The Centers for Medicare & Medicaid Services (CMS) has proposed a new rule with provisions designed to advance value-based purchasing (VBP) arrangements with drug manufacturers. Comments about the proposal are due July 20, 2020.
On the heels of Oklahoma’s first-in-the-nation, value-based purchasing deal to improve adherence to an antipsychotic drug, the state’s Medicaid agency just signed its second value-based contract for a prescription drug used to treat serious bacterial skin infections.
While several private insurers have initiated value-based contracting, which links payments to a drug’s effectiveness and outcome, Oklahoma is the first state Medicaid program to initiate this payment reform innovation.
Oklahoma’s second contract, finalized this month, is with the pharmaceutical company Melinta for oritavancin (Orbativ), a drug used primarily to treat bacterial skin infections. Because oritavancin costs more than other treatments, the state Medicaid program had required prior authorization before paying for the drug. However, under the new value-based contract, prior authorization will no longer be required.
In return for having the drug listed as a first-line treatment, Melinta ensures that oritavancin will not result in a net increase in costs. While other drugs used to treat bacterial skin infections may require hospitalization for administration, oritavancin does not. While its purchase price is higher, oritavancin is not expected to cost the state Medicaid program more because it is expected to eliminate costly hospitalizations required by other drug options.
However, under the terms of the value-based contract, if the state does incur higher costs from oritavancin – despite the avoided hospitalizations — Melinta will be on the hook to cover those costs through additional rebates to the state.
Oklahoma’s contract with Melinta builds on its first-in-the-nation, value-based prescription drug contract signed in July, 2018. That contract is with the drug manufacturer Alkermes for the long-acting injectable, anti-psychotic drug aripiprazole lauroxil (Aristada). The contract is designed to reward increased patient adherence. Under the contract’s terms, as adherence targets are met – which result in greater drug usage, sales, and improved outcomes — the price the state pays for the drug decreases.
Each of these two value-based contracts is a unique, negotiated agreement that required time and trust between the state and drug manufacturer to execute. While Oklahoma initially approached larger drug manufacturers to enter into value-based contracting for high-priced, higher-profile drugs, such as those used to treat hepatitis C, Oklahoma to date has found success with smaller companies, which had greater flexibility to enter into innovative agreements with the state.
Each contract requires extensive data analysis to explore the relevant patient population characteristics and potential, measureable outcomes in order to design a viable agreement. Oklahoma’s groundbreaking work in Medicaid value-based contracting for prescription drugs is expected to pave the way for other states to pursue similar initiatives.
The National Academy for State Health Policy (NASHP) supported Oklahoma’s data analysis to build its contracts through a sub-grant from the Laura and John Arnold Foundation, which also supports NASHP’s Center for State Rx Drug Pricing.
SMART-D, the State Medicaid Alternative Reimbursement and Purchasing Test for High-Cost Drugs, also helped Oklahoma by supporting its successful application to the federal government for a state plan amendment that enabled it to enter into value-based contracts under its Medicaid Drug Rebate Program.
Earlier this year, more than 50 state leaders joined a session exploring Oklahoma’s value-based contracting at NASHP’s 31st Annual Health Policy Conference. In the coming months, NASHP will write more about value-based purchasing and sponsor a webinar to enable a national discussion on state value-based contracting for prescription drugs.
By Robin Lunge, JD, MHCDS
Robin Lunge is a member of Vermont’s Green Mountain Care Board, which regulates health insurance rates, hospital budgets, and accountable care organizations. In this brief, she explores how the state’s transformation from a fee-for-service payment system to a value-based, multi-payer model designed to curb health care spending and improve care is faring. Specifically, she examines its early impact on private-sector accountable care organizations.
Read the report.
The National Academy for State Health Policy (NASHP) has awarded $300,000 in grants to Colorado, Delaware, and Oklahoma to help the states develop innovative policy solutions to tackle high prescription drug prices.
With the support from the Laura and John Arnold Foundation, the funding enables states to explore promising policy approaches to control rapidly escalating drug costs highlighted in NASHP’s Pharmacy Costs Work Group recommendations. Rising prescription drug prices are hitting states hard because states cover the prescription costs of their Medicaid beneficiaries and state employees.
“These grants represent promising administrative models of what states can do right now, outside of the need for legislation or waivers, to address the high price of prescription drugs,” said NASHP Executive Director Trish Riley. “Drug costs have strained state budgets to the point they have been forced to take action. Colorado, Delaware, and Oklahoma are helping lead the way by testing new models to lower the drug cost trajectory.”
These state approaches to control drug prices are among several occurring nationwide. On Monday, Oct. 9, California Gov. Jerry Brown signed Senate Bill 17 into law, which requires drug manufactures to give advance notice and justification for significant price increases.
The grants to the three states will fund the following state approaches:
Colorado will develop a new payment system for physician-administered drugs:
Physician-administered drugs (PADs) are costly prescription drugs, such as chemotherapy and other specialty drugs, that are delivered by intravenous infusion or injection in clinical settings. Developing appropriate payment methods for drugs administered by physicians presents a challenge to states due to a lack of information about how much physicians actually pay for these drugs. Colorado has relied on available price information to establish PAD payment rates, including average sales price and wholesale acquisition costs. However, it is not known how closely these prices reflect what providers actually pay in Colorado. To better calculate payment rates, Colorado will conduct an average acquisition cost survey with providers across a range of practices, including small physician offices, clinics, and hospitals. The information collected in the survey will allow Colorado to develop a new payment model similar to the average acquisition model that it currently uses for pharmacy-dispensed prescription drugs. That pharmacy payment methodology has yielded savings exceeding 5 percent and savings are also expected from this new approach with PADs.
Delaware’s agencies and hospitals will maximize savings with a shared preferred drug list:
States have historically used preferred drug lists (PDLs) to strengthen their negotiating power with drug manufacturers. Delaware plans to increase its purchasing power by creating a common PDL across state agencies and hospitals for selected categories of drugs. Partners in this innovative, collaborative approach include the Delaware Division of Medicaid and Medical Assistance, the Delaware Statewide Benefits Office, the Delaware Department of Correction, and major hospitals. The partnership’s first task will be to identify the drug categories that promise the most savings. The goal is to lower the net cost per patient, per year for all categories included in the common PDL by 1 percent in the first year, and by 5 percent by the second year.
Oklahoma will develop a value-based purchasing agreement:
Value-based purchasing, which ties provider payments to quality and outcomes rather than volume, has been a driving principle in payment reform. Innovators are now applying alternative payment methodologies (APMs) to prescription drug purchases. One APM approach is a value-based payment contract between payers and manufacturers like the one recently negotiated between Medicare and Novartis for the gene therapy drug Kymriah (tisagenlecleucel). Under this agreement, the Centers for Medicare & Medicaid will pay for the drug only if patients benefit from the medication by the end of the first month of treatment. Oklahoma is working to be one of the first state Medicaid programs in the nation to enter into a value-based purchasing agreement with a manufacturer. It is currently working to identify the most appropriate drug to move forward with, using this approach, before entering into contract negotiations.
These three states were selected through a competitive application process as part of NASHP’s State Drug Spending and Pricing Policy Initiative through its Center for State Rx Drug Pricing. NASHP will provide technical and strategic assistance to the three states as they implement their policies, and will share outcomes and lessons learned with other states. The grants continue through January 2019.
NASHP invites all states interested in learning more about the wide range of policy responses to address rising drug costs to explore its Center for State Rx Drug Pricing for model legislation, white papers addressing key aspects of legislative strategy, a state legislation tracker, and more resources.
The Centers for Medicare & Medicaid Services (CMS) recently released its third annual evaluation of the State Innovation Model (SIM) Round One Test States, which analyzes the ability of states to use policy and regulatory levers to drive statewide health care transformation. The evaluation, completed by a team of researchers from RTI International, the Urban Institute, and the National Academy for State Health Policy, arrives at a pivotal time. Many states are eager for information about their peers’ experiences transforming delivery systems to reward value over volume and be more consumer-centered.
- Expanding value-based payments: In Year 3, SIM Round One Test States successfully expanded value-based payments through reforms such as accountable care organizations (ACOs), behavioral health homes, and patient-centered medical homes (PCMHs). Despite efforts to expand value-based payment models to private insurers, these reforms have, for the most part, been focused on Medicaid rather than multi-payer reforms.
- Engaging commercial payers: Where multi-payer participation has been achieved (Arkansas and Vermont), regulatory and purchasing power (i.e. contract requirements) were effective levers. For example, in Arkansas, insurance regulations require all Qualified Health Plans certified to sell through the health insurance Marketplace to enroll their members in PCMHs and to make per member per month payments to PCMHs. Legislation was another important lever enabling multi-payer reforms by creating conditions under which commercial payers may be more likely to adopt value-based payment models. For example, Vermont’s Green Mountain Care Board used legislative authority to set standards for ACOs. Relying on the voluntary participation of commercial payers has had less success in expanding value-based payment from Medicaid to commercial payers.
- Engaging providers: Multiple states have designed their payment reforms to allow for provider choice and flexibility in order to encourage participation. Maine, Minnesota, and Vermont allow providers to select the type of risk and/or the timing of the risk they take on when joining ACOs. This means a choice between one- or two-sided risk. One-sided risk is the opportunity to share in the reward of savings and two-sided risk includes both options of reward and the potential for financial penalties. States are also attempting to be responsive to providers’ feedback to their models. In Maine, for example, behavioral health home provider reimbursement rates were increased in response to provider concerns, and in Minnesota the model for attributing Medicaid beneficiaries to ACOs was changed to improve the model’s accuracy. Finally, in their third year, two SIM Round One Test took steps to convene and engage medical and nonmedical service providers, for example, through regional collaboratives in Vermont and through Accountable Communities for Health in Minnesota.
- Building data analytic capacity and infrastructure: One notable area of focus for SIM Round One Test States is the development of in-state capacity for the data analytics and exchange necessary to drive and support value-based payment reform. These efforts are often foundational in order to enable payment reforms to succeed. This work includes a range of activity including generating reports on cost and quality measures, working with providers to interpret and act upon reports, connecting providers to health information exchanges, and developing notification systems to alert providers about their patients’ use of emergency rooms.
While 2016 was too early to assess the impact of SIM Round One on expenditures and utilization of services in test states, taken as a whole, these efforts are part of a national movement toward value-based payments and shed light on how states can effectively achieve these reforms. For more detailed information, read the complete third annual valuation.
State Medicaid agencies have generally found it challenging to include federally qualified health centers (FQHCs) in value-based purchasing initiatives because of a federal law passed in 2000 that regulates how state Medicaid programs pay FQHCs for the care they provide. State Medicaid agencies are required to reimburse FQHCs through the Prospective Payment System (PPS), a volume-based, per-visit payment rate, or through an alternative payment methodology (APM). Increasingly, states are demonstrating that value-based purchasing through APMs is not only possible, it can be beneficial for both state Medicaid agencies and FQHCs.
|How States Work with FQHCs to Promote High Quality, Efficient Care
The nation’s 1,400 community health centers, including FQHCs, provide primary care to 24.3 million low-income residents.Federal law, now incorporated into section 1902(bb) of the Social Security Act, requires state Medicaid programs to reimburse FQHCs through the Prospective Payment System (PPS), which sets minimum per visit payment rates for individual clinics. PPS rates can vary by clinic location.State Medicaid agencies may reimburse FQHCs through an alternative payment model (APM) that provides financial incentives for quality and efficient care if a FQHC agrees to participate and its total payments equal what it would have received under PPS.NASHP is creating a toolkit to help state Medicaid agencies develop value-based APMs for FQHCs. For more information visit www.nashp.org and subscribe to NASHP’s weekly e-newsletter for additional resources.
Since May 2016, the National Academy of State Health Policy’s (NASHP) Value-Based Payment Reform Academy has been working with six states—Colorado, Washington, DC, Hawaii, Michigan, Nevada, and Oklahoma—to support their development of APMs for FQHCs that reward value over volume. Supported by the Health Resources and Services Administration (HRSA), the academy provided each state’s team, made up of Medicaid, primary care association (PCA), and FQHC leaders, with 15 months of technical assistance from NASHP staff, federal and state leaders, and national experts to help plan and develop value-based APMs.
The lessons learned from these states about value-based APM development provide important information for other states considering these models. This is an opportune time for states to begin working with their PCAs and FQHCs to develop value-based APMs for a number of reasons.
First, FQHCs are critical health care providers for Medicaid beneficiaries in many states. Second, HRSA has a long history of helping FQHCs build capacity, providing many with funding and support to make investments in electronic health record systems and registries and to help them implement practice transformation to become recognized patient-centered medical homes.
FQHCs that have made these investments in care delivery transformation are well on their way to having the necessary capacity and infrastructure to participate in value-based APMs. Medicare and state Medicaid programs are increasingly implementing value-based APMs to broadly incentivize their providers to improve health outcomes and patient experiences while reducing costs.
States are finding they can pursue value-based APMs with their FQHCs within federal Medicaid PPS regulations as long as:
- Individual FQHCs agree to the APM; and
- Each clinic’s total payments are equivalent to, or higher than, the total payments they would receive through PPS.
As long as states meet the above requirements for APMs, they have the ability to implement value-based reimbursement models to encourage and incentivize efficient, high-quality care over volume-based care.
Academy-assisted states’ efforts and progress demonstrate a growing commitment to partnering with FQHCs to develop value-based APMs that better align with comprehensive, high quality, patient-centered primary care. State policy makers interested in developing value-based APMs for FQHCs should consider the following lessons learned from the academy’s state teams:
- Identify a vision and shared goals that define how health care should be delivered to patients, then determine how payment needs to change to support providers to achieve that vision.
- Engage critical stakeholders from Medicaid, state departments of health, PCA, and FQHCs to develop collaborative processes. Strategies, such as regular meetings, help foster trust and transparency among the state agencies and organizations involved in the development efforts.
- Consider the state Medicaid agency’s bandwidth, and look for opportunities to align FQHC value-based APMs with broader Medicaid initiatives and goals. As with other payment reform efforts, the implementation of new models may involve staff from various sections, such as managed care, quality, rate setting, and information technology.
- Work with PCAs to assess FQHCs’ readiness to take on value-based APMs. Remember that FQHCs must opt-in to participate in an APM. It is not necessary for all FQHCs in a state to simultaneously adopt this new model. States may find it beneficial to pilot the APM in a few advanced FQHCs and refine the model as necessary.
To learn more about the academy and how the states’ APM initiatives are progressing across the country, explore the following NASHP resources:
- Webinar: Value-Based Alternative Payment Methodologies for Federally Qualified Health Centers: Lessons from Colorado and Minnesota [August 2017]
- Value-Based Payment Reform Academy Project Information [February 2016]
- Blog: Oregon’s Bridge to Value-Based Payments for Community Health Centers: A Win for Medicaid, Providers, and Patients [September 2015]
In October 2017, NASHP will release a toolkit that provides states with a roadmap, key steps, promising strategies, and unique considerations to develop value-based APMs for FQHCs. Visit www.nashp.org often and subscribe to NASHP’s weekly e-newsletter for additional resources.
How States Work with FQHCs to Promote High Quality, Efficient CareThe nation’s 1,400 community health centers, including FQHCs, provide primary care to 24.3 million low-income residents.Federal law, now incorporated into section 1902(bb) of the Social Security Act, requires state Medicaid programs to reimburse FQHCs through the Prospective Payment System (PPS), which sets minimum per visit payment rates for individual clinics. PPS rates can vary by clinic location.State Medicaid agencies may reimburse FQHCs through an alternative payment model (APM) that provides financial incentives for quality and efficient care if a FQHC agrees to participate and its total payments equal what it would have received under PPS. NASHP is creating a toolkit to help state Medicaid agencies develop value-based APMs for FQHCs. For more information visit www.nashp.org and subscribe to NASHP’s weekly e-newsletter for additional resources.
Congratulations to the six states selected to participate in the NASHP Value-Based Payment Reform Academy:
- Washington, DC
NASHP is pleased to announce it is convening a Value-Based Payment Reform Academy. The goal of this academy is for selected states to develop and implement value-based alternative payment methodologies (APMs) for federally qualified health centers (FQHCs) and rural health clinics (RHCs) that support their goals for transforming how care is paid for and delivered.
For the purposes of this academy, NASHP defines value-based APMs as those that incentivize value over volume, promote the delivery of comprehensive, coordinated, and patient-centered care, are tied to quality and efficiency, and meet the requirements for FQHC and RHC reimbursement under current federal law (Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000).
NASHP will select up to six (6) states to receive 12 months of targeted technical assistance to support the development and implementation of value-based APMs. Technical Assistance will include:
- Access to expert consultation from national, federal, and state leaders
- In-person site visit to your state from NASHP staff
- Small group state-to-state learning opportunities
- Travel support for four team members to one in-person kick-off meeting
- Ongoing access to NASHP staff
The Academy will run from May 2016 through May 2017. Please contact Rachel Yalowich (email@example.com) with any questions about the request for applications or the application process.
NASHP hosted an informational webinar on March 10, 2016 from 2:00-3:00pm ET, which provided more information about this Academy and answered audience questions. To download the slides, click here. To view the webinar, click here.
To apply to participate in this payment academy please complete the RFA Application Questions and provide accompanying letters of support, as necessary, electronically. Completed applications should be emailed to Hannah Dorr (firstname.lastname@example.org) by 5pm EDT on April 1, 2016. Please answer the questions in no more than five double-spaced pages. We will notify each candidate state of the status of its application no later than April 21, 2016.
Download the RFA
Download the RFA Application Questions
View the Academy’s current faculty list (updated as of April 12, 2016)
View Frequently Asked Questions About the Academy
Oregon’s Bridge to Value-Based Payments for Community Health Centers: A Win for Medicaid, Providers, and Patients
This work is supported through the National Academy for State Health Policy’s National Organizations of State and Local Officials (NOSLO) Cooperative Agreement with the Health Resources and Services Administration.