officials (AG or health agency) may seek independent review of the transaction either by a designated state body, such as a health care commission, or independent consultants. Independent review can provide more in-depth analysis to aid state AGs or agencies’ assessment of proposed health care transactions. State policymakers could require the parties to the transaction to pay for independent review to relieve the state of the financial burden of conducting complex market analyses.
Conditions. Legislative authority to review and approve health care transactions should also allow the AG to impose conditions of approval on the parties to the transaction. The range of conditions should respond to the criteria for approval and specific market concerns. For example, conditions could include requirements to keep critical facilities or services open, mandated community health investments, prohibitions on future acquisitions or employment of physicians, divesture of entities or providers to preserve competition, rate controls, refraining from charging facility fees for acquired physician practices, or prohibitions on anti-competitive health plan contracting. Even without statutory authority to impose conditions of approval on transactions, state AGs can negotiate consent decrees to settle their claims challenging anticompetitive transactions. One benefit of a statutory approval authority is that, unlike consent decrees, the AG or other state official need not go to court to enforce the conditions of approval.
Post-transactions monitoring. One of the conditions the AG can impose on approving a transaction is that the parties pay for an independent monitor to provide periodic post-transaction reports to the AG and state agencies. The monitor tracks compliance and market effects of the transaction. If the reports identify areas of noncompliance or potential abuses of market power, the state AG can bring enforcement action and seek penalties.
C. Oversight of consolidated entities
Although pre-transaction review is a critical tool, more than 90 percent of health care provider markets are already highly concentrated, so states require mechanisms to regulate anticompetitive behavior by entities that already possess market power. Different state authorities can play a role in overseeing vertically consolidated health care entities, including the state AG, an independent health policy commission, and the state’s certificate of need (CON) authority.
1. AG enforcement against anticompetitive conduct
State AGs possess broad powers under federal and state antitrust laws to challenge anticompetitive behavior of entities with market power. And unlike federal antitrust authorities, state AGs have authority over nonprofit entities.
Vertically consolidated health care entities may engage in a range of anticompetitive conduct, including using their market power to raise prices and exclude rivals, engaging in all-or-nothing bargaining with health plans to demand higher prices for all affiliated providers, and including anticompetitive terms in their contracts with health plans, such as anti-tiering or anti-steering, gag clauses preventing plans from sharing price information with consumers, or “most favored nation” provisions.
State AGs have successfully challenged anticompetitive conduct in North Carolina, California, and Washington. North Carolina’s AG joined the DOJ in a case against Atrium Health, a dominant health system, to challenge its use of anti-steering clauses in health plan contracts, which prevented private health plans from using financial incentives for patients to choose higher-value and lower cost providers. In its settlement of the case, Atrium agreed to stop using anti-steering clauses and preventing health plans from sharing costs with patients.
California AG, Xavier Becerra, brought a case against health care giant Sutter Health, alleging Sutter used its market power to raise prices in the region through its use of anticompetitive contract terms, including all-or-nothing and anti-steering clauses, the use of gag-clauses to prevent disclosure of price and quality information. In late 2019, Sutter tentatively agreed to pay $575 million to settle the case, to stop using all-or-nothing contracting, and to cap out-of-network rates. In June, however, Sutter asked the court to delay approving the settlement, citing losses from the COVID-19 pandemic, despite having received some $200 million in federal relief funding. Final court approval of the settlement is still pending.
On the heels of the AG’s action against Sutter, the California legislature sought to expand the AG’s authority to police anticompetitive conduct by health care entities in S.B. 977. The bill would make it unlawful for a health systems with substantial market power in any market for hospital or non-hospital services to take any action that would have a substantial tendency to cause anticompetitive effects, such as raising prices, diminishing quality, reducing choice or access with respect to hospital or nonhospital (e.g., physician services). Specifically, conduct involving tying or exclusive dealing by a health system with market power would be presumptively illegal.
In a case focusing on vertical consolidation, Washington’s Attorney General Bob Ferguson sued to unwind two hospital-physician transactions by CHI Franciscan health system that drove up prices on the Kitsap peninsula. The complaint alleged Franciscan violated Section 1 of the Sherman Act, Section 7 of the Clayton Act, and the State’s Consumer Protection Act. The parties agreed to settle the case in a consent decree in which Franciscan agreed to pay $2.5 million, divest of a surgery center, notify the state AG of future transactions, and agree to contractual changes, including a bar on using all-or-nothing bargaining with health plans.
In each case, the state AG was able to use enforcement authority to stop anticompetitive conduct by health care providers and enter settlement agreements that prevented the consolidated entities from continuing to abuse their market power. Though settlements included conduct remedies and even monetary relief, they meant the cases did not go to trial and establish legal precedent for future enforcement actions. These cases are resource-intensive and politically charged, but they can challenge abuses of market power by consolidated entities and send a message of deterrence against other powerful providers. State legislatures can aid enforcement by outlawing anticompetitive contracting practices, such as all-or-nothing bargaining, anti-tiering or anti-steering clauses, most-favored nation provisions, and gag clauses. In addition, statutes can augment State AGs’ enforcement authority by declaring unlawful certain anticompetitive practices by health care entities with market power, such as tying and exclusive dealing.
2. Oversight by independent commission
Several states have established independent health care cost or policy commissions, insulated from political influence, to provide analysis, recommendations, and oversight of health care market consolidation. The following states have statutorily established a health care commission or board to address health care costs: Colorado, Delaware, Maryland, Massachusetts, Oregon, Pennsylvania, Vermont, and Washington. Connecticut established the Office of Health Strategy to coordinate the state’s health care cost containment strategy. In addition, Rhode Island’s Governor and heads of their health and health insurance agencies convened the Health Care Cost Trends Steering Committee through executive action with funding from a private grant.
Market and transaction analysis. States health care commissions provide in-depth data analysis, often using data from the state’s APCD, and policy recommendations to the Governor, legislature, and executive branch agencies. In addition, health care commissions can have a role in reviewing health care transactions, making recommendations to the State AG and providing post-transaction monitoring. Beyond transaction-specific oversight, health care cost commissions can track health care cost and market trends more broadly across the state.
Health care cost growth benchmarks. Several states have given their health care commissions authority to set and monitor health care cost growth targets. Massachusetts pioneered the approach, which has been replicated in Delaware, Oregon, Rhode Island, Connecticut, and Washington. Common features include: establishing a statewide cost growth benchmark, analyzing data and calculating spending against the benchmark, reporting on cost drivers, and using hearings, transparency, performance improvement plans to encourage providers to comply with targets. While some have questioned whether these health care cost commissions possess sufficient authority to enforce compliance with health care cost growth benchmarks, the Massachusetts experience has proven fairly successful at reigning in health spending growth even with limited enforcement tools. As the model evolves, states may want to enhance the enforcement authority if soft regulatory tools prove inadequate to secure compliance with health care cost growth targets.
3. Oversight by certificate of need (CON) authority
The COVID-19 pandemic has highlighted the importance of health care planning to assure the state’s capacity to address public health crises as well as ongoing demand for health services, particularly in rural areas where a sole provider is responsible for the provision of health care services. Although debate continues over the impact of existing CON laws on competition, price, and quality in the health care market, states with CON authorities have the administrative infrastructure to expand CON from a health facility planning function to an overseer of vertically consolidated health care entities. Over a dozen states already require a CON or require notice to CON authorities for the sale or transfer of health care facilities, including nonprofits health care entities. Moreover, existing facilities often seek CON approval to add or remove services or seek affiliations. These CON requirements could be extended to vertical transactions involving physician groups and play a larger role in ongoing oversight of vertically consolidated providers.
Connecticut’s CON authority, the Health Systems Planning (HSP) office, reviews and requires a CON for all transactions involving a broad range of health care providers, including hospitals and provider groups. HSP conducts an in-depth cost and market impact review for transactions involving the sale or transfer of a hospitals in transactions of a certain size or involving a for-profit buyer and may place conditions on the approval of a CON for a hospital transaction.
To oversee vertical transactions, a state could extend the authority of the CON officials to require a CON for provider group transactions of a certain size, require some form of market impact analysis, and authorize the imposition of conditions of approval for the CON. Such conditions could include refraining from charging facility fees, limiting price increases, maintaining key services, avoiding anti-competitive contracting with health plans, limiting physician employment and exclusive contracting, and satisfying quality metrics, and investing in community and population health services. Oversight over compliance with conditions must be robust, long-term, and backed by enforcement authority, including action by the state AG for violations of conditions or anticompetitive conduct.
In many states, however, CON is highly susceptible to political influence by dominant health systems and other powerful stakeholders. Thus, if CON Authorities are given a larger role in overseeing consolidated health care entities, they need to be insulated from capture by incumbent industry leaders and publicly accountable. To engage in robust oversight of health care transactions and entities’ ongoing activities, CON authorities require financial, claims, and market data, whether submitted as part of the CON application process or from the state APCD, and have capacity for data analysis.
D. Controlling rising costs driven by vertical consolidation
Another set of tools to curb rising costs when vertical consolidation has already occurred include regulations on the outpatient fees themselves. These policies target rising outpatient costs driven by additional facility fees, out-of-network billing by investor-backed physician staffing companies, and changes in referral and utilization patterns.
1. Restrictions on facility fees
The main policy tools available to states to address unwarranted facility fees are transparency and facility fee regulation.
Facility fee transparency. Like all cost-control efforts, transparency is a first step to shine a light on the practice and put patients on notice that they may receive bills for facility fees due to corporate acquisition. However, transparency alone does not ameliorate the problem of facility fees nor does it shield a patient from incurring a facility fee. Even if they are notified of added facility fees, patients may not know what to do with the information and may be unable (or unwilling) to switch providers based on the notification about facility fees.
Examples of state laws requiring facility fee transparency come from Washington, Connecticut, Minnesota, and Texas. Washington and Minnesota’s laws require that, prior to non-emergency care, provider-based clinics that charge a facility fee must notify patients that the clinic is licensed as part of the hospital and the patient may receive a separate charge or billing for the facility component, which may result in a higher out-of-pocket expense; the health care facilities must also prominently post a statement that it is part of a hospital. Connecticut requires a similar notice and requires providers itemize facility fee charges on bills, disclose Medicare’s applicable facility fee rate for comparison, and provide information about the patient’s right to request reduction of the facility fee. Texas law requires that facilities must notify patients that the site charges a facility fee, and the disclosure must include the median facility fee at the facility, the range of possible fees, and the facility fee for each level of care. To enhance transparency, states may require annual reporting of facility fees charged or billed by health care providers, identified by location (e.g., the physician’s office) to be published on a publicly accessible website.
Facility fee regulation. Prohibiting or limiting allowable facility fee charges by providers can eliminate price differences for the same outpatient services based on the location or “site” of service. Medicare has instituted site-neutral payment, based on the view that “if the same service can be safely provided in different settings, a prudent purchaser should not pay more for that service in one setting than another.”
States could adopt policies that would limit or prohibit hospitals and health systems from charging facility fees. For the broadest impact, the state could (a) eliminate all facility fees at locations more than 250 yards away from a hospital’s main campus (a site-specific limit), and (b) eliminate facility fees for outpatient services that do not require additional standby capacity, including evaluation and management (E&M) services, regardless of whether the service is provided on- or off-campus (a service-specific limit).
Connecticut prohibits hospitals from charging a facility fee for outpatient office visits at an off-campus, hospital-based facility. But this prohibition only applies to E&M codes used for office visits, not the full range of outpatient services. In addition, Connecticut does not limit facility fees for on-campus outpatient visits. However, states could implement broader site-specific and service-specific facility fee restriction policies that cover the full range of non-emergency outpatient services and apply both on- and off-campus. For uninsured patients, Connecticut requires providers to charge no more than the applicable Medicare rate for outpatient services received at an off-campus, hospital-based facility, thereby incorporating any Medicare site-neutral payment changes into the amounts charged to uninsured patients.
Eliminating facility fees for the broad range of outpatient services (including those currently enjoying higher site payments under previously consummated acquisitions) is highly contentious and politically difficult. Connecticut legislators originally planned broader facility fee regulation, but they narrowed the requirement after facing strong opposition from powerful hospital facilities and physician groups in the state.
Connecticut’s law on facility fees also set forth a model for enforcement by making a provider’s violations of the facility fee prohibitions an unfair trade practice under the state’s Unfair and Deceptive Acts and Practices (UDAP) law. It is also an unfair trade practice for a provider in Connecticut to report a patient’s nonpayment of a prohibited facility fee to a credit reporting agency. This provides individual patients who have been charged unlawful facility fees or who have not received mandated notices about such fees a private right of action against providers. By contrast, Medicare patients do not have a private right of action if they are improperly charged cost-sharing payments for facility fees. Similarly, states can create an administrative enforcement mechanism for the relevant state agency, such as the Department of Health, to impose administrative penalties for violations of the facility fee policy. Ideally, administrative enforcement would be in addition to private remedies.
2. Counteracting private equity-backed consolidation
Although vertical consolidation between hospitals and physicians tends to reduce the opportunities for out-of-network billing (because employed physicians are more likely to participate with all the plans of their parent health system), the opposite is true for consolidation driven by private equity firms. Surprise medical billing is a key revenue strategy for private equity firms that invest in physician practices where patients are unable to choose their provider, such as emergency physicians or anesthesiologists. These companies strategically go out-of-network so they can seek higher out-of-network charges from health plans and balance bills from patients, driving up premiums and out-of-pocket bills.
Thus, states can counteract the higher costs driven by private equity investment in health care by enacting comprehensive protections against surprise medical bills. As NASHP and others have tracked, a growing number of states have enacted laws against surprise out-of-network billing, which protect many of the state’s consumers and payers from the excess costs from out-of-network bills.
Many of the tools described above — gathering data on pricing and referral trends from an APCD, pre-transaction review, and post-transaction oversight — can include particularized scrutiny for transactions involving private equity or venture-backed investors or staffing companies. An additional policy idea worth exploring is to shore up states’ prohibitions on the corporate practice of medicine to target private investment and control of physician practices by unlicensed corporations.
3. Global budgets
Three states, Maryland, Vermont, and Pennsylvania, have secured arrangements with the Centers for Medicare & Medicaid Services (CMS) and the Center for Medicare & Medicaid Innovation (CMMI) to establish global budgets for health systems within the state. Although global budgets generally target hospitals, vertical consolidation increases spending for hospitals and physicians and for inpatient and outpatient services. Thus, the global payment model could be a tool to contain rising costs posed by vertical consolidation.
Maryland’s global budget model builds on its long-standing all-payer rate setting system, administered by the Health Services Cost Review Commission under a federal waiver allowing higher Medicare payments as part of the system. In 2014, the state moved to an all-payer global budget system for all the acute care hospitals in the state. The state limits per-person hospital spending to a predetermined target growth rate, with a goal on reducing total spending growth and shifting care toward lower-cost settings and primary care. Although early results of the program were mixed, the effects may be limited in part because the program did not initially include physician payments in the global budgets. Subsequent refinements are shifting to a total cost of care model that would extend financial incentives beyond hospitals to physicians and other care settings.
Vermont’s all-payer ACO model involves most of the state’s hospitals and payers to collaborate in a statewide accountable care organization. Vermont’s Green Mountain Care Board is responsible for overseeing the ACO, setting benchmarks and budgets, and evaluating performance and cost-trends among the participating providers. The Green Mountain Care Board also oversees a hospital budget review process that establishes, publicizes, and enforces hospital budgets as a means of controlling health spending.
Pennsylvania has also launched a global budget demonstration for rural hospitals with the federal CMMI that will transition rural hospitals from fee-for-service to a global budget payment. While Pennsylvania does not rely on its Health Care Cost Containment Council to administer the global budget program, the cooperating federal and state agencies established an independent body to administer the program, the Rural Health Redesign Center Authority, though legislation in 2019.
Global budgets work best if they unify all the payers to participate in and contribute to the budget for a region’s health systems. Thus, these global budget models all involve CMS to include Medicare and Medicaid and the state’s biggest payers. In addition, with spending increasingly shifting to outpatient services and driven by physician referral patterns, to effectively control costs, the global budget model must go beyond hospitals to include physicians and outpatient facilities, whether in an ACO or a total-cost-of-care approach. Despite the significant amount of coordination and administrative infrastructure required to implement global budgets, these states have shown that health system budgets may be a way forward in rural and other areas where competition is inadequate and health systems are vulnerable to financial instability.
It is well-established that horizontal hospital consolidation and the concentration of provider market power is leading to uncontrolled increases in health care prices and spending. Yet, vertical health care consolidation between hospitals and physician groups and private equity investment in physician practices has largely gone unchecked, due to the relatively small dollar values of these transactions and pressure for health care integration. Policymakers are now starting to realize the threat posed by vertical health care consolidation, years into a wave of vertical mergers that is accelerating with the strain on independent practices from the COVID-19 pandemic.
States have a critical role in developing policy tools to address vertical health care consolidation, because these transactions escape review by federal authorities. States must consider a range of policy tools with a focus on oversight of vertically consolidated entities and broad regulatory authority over rising costs, because much consolidation has already occurred. States are at the vanguard of this policy effort to address this perennial health policy challenge: soaring health care costs driven by consolidation.
 Dep’t of Health & Human Svcs. CARES Act Provider Relief Fund, https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/index.html#:~:text=CARES percent20Act percent20Provider percent20Relief percent20Fund,lines percent20of percent20the percent20coronavirus percent20response.
 Reed Abelson, Doctors Without Patients: ‘Our Waiting Rooms Are Like Ghost Towns,’ N.Y. Times (May 5, 2020), https://www.nytimes.com/2020/05/05/health/coronavirus-primary-care-doctor.html; Daniel Horn, Wayne Altman, Zirui Song, Primary Care Is Being Devastated by COVID-19. It Must Be Saved. Stat News, April 29, 2020, https://www.statnews.com/2020/04/29/save-primary-care-devastation-COVID-19/; Rachel Weiner, Small medical practices struggle to survive amid coronavirus pandemic, Wash. Post, May 14, 2020, https://www.washingtonpost.com/health/small-doctor-practices-struggle-to-survive-amid-coronavirus-pandemic/2020/05/14/328984e6-9390-11ea-91d7-cf4423d47683_story.html; Marc Zarefsky, 97 percent of Physician Practices Feel COVID-19 Financial Sting: Where to Get Help, Am. Med. Ass’n , May 8, 2020, https://www.ama-assn.org/practice-management/sustainability/97-practices-feel-COVID-19-financial-sting-where-get-help;
 Allison Inserro, Newsroom: Hospital Acquisitions of Physician Practices Continue, Am. J. Managed Care, Feb. 26, 2019, https://www.ajmc.com/newsroom/hospital-acquisitions-of-physician-practices-continue.
 Joanne Finnegan, Report: 8,000 medical practices acquired by hospitals in 18 months, Fierce Healthcare (Feb. 21, 2019), https://www.fiercehealthcare.com/practices/consolidation-trend-continues-8-000-more-hospital-owned-practices-14-000-more-hospital.
 Carole Kane, Updated Data on Physician Practice Arrangements: For the First Time, Fewer Physicians are Owners Than Employees, AMA Policy Research Perspectives (May 2019), https://www.ama-assn.org/system/files/2019-07/prp-fewer-owners-benchmark-survey-2018.pdf.
 Jane Zhu, Lynn Hua, Daniel Polsky. Private equity acquisitions of physician medical groups across specialties, 2013-2016. 323 JAMA 663-665 (Feb. 18, 2020), doi:10.1001/jama.2019.21844; Lawrence Casalino et al, Private Equity Acquisitions of Physician Practices, 170 Ann. Internal Med. 114-116 (Jan. 15, 2019); Stephanie Cameron, Dan Zabinksi, Jeff Stendsland, Congressional Request on Healthcare Provider Consolidation, MedPAC (Nov. 7, 2019), http://medpac.gov/docs/default-source/default-document-library/consolidation-draft-3.pdf?sfvrsn=0.
 Rita Rubin, COVID-19’s Crushing Effects on Medical Practices, Some of Which Might Not Survive JAMA. Published online June 18, 2020. doi:10.1001/jama.2020.11254; Bob Herman, The Coronavirus could force more doctors to sell—or shutter, Axios (Apr. 20, 2020), https://www.axios.com/coronavirus-doctors-practices-sell-close-d59aa9f0-1e01-4a90-82f7-d4ebab26e355.html.
 Laurence C. Baker, M. Kate Bundorf & Daniel P. Kessler, Vertical Integration: Hospital Ownership of Physician Practices Is Associated with Higher Prices and Spending, 33 Health Aff. 756, 760 (2014); Cory Capps, David Dranove, Christopher Ody, The Effect of Hospital Acquisitions of Physician Practices on Prices and Spending, 59 J. Health Econ. 139 (2018); James C. Robinson & Kelly Miller, Total Expenditures per Patient in Hospital-Owned and Physician-Owned Physician Organizations in California, 312 JAMA 1663 (2014); Hannah T. Neprash et al., Association of Financial Integration Between Physicians and Hospitals With Commercial Health Care Prices, 175 JAMA Internal Med. 1932, 1937 (2015).
 See Capps, Dranove, & Ody, supra note 9 (estimating that a quarter of the 14 percent price increase associated with physician-hospital integration resulted from the addition of facility fees); Neprash et al., supra note 9, at 1937; James D. Reschovsky & Chapin White, Location, Location, Location: Hospital Outpatient Prices Much Higher than Community Settings for Identical Services, Res. Brief No. 16, Nat’l Inst. Health Care Reform, 1 (2014), http://www.nihcr.org/Hospital-Outpatient-Price.
 Amanda Cassidy, Health Policy Brief: Site Neutral Payments, Health Aff. 3 (July 24, 2014), http://healthaffairs.org/healthpolicybriefs/brief_pdfs/healthpolicybrief_121.pdf; Donna Rosato, The Surprise Hospital Fee You May Get Just for Seeing a Doctor, Consumer Reports (June 13, 2019), https://www.consumerreports.org/fees-billing/surprise-hospital-fee-just-for-seeing-a-doctor-facility-fee/;
Reschovsky & White, supra note 10, at 4.
 In 2020, the dollar value threshold for reportable transactions under the Hart-Scott-Rodino Act is $94 million. U.S Federal Trade Comm’n, Premerger Notification Office Staff, HSR threshold adjustments and reportability for 2020 (Jan. 31, 2020), https://www.ftc.gov/news-events/blogs/competition-matters/2020/01/hsr-threshold-adjustments-reportability-2020.
 Although the Employee Retirement Income Security Act (ERISA) prevents states from mandating that self-insured employer-based plans participate in the APCD, states have secured voluntary participation by these plans. NASHP, Next Steps for APCDs: U.S. Department of Labor (DOL) Rulemaking, Oct. 4, 2016, https://www.nashp.org/next-steps-for-apcds-us-department-of-labor-dol-rulemaking/.
 APCD Council, Interactive State Report Map (as of July 14, 2020), https://www.apcdcouncil.org/state/map.
 Robert Berenson, Jaime S. King, Katherine L. Gudiksen, Roslyn Murray, Adele Shartzer, Urban Institute Research Report: Addressing Health Care Market Consolidation and High Prices 11-14 (Jan. 2020), https://www.urban.org/research/publication/addressing-health-care-market-consolidation-and-high-prices; Erin Taylor & Michael Bailit, State Health & Value Strategies, Issue Brief: Leveraging Multi-Payer Claims Databases for Value (Mar. 25, 2019), https://www.shvs.org/leveraging-multi-payer-claims-databases-for-value-2/.
 Saint Alphonsus Med. Ctr.-Nampa Inc. v. St. Luke’s Health Sys., Ltd., 778 F.3d 775, 791 (9th Cir. 2015).
 Federal Trade Comm’n, Press Release: FTC and DOJ Announce Draft Vertical Merger Guidelines for Public Comment, Jan. 10, 2020, https://www.ftc.gov/news-events/press-releases/2020/01/ftc-doj-announce-draft-vertical-merger-guidelines-public-comment.
 15 U.S.C. § 18a (in 2019 the HSR threshold for notification was $90 million).
 The analyses, state examples, and recommendations in this section are drawn from an in-depth report by legal and economic researchers at the Source for Healthcare Price & Competition at UC Hastings College of the Law. Jaime S. King, Samuel M. Chang, Alexandra D. Montague, Katherine L. Gudiksen, Amy Y. Gu, Daniel Arnold, and Thomas L. Greaney, Preventing Anticompetitive Healthcare Consolidation: Lessons from Five States, The Source on Healthcare Price and Competition 11 (June 15, 2020), https://sourceonhealthcare.org/profile/preventing-anticompetitive-healthcare-consolidation-lessons-from-five-states/.
 Id. at 11.
 Act effective as of July 28, 2019, ch. 267, 2019 Wash. Laws, http://lawfilesext.leg.wa.gov/biennium/2019-20/Pdf/Bills/Session percent20Laws/House/1607-S.SL.pdf?q=20200124073816.
 Conn. Gen. Stat. § 19a-486i, http://media.sourceonhealthcare.org/Conn_Gen_Stat_19a-486i.pdf.
 Mass. Gen. Laws ch. 6D, § 13, https://malegislature.gov/Laws/GeneralLaws/PartI/TitleII/Chapter6D/Section13.
 S.B. 977, 2019-2020 Reg. Sess., § 1190.10(a) (Cal. 2020) (as amended June 19, 2020), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB977.
 Cal. S.B. 977, § 1190.10(f).
 King et al., supra note 21, at 14-26.
 King et al., supra note 21, at 20. (“Substantive transaction reviews, such as a CMIR or HCIS, may require access to trade secrets or other propriety information. To ensure the state has access to all information necessary to conduct a thorough review, state legislatures should grant the AG and other state entities the authority to compel information during the review process and for subsequent investigations following the review.”). The report by King et al. details state examples from California, Connecticut, Rhode Island, and Massachusetts, authorizing state officials to compel the parties to produce information to assist in review. Id. at Appendix F.
 King, et al., supra note 21, at 16. As an alternative to legislative review criteria, at least one state (Pennsylvania) has created a sub-regulatory process and criteria for the AG to review health care transactions involving nonprofit entities. See Review Protocol for Fundamental Change Transactions Affecting Health Care Nonprofits, Office of the Attorney Genereal, Commonwealth of Pennsylvania, https://www.attorneygeneral.gov/protect-yourself/charitable-giving/review-protocol-for-fundamental-change-transactions-affecting-health-care-nonprofits/.
 See, e.g., MASS. GEN. LAWS ch. 6D § 13, https://malegislature.gov/Laws/GeneralLaws/PartI/TitleII/Chapter6D/Section13 (requiring the Health Policy Commission to conduct a cost and market impact review of proposed transactions that will have a significant impact on the state’s ability to meet its cost-growth benchmark or on the competitive market); CONN. GEN. STAT. § 19a-639f, https://www.cga.ct.gov/current/pub/chap_368z.htm#sec_19a-639f (requiring the Health Systems Planning Unit of the Office of Health Strategy—the state’s CON authority—to conduct a cost and market impact review of proposed transactions requiring a CON including the retainer of independent consultants to conduct the economic analysis).
 King et al., supra note 21, at 18-20.
 King et al., supra note 21, at 23-26.
 King et al., supra note 20, at 26-28.
 Brent D. Fulton, Health Care Market Concentration Trends in the United States: Evidence and Policy Responses, 36 Health Aff. 1530–38 (2017).
 Berenson et al., supra note 16, at 33-34.
 Id. At 34-35 (describing these anticompetitive contract terms in more detail and providing examples).
 United States v. Charlotte-Mecklenburg Hosp. Auth., 248 F. Supp. 3d 720 (W.D.N.C. 2017).
 Final Judgement, United States of America and the state of North Carolina v. the Charlotte-Mecklenburg Hospital Authority d/b/a Carolinas Healthcare System, No. 3:16-cv-00311-RJC-DCK (W.D. NC Apr. 24, 2019). https://www.justice.gov/atr/case-document/file/1157461/download.
 Becerra Complaint, People of the State of California ex rel Xavier Becerra v. Sutter Health., CGC 18-565398 (Cal. Super. Ct. S.F. City and Cnty. 2019).
 Jenny Gold, Citing COVID, Sutter pushes to revisit $575M antitrust settlement, Modern Healthcare (June 17, 2020), https://www.modernhealthcare.com/providers/citing-COVID-sutter-pushes-revisit-575m-antitrust-settlement.
 Cal. S.B. 977, § 1191(a).
 Washington State Office of Attorney General, Press Release: CHI Franciscan Will Pay Up to $2.5 Million Over Anti-Competitive Kitsap Deals, https://www.atg.wa.gov/news/news-releases/attorney-general-ferguson-chi-franciscan-will-pay-25-million-over-anti.
 Complaint, State of Washington v. Franciscan Health System, No. 3:17-cv-05690 (W.D. WA Aug. 31, 2017).
 Consent Decree, Complaint, State of Washington v. Franciscan Health System, No. 3:17-cv-05690 (W.D. WA May 13, 2019), https://agportal-s3bucket.s3.amazonaws.com/uploadedfiles/Another/News/Press_Releases/ConsentDecree_1.pdf.
 Berenson et al., supra note 16, at 37-39 (discussing the tradeoffs between litigation and legislative approaches to combat anticompetitive practices by health care entities).
 Berenson et al., supra note 16, at 49-53. In 2020, Washington passed H.B. 2457, creating the Health Care Transparency Board and authorizing it to establish a health care cost growth benchmark, http://lawfilesext.leg.wa.gov/biennium/2019-20/Pdf/Bills/Session percent20Laws/House/2457-S2.SL.pdf#page=1.
 Conn. Gen. Stat. § 19a-754a.
 Office of the Rhode Island Health Insurance Commissioner, RI Health Care Cost Trends Project, http://www.ohic.ri.gov/ohic-reformandpolicy-costtrends.php.
 See, e.g., “What Is the Delaware Health Care Commission?” Delaware.gov, https://dhss.delaware.gov/dhcc/about.html; “What is the Pennsylvania Health Care Cost Containment Council?” http://www.phc4.org/council/mission.htm.
 For example, the Massachusetts Health Policy Commission performs analysis of the market impact of proposed health care transactions and makes findings and recommendations to the Attorney General. Act of 2012, ch. 224, 2012 Mass. Laws, https://malegislature.gov/Laws/SessionLaws/Acts/2012/Chapter224; Massachusetts Health Policy Commission, “Market Oversight,” https://www.mass.gov/market-oversight.
 Milbank Memorial Fund, Health Care Cost Growth Benchmarks By State, Accessed July 21, 2020, https://www.milbank.org/focus-areas/total-cost-of-care/health-care-cost-growth-benchmarks-by-state/ (noting that Massachusetts, Oregon, and Washington’s cost growth benchmarks were established legislatively, while Connecticut, Delaware, and Rhode Island’s were established by Executive Order); Elsa Pearson & Austin Frakt, Health Care Cost Growth Benchmarks in 5 States, JAMA Forum (June 4, 2020), https://jamanetwork.com/channels/health-forum/fullarticle/2767017.
 Lisa Waugh & Douglas McCarthy, How the Massachusetts Health Policy Commission Is Fostering a Statewide Commitment to Contain Health Care Spending Growth, Commonwealth Fund (Mar. 5, 2020), https://www.commonwealthfund.org/publications/case-study/2020/mar/massachusetts-health-policy-commission-spending-growth; Joel Ario, Kevin McAvey, Kyla Ellis, Implementing a Statewide Healthcare Cost Benchmark: How Oregon and Other States Can Build on the Massachusetts Model, Manatt Health (December 2019), https://www.manatt.com/Manatt/media/Documents/Articles/RWJ-Phase-5-Report-Cost-Benchmarking-Paper-December-2019_FOR-WEB.PDF.
 Berenson et al., supra note 16, at 53; Waugh & McCarthy, supra note 51.
 NASHP staff internal analysis suggests that the following states require CON review of certain health care transactions: Arkansas (only for specified facilities), Connecticut (CON required for transfer of a facility of a large practice group), Delaware (CON for acquisition of a non-profit healthcare facility), Hawaii (administrative review only), Illinois (exemption required), Kentucky, Maine, Massachusetts, Michigan (CON required for acquisition of an existing facility), Mississippi (CON required for change in ownership of existing health care facilities, major medical equipment, or a health service), Missouri (CON required for change of owner, operator to an existing CON approved project not yet complete), New Jersey (for general hospitals only), New York (CON required for change in ownership, consolidations, or creation of parent entities), Oklahoma (only long-term care, psychiatric, and chemical dependency treatment facilities),Washington (sale, lease, or purchase of an existing hospital).
 Conn. Gen. Stat. § 19a-638 (“A certificate of need issued by the unit shall be required for [. . .] [a] transfer of ownership of a health care facility [or] [. . .] [a] transfer of ownership of a large group practice to any entity” except as specified”).
 Conn. Gen. Stat. § 19a-639.
 Wash. Rev. Code § 70.01.040, http://media.sourceonhealthcare.org/WA_70.01.040.pdf. Minn. Stat Ann. §62J.824 (2018) https://www.revisor.mn.gov/statutes/cite/62J.824
 Conn. Gen. Stat. §19a-508c, http://media.sourceonhealthcare.org/Conn_Gen_Stat_19a-508c.pdf.
 Acts 2019, 86th Leg., R.S., Ch. 1062 (H.B. 1112) (2019),https://statutes.capitol.texas.gov/Docs/HS/htm/HS.254.htm.
 Medicare Payment Advisory Commission, Report To the Congress: Medicare Payment Policy 75 (2014), http://www.medpac.gov/docs/default-source/reports/mar14_entirereport.pdf. In 2015, Congress passed the Bipartisan Budget Act requiring Medicare to implement site-neutral payment for outpatient services (other than emergency department services) furnished at any new, off-campus hospital outpatient departments, meaning these services will be reimbursed at the same, lower rates as freestanding physicians’ offices. This Medicare site-neutral payment policy went into effect in 2017 for outpatient locations acquired or built after 2015. In 2018, CMS has expanded the policy to cover E&M office visits at sites previously exempted under the 2015 law. CMS’s expansion of site-neutral payment was challenged in court and upheld on appeal before the D.C. Circuit in 2020. Litigation is ongoing. Am. Hosp. Assn. v. Azar , D.C. Cir. App., No. 19-5352.
 In 2019, Massachusetts Governor Charlie Baker proposed a comprehensive health care cost containment package that included both site-specific and service-specific limits on facility fees. H. 4134, 191st Gen. Ct., 2019-2020 Sess. (Mass. 2019), https://malegislature.gov/Bills/191/H4134.
 Conn. Gen. Stat. § 19a-508c(k).
 Arielle Levin Becker, House nearing deal on massive health care bill, CT Mirror, May 29, 2015, http://ctmirror.org/2015/05/29/house-nearing-deal-on-massive-health-care-bill/.
 Conn. Gen. Stat. §19a-508c(k).
 Conn. Gen. Stat. § 20-7f.
 Zack Cooper, Fiona Scott Morton, Nathan Shekita, Surprise! Out-of-Network Billing for Emergency Care in the United States, (Feb. 2020 preprint) https://www.journals.uchicago.edu/doi/pdfplus/10.1086/708819; Zack Cooper, Hao Nguyen, Nathan Shekita, and Fiona Scott Morton, Out-Of-Network Billing And Negotiated Payments For Hospital-Based Physicians, 29 Health Aff. 24 (2020), https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2019.00507.
 NASHP, Comprehensive State Laws Enacted to Address Surprise Balance Billing (updated March 14, 2019), https://www.nashp.org/wp-content/uploads/2019/03/Surprise-Billing-Laws-Chart-final-for-pdf-3.14.19.pdf; Manaasa Kona, State Balance-Billing Protections, Commonwealth Fund (updated July 20, 2020), https://www.commonwealthfund.org/publications/maps-and-interactives/2020/jul/state-balance-billing-protections.
 See, e.g., Cal. S.B. 977 (2020), which would specifically apply AG approval and oversight to health care transactions involving private equity or hedge funds.
 Centers for Medicare and Medicaid Services, Maryland All-Payer Model, Accessed July 23, 2020, https://innovation.cms.gov/innovation-models/maryland-all-payer-model.
 One study found that Maryland’s all-payer global budget system reduced total spending compared to out-of-state controls. Susan Haber et al., Evaluation of the Maryland All-Payer Model: Second Annual Report, Prepared by RTI International for CMS (Aug. 2017), https://innovation.cms.gov/files/reports/md-all-payer-secondannrpt.pdf. However, another study found no changes in utilization, so the savings were likely attributed to lower hospital prices. Eric T. Roberts, et al., Changes in Health Care Use Associated with the Introduction of Hospital Global Budgets in Maryland, 178 JAMA Internal Med. 260-268 (2018), available at: https://www.commonwealthfund.org/publications/journal-article/2018/jan/changes-health-care-use-associated-introduction-hospital.
 Centers for Medicare and Medicaid Services, Innovation Center, Maryland Total Cost of Care Model, Accessed July 22, 2020, https://innovation.cms.gov/innovation-models/md-tccm.
 Centers for Medicare and Medicaid Services, Innovation Center, Vermont All-Payer ACO Model, Accessed July 22, 2020, https://innovation.cms.gov/innovation-models/vermont-all-payer-aco-model.
 State of Vermont, Green Mountain Care Board, “ACO Oversight,” Accessed July 22, 2020, https://gmcboard.vermont.gov/aco-certification-and-budget-review.
 State of Vermont, Green Mountain Care Board, “Hospital Budget Review,” Accessed July 22, 2020, https://gmcboard.vermont.gov/hospital-budget.
 Pennsylvania Rural Health Model, Accessed July 22, 2020, https://www.health.pa.gov/topics/Health-Innovation/Pages/Rural-Health.aspx.
 Pennsylvania Rural Health Redesign Center Authority Act, Pub. L. 742, No. 108 (2019 Pa. Acts), https://www.legis.state.pa.us/cfdocs/legis/li/uconsCheck.cfm?yr=2019&sessInd=0&act=108.
*Erin C. Fuse Brown, JD, MPH, is associate professor of law and director of the Center for Law, Health and Society at Georgia State University College of Law. This work was performed in her capacity as a consultant to National Academy for State Health Policy.
Acknowledgements: The National Academy for State Health Policy (NASHP) wishes to thank Arnold Ventures for its generous support of NASHP’s Center for Health System Costs, for which this paper was commissioned.
Massachusetts Gov. Charlie Baker will kick off the National Academy for State Health Policy’s 33rd annual conference with a keynote address at 4:30 p.m. (ET) Monday, Aug. 14, 2020. The conference, originally scheduled for Boston, will be delivered on-line.
Massachusetts has long been a national health reform leader and Gov. Baker has played a key role in many advances since his election in 2015. Previously, he served 10 years as CEO of the non-profit Harvard Pilgrim Health Care, which the National Committee for Quality Assurance repeatedly ranked as the nation’s top-ranked health plan during his tenure. Earlier, Gov. Baker held key positions in Massachusetts state government as Secretary of Health and Human Services and Secretary of Administration and Finance.
Gov. Baker is leading Massachusetts through the COVID-19 pandemic and has prioritized testing and contact tracing programs. His administration implemented reforms at the state’s health exchange, the Massachusetts Health Connector. Massachusetts currently leads the nation in health insurance coverage with only 3 percent of its population uninsured.
Last year, Gov. Baker introduced An Act to Improve Health Care by Investing in VALUE, designed to deliver more cost effective, nimble, and patient-centric health care for the 21st century. A cornerstone of the comprehensive plan is a significant investment in primary care and behavioral health, while maintaining the state’s cost growth targets administered by the state’s Health Policy Commission. That first-in-the-nation, cost-growth benchmarking system has reported success in bending the health care cost trajectory and other states are now replicating it.
Baker’s newest proposal for the plan would add enforcement provisions that require health care providers who exceed the target to pay fines. The proposal, which the state Legislature is currently deliberating, also includes provisions to lower pharmaceutical costs, including subjecting manufacturers who raise drug prices excessively to fines and redirecting those revenues to support community hospitals and safety net providers.
Register for NASHP’s annual conference, State Health Policy: Flexibility and Resiliency through COVID-19 and Beyond, on Aug. 17-19, 2020.
To improve the quality of services for children and youth with special health care needs (CYSHCN) and reduce health care costs, states are implementing strategies to improve access to home health services. Of particular importance as states confront COVID-19-related budget challenges, home health services can help to avoid costly emergency department use, hospitalizations, and institutional care.
State Medicaid agencies can use home health services to improve the quality of care and life for Medicaid enrollees and reduce costs. Today, many states are renewing their focus on this critical set of services as part of their Medicaid delivery system reforms, including managed care delivery arrangements and value-based care. Home health services are important for individuals with complex needs, especially for children with chronic, serious, and complex conditions.
Quality home health care can help children avoid emergency department use and prolonged hospitalization or institutional care. Access to high- quality home health services can improve the outcomes and health of children and their families.
States seeking new ways to improve health outcomes for Medicaid enrollees with complex needs have been challenged by longstanding policy barriers and workforce shortages. Few policy studies have analyzed state approaches to coverage and delivery of home health services for children and youth with special health care needs (CYSHCN). This brief describes how six states structure and provide home health services to children enrolled in Medicaid.
Nearly 20 percent (14.6 million children) of US children from birth to age 18 have chronic or complex health care needs that require physical and behavioral health care services and supports beyond what children normally require. CYSHCN often depend on home health services as part of primary and specialty care, and other services and supports. Of CYSHCN in the United States, 52 percent are white, 21 percent are Latinx, and 18 percent are African American. A subset of CYSHCN – children with medical complexity – who comprise approximately 0.5 percent of US children, are even more likely to require home health services. In 2016, nearly 500,000 families of CYSHCN reported needing home-based medical and therapeutic services.
Medicaid plays a crucial role in providing coverage for CYSHCN, serving almost half of the CYSHCN population (48 percent). CYSHCN are eligible for Medicaid through a variety of coverage pathways, some of which are mandatory under federal Medicaid law and others are optional at the state level. These pathways include Medicaid coverage for children:
- Based solely on their household income;
- Enrolled in the Medicaid Aid to the Aged, Blind and Disabled (ABD) category of assistance;
- Receiving Supplemental Security Income (SSI);
- Enrolled in foster care or receiving adoption assistance;
- Enrolled through a Medicaid waiver, including the Katie Beckett waiver that provides home-based services for children with complex health care needs
How Home Health Services Are Defined, Delivered, and Covered
Federal regulations broadly define home health services to include a range of specific services for adults and children that are provided at a “beneficiary’s place of residence,” including:
- Nursing services;
- Home aide services provided by a home care agency;
- Medical supplies and equipment for use in home-based settings; and
- Physical therapy, occupational therapy, or speech pathology and audiology services, provided by a home health agency.
These services are outlined in federal regulations, but state Medicaid programs have the discretion to deliver them in varying ways, with unique policies and procedures. For example, a state may offer home nursing services through Medicaid managed care delivery systems but provide home-based therapies through a fee-for-service system. Prior authorization policies may also vary for different home health services within a state.
Home nursing care in particular can be an important service for children with medical complexity (CMC). CMC often face a range of conditions and diagnoses that require care in a home-based setting and without access to home health services they would face higher hospitalization rates. Community-based care is also considered a best practice for children with special health care needs and is typically more cost effective than institutional care.
Home health services are provided by a range of providers including nurses, home health aides, personal care assistants, and others. Additionally, families play a critical role in delivering home health services to children. Family caregivers provide over 1.5 billion hours annually of health care for their children, according to a recent report. Several states have begun to recognize the invaluable role families play and, as a result, provide training support and reimbursement to family caregivers for certain home health services, such as personal care services.
Medicaid Coverage of Home Health Services for Children
Medicaid coverage of home health services for children is established by the Early, Periodic, Screening, Diagnosis and Treatment (EPSDT) benefit. Medicaid EPSDT mandates coverage of all services that are medically “necessary health care, diagnostic services, treatment, and other measures to correct or ameliorate defects and physical and mental illnesses and conditions.” Coverage of these services includes all mandatory and optional services that the state can cover under Medicaid, whether or not such services are covered for adults.
The EPSDT benefit is mandated for all children enrolled in Medicaid under age 21. Determining if a service is medically necessary is a key step for states when establishing whether a service is covered under the EPSDT benefit. States are required to determine medical necessity, but they do so in a variety of ways depending on the delivery system providing the service. The table in Appendix A details how the six states define medical necessity under Medicaid EPSDT and the prior authorization processes states use to determine medical necessity for all services, including home health services.
Federal law underscores the role of states in providing community-based and home-based services for children enrolled in Medicaid. Most notably, the US Supreme Court case, Olmstead v. L.C., established that unjustified institutionalization of Medicaid beneficiaries violates the Americans with Disabilities Act. As a result of the ruling, states must cover services in their programs, including Medicaid, in the community rather than institutions.
State Medicaid programs are using a variety of strategies to improve access to home health services, particularly for CYSHCN. Some strategies are unique to home health services and others focus on improving care overall. The six study states (WA, OH, IA, MD, DL, CT) use a variety of delivery systems to provide home health services. Their strategies include addressing provider capacity, advancing the person-centered medical home model, streamlining prior authorization processes, collaborating with Title V CYSHCN programs, and promoting stakeholder collaboration.
Innovations to Address Home Health Services Workforce Shortages
The availability of well-trained providers is foundational to the timely delivery of high-quality home health services for CYSHCN. The extensive needs of CYSHCN and children with medical complexity often require ongoing skilled care by nurses and therapists. The design of service delivery models, provider education and training, and the adequacy of home health provider payment rates are all important factors affecting the home health workforce for CYSHCN.
Lack of sufficient home health provider capacity is one of the most significant challenges for states. States are experiencing shortages of pediatric nurses, licensed practical nurses (LPNs), and physical, occupational, and speech therapists. As a result, CYSHCN and their families can often experience barriers and wait lists for home health services.
Staff shortages are attributed to a variety of factors including geographic access challenges in rural areas, lack of home health services training programs, and payment rates that lag behind those of competing institutions or nearby regions. In Ohio, staff shortages are mostly concentrated in rural areas. Maryland has provider shortages in areas that are adjacent to Washington, DC where Medicaid payment rates are higher. Maryland also experiences home health care provider capacity challenges in certain areas due to competition from nursing facilities within the state. In Connecticut, home health agencies that serve CYSHCN enrolled in Medicaid face competition for pediatric nurses from hospitals.
States are actively seeking solutions to address provider shortages. The Maryland Department of Health developed the Task Force to Study Access to Home Health Care for Children and Adults with Medical Disabilities using input from a variety of stakeholders in an effort to improve LPN training in home nursing skills and use of durable medical equipment. The Maryland task force explored a range of options including:
- Partnerships between home health agencies and nursing programs at universities and community colleges to create training programs for LPNs interested in home health work;
- Opportunities for agency staff to participate in training simulation labs; and
- Preceptorships in which families would participate in training environments with providers in training.
The task force also recommended that provider agencies pool their resources to provide home health skills training and use a skills checklist to evaluate LPN competency on an annual basis to allow for a better understanding of how to continuously improve home health LPN skills, certifications, and competencies.
In an effort to improve the supply of home health nurses, Ohio’s Medicaid agency has increased awareness of the state’s workforce loan forgiveness and training programs. In addition, an Ohio children’s hospital has partnered with a home health agency serving CYSHCN enrolled in Medicaid to provide home health nurses with specialized training in pediatric nursing.
Several states have either considered or implemented increases in home health care provider payment rates as a strategy to increase the number of providers participating in the Medicaid delivery system. Given the substantial fiscal impact of increasing payment rates, states have had to weigh the impact that these rate increases would have compared to other strategies for addressing workforce shortages. Ohio increased payment rates for home health nurses in 2017. Maryland’s task force provided several recommended options for significant increases to Medicaid home- and community-based services waiver and other community-based nursing providers’ payment rates. After an analysis of the fiscal impact of proposed increases, Maryland’s task force suggested that a phased-in approach to increases could be a pathway to modifying rates. This approach was implemented, and in May 2018 Maryland announced a 3 percent payment increase. In an effort to streamline the reimbursement methodology for home health agencies, Connecticut Medicaid proposed a structured fee schedule approved by the state legislature in 2017, which allows for improved fiscal monitoring and data collection. Delaware’s Children with Medical Complexity Steering Committee, in studying how to improve the system of care for children with medical complexity, recommended a workforce study to investigate possible shortages of private-duty nurses available to provide care to this population.
Recognizing the different levels of care that CYSHCN may need from home health care can also help make the best use of the limited number of pediatric home health providers. Maryland Medicaid allows for reimbursement of several tiers of service, with different payment rates to meet a range of needs within the fee-for-service (FFS) component of the program. For example, Medicaid covers certified nursing assistants (CNAs) and certified medical technicians (CMTs) to provide services, such as medication administration, that do not require an LPN level of care.
States are also acknowledging the crucial role that families play in understanding and supporting the unique needs of children as part of broader strategies to address shortages of home health providers. For children enrolled in Medicaid waivers, Ohio Medicaid allows family caregivers to be reimbursed for providing home-based personal care services to children. The Maryland task force recommended efforts to foster dialogue between parents and home care providers to increase feedback, manage expectations, and increase transparency about wait times. In Delaware, CYSHCN families were extensively engaged in the state’s steering committee process that identified challenges and developed solutions for managing the health care needs of children with medical complexity.
Innovations to Advance the Medical Home Model
The American Academy of Pediatrics has identified medical homes as a core component of a comprehensive system of care for CYSHCN. The medical home model can create the infrastructure needed for primary care provider (PCP) practices to engage with and coordinate home health and other providers involved in the care of CYSHCN. The model can help integrate home health services with all aspects of children’s care and provide the care coordination support needed to monitor access to home health services, ensure that authorized services are delivered, and close gaps in care.
In Connecticut, the medical home model is central to the state’s managed fee-for-service approach to delivering care to all members, particularly CYSHCN. Primary care practices receive in-office, ongoing support to attain and maintain National Committee for Quality Assurance (NCQA) or The Joint Commission medical home recognition. In addition, care coordinators employed by the state’s contracted Administrative Services Organizations support primary care providers and offer home visits and telephonic follow-up as needed. To the extent that PCMH practices have difficulty connecting families with home health care providers, they work closely with the state’s medical, behavioral, and dental administrative services organizations (ASO) to find qualified providers. ASOs are organizations that are contracted by the state to provide administrative services such as management of claims and benefits and provider delivery reform support. Delaware’s steering committee on medical complexity recommended implementing the PCMH model as part of a comprehensive strategy to manage the health care needs, including home health services, of this population. Delaware found that the PCHM model could help ensure primary care provider leadership in coordination across all sectors of the health care system, including home health.
Innovations to Streamline Prior Authorization
The prior authorization process within Medicaid is intended to hold providers accountable for delivering medically necessary care and achieving cost savings in the health care system. However, because CYSHCN often need home health and other services on an ongoing basis, requirements for repeated prior authorizations can have the unintended effect of impeding access. Access to home health for CYSHCN can be further delayed because of administrative challenges associated with navigating multiple prior authorization processes and forms used by different managed care plans.
To streamline the process and reduce unnecessary duplication of effort, Delaware managed care plans are working on a method to create a “system flag” within the Medicaid managed care data system for children with medical complexity. Using this system strategy will streamline and simplify the prior authorizations process, so that prior authorization processes can be simplified and not overly onerous. Additionally, to enable ongoing monitoring of managed care organization (MCO) prior authorization processes, Delaware Medicaid requires quarterly reporting on prior authorization decisions. Iowa Medicaid has recognized the challenges and delays associated with lack of uniformity in prior authorization requirements for MCOs. The state is working with managed care plans to develop a standard prior authorization form to be used across all plans. This will ease the burden on providers who were forced to be familiar with a wide assortment of forms and processes for multiple MCOs. State Medicaid officials anticipate that the form will be available in the next 18 months.
Improving Collaboration with Title V CYSHCN Programs and Stakeholders
In some states, state Title V Maternal and Child Health Services Block Grant (Title V) CYSHCN programs partner with Medicaid agencies to coordinate home health services for CYSHCN. State Title V CYSHCN programs are mandated under federal statute to support coordinated, community-based care for CYSHCN. Additionally, state Title V programs have extensive data and expertise on the needs of the population, as well as connections to pediatric specialists who can facilitate access to home health and other needed services. In some states, Title V programs provide important gap-filling services and supports, such as durable medical equipment, to supplement Medicaid or private insurance.
In Ohio, state Medicaid and state Title V CYSHCN program staff partnered to help ensure a smooth transition for CYSHCN who transitioned to Medicaid managed care in 2012, which included children who access home health services. Ohio Medicaid and Title V program staff meet monthly to review cases of CYSHCN who have reported issues with accessing services or experiencing barriers to care. For example, medical-necessity determinations have not always considered that, due to their development, children requiring durable medical equipment may need more frequent replacements than they were receiving. This case review process has allowed for better understanding of the unique needs of children with medical complexity and better implementation of EPSDT medical necessity policies by Medicaid managed care organizations.
The University of Iowa’s Child Health Specialty Clinics (CHSC), Health and Disease Management team helps coordinate care for a subset of Medicaid-enrolled CYSHCN who are served through Medicaid fee-for-service programs and are not part of the state’s Medicaid managed care program. In Iowa, CHSC is part of the state’s Title V CYSHCN program. Care coordinators help maintain ongoing communication with home health agencies to facilitate timely access to pediatric nursing services. CHSC also trains and certifies family navigators – individuals who have lived experience with CYSHCN – to support families on waiting lists for Medicaid waiver services. This work requires coordination and collaboration between CHSC and the state Medicaid program to ensure coordinate care for children who are served by both programs.
Creating Opportunities for Stakeholder Collaboration
CYSHCN typically need services from many programs, organizations, and care systems, including Medicaid, public health, education, social services, behavioral health and substance use, foster care, and others. However, these agencies and systems historically have operated in silos, with minimal data sharing, collaboration, or integration. The lack of collaboration across systems can lead to care gaps, duplication of services, fragmentation of care, and long delays in obtaining services. State officials increasingly are recognizing the need for communication and collaboration across multiple stakeholders within and outside of government to develop effective solutions for delivering home health services for children.
Delaware’s Children with Medical Complexity Steering Committee convened for eight months in 2017 and 2018 to develop a comprehensive plan to manage the health care needs of children with medical complexity. The steering committee included Medicaid officials, as well as other state divisions and agencies, providers, health plans, and family representatives. The committee’s goals were to strengthen the system of care, increase collaboration across agencies, encourage community involvement, and ensure adequate and appropriate access to health services for Children with Medical Complexity. The steering committee divided into four work groups to address key issues, including access, and submitted recommendations to the legislature. Families provided extensive input on the nature of challenges in access to services, the need for respite care, transportation, difficulties in obtaining durable medical equipment, appeal and fair hearings processes, and coordination among payers.
Ohio Medicaid officials also convened an interagency workgroup to identify potential gaps and duplication of services for CYSHCN served by both Medicaid and state Title V CYSHCN programs. This interagency effort has allowed for sharing of CYSHCN-specific knowledge from Title V CSYHCN staff about the needs of this population with Medicaid staff to better deliver services, including home health services.
Key Strategies and Conclusion
The experiences of the six states featured in this report provide insights for other states interested in improving their coverage and delivery of home health services for children enrolled in Medicaid.
Prioritize efforts to address provider shortages. The shortage of qualified providers is the single greatest challenge for states seeking to optimize home health services for CYSHCN. The complexity of this issue requires creative and multi-faceted solutions. Stakeholder task forces and study committees, partnerships with state workforce agencies, innovative approaches to education and training, review of Medicaid payment rates, and exploration of credentialing and reimbursing family caregivers all play important roles in state strategies to improve and expand the home health care workforce for CYSHCN.
Seek regular feedback from families. Family experiences and satisfaction levels are the ultimate determinant of quality care for CYSHCN. States can leverage a variety of tools for beneficiary feedback, including annual surveys, focus groups, stakeholder advisory committees, regional forums, and one-on-one stakeholder meetings. Advisory committees may be time-limited or ongoing, depending on the nature of the issue and state agency capacity. Feedback from a range of stakeholders — including families, providers, health plans, and care coordinators —c an be critical to learn from individuals with a variety of perspectives, identify the most pressing problems, and formulate effective solutions tailored to beneficiary needs.
Leverage the benefits of cross-sector and stakeholder collaboration. Delivery of comprehensive, high-quality home health services to CYSHCN requires active engagement of many entities and systems and state agencies have recognized the need to go beyond siloed approaches to policy and program development. Partnerships across state agencies, particularly between state Medicaid and Title V CYSHCN programs and with provider groups, families of CYSHCN, and other key stakeholders can expand the knowledge base of all participants, advance innovative approaches to training, facilitate data sharing, and help build the relationships and infrastructure needed to overcome access challenges.
Adjust service delivery models to increase capacity. States are considering and implementing a variety of creative approaches to address persistent provider shortages. These strategies include development of medical home models that rely on team-based care and use of non-licensed staff (e.g., certified nursing assistants and certified medical technicians) to provide services, such as medication administration, that do not require the involvement of nurses or LPNs. Changes to prior authorization and staffing rules, such as allowing multiple agencies to provide authorized services or adjusting pediatric nurse assignments, may help maximize staffing resources to mitigate capacity challenges.
Strengthening oversight to improve quality and access to services. Medicaid programs have a variety of tools to strengthen accountability for access to quality care in either fee-for-service or managed care delivery systems. States are using a range of strategies that include requiring flagging of CYSHCN in information technology systems for targeted support, establishing provider network requirements aligned with CYSHCN needs, and requiring regular managed care plan reporting to identify challenges in delivery of authorized services. Additionally, states are enhancing oversight of home health services through targeted external reviews to validate the availability of qualified provider panels and regular evaluation of service delivery.
Customize fee-for-service and managed care approaches to improve access. State officials in both fee-for-service and managed care environments have found effective ways to advance access to home health services for CYSHCN, and leadership in both systems have viewed the payment models as critical to their success. A fee-or-service model may offer the advantage of allowing home health providers a “one-stop shop” to receive prior authorization for home health and other services and can be simple for families to understand. A Medicaid managed care model may provide the infrastructure needed to achieve effective care coordination and cost savings.
Officials in Medicaid managed care states report using fee-for-service carve-outs for specific populations and/or services in a way that is seamless to CYSHCN families and helps advance access to home health and other needed services. In carve-out environments, close coordination between health plans and providers is critical to ensure access. The optimal mix of managed care, fee-for-service, and carve-out strategies to advance access to home health services for CYSHCN will vary depending on the unique populations, policy landscape, and health care delivery systems in individual states.
Focusing on the unique needs of CYSCHN represents a key opportunity for states to increase quality and access to these services. The six states highlighted in this issue brief have each found unique ways of tackling both access and quality of home health services in different delivery system models. The efforts of these states demonstrate that by analyzing barriers to access, such as provider shortages, and collaborating with both stakeholders and families, states can improve the quality and delivery of home health services for children in Medicaid.
Appendix A: Summary of State Characteristics Related to Delivery of Home Health Services within Medicaid
|Home Health Services for Children and Youth with Special Health Care Needs (CYSHCN) Delivery Systems
Fee for Service (FFS) or Medicaid Managed Care (MMC)
|CT||Fee for service|
|IA||Medicaid managed care|
|DE||Medicaid managed care|
|MD||Medicaid managed care
Managed care organizations (MCOs) “may not” be required to cover a number of specified services covered under FFS, including personal care services (assistance with activities of daily living) pursuant to COMAR 10.09.20.,
|OH||Medicaid managed care|
|WA||Medicaid managed care|
|Populations of CYSHCN Enrolled in Medicaid Managed Care|
|IA||Mandatory enrollment for all populations of CYSHCN
Voluntary enrollment for American Indians/Alaskan Natives (AI/AN)
Excludes children who are enrolled in the Health Insurance Premium Payment (HIPP) program from managed care.
|DE||Mandatory enrollment in Medicaid managed care for all populations of CYSHCN.
AI/AN are exempt from managed care enrollment.
|MD||Mandatory enrollment for all populations of CYSHCN|
|OH||Managed care enrollment is mandatory for:7
· Children receiving Title IV-E federal foster care maintenance;
· Children receiving Title IV-E adoption assistance:
· Children in foster care or other out-of-home placement; and
· Children receiving services through the Ohio Department of Health’s Bureau for Children with Medical Handicaps (BCMH) or any other family-centered, community-based, coordinated care system that receives grant funds under the Social Security Act and is defined by the state in terms of either program participation or special health care needs.
Managed care enrollment is optional/voluntary for:
· American Indians who are members of federally recognized tribes; or
· Individuals diagnosed with a developmental disability who have a level of care that meets the criteria specified in state regulations and receive services through a 1915(c) home- and community-based services (HCBS) waiver administered by the Ohio department of developmental disabilities (DODD).
|WA||Mandatory enrollment for most populations of CYSHCN
Voluntary enrollment for children in foster care or receiving adoption assistance
|Early, Periodic, Screening, Diagnosis and Treatment (EPSDT) Medical Necessity Definition in States’ Medicaid Managed Care Contract, Provider Manual, or Other State Documents|
|CT||Definition of medical necessity|
|IA||State regulations do not include a definition specific to EPSDT. IAC 79.9(2) includes an overall definition of medical necessity definition.
The Amerigroup Medicaid managed care contract similarly includes a general definition of medical necessity.
|DE||Medical necessity is defined as the essential need for health care or services which, when delivered by or through authorized and qualified providers, will:
For members enrolled in Diamond State Health Plan – Plus (DSHP-Plus) long-term support services, provide the opportunity for members to have access to the benefits of community living, to achieve person-centered goals, and live and work in the setting of their choice. In order that the member might attain or retain independence, self-care, dignity, self-determination, personal safety, and integration into all-natural family, community and facility environments, and activities. The contractor shall not arbitrarily deny or reduce the amount, duration or scope of a medically necessary service solely because of member’s diagnosis, type of illness or condition. The contractor shall determine medical necessity on a case-by-case basis and in accordance with this section of the contract.
|MD||Per Maryland EPSDT regulations, MCOs must cover the following for Medicaid enrollees under age 21: Health care services that are medically necessary, which means that the service or benefit is:
· Directly related to diagnostic, preventive, curative, palliative, rehabilitative, or ameliorative treatment of an illness, injury, disability, or health condition;
· Consistent with current accepted standards of good medical practice;
· The most cost-efficient service that can be provided without sacrificing effectiveness or access to care; and
· Not primarily for the convenience of the consumer, the consumer’s family, or the provider.
Health care services described in the regulation include (but are not limited to):
· Chiropractic services;
· Nutrition counseling services; and
· Private duty nursing services including:
o An initial assessment and development of a plan of care by a registered nurse;
o On-going private duty nursing services delivered by a licensed practical nurse or a registered nurse; and
o Durable medical equipment.
|OH||Per state regulations, medical necessity in EPSDT is defined as procedures, items, or services that prevent, diagnose, evaluate, correct, ameliorate, or treat an adverse health condition such as an illness, injury, disease or its symptoms, emotional or behavioral dysfunction, intellectual deficit, cognitive impairment, or developmental disability.|
|WA||Per state regulation, the standard for coverage for EPSDT is that the services, treatment or other measures are:
· Medically necessary;
· Safe and effective; and
· Not experimental.
EPSDT services are exempt from specific coverage or service limitations which are imposed on the rest of the Categorically Needy and the Medically Needy program. Services not otherwise covered under the Medicaid program are available to children under EPSDT. The services, treatments and other measures which are available include but are not limited to:
· Nutritional counseling;
· Chiropractic care;
· Orthodontics; and
· Occupational therapy (not otherwise covered under the MN program).
· Prior authorization and referral requirements are imposed on medical service providers under EPSDT.
|Entity Reviewing Prior Authorization Requests|
|CT||Most prior authorization requests are reviewed and processed by the department’s Administrative Services Organization (ASO), Community Health Network of Connecticut (CHNCT)|
|IA||In Medicaid fee for service, the Iowa Medicaid Enterprise (IME) Medical Services Unit reviews prior authorization requests and makes coverage determinations. 
In managed care: 
MCOs must use “appropriate licensed professionals” to supervise medical necessity determinations and specify the type of personnel responsible for each level of UM. MCOs must document access to board-certified consultants to help make medical necessity determinations. Any decision to deny long-term support services (LTSS) must be made by a long-term care professional with appropriate expertise providing LTSS.
|DE||MCOs receive and review prior authorization requests for covered services including:
· Home-based services:
|MD||MCOs receive and review prior authorization requests for home-based services.|
|OH||The Ohio Department of Job and Family Services reviews prior authorization requests for services other than those provided by MCOs.|
|WA||The state’s Developmental Disabilities Administration reviews prior authorization requests for private-duty nursing.
The Washington Health Care Authority reviews prior authorization requests for durable medical equipment.
Medicaid personal care is authorized by Home and Community Services and Developmental Disabilities administrations within the state’s Department of Social and Health Services.
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 Code of Maryland Regulations (Last Updated: December 4, 2019), Title 10, Maryland Department of Health, Part two, Subtitle 09 Medical Care Programs, Chapter 10.09.63. Maryland Medicaid Managed Care Program: Eligibility and Enrollment.
 Code of Maryland Regulations (Last Updated: December 4, 2019), Title 10, Maryland Department of Health, Part two, Subtitle 09 Medical Care Programs, Chapter 10.09.70. Maryland Medicaid Managed Care Program: Non-Capitated Covered Services
 Code of Maryland Regulations (Last Updated: December 4, 2019), Title 10, Maryland Department of Health, Part two, Subtitle 09 Medical Care Programs, Chapter 10.09.20. Community Personal Assistance Services
“The Ohio Department of Medicaid, Medicaid Ohio Medical Assistance Provider Agreement for Managed Care Plan,” n.d. https://medicaid.ohio.gov/Portals/0/Providers/ProviderTypes/Managed Care/Provider Agreements/Medicaid-Managed-Care-Generic-PA.pdf
 Washington State Health Care Authority. “Washington Apple Health Managed Care Contract,” n.d. https://www.hca.wa.gov/assets/billers-and-providers/model_contract_ahmc.pdf.
 Iowa Department of Human Services. Iowa Health Link contract with Amerigroup, effective January 2016. http://dhs.iowa.gov/sites/default/files/AmeriGroup_Contract.pdf
 Delaware Health and Social Services. “Division of Medicaid and Medical Assistance 2018 Medicaid Managed Care Master Service Agreement,” December 19, 2017. https://dhss.delaware.gov/dmma/files/mco_msa2018.pdf.
 Code of Maryland Regulations (Last Updated: December 4, 2019), Title 10, Maryland Department of Health, Part two, Subtitle 09 Medical Care Programs, Chapter 10.09.63. Maryland Medicaid Managed Care Program: Eligibility and Enrollment.
 “Health Care Services and Supports.” Apple Health managed care | Washington State Health Care Authority. Accessed December 13, 2019. https://www.hca.wa.gov/health-care-services-supports/apple-health-medicaid-coverage/apple-health-managed-care#changes-to-apple-health-managed-care.
 Iowa Department of Human Services. “General Provisions for Medicaid Coverage Applicable to All Medicaid Providers and Services.,” n.d. https://www.legis.iowa.gov/docs/iac/rule/441.79.9.pdf.
 Amerigroup RealSolutions in Healthcare. “Medical Policy: Medical Necessity Criteria.” Accessed July 10, 2019. https://medicalpolicies.amerigroup.com/medicalpolicies/policies/mp_pw_a044145.htm
 Delaware Health and Social Services. “Division of Medicaid and Medical Assistance 2018 Medicaid Managed Care Master Service Agreement,” December 19, 2017. https://dhss.delaware.gov/dmma/files/mco_msa2018.pdf.
 Lawriter – OAC – 5160-1-01 Medicaid medical necessity: definitions and principles. Accessed December 13, 2019. http://codes.ohio.gov/oac/5160-1-01.
 Chapter 182-534 WAC: Accessed December 13, 2019. https://apps.leg.wa.gov/wac/default.aspx?cite=182-534&full=true#182-534-0100.
 Connecticut Department of Social Services (DSS). “Connecticut InterChange MMIS,” September 28, 2018. https://www.ctdssmap.com/CTPortal/Information/Get Download File/tabid/44/Default.aspx?Filename=ch9_auth_v4.5.pdf&URI=Manuals/ch9_auth_v4.5.pdf.
 Iowa Department of Human Services. “ALL PROVIDERS IV. BILLING IOWA MEDICAID,” February 1, 2018. https://dhs.iowa.gov/sites/default/files/All-IV.pdf?080220190110.
 Iowa Department of Human Services. “Iowa Health Link MCO Contract ,” February 1, 2016. https://dhs.iowa.gov/sites/default/files/AmeriHealth_Iowa_Contract.pdf?050820191355.
 “Physical Health Prior Authorizations.” AmeriHealth Caritas Delaware. Accessed December 13, 2019. https://www.amerihealthcaritasde.com/provider/resources/physical-prior-auth.aspx.
 Division of State Documents. Accessed December 13, 2019. http://www.dsd.state.md.us/comar/comarhtml/10/10.09.04.06.htm.
 Lawriter – OAC – 5160-1-31 Prior authorization [except for services provided through medicaid contracting managed care plans (MCPs)]. Accessed December 13, 2019. http://codes.ohio.gov/oac/5160-1-31.
 Chapter 182-551 WAC: Accessed December 13, 2019. https://apps.leg.wa.gov/wac/default.aspx?cite=182-551&full=true#182-551-3400.
 Washington Apple Health (Medicaid). “Medical Equipment and Supplies Billing Guide,” August 1, 2019. https://www.hca.wa.gov/assets/billers-and-providers/Med-Equip-Supplies-bi-20190801.pdf.
 “Health Care Services and Supports.” Medicaid Personal Care | Washington State Health Care Authority, January 1, 2018. https://www.hca.wa.gov/health-care-services-supports/program-administration/medicaid-personal-care.
Slide Deck: How States Can Improve Home Health Delivery for Children with Medical Complexity
This slide deck features innovative solutions states have implemented to address challenges in home health delivery, such as provider shortages, lack of coordination between Medicaid, Title V CYSHCN programs, and other stakeholders, and cumbersome prior authorization processes.
Confronted with a pandemic that impacts the health of women and children – ranging from pregnancy and delivery to access to substance abuse treatment – a consortium of New Jersey state and health care experts launched a Project ECHO (Extension for Community Healthcare Outcomes) initiative to share COVID-19 expertise between specialists and primary care to meet the needs of women during the crisis.
The brutal deaths of Breonna Taylor, Ahmaud Arbery, George Floyd, and countless people of color before them, and the shocking disparities in death rates from the coronavirus, are tragic examples of the still pervasive racism in America. For organizations like NASHP, it is not enough to speak out – we need to redouble our efforts, along with our state partners, to combat racism and ensure health equity. NASHP pledges to more intently listen to Black voices, to work harder to frame policies rooted in the experiences of communities that have been disenfranchised for far too long and, most importantly, to make way for, seek out, and support Black leadership in state health policy. We won’t achieve the change we need until we first change ourselves.
Health Equity Resources
COVID-19 and Health Equity
American Medical Association: Why African American Communities Are Being Hit Hard by COVID-19, May 13, 2020. Join a virtual town hall hosted by the AMA and the National Association of Black Journalists exploring COVID-19 and the black community, moderated by NABJ President Dorothy Tucker, an investigative reporter for CBS 2 Chicago (WBBM-TV).
Journal of the American Medical Association: COVID-19 and Health Equity — A New Kind of “Herd Immunity,” May 11, 2020. Segregation of health care also contributes to racial disparities in health care. COVID-19 testing centers are more likely to be in well-off suburbs of predominantly white residents than in low-income neighborhoods that are predominantly Black. The advice to obtain testing through a primary care clinician limits access to testing for people who lack one. Improving access to care for all and ensuring high-quality care, with greater focus on under-resourced settings and vulnerable groups, is an important “treatment” for racial disparities in health.
American Medical Association FAQs: Health Equity in a Pandemic, April 2020. Marginalized and minoritized patients have and will suffer disproportionally during the COVID-19 crisis. The AMA is answering frequently asked questions on health equity in the pandemic response to equip physicians with the consciousness, tools and resources to confront inequities.
American Medical Association You Tube Health Equity Discussion: Physicians Detail COVID-19’s Impact in Latinx Communities, May 21 2020. More than 28 percent of people diagnosed with COVID-19 are Latinx. Aletha Maybank, MD, MPH, chief health equity officer and group vice president of the AMA, joins four Latinx physicians to discuss how the coronavirus has impacted their communities.
Police Violence Impact on Community Health
UNC Center for Health Equity Research: Health Equity Implications of Police Violence, August 2017. As of August 2017, the US is on track to approach 1,000 deaths of civilians at the hands of police for at least the third year in a row. This brief provides an overview of existing evidence documenting police-related killings of civilians, and suggests key strategies to mitigate the disparate health impacts resultant from those acts of violence.
The Lancet: Police Killings and their Spillover Effects on the Mental Health of Black Americans: A Population-Based, Quasi-Experimental Study, July 28, 2018. Police kill more than 300 Black Americans — at least a quarter of them unarmed — each year in the United States. These events might have spillover effects on the mental health of people not directly affected.
American Psychological Association PsycNet: Black and Blue: Exploring Racial Bias and Law Enforcement in the Killings of Unarmed Black Male Civilians, April 2016. The report attempts to disentangle racial bias from common characteristics of law enforcement agents (e.g., social dominance orientation), while also addressing the interaction between racial bias and policing to more effectively identify and develop solutions to eradicate excessive use of force during interactions between “Black” (unarmed Black male civilians) and “Blue” (law enforcement).
American Journal of Public Health: Unequal Burdens of Loss: Examining the Frequency and Timing of Homicide Deaths Experienced by Young Black Men Across the Life Course, July 2015. A study of the frequency and developmental timing of traumatic loss resulting from the health disparity of homicide among young black men in Baltimore.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes a Pandemic Unemployment Compensation benefit of $600 a week, which supplements traditional unemployment insurance (UI) benefits and provides an important source of additional financial support for individuals who qualify for these payments.
However, as highlighted in NASHP’s April 6, 2020 blog, Federal Guidance Needed to Clarify CARES Act Health Coverage Provisions, because these supplemental payments are counted as income for determining eligibility for marketplace subsidies – but not counted when determining eligibility for Medicaid and the Children’s Health Insurance Program (CHIP) – there could be challenges for both individuals and states.
States are required to use streamlined applications across their health coverage programs and several states (CT, DC, CO, MA, MD, MN, RI, VT, and WA) have developed fully integrated eligibility systems shared by their Medicaid and state marketplaces. States must closely coordinate across these agencies as any changes to application instructions or questions could have ramifications for eligibility determinations between the programs.
The Centers for Medicare & Medicaid Services (CMS) recently released guidance that provides information on ways that states can identify the $600 weekly payments that are to be disregarded when determining Medicaid and CHIP eligibility. While the guidance gives states implementation flexibility, the options offered could be burdensome for both state Medicaid and CHIP agencies and individuals. Some of the issues include:
- Complications in coordinating with state unemployment offices: The guidance suggests that state Medicaid and CHIP agencies can work directly with their state unemployment agencies to determine which individuals will qualify for the additional payments. Yet, implementing a plan to identify these individuals in close coordination with unemployment agencies that are already significantly stressed with handling increased consumer demand is expected to be challenging for states.
- Challenges in implementing system changes: CMS notes that state unemployment agencies have the option to include the supplemental payments within their regular UI payments, or make the supplemental payments separately, which could help identify the $600 supplement for health coverage purposes. Separating the supplemental $600 payment from an individual’s regular UI may create additional work for the unemployment agency at a time when they are least able to accommodate additional work, but it could help both Medicaid and CHIP agencies (and although not referenced in the guidance, the marketplaces) to account for those separated funds in eligibility calculations.
CMS suggests that if state Medicaid and CHIP agencies can identify and document that all UI recipients will receive the additional payments, they will be able to program their eligibility systems to automatically reduce all UI income by $600 per week until the additional payments end on July 31, 2020. While the guidance indicates that states can potentially receive a higher federal match rate for making these system changes, quickly implementing them on a temporary basis will be administratively difficult for states – and it also assumes that states will have the ability to determine that all UI recipients are eligible for the additional payments.
- Relying on individuals to correctly report income could create eligibility determination complications: CMS indicates that states can choose to provide instructions in application forms or in their call center scripts to direct individuals to not report the $600 per week additional payments in their income for Medicaid and CHIP eligibility determinations. States can also ask that individuals self-attest about whether or not their UI income includes the $600 per week of additional payments. But some individuals may still mistakenly report the supplemental payments or not provide the correct information about whether their UI income includes the additional payments, which could negatively affect their Medicaid or CHIP eligibility. It could also hamper the ability of states to make accurate eligibility decisions and could result in state eligibility determination workers having to conduct extensive outreach to clarify applicants’ income information.
An important, remaining issue is that the CMS guidance does not address how states should align Medicaid and CHIP eligibility determinations with the fact the CARES Act requires the $600 supplemental payments to be counted as income when assessing eligibility for marketplace subsidies. This is particularly concerning for low-income consumers who are deemed ineligible for Medicaid and then are deemed eligible for low or zero marketplace subsidies because the inclusion of the supplemental payments has pushed them into an even higher income threshold. Concerns also remain about whether consumers might face penalties for inaccurately reporting income because of confusion caused by the different reporting requirements.
Additional federal guidance from the Center for Consumer Information and Insurance Oversight is needed to ensure that states can make accurate and timely eligibility determinations and that individuals are efficiently enrolled in health coverage.