Manatt on Health: Medicaid Edition

Manatt on Medicaid: Massachusetts Releases Details on Forthcoming DSRIP Waiver Proposal

Authors: Patricia Boozang, Senior Managing Director | Sharon Woda, Managing Director | Sarah Sullivan Codner, Senior Analyst

Medicaid Accountable Care Organizations

On April 14, 2016, the Massachusetts Executive Office of Health and Human Services released new details on a proposed restructuring of the MassHealth (Massachusetts Medicaid) payment and delivery system.1 MassHealth is in the process of negotiating an ambitious five-year 1115 waiver with the Centers for Medicare and Medicaid Services (CMS), to transform MassHealth from a fragmented and predominately fee-for-service program to a system of provider-led accountable care organizations (ACOs) operating in partnership with Medicaid managed care organizations (MCOs) and community-based organizations.

The MassHealth ACO initiative builds on over four years of work undertaken by the Commonwealth to move all payers, including MassHealth, toward alternative payment strategies.2 The pending reform proposal also responds to CMS's emphasis on moving Medicaid programs toward value-based purchasing through a variety of levers, including recent Medicaid managed care regulations,3 and time-limited Delivery System Reform Incentive Payment (or DSRIP) 1115 waivers.4

Massachusetts was one of the first states to receive federal approval for a DSRIP waiver, through their Delivery System Transformation Initiative (DSTI). DSTI supports delivery system transformation projects at seven safety net institutions in the Commonwealth. DSTI was approved in an 1115 waiver in 2011 and recently renewed through 2017. As part of its waiver concept, Massachusetts seeks to replace DSTI by transitioning to a DSRIP program in line with more recently approved programs, such as New York State's Partnership Plan5 and California's Medi-Cal 2020 1115 waiver.6 The proposed reforms would more closely link federal funds to time-limited investments in large-scale delivery system transformation, with collaboration across the care continuum, increased provider accountability, and statewide cost and quality targets.

The MassHealth reform proposal is the product of an inclusive and transparent stakeholder engagement process lasting over a year. Throughout the development of the proposal, MassHealth has engaged stakeholders through listening sessions, work groups and public meetings, with ample opportunity for public comment.

Key Features of Massachusetts' Proposed MassHealth ACO Initiative

MassHealth's restructuring proposal has several key features, consistent with national trends, discussed below:

  • Proposed DSRIP funding would provide time-limited investments in State, ACO and community-level infrastructure targeted to bending the MassHealth cost curve. To secure a proposed $1.5 billion in DSRIP funding over five years, MassHealth would commit to a 2.5 percent total cost reduction over five years and a number of quality measures. To achieve these targets, the State plans to contract with newly formed MassHealth Medicaid ACOs as well as MCOs, with cost and quality performance requirements imposed on these partners.
  • ACOs would cover all Medicaid-only populations and benefits. All adults, children and youth, including beneficiaries with behavioral health and long-term supports and services (LTSS) needs, would be included in the proposed reform effort. Individuals eligible for Medicare or who have other insurance would be excluded. ACOs would assume varying degrees of accountability for total physical health, behavioral health and prescription costs. LTSS cost accountability could be integrated as early as program year two, with LTSS provider/ACO collaboration requirements in year one. Home and community-based services (HCBS) waiver services coordinated by other state agencies would be carved out, but individuals receiving HCBS services would still be ACO eligible.
  • A range of ACO options would accommodate varying degrees of provider readiness to assume risk and provide an ongoing role for Medicaid MCOs. Medicaid ACOs have been gaining traction around the country, with diverse models implemented in nine states to date.7 Massachusetts' approach provides for three ACO models, in which interested providers and MCO partners may choose to participate:
    1. Model A: "Integrated ACO/MCO" approach, in which an ACO integrates with a single MCO, assuming full, two-sided insurance risk on prospective capitation;
    2. Model B: "Direct to ACO" approach, in which the State provides insurer functions (building on the current State-run Primary Care Clinician (PCC) plan) for an ACO assuming two-sided retrospectively adjudicated performance risk, with the option to advance to prospective capitation in later years; and
    3. Model C: "MCO-supported ACO" approach, in which an ACO enters into one of three tracks for two-sided retrospective performance risk-sharing contracts with multiple MCOs, with MCOs providing insurance functions as they do today.
    Each of the models offers DSRIP incentives for providers to form network affiliations and execute against a risk-adjusted total cost-of-care budget, but with varying levels of accountability and interconnectivity among providers and with MCOs. DSRIP funding is expected to be greatest for those providers opting for a Model A arrangement. Providers not opting to join any ACO model could still contract with MCOs or the Commonwealth's PCC program8 for their Medicaid patients, but would not be eligible to receive DSRIP funding.
  • Member attribution to a MassHealth ACO would be based on primary care provider (PCP) selection. Each PCP would be able to participate in only one ACO model, or opt out of ACO models altogether, while specialists and hospitals can act as network providers for multiple ACOs. When MassHealth members actively select or are auto-assigned to a PCP, they would be attributed to their PCP's ACO. A 90-day opt-out period would allow members to change their ACO assignment by selecting a new PCP in a different ACO, different ACO model, or no ACO.
  • MCOs would retain a key role in MassHealth. Nearly half (48 percent) of MassHealth members' benefits are managed by one of five private MCOs today.9 Following reprocurement, scheduled for early 2017, the MCOs would support Model A and Model C ACOs and contract directly with providers that opt not to join an ACO. Under both models, MCOs would assume insurance risk and perform traditional insurer functions (i.e., claims payment, appeals). In addition, the MCOs will work with ACOs to support care coordination and provide population health management analytics. Model A ACOs will develop joint ventures or shared ownership with their selected MCO partners, whereas Model C ACOs will have a more traditional value-based contracting agreement with multiple MCOs.
  • MassHealth's reform proposal emphasizes integration of community organizations and social determinants of health. The proposed MassHealth program explicitly requires and funds ACO partnerships that integrate community organizations and social services into a total cost-of-care model. MassHealth plans to certify "Community Partners" (CPs) for behavioral health services and LTSS, each of which would receive direct DSRIP funding for care coordination. DSRIP funding for ACOs and CPs would be contingent on their developing formal collaboration agreements. Additionally, a subset of ACO DSRIP funding would be earmarked to fund "flexible" social services that are not otherwise covered by Medicaid (i.e., utility bills, housing support, nutrition services, air conditioners, child care). MassHealth is also partnering with the University of Massachusetts Medical School to develop an ACO total cost of care risk-adjustment model that integrates social determinants of health.

Moving Forward

While there are myriad details to be worked out, MassHealth is currently planning to launch the proposed Medicaid ACO program in October 2017, with ACO applications open as early as July 2016. MassHealth aims to submit its 1115 waiver proposal in time for approval before the end of the current federal administration. A draft waiver for public comment is anticipated in May 2016 for June 2016 submission. Manatt will provide a full analysis of the 1115 waiver when it is released.

1Massachusetts Executive Office of Health and Human Services, "MassHealth Delivery System Restructuring: Additional Details," April 14, 2016:

2MassHealth ACOs form a key part of MassHealth's efforts to comply with "Chapter 224" state regulations setting an 80% target for MassHealth membership in alternative payment contracts, originally by 2015. See "Appendix: MassHealth's Plan to Reach 80% Adoption for Alternative Payment Methodologies" in Commonwealth of Massachusetts Office of the State Auditor, Official Audit Report, "Office of Medicaid (MassHealth) – Review of MassHealth's Progress to Implement Alternative Payment Methodologies," February 18, 2016: For more information on Chapter 224 and its APM requirements, see A Gosline and E Rodman, "Summary of Chapter 224 of the Acts of 2012," Blue Cross Blue Shield of Massachusetts Foundation, September 28, 2012:

3Centers for Medicare and Medicaid Services, 81 FR 27497, "Medicaid and Children's Health Insurance Program (CHIP) Programs; Medicaid Managed Care, CHIP Delivered in Managed Care, and Revisions Related to Third Party Liability," Final Rule, May 2016:

4See A Gates, R Rudowitz, and J Guyer, "An Overview of Delivery System Reform Incentive Payment (DSRIP) Waivers," Kaiser Family Foundation, October 2014:; and J Guyer, N Shine, R Rudowitz, and A Gates, "Key Themes from Delivery System Reform Incentive Payment (DSRIP) Waivers in 4 States," Kaiser Family Foundation, April 2015:

5D Bachrach, W Bernstein, J Augenstein, M Lipson, and R Ellis, "Implementing New York's DSRIP Program: Implications for Medicaid Payment and Delivery System Reform," The Commonwealth Fund, April 2016:

6C Mann, N Newman, and R Kesarwani, "Manatt on Medicaid: CMS Approves California's Delivery System Reform Incentive Payment (DSRIP) Waiver Renewal," January 2016:

7Center for Health Care Strategies, "Medicaid Accountable Care Organizations: State Update," March 2016: See also J Lloyd, R Houston, and T McGinnis, "Medicaid Accountable Care Organization Programs: State Profiles," Center for Health Care Strategies, October 2015:; and T McGinnis, R Houston, and D Brown, "The Balancing Act: Integrating Medicaid Accountable Care Organizations into a Managed Care Environment," Center for Health Care Strategies, November 2013:

8The MassHealth PCC program is a primary care case management, or PCCM, program.

9As of November 2015. See Massachusetts Medicaid Policy Institute, "MassHealth: The Basics, Enrollment Update as of November 2015," Blue Cross Blue Shield of Massachusetts Foundation, March 2016:



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