Provider Service Networks Can Cut Costs

Provider service networks, and other case management programs, may reduce the cost of care in the long run.

Florida’s Medicaid program has allowed for several pilot models under a Section 1115 waiver of the Affordable Care Act (ACA) affecting 5 counties and approximately 300,000 enrollees. This allowed for a comparison of three different delivery systems: (1) provider service networks (PSNs), ACO-like entities that paid a per-member-per-month administrative fee as well as a provider payment on a fee-for-service basis, (2) standard HMOs that paid a risk-adjusted monthly premium per enrollee, and (3) HMOs which provided primary care case management programs (called Medipass) which paid on a fee-for-service basis.

The authors examined the direct payments for medical care or, in the case of HMOs, capitated premiums for the two fiscal years before implementation of the demonstration project as well as the first four years after project implementation in two urban counties compared to two similar counties not granted demonstrations. The non-demonstration counties did show demographic differences from demonstration counties, including a higher percentage of African-American enrollees and lower percentage of Latino enrollees. Individuals receiving SSI or TANF were considered mandatory participants in the demonstration projects.

After adjustment for demographics,  provider service networks for SSI enrollees reduced expenditures by $153 per-member-per-month compared to the non-demonstration counties and HMOs reduced expenditures by $146. For TANF enrollees, provider service networks reduced expenditures by $32 compared to the non-demonstration counties and HMOs reduced expenditures by $29. There was an increased average of expenditures for both SSI and TANF enrollees initially, but there was a downward trend in expenditures over the four year period for both PSN and HMO enrollees. The authors concluded that per-member-per-month expenditure reductions were slightly larger for PSNs and that it may take several years before cost reductions are realized.

Commentary

Provider service networks (PSNs) and other options similar to accountable care organizations (ACOs) involve a wide range of measures that include specific performance targets, structures, proactive planning, and health information technology usage, all to increase care coordination and encourage quality improvement.

This opportunity for coordinated care in the Medicaid population provides significant potential to address the disparities that affect that group of patients. While there are multiple models being studied in different states, these smaller demonstration projects allowed under the Affordable Care Act are a necessary step to actually discovering and implementing successful models and not merely forming conjecture in the health policy literature. Additional and continued funds must be supplied to allow for further evidence as to their effectiveness and potential. Successful models must then be duplicated around the nation to spur better care for Americans on Medicaid.

Harman, JS, et al. HSR. 2013; online ahead of print.

by

Kameron Matthews, MD, JD