Summary of Alabama's At-Risk Provider Driven Medicaid Care Management Programs

By Richard J. Brockman and Angie Cameron

A.        Background:

Alabama recently passed into law two separate bills to develop at-risk provider-driven Medicaid care management programs. The first bill, passed in 2013, created the Regional Care Organization (RCO) system. See Alabama Code § 22-6-150 et seq. This legislation was developed upon the recommendation of the Medicaid Study Commission, which was created by the Governor who appointed members representing a range of providers, insurers, consumer advocacy groups, and state government officials. 

Under the RCO legislation, the state is to be divided into not less than five or more than eight regions. Each region is required to have a sufficient Medicaid population to support at least 2 RCOs, although there is no requirement that there be more than one RCO in a given region. By rule, the Alabama Medicaid Agency (Medicaid) established five regions. The legislation contemplates that providers in each region would convene to form and fund the RCOs. To the extent practical, the regions were designed to accommodate historical referral patterns, while having sufficient targeted Medicaid populations to support two RCOs. Currently there are eleven probationary RCOs. Three probationary RCOs are in the north region, and two probationary RCOs are in each of the other four regions. Although the legislation provides that all Medicaid beneficiaries would be assigned to a RCO, it also permits Medicaid to carve-out classes of beneficiaries. The RCO legislation further provides that long term care (LTC) services would be studied and continue to be administered under the current Medicaid system through October 1, 2016, the date the RCOs are to be operational. "Long term care services" is defined in the RCO statute as "…Medicaid funded nursing facility services, home and community based support services, and such other long-term care services as Medicaid may determine by rule…." The RCO legislation definition includes intermediate care facilities for the developmentally disabled (ICF-DDs).

The second bill, passed on May 28, 2015, created the Integrated Care Network (ICN) system. The ICN legislation authorizes a provider-driven program for the Medicaid LTC population that would function similar to the RCOs. This bill was written based on the recommendations made by the Medicaid LTC Study Task Force commissioned in the RCO legislation. Similar to the Medicaid Study Commission, the LTC Study Task Force consisted of representatives from an array of providers, consumer groups and government officials. The task force received reports from various of its members, as well as persons and groups outside its membership. 

The ICN legislation contemplates that providers would convene to form and fund the ICNs and that Medicaid would assign LTC beneficiaries to the ICNs. In addition to care managing Medicaid beneficiaries and their benefits, the legislation permits ICNs to coordinate with other provider programs. The ICN program is to be operational no later than October 1, 2018.  This bill further provides that until the ICN program is operational, LTC services would continue to be administered by Medicaid under its current program.

The RCO and ICN entities will each receive an actuarially determined monthly per member-per month (PMPM) payment from Medicaid and in return (i) case manage assigned Medicaid beneficiaries and (ii) process claims and pay providers for Medicaid covered goods and services provided to its assigned Medicaid beneficiaries. RCOs and ICNs are deemed to be "at-risk" entities because, in accepting the actuarially determined PMPM payment, each (i) assumes all responsibility for care managing, claims processing, and paying Medicaid covered claims for its assigned Medicaid beneficiaries, and (ii) must make up any short-falls. 

Medicaid has applied to the Centers for Medicare and Medicaid Services, Department of Health and Human Services (CMS) for a section 1115 waiver for the RCOs. (States may apply to CMS for waivers from certain federal Medicaid state plan requirements. These waiver applications refer to specific sections of the federal Medicaid statute). It is contemplated that the ICN program will either be added to that section 1115 waiver application or there will be a separate section 1115 waiver filing, as well as a filing to apply for a section 1915 waiver for the home care portions of the ICN program.

B.        Comparison of the Features in the RCO and ICN Legislation:

1. Formation: Collaborators (e.g., providers, suppliers, and investors) can apply to form a RCO or ICN, and based on criteria, Medicaid can confer RCO or ICN status on qualified applicants.

2. Boards: Each RCO and each ICN will have a 20-member board consisting of (i) 12-members representing at-risk members, and (ii) 8 members who are not-at risk. The at-risk members either put up capital or agree to provide Medicaid services even if the RCO or ICN has no funds to pay for services. Each RCO board must meet certain prescribed composition requirements for its non-at-risk membership. Other than the number of at risk and non-at-risk representatives, the ICN legislation is silent on composition. For either a RCO or ICN, a majority of a board's at-risk members cannot be from a single provider, unless that RCO or ICN has only one at risk provider. Each RCO and each ICN also must have a citizens' advisory committee. There are differences in the citizens' advisory committee compositions. For instance, an ICN must have representatives from Disabilities Leadership Coalition of Alabama or Alabama ARISE, the Alabama Chapter of AARP, Alabama Disability Advocacy Program, the Disability Rights and Resources, and ARC of Alabama. The RCOs must have representatives from Disabilities Leadership Coalition of Alabama or Alabama ARISE. Each must have representation of Medicaid beneficiaries. All boards must meet the population diversity make-up of the region served. There are prescribed minimum frequencies the boards must meet, and Medicaid reserves approval over all board activities.

3. Anti-trust and Insurance Exemptions: Each statute (i) provides for Medicaid "state action" supervision over the collaboration of conveners seeking to form a RCO or an ICN, (ii) gives express exemptions from state anti-trust provisions, and (iii) grants an exemption from state department of insurance requirements and supervision.

4. Medicaid Supervision Over Governance: Medicaid has control over approving RCO and ICN charters, bylaws, and board members (including filling board vacancies left unfilled for more than three months).

5. Quality Assurance:  Medicaid appointed Quality Assurance (QA) committees will review patient outcomes, costs, and operational results of each ICN and RCO. Negative QA findings can lead to discipline or termination of a non-compliant RCO or ICN. The composition of the QA committee for RCOs requires that at least 60 percent of the members be physicians serving RCO beneficiaries. The ICN statute leaves the ICN QA committee's composition to rule making.

6. Appeals: Each statute has a prescribed administrative appeals process for providers and beneficiaries, and RCOs and ICNs are also afforded a process to appeal adverse Medicaid decisions.

7. Per Member-Per Month Payments: Based on actuarially derived calculations for the population to be served, Medicaid will pay each RCO and each ICN a separately calculated PMPM payment, and each RCO and ICN is responsible for (i) case managing its members, (ii) processing and paying providers and suppliers for Medicaid goods and services provided to its respective members, and (iii) making-up any shortfalls.

8. Scope of Services: Each RCO and ICN is responsible to pay for all covered Medicaid services provided to each beneficiary assigned to it. For example, in the case of a beneficiary who is a nursing facility resident, the ICN, in addition to paying for that beneficiary's Medicaid covered nursing facility care, is responsible for Medicaid covered physician, hospital, pharmacy, or other covered Medicaid services provided to that beneficiary. A RCO likewise is responsible for all Medicaid services required for its beneficiaries regardless of provider or setting.

9. Any Willing Provider and Reimbursement: Each RCO and ICN must contract with any willing Medicaid qualified provider and reimbursement to providers cannot be less than the current Medicaid payment regime. Medicaid sets minimum payment levels.

10. Operational Capabilities:   Each RCO and ICN must demonstrate the ability to (i) attract a provider network, (ii) case manage beneficiaries, and (iii) process claims.  These functions may be subcontracted.

11. Beneficiary Assignment. Unless a beneficiary is in a carved-out class, each Medicaid beneficiary must be assigned to either a RCO or ICN, but no beneficiary can be assigned to both a RCO and an ICN.

C.        Summary of Differences in RCO & ICN Legislation:

1. Application and Selection Process:

            a) RCO applicants must first pass through a phased probational period and be fully operational by October 1, 2016. Under this phased system of evaluation, to receive full status, a RCO applicant must: (i) by October 1, 2014, have organized and established an approved board and received probational status; (ii) by April 1, 2015, have developed a provider network; (iii) by October 1, 2015, show solvency is met; and (iv) by October 1, 2016, be certified as a fully operational RCO. To be "fully operational," the RCO must meet the first three timeline criteria, as well as demonstrate the ability to case manage beneficiaries, and process, manage, and pay claims.

            b) ICN applicants will be selected through a competitive bid or procurement process as follows:  (i) by April 1, 2017, Medicaid must establish the selection criteria and process; (ii) by April 1, 2018, applications to be an ICN must be submitted; and (iii) by October 1, 2018, each selected ICN must be fully operational by showing it (A) has organized and established an approved board, (B) has developed a provider network, (C) meets its solvency requirements, and (D) possesses the ability to case manage beneficiaries, and process, manage, and pay claims.

Each RCO and ICN also should have a functioning citizens' advisory committee meeting its respective legislative composition directive.

2. Service Area and Population to be Served:

a) Each RCO serves certain assigned Medicaid beneficiaries living within a defined region of the state. Medicaid determines which classes of beneficiaries the RCO will serve, although the LTC population is reserved by statute for the ICNs.

            b) The ICN legislation authorizes one or more ICNs. There are no defined boundaries for ICNs, but Medicaid could by regulation define areas to be served by ICNs, or designate that the ICNs be statewide. The number of ICNs will be determined by Medicaid. ICNs will serve those Medicaid beneficiaries receiving services by either a nursing facility or home and community based waiver program.

3. Capital and Reserve requirements:

            a) Each RCO must have $2.5 million in capital and cash reserves equal to 25 percent of one month's claims. A RCO can meet its reserve requirements by posting a surety bond. No assets of the RCO can be pledged to secure the bond.

            b) Each ICN must meet solvency requirements set by Medicaid through rule making. An ICN can post an irrevocable letter of credit (issued by a state or federally chartered bank with at least $4 billion in assets) to secure its reserve requirements. No assets of the ICN can be used to secure the irrevocable letter of credit.

4.         Alternatives:

            a) If no RCO manifests in any designated region, then Medicaid may, but is not required to, contract with an alternative care provider, which could be a commercial managed care company or some other type of Medicaid care management system.

            b) If no ICN manifests, Medicaid must continue administering the LTC program under its current system.

5. Beneficiary Options.

            a) RCO designated beneficiaries are to be passively enrolled by Medicaid into the RCOs. If there is more than one RCO in a region, the beneficiary may choose between the RCOs. If the beneficiary does not choose a RCO, Medicaid will assign the person to a RCO. Medicaid may limit the circumstances under which a Medicaid beneficiary may change care organizations. It does not appear as though a beneficiary may opt out of the RCO.

            b) ICN designated beneficiaries are to be passively enrolled by Medicaid into the ICN, but if Medicaid determines there should be only a single statewide ICN, the legislation suggests that Medicaid could provide beneficiary choice by permitting beneficiaries to opt out and be administered by Medicaid.

6. Program integration with other health plans and payors:

            a) RCO legislation provides that the RCOs serve only Medicaid beneficiaries, and is silent on program integration.

            b) ICN legislation provides that in addition to serving Medicaid beneficiaries, the ICN can coordinate care through an affiliation with other programs. It further describes the class of Medicaid beneficiaries to be assigned to an ICN as those eligible for nursing facility services or home and community based waiver programs, and those Medicaid beneficiaries who are also eligible for Medicare.

7. Contracts:   

            a) Initial RCO contracts are for three years, with options for two one-year extensions. If the RCO performs, Medicaid may enter into additional multi-year contracts.

            b) Initial ICN contracts are for two years, with options for three one-year extensions.  If the ICN performs, Medicaid may enter into additional multi-year contracts.

A contract for either a RCO or ICN may be terminated by Medicaid for non-performance, subject to administrative appeals.

D. Conclusion:

Under the RCO and ICN programs, Alabama providers (with consumer input through non-at-risk board membership) are given the unique opportunity to develop and apply innovative and creative methods for case managing assigned Medicaid beneficiaries through collaborating provider networks. Establishing the RCOs and ICNs will require significant investment by the provider community. While these are difficult undertakings, Alabama's Governor and Legislature have deemed that this course has the potential to not only create tangible Medicaid program savings by requiring the RCOs and ICNs to promote care collaboration among providers, thereby bending the growth curve, but also, through this system of care collaboration, develop better access to needed medical treatment and better quality of care and life for its citizens who are Medicaid beneficiaries. It is anticipated that these provider collaborating networks will reach into other payor classes, such as Medicare, to innovate better care coordination throughout the care continuum and permitting these benefits to have wider application.

Richard Brockman is Counsel with Burr & Forman LLP. He is also the current President of the Alabama Nursing Home Association.  Richard served on the Governor's Medicaid Study Commission during the development of the RCO legislation and worked with the Medicaid LTC Task Force in the development of the ICN legislation.

Angie Cameron is a Partner with Burr & Forman LLP practicing in the firm's healthcare group.