CMS Issues Guidance to State Medicaid Directors for Adoption of Value-Based Care

On September 15, the Centers for Medicare & Medicaid Services (CMS) issued guidance to state Medicaid directors encouraging states to adopt value-based care (VBC) models for their healthcare systems. Under a VBC model, providers are reimbursed based on their ability to reduce costs while maintaining standards of care or to improve quality of care in a cost-effective manner. CMS believes that VBC arrangements may allow providers to more effectively address health care disparities and social determinants of health system wide.

The guidance from CMS does not introduce any new payment models or financial opportunities. Instead, it encourages state Medicaid directors to consider a variety of current alternative payment models such as:

Payment Models Built on Fee-For-Service Architecture. Under this model, the state pays providers on a fee-for-service basis. Providers could be eligible for shared savings payments based on performance for a subset of total care (“upside risk”), as long as the providers also meet certain quality targets. However, if the quality and performance targets are not met, the providers could owe money to the state (“downside risk”).

Payments for “Episodes of Care.” Under this model, the state pays providers a bundled payment for a set of services relating to a single healthcare event during a defined period (“episode of care”).

Payment Models Involving Total Cost of Care Accountability. Under this model, providers are held financially accountable for meeting quality and performance metrics. The quality and performance metrics can be based on services provided or targeted to an entire population or a specific sub-set.

CMS is not dictating that states develop or follow any specific payment models at this time. The guidance letter urges the states to consider implementing VBC strategies and to set benchmarks for additional value-based payments. Providers should start preparing for the implementation of such strategies by understanding the various types of alternative payment models and how they might impact services and reimbursement.

If you have any questions on the CMS guidance, please contact the authors of this alert.