DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland   21244-1850 
 
Center for Medicaid and CHIP Services 
                  SMDL# 12-001 
                  ICM# 1 
 
                  RE: Integrated Care Models 
July 10, 2012 
 
Dear State Medicaid Director:  
 
The Centers for Medicare & Medicaid Services (CMS) is initiating a series of communications 
intended to strengthen our collaborations with states to facilitate achieving better care, better 
health, and reduced expenditures in Medicaid programs.  This letter is the first in this series that 
will describe policy considerations for creating integrated care models. These models support 
value-driven strategies to ensure that Medicaid reaches its fullest potential as a high performing 
health system and aligns with promising delivery system and payment reforms underway in the 
private and public sectors.   
 
For the purposes of this letter and future communications, we are using the term Integrated Care 
Models (ICMs) to describe these initiatives, which could include (but are not limited to) 
medical/health homes, Accountable Care Organizations (ACO), ACO-like models, and other 
arrangements that emphasize person-centered, continuous, coordinated, and comprehensive care 
(see Attachment 3 of accompanying SMD # 12-002 for further description).   
 
ICMs are characterized by organized and accountable care delivery and payment methodologies 
aligned across payers and providers to ensure effective, seamless, and coordinated care.  By 
orienting the system around the needs and preferences of beneficiaries, successful ICMs can 
demonstrate improved health care outcomes and result in improved beneficiary experience, while 
reducing overall health care expenditures.  ICMs include integration of various types of health 
care services such as primary, acute, specialty, dental, behavioral, and long-term support 
services.  Various iterations of ICMs have long existed in capitated managed care, but for the 
purposes of this letter and the second letter in the series, we are referring to ICMs in the fee-for-
service (FFS) system.  We plan to issue future guidance specifically addressing ICM 
implementation within risk-bearing managed care contracts. 
 
Our work with several states, which are creating delivery models that better coordinate services, 
reward quality achievements, and share savings with providers, has led to a focus on four areas: 
reform, modernization, stewardship, and collaboration. 
 
  Delivery System Reform:  Structural and programmatic reforms such as ICMs and new 
financial incentives can form the basis for high performing Medicaid systems.  There is 
considerable flexibility under current authorities of most state Medicaid plans to achieve 
many of these reforms, including ICMs.  In addition, the Affordable Care Act (Pub. L.  
111-148, as revised by Pub. L. 111-152) provides new authorities, including a state plan 
option to provide health homes for enrollees with chronic conditions.   
   
   
Page 2  State Medicaid Director 
 
  Modernization:  New technologies are critical to deliver the high quality, timely, 
accurate, and appropriate data necessary for reform.  One hallmark of high performing 
health care systems is the use of cost, performance, quality, beneficiary, and program 
data to improve quality and efficiency.  To that end, both states and CMS are actively 
engaged in major information technology improvement initiatives including multi-payer 
claims databases, modernized eligibility systems, expanded data reporting and analysis 
capabilities, and new systems supporting modernized business processes.  We have also 
articulated new standards, modern architectures, and more specific guidance for the 
building of state systems with federal investments.  CMS and states must also continue to 
ensure that electronic health record systems can support health information exchange and 
provide the necessary infrastructure for automated quality measurement, reporting, and 
continuous quality improvement that underpin important delivery and payment system 
reforms.   
 
  Stewardship:  New flexibilities should be accompanied by new models for 
accountability.  A strong quality measurement infrastructure is essential for transition to a 
more outcomes-based accountability in Medicaid.  The state and federal efforts to 
modernize data systems will provide us with a new opportunity to focus, standardize, and 
validate quality metrics reported by providers and states and allow for rapid and ongoing 
evaluation of the impact on the health and care of Medicaid beneficiaries.  A shift from 
paying solely for volume towards outcomes-based accountability will also facilitate 
efforts to limit duplicative processes and eliminate administrative processes with little 
value.   
 
  Collaboration:  Broad system transformation is only achievable by partnership between 
CMS, states (and within state government), consumers, advocates, managed care 
organizations, providers, tribal organizations, and other stakeholders.  These partnership 
efforts include the following: 
   
  Last year, the Center for Medicaid and CHIP Services launched special technical 
assistance teams to assist states in a variety of Medicaid reform efforts.  Over the 
course of the last year, the Medicaid State Technical Assistance Teams (MSTAT) 
worked intensively with more than 25 states.  The interest of these states reflects the 
broad interest in ensuring Medicaid is an active player in focusing health care systems 
on quality-driven care coordination resulting in lower cost through program 
improvement.  These efforts are consistent with initiatives authorized under the 
Affordable Care Act, whether as part of a multi-payer initiative or new care models, 
and have led directly to the new ICM state plan flexibility described in the second 
letter in this series.  
 
  Building on the MSTAT experience, CMS is actively discussing these topics with 
several states participating in the Medicaid and CHIP Value-Based Learning 
Collaborative and providing technical assistance to states.  The work and lessons 
learned from these collaborations will be shared widely with other states and 
stakeholders. 
 
 
   
Page 3  State Medicaid Director 
 
  Collaborations and strategic governance within states are importantICMs require 
close partnerships across the service delivery system.  Aligning the efforts of 
providers, managed care organizations, various payers, information technology 
vendors, public health, and other partners in the health system will help maximize 
improvements in service delivery as well as control costs.  Some states are forging 
new ground and providing leadership to address specific challenges unique to urban 
or rural regions.   
 
  CMS also recognizes the role of federal collaboration, especially in terms of aligning 
priorities and efforts and coordinating communication.  As an example of how CMS 
is beginning this effort by aligning work within its own agency, we are testing new 
models of care and working to disseminate what we have learned to bring successful 
models to scale through the Centers for Medicare and Medicaid Innovation and in the 
Medicare-Medicaid Coordination Office.  There are a myriad of other opportunities 
across the department and administration and we are committed to ensuring 
alignment across all of these efforts.   
 
  Collaboration with consumer and consumer advocacy groups is critical.  In order to 
achieve the important goals of better health and better care with lowered costs, we 
must continue to put our beneficiaries first.  This is a time of significant change in the 
Medicaid program, and we should ensure beneficiaries voices are heard in the 
design, implementation, and oversight of new initiatives. 
 
  A state with federally-recognized Indian tribes, Indian health programs, and/or urban 
Indian health organizations must consult with these entities as outlined in section 
1902(a)(73) of the Social Security Act and in 42 CFR 431.408(b), and consistent with 
other current CMS tribal consultation policy. 
 
The second letter in this series, which we are also issuing today, describes flexibility in the 
Medicaid statute that supports delivery system and payment reform in FFS systems.  Future 
communications will include methodologies for shared savings arrangements, a quality and cost 
measures framework, achieving results through managed care contracts, and guidance on 
alignment with other federal initiatives.    
 
Sincerely, 
 
            /s/ 
             
Cindy Mann 
              Director 
    Page 4  State Medicaid Director 
 
cc: 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
Division of Medicaid and Childrens Health 
 
Matt Salo 
Executive Director 
National Association of Medicaid Directors 
 
Alan R. Weil, J.D., M.P.P. 
Executive Director 
National Academy for State Health Policy 
 
Ronald Smith 
Director of Legislative Affairs 
American Public Human Services Association 
 
Tracey Wareing            
Executive Director 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Heather Hogsett 
Director of Health Legislation 
National Governors Association 
 
Debra Miller 
Director for Health Policy 
Council of State Governments 
 
Christopher Gould 
Director, Government Relations 
Association of State and Territorial Health Officials