State Medicaid Policy Changes Increasingly Driven by Evidence

Research Activities, August 2012, No. 384

Faced with shrinking State and Federal budgets and rising health care costs, Medicaid medical directors struggle each day to make policy decisions they hope will improve the care of the 62 million low-income children and adults insured by State Medicaid programs. The problems they face are many and often vary from state to state.

For example, Medicaid patients are 70 percent more likely to be readmitted to the hospital within a month of their initial hospitalization than their privately insured counterparts. These are costly and often preventable readmissions.

Medicaid also pays for the delivery of nearly half the newborns in the United States and delivery costs are skyrocketing. Cesarean section rates have jumped 50 to 75 percent across many States in just the past year. Rates of elective deliveries and elective deliveries prior to term are also rising fast, creating health problems for infants in many cases and higher costs.

States must also figure out how to manage the care of very complex patients who have serious mental illness, one or more chronic medical conditions such as diabetes, and substance abuse problems. These hard-to-treat patients—some of whom may visit the emergency department 100 or more times in a year—comprise 5 percent of the Medicaid population, but 50 percent of its costs. Integrating mental health and primary care is one approach States are looking at to manage this group.

Photograph: Members of the Medicaid Medical Directors Learning Network collaborate.

Balancing quality, cost, and access

"As Medicaid medical directors, we're trying to balance care quality, cost, and access," notes Jeffrey Thompson, M.D., chief medical officer for the Health Care Authority of Washington State. "If you have to cut things, how do you do it in a way that doesn't hurt people and that doesn't lead to unintended consequences and that will bring value?"

Medicaid medical directors from 48 member States, including the District of Columbia,* study these problems and share best practices through the Medicaid Medical Directors Learning Network (MMDLN) that has been funded by AHRQ since 2005. Through the Network they discuss mutual problems, conduct studies, and share solutions to problems.

They also learn about and use AHRQ resources to study and find solutions to many problems. AHRQ resources include patient-centered outcomes research that compares diagnostic and treatment approaches to a wide range of medical conditions, assessments of medical technologies, and databases such as the Healthcare Cost and Utilization Project (HCUP), which details hospital costs and use patterns in each State.

"Using data to drive best practices is a big home run for the MMDLN," asserts Thompson. "The MMDLN has had a huge impact on Washington State's Medicaid policy due to sharing of research evidence and best practices . . . Through the Network you can probably find someone that has figured out how to address a problem your State has. It's very difficult for you do that all by yourself."

Tackling preventable hospital readmissions

One problem the Network is focusing on is hospital readmissions. An average of 8 percent of adult Medicaid patients who were hospitalized in 2009 for a medical condition other than childbirth had to be readmitted within 30 days of their initial hospital stay that year, according to a 16-State study by the MDDLN. The readmission rate for each of the 16 participating States varied from 5.8 to 15.2 percent, for an average readmission rate of 8.3 percent. The average hospital payment for 30-day readmissions amounted to $83,263,557 or 14 percent of the total Medicaid payment for acute hospital care.

Why are Medicaid patients 70 percent more likely to be readmitted to the hospital than their privately insured counterparts? "Some of it is the burden of illness issue," explains Judy Zerzan, M.D., chief medical officer for Colorado Medicaid. "This group tends to have more physical and behavioral health problems. Also, the Medicaid population is a low-income group, so they don't necessarily have the resources needed for care—for example, the ability to pay for support at home after a hospitalization, equipment needed for care, or the ability to travel to care. Access is also difficult because not all providers take Medicaid, so it can be hard to find a primary care provider and even harder to find a specialist in some areas. All these things together make a perfect storm for rehospitalization."

Zerzan and medical directors from 15 other States are examining the 2009 and 2010 data on rehospitalizations they collected to see if there are any State policies, percentage of enrollees in managed care, or other factors that correlate with fewer rehospitalizations in States with lower numbers. The goal is to identify potential best practices other States can implement.

Some States are reworking policies based on the rehospitalization data to nudge hospitals to take action. For example, Colorado extended its nonpayment policy for hospital readmissions from 24 hours to 48 hours following the initial discharge. Pennsylvania extended its policy from 15 days to 30 days for readmissions related to the initial hospitalization. These were typically readmissions due to untimely discharge the first time, services that were not completed during the initial hospitalization, and complications due to the initial hospitalization such as surgical wound infections.

"We are very interested in where the rubber meets the road for interventions," David Kelley, M.D., chief medical officer in the Office of Medical Assistance Programs, Pennsylvania Department of Public Welfare, told Research Activities. "Our managed care organizations are meeting with hospitals, sharing information on their readmission rates and the financial implications, and asking them to work collaboratively to reduce preventable readmissions."

To tackle the problem, Colorado Medicaid developed a three-pronged program under an Accountable Care Collaborative to reduce readmissions. It includes seven Regional Care Collaborative Organizations, an umbrella group that provides care coordination, helps practices improve care, and facilitates connections to other community resources that impact health like housing, food, and transportation.

Primary care providers get a per-member per-month payment as an incentive to change practices to better coordinate care of Medicaid patients. The third part is a database that tracks the rehospitalization rates. Zerzan and colleagues share the data with hospitals and primary care providers so they can identify what could have been changed to prevent readmissions.

Says Zerzan, "Some readmissions can't be helped. But there are others where there really is a gap in care, or something in transition of care that didn't work that leads to readmissions. Those are the readmissions we are trying to stop." Zerzan says the MMDLN is critical to sharing what practices work and don't. "We say that our informal motto at the MMDLN is 'we share senselessly and steal shamelessly.'"

Reducing surgical and elective deliveries

Rates of surgical and elective deliveries and elective deliveries prior to term are soaring in the United States. Medical directors in the MMDLN are sharing approaches to deter these practices. Washington, Ohio, and Pennsylvania Medicaid have used AHRQ's research reviews on cesarean sections and elective delivery to drive change. Using these resources and a quality assessment approach, Washington Medicaid reduced preterm elective delivery by 65 percent in the past year.

Says Thompson, "People used to think that delivering a child between 37 and 39 weeks was safe and what we're finding out is that you really do want to wait until the woman is term because the [infant's] brain is bigger, the lungs are bigger, the immune system is better, the child is more developed and has more fat to keep itself warm."

Ohio Medicaid used AHRQ's evidence report, Maternal and Neonatal Outcomes of Elective Induction of Labor, to refine clinical policy and improve health outcomes for Medicaid mothers and infants. Using the report's information and expertise, Ohio Medicaid's Neonatal Transformation Team reduced the induction of labor without clear medical indication in near-term infants by 40 percent over an 18-month period in 20 maternity hospitals. This reduction equated to a shift of more than 8,300 infants from near-term to full-term, preventing nearly 200 neonatal intensive care unit admissions and some infant deaths, and resulting in a reduction in unplanned cesarean delivery rates.

"Reducing cesarean [deliveries] was not our primary intent, but reducing elective deliveries without clear medical indication did result in a modest reduction of those rates," notes Mary Applegate, M.D., medical director of Ohio Medicaid.

Pennsylvania Medicaid drew on research from the AHRQ Evidence Report/Technology Assessment, Cesarean Delivery on Maternal Request, which detailed appropriate and inappropriate reasons for cesarean deliveries, to change payment policies to managed care organizations for cesarean deliveries.

Pennsylvania's c-section rate is 29 percent. Says Kelley, "In setting our rates for our managed care plans, we decided to pay for up to 25 percent of primary c-sections to the managed care plans. Any primary c-sections beyond that would be paid at the vaginal delivery rate."

After 2 to 3 years of this approach, the State Medicaid program did not see a reduction, but it also didn't see an increase in c-sections. "We had discussions with the six academic institutions that deliver about 95 percent of the babies in southeastern Pennsylvania. We've had all six OB [obstetric] chairs at the table with our managed care plans to discuss better care management and reducing inappropriate early inductions and c-sections."

What's driving early induction of labor and c-sections? Kelley says he can only speculate, but presumes the malpractice issue associated with OB care in the State is a particularly sensitive issue within the OB community. "I don't know if the concern about malpractice drives a low tolerance for natural delivery to progress, but that certainly may be a factor. I have been told the malpractice premium rates for OBs in southeastern Pennsylvania are on average close to $220,000 a year."

Integrating mental health with primary care

Pennsylvania Medicaid also piloted a program to tackle the care of patients with serious mental illness based on information in an AHRQ report, Integration of Mental Health/Substance Abuse and Primary Care, which described successful and unsuccessful approaches to integration.

They piloted with the Center for Health Care Strategies a pay-for-performance program from 2009 to 2011 in collaboration with select counties, behavioral health and physical health managed care organizations (MCOs), and consumers.

To get the incentive payments, MCOs had to perform four tasks. They had to categorize individuals with serious mental illness, work with counties and health plans to develop a care plan for members, and notify each other within one business day if a patient had been hospitalized and work with patients to ensure they did not land back in the hospital. They also had to notify a prescriber of an atypical antipsychotic that a patient hadn't refilled a prescription within a few business days.

In the second year of the program, half of the incentive money was set aside for two outcomes: hospital admissions and emergency department (ED) visits. A preliminary analysis of the data indicates significant reductions in both hospitalizations and ED visits for this difficult-to-manage group.

Pennsylvania and other States are also trying co-location of physical and mental health services in one place, having federally qualified health centers provide mental health services, and, as they are doing in Washington, training staff in primary care practices to assess and measure depression and anxiety in patients.

"I think there needs to be a lot more research and understanding about how to manage across chronic mental and medical health conditions and substance use," notes Thompson. "This is the 5 percent group that incurs 50 percent of Medicaid costs. I think everyone's trying to figure out how to run the medical home so you can provide access to quality, affordable health care. However, it's still in the early stages of our understanding, especially with seriously mentally ill children and adults. How do you take care of a patient with schizophrenia, diabetes, and alcoholism? It's not just about putting a primary care doc in a mental health setting or a mental health professional in a primary care setting."

* Editor's note: The MMDLN is open to all Medicaid medical directors and clinical leaders who advise them. AHRQ funding for the MMDLN supports in-person meetings, Web conferences, and other activities that help the members use evidence-based research findings to make policy decisions. 

Page last reviewed August 2012
Internet Citation: State Medicaid Policy Changes Increasingly Driven by Evidence: Research Activities, August 2012, No. 384. August 2012. Agency for Healthcare Research and Quality, Rockville, MD.