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, CHIP and Survey & Certification 
 
              SMDL#  10-024 
              ACA#     12  
 
November 16, 2010 
 
              Re:  Health Homes for Enrollees with 
        Chronic Conditions  
 
Dear State Medicaid Director: 
Dear State Health Official: 
 
This letter is one of a series intended to provide preliminary guidance on the implementation of 
the Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, as 
revised by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted 
on March 30, 2010, together known as the Affordable Care Act.  Specifically, this letter provides 
preliminary guidance to States on the implementation of section 2703 of the Affordable Care 
Act, entitled State Option to Provide Health Homes for Enrollees with Chronic Conditions.   
 
Section 2703 adds section 1945 to the Social Security Act (the Act) to allow States to elect this 
option under the Medicaid State plan.  This provision is an important opportunity for States to 
address and receive additional Federal support for the enhanced integration and coordination of 
primary, acute, behavioral health (mental health and substance use), and long-term services and 
supports for persons across the lifespan with chronic illness.  This guidance outlines our 
expectations for States successful implementation of the health home model of service delivery 
and provides initial guidance on important aspects of the health home provision.   
 
The Centers for Medicare & Medicaid Services (CMS) is collaborating with Federal partners, 
including the Substance Abuse and Mental Health Services Administration (SAMHSA), the 
HHS Assistant Secretary for Planning and Evaluation (ASPE), the Health Resources and 
Services Administration (HRSA), and the Agency for Healthcare Research and Quality (AHRQ) 
to ensure an evidence-based approach and consistency in implementing this statutory provision.  
We recognize and greatly appreciate their expertise in medical home initiatives, integration of 
primary care and behavioral health, evaluative experience, and quality measurement.   
 
Background 
 
Health Home Model for Service Delivery 
 
The health home provision authorized by the Affordable Care Act provides an opportunity to 
build a person-centered system of care that achieves improved outcomes for beneficiaries and 
better services and value for State Medicaid programs.  This provision supports CMSs 
overarching approach to improving health care through the simultaneous pursuit of three goals: 
improving the experience of care; improving the health of populations; and reducing per capita 
costs of health care (without any harm whatsoever to individuals, families, or communities).   
 
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The health home service delivery model is an important option for providing a cost-effective, 
longitudinal home to facilitate access to an inter-disciplinary array of medical care, behavioral 
health care, and community-based social services and supports for both children and adults with 
chronic conditions.  While there is still much to learn, we expect that use of the health home 
service delivery model will result in lower rates of emergency room use, reduction in hospital 
admissions and re-admissions, reduction in health care costs, less reliance on long-term care 
facilities, and improved experience of care and quality of care outcomes for the individual. 
 
Health homes can play a particularly pivotal role in improving the health care delivery system 
for individuals with chronic conditions.  Consistent with the intent of the statute, we expect 
States that provide this optional benefit, and the health home providers with which the State 
collaborates, to operate under a whole-person philosophy  caring not just for an individuals 
physical condition, but providing linkages to long-term community care services and supports, 
social services, and family services.  The integration of primary care and behavioral health 
services is critical to the achievement of enhanced outcomes.  
 
Health Homes and Medical Homes 
 
To provide context about the genesis of the health home model, we are providing background in 
this letter on the medical home model.  While Congress defined the term health home in 
section 2703 of the Affordable Care Act, the medical home model provides instructive history on 
the evolution of the health home model.  In 1967, the American Academy of Physicians (AAP) 
Standards of Child Health Care envisioned the medical home as:  one central source of a 
childs pediatric records to resolve duplication and gaps in services that occur as a result of lack 
of communication and coordination.  In 1992, the AAP applied the medical home term to 
medical care that is accessible, continuous, comprehensive, family-centered, coordinated, and 
compassionate; and in 2002, AAP further characterized care in a medical home as accessible, 
continuous, comprehensive, family-centered, coordinated, compassionate, and culturally 
effective.  The Future of Family Medicine Project expanded on the concept in 2004 when it 
called for every American to have a personal medical home.  The American Academy of Family 
Physicians (AAFP) developed a related policy statement the same year, and the American 
College of Physicians (ACP) introduced the advanced medical home in 2006.  The AAFP and 
ACP teamed with the AAP and the American Osteopathic Association to draft and disseminate 
Joint Principles of the Patient-Centered Medical Home.  According to the principles, patient-
centered medical homes should have these characteristics:  a personal physician; physician-
directed medical practice; whole-person orientation; coordinated care; quality and safety; 
enhanced access; and adequate payment.  
 
In 2007, the Commonwealth Fund defined medical home as a healthcare setting that offers 
patients a regular source of care, enhanced access to physicians and timely, well-organized care.  
Other definitions of a medical home include the use of chronic disease management, electronic 
health records, web-based information, and open access to scheduling.  The Patient-Centered 
Medical Home (PCMH) is a model for care, provided by physician-led practices, that seeks to 
strengthen the physician-patient relationship by replacing episodic care based on illnesses and 
individuals complaints with coordinated care for all life stages, acute, chronic, preventive, and   
 
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end of life, and a long-term therapeutic relationship.  The physician-led care team is responsible 
for coordinating all of the individuals health care needs, and arranges for appropriate care with 
other qualified physicians and support services.  The individual decides who is on the team and 
the primary care physician makes sure team members work together to meet the individuals 
needs in an integrated fashion.  
 
At the Federal level, in an effort led by the Office on Disability, agencies from across the 
Department of Health and Human Services (HHS), including CMS, worked together in 2008 to 
develop a conceptual model of the medical home to include service domains, training 
requirements, financing, policy, and research.  The Federal workgroup concluded that the 
medical or health home is a conduit to lowering health care costs, increasing quality, reducing 
health disparities, achieving better outcomes, lowering utilization rates, improving compliance 
with recommended care, and coordinating a spectrum of medical and social services required by 
the individual across the lifespan.   
 
Since 2009, AHRQ has convened a Federal collaborative around implementation of the PCMH, 
which includes CMS, SAMHSA, and HRSA.  In 2010, AHRQ launched a public website, 
www.pcmh.ahrq.gov aimed at providing health care decision makers and researchers evidence-
based resources about the medical home and its potential to transform primary care.  On the site, 
AHRQ published its definition of the PCMH which emphasizes the importance of team-based 
care and recognizes that many clinicians may lead a patient-centered health care team.  
 
In 2009, SAMHSA launched its Primary Care and Behavioral Health Care Integration (PBHCI) 
program.  This program seeks to improve the physical health status of people with serious mental 
illnesses (SMI) by supporting community-based efforts to coordinate and integrate primary 
health care with mental health services in community-based behavioral health care settings.  
Better coordination and integration of primary and behavioral health care will result in:  
improved access to primary care services; improved prevention; early identification and 
intervention to reduce the incidence of serious physical illnesses, including chronic disease; and 
increased availability of integrated, holistic care for physical and behavioral disorders, as well as 
better overall health status for individuals.  SAMHSA has funded 56 sites nationally, and, in 
cooperation with HRSA, has co-funded a national resource center dedicated to integrating 
primary and behavioral health care in both behavioral health settings and primary care settings. 
 
Many State Medicaid programs have developed medical home models and States receive 
Medicaid reimbursement for medical homes through a variety of authorities.  Under the authority 
of section 1932(a) of the Act, States have implemented delivery systems beyond traditional 
primary care case management programs, many focusing on high-cost, high-user beneficiaries 
(not limited to specific diagnoses).  While many of these models are physician-based, there is a 
growing movement toward interdisciplinary team-based approaches.  Services such as care 
coordination and follow-up, linkages to social services, and medication compliance are 
reimbursed through a per member per month structure.  In addition to the authority in section 
1932(a) of the Act, some States are using full-risk managed care plans and demonstrations 
approved under section 1115 of the Act to implement their medical homes. 
   
 
Page 4 - State Medicaid Director 
 
Given the prior history of Medicaid involvement in medical home models and delivery systems, 
and the new statutory definition of the term health home, a goal of implementing section 2703 
of the Affordable Care Act will be to expand the traditional medical home models to build 
linkages to other community and social supports, and to enhance coordination of medical and 
behavioral health care, in keeping with the needs of persons with multiple chronic illnesses.  The 
whole-person philosophy described below is fundamental to a health home model of service 
delivery.  CMS expects health homes to build on the expertise and experience of medical home 
models, when appropriate, to deliver health home services.  
 
Coordination with Existing State Programs 
 
The CMS recognizes that many States that are interested in this Medicaid State plan option will 
want to coordinate with their existing medical home initiatives, including those that utilize 
private insurance, Medicare, and multi-payer funding streams.  CMS encourages States with 
existing or planned medical home initiatives to compare those programs to the definition of 
health home in section 2703 of the Affordable Care Act and the intent, population focus, delivery 
models, services, provider standards, quality measure reporting, and State monitoring required 
under this health home State plan option, and to design this option to complement those 
initiatives.  CMS is available to provide technical assistance as States begin this analysis. 
 
General Information 
 
The State option to provide health home services to Medicaid beneficiaries with chronic 
conditions becomes effective on January 1, 2011.  A State may elect this option through an 
amendment to the Medicaid State plan; however, the effective date of the State plan amendment 
(SPA) may not be earlier than the statutory effective date.  We are issuing this letter to provide 
initial guidance, as well as to inform States of the ability to claim title XIX funds prior to 
submitting a health home SPA in order to plan and develop their health home model.  
 
Throughout this guidance, there will be references to the health home model of service 
delivery that encompasses all the medical, behavioral health, and social supports and services 
needed by a beneficiary with chronic conditions.  The specific activities authorized by the 
Affordable Care Act will be referred to as health home services throughout this guidance, and 
are addressed below.  Only health home services qualify for the 90 percent Federal medical 
assistance percentage (FMAP) rate (for the first eight fiscal quarters that a health home State 
plan amendment is in effect). 
 
We have developed a draft template for States to use in designing and developing health home 
SPAs that is attached to this letter.  We will roll out a web-based submission process for health 
home SPAs in early December, which will include the same data fields as shown on the draft 
template screen shots.  At that time, we will release a CMCS Informational Bulletin with 
instructions on use of the web-based tool for submission.  CMS is available for technical 
assistance using the draft template as well as the web-based tool in the future.  We strongly 
encourage States to use the draft template to prepare for SPA submission and the web-based tool   
 
Page 5 - State Medicaid Director 
 
for actual submission, as some of the information from the SPA will be displayed on the 
www.healthcare.gov website and used for reporting purposes. 
 
Initially, CMS will use the guidance in this letter to review and approve health home SPAs.  
States are expected to describe in their SPAs how their programs adhere to the guidance reflected 
in this letter.  Upon the issuance of final regulations, States may need to amend their State plans, 
if necessary, to come into compliance with the regulatory requirements.  
 
We have established an electronic health home mailbox for States and interested parties to use 
for submission of questions or comments about this provision of the law.  Inquiries may be sent 
to healthhomes@cms.hhs.gov.   
 
Health Home Population Criteria 
 
Section 1945(a) of the Act permits States the option to offer health home services to eligible 
individuals with chronic conditions who select a designated health home provider.  The chronic 
conditions described in section 1945(h)(2) of the Act include a mental health condition, a 
substance use disorder, asthma, diabetes, heart disease, and being overweight, as evidenced by a 
body mass index over 25.  Section 1945(h)(2) of the Act authorizes the Secretary to expand the 
list of chronic conditions reflected in this provision.  Further information regarding how the 
Secretary will use this authority will be articulated in future guidance.  Additional chronic 
conditions, such as HIV/AIDS, will be considered for incorporation into health home models. 
 
Section 1945(h) of the Act sets forth the minimum criteria that an eligible individual with 
chronic conditions must meet.  The health home population the State elects must consist of 
individuals eligible under the State plan or under a waiver of such plan who have at least two 
chronic conditions, as listed in section 1945(h)(2) of the Act, one chronic condition and be at risk 
for another, or one serious and persistent mental health condition.   
 
The State may elect in its State plan to provide health home services to individuals eligible to 
receive health home services based on all the chronic conditions listed in the statute, or provide 
health home services to individuals with particular chronic conditions.  While all individuals 
served must meet the minimum statutory criteria, States may elect to target the population to 
individuals with higher numbers or severity of chronic or mental health conditions.  The 
population must include all categorically needy individuals who meet the States criteria 
(including those eligible based on receipt of services under a section 1915(c) home and 
community-based services waiver) and a State option may include individuals in any medically 
needy group or section 1115 demonstration population.  There is no statutory flexibility to 
exclude dual eligible beneficiaries from receiving health home services. CMS recognizes the 
challenges States face in serving dual eligible beneficiaries and we are working to assist States in 
their efforts to more effectively integrate Medicare and Medicaid benefits.  
 
Because the statute waives the comparability requirement at section 1902(a)(10)(B) of the Act, it 
allows States to offer health home services in a different amount, duration, and scope than 
services provided to individuals who are not in the health home population.     
 
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Service Definitions 
 
Section 1945(h)(4) of the Act defines health home services as comprehensive and timely high 
quality services, and includes the following health home services to be provided by designated 
health home providers or health teams:  
 
  Comprehensive care management;  
  Care coordination and health promotion;  
  Comprehensive transitional care from inpatient to other settings, including appropriate 
follow-up;  
  Individual and family support, which includes authorized representatives;  
  Referral to community and social support services, if relevant; and  
  The use of health information technology to link services, as feasible and appropriate. 
 
CMS recognizes the importance of health information technology in furthering the aims of the 
health home model of service delivery.  While States have the flexibility to determine how to use 
health information technology in their health home models, CMS encourages States to consider 
utilizing technologies to provide health home services and improve care coordination across the 
care continuum.  Further information regarding how the Secretary will define these services will 
be articulated in future guidance. 
 
Payment Methodologies 
 
Section 1945(c)(1) of the Act authorizes States to make medical assistance payments for health 
home services delivered by a designated provider, a team of health care professionals operating 
with the designated provider, or a health team.  Section 1945(c)(2) of the Act requires that the 
State include the payment methodology in its State plan, but permits considerable flexibility in 
designing the payment methodology.  Specifically, section 1945(c)(2)(A) of the Act expressly 
permits States to structure a tiered payment methodology that accounts for the severity of each 
individuals chronic conditions and the capabilities of the designated provider, the team of 
health care professionals operating with the designated provider, or the health team.  In addition, 
section 1945(c)(2)(B) of the Act permits States to propose alternative models of payment that are 
not limited to per member per month payments for CMS approval.  
 
Consistent with section 1902(a)(30)(A) of the Act, CMS will review health home SPA 
submissions for consistency with the goals of efficiency, economy, and quality of care, and 
require a comprehensive description of the rate-setting policies in the Medicaid State plan.  We 
remind States of the requirement to provide public notice to affected stakeholders of changes in 
State plan methods and standards prior to the effective date of a SPA, consistent with the public 
notice requirements at 42 CFR 447.205.  CMS does not anticipate any conflict between the 
provisions described under the health home payment authority and section 1902(a)(32) of the 
Act, which (excepting certain employment or contractual arrangements) requires direct payments 
to Medicaid providers. 
   
 
Page 7 - State Medicaid Director 
 
State officials clearly have much to consider in constructing State plan payment methodologies 
for health home services that improve service delivery, provide for quality health outcomes for 
Medicaid beneficiaries and help to document the evaluative measures at section 2703(b) of the 
Affordable Care Act.  CMS encourages States to work closely with their stakeholder and 
provider communities and to draw upon national experience in developing reimbursement 
methodologies for these services.  We also invite States to work with CMS prior to formally 
submitting a SPA to ensure that proposed payment methodologies meet these objectives and all 
applicable Federal and statutory requirements.   
 
Similarly, States interested in implementing a health home SPA in conjunction with using a 
capitated model are encouraged to work with CMS informally prior to developing an official 
submission.  While CMS envisions a health home model of service delivery with either a fee-for-
service or capitated payment structure, we would consider other methods or strategies utilizing 
additional payment models.   
 
Enhanced FMAP 
 
Section 1945(c)(1) of the Act provides that the FMAP for health home services shall be 90 
percent for the first eight fiscal quarters that a SPA is in effect.  Thereafter, States can claim at 
the regular FMAP rate used for other Medicaid services during the calendar quarter.  Once CMS 
approves a States health home SPA, the State can submit a claim to CMS for reimbursement 
using the Medicaid and Childrens Budget Expenditure System (MBES/CBES) and record the 
expenditures on a new line item 64.9.  The new line item will be called Health Homes for 
Enrollees with Chronic Conditions.   
 
Expenditures claimed at the enhanced match should be recorded in line 64.9-a, and expenditures 
claimed at the regular match should be recorded in line 64.9-b.  Please be cognizant of the 
requirement that the eight quarters of 90 percent FMAP begin upon the effective date of the 
SPA.  If there is a delay in implementation, this date could be different from the first day or first 
quarter when health home services claims are received.  There is no time limit by which a State 
must submit its health home SPA to receive the eight quarters of 90 percent FMAP.   
 
Provider Infrastructure 
 
Section 1945(a) of the Act describes three distinct types of health home provider arrangements 
from which a beneficiary may receive health home services:  designated providers, as defined in 
section 1945(h)(5) of the Act; a team of health care professionals, which links to a designated 
provider, as defined in section 1945(h)(6) of the Act; and a health team, as defined in section 
1945(h)(7) of the Act.   
 
Section 1945(h)(5) of the Act includes examples of providers that may qualify as a designated 
provider, such as physicians, clinical practices or clinical group practices, rural health clinics, 
community health centers, community mental health centers, home health agencies, or any other 
entity or provider (including pediatricians, gynecologists, and obstetricians) that is determined 
appropriate by the State and approved by the Secretary.  This list, therefore, is not an exhaustive   
 
Page 8 - State Medicaid Director 
 
list.  States may include additional providers in this category, meeting the criteria of subsection 
(5), including other agencies that offer behavioral health services.  States should describe all 
designated providers in the proposed SPA, which is subject to CMS approval.  As discussed in 
more detail below, each designated provider must have systems in place to provide health home 
services, and to satisfy certain qualification standards.  
 
Section 1945(h)(6) of the Act contains examples of the providers comprising a team of health 
care professionals, such as physicians and other professionals that may include a nurse care 
coordinator, nutritionist, social worker, behavioral health professional, or any professionals  
deemed appropriate by the State and approved by the Secretary, but this, too, is not an exhaustive 
list.  These teams of health care professionals may operate in a variety of ways, such as free 
standing, virtual, or based at a hospital, community health center, community mental health 
center, rural clinic, clinical practice or clinical group practice, academic health center, or any 
entity deemed appropriate by the State and approved by the Secretary.  The SPA should include 
a description of the composition of these teams. 
 
Section 1945(h)(7) of the Act defines health team to have the same meaning given this term in 
section 3502 of the Affordable Care Act, titled Establishing Community Health Teams to 
Support the Patient-Centered Medical Home.  Section 3502(b)(4) of the Affordable Care Act 
requires the Secretary to define the health team, but also indicates that the team should be an 
interdisciplinary, inter-professional team, and that the definition must include the following 
providers:  medical specialists, nurses, pharmacists, nutritionists, dieticians, social workers, 
behavioral health providers (including mental health providers, and substance use disorder 
prevention and treatment providers), doctors of chiropractic, licensed complementary and 
alternative medicine practitioners, and physicians assistants.   
 
We are interpreting the statute to allow States to choose which provider arrangement(s) to offer, 
and, if more than one option is offered, the beneficiary may choose among those options.  We 
recognize that there is diversity in provider arrangements across the States.  Regardless of the 
provider arrangement(s) a State may offer, CMS will expect the State to embed the criteria 
described in the provider standards below in its provider qualifications, and to be accountable for 
the providers adhering to and upholding those standards on an initial and ongoing basis.     
 
Provider Standards  
 
States will be expected to develop a health home model of service delivery that has designated 
providers operating under a whole-person approach to care within a culture of continuous 
quality improvement.  A whole-person approach to care looks at all the needs of the person and 
does not compartmentalize aspects of the person, his or her health, or his or her well-being.  We 
expect providers of health home services to use a person-centered planning approach to 
identifying needed services and supports, providing care and linkages to care that address all of 
the clinical and non-clinical care needs of an individual.    
 
     
 
Page 9 - State Medicaid Director 
 
Section 1945(b) of the Act requires the Secretary to establish standards for qualification as a 
designated provider for the purpose of being eligible to become a health home.  Pending final 
guidance, CMS expects designated providers of health home services to address the functions 
listed below, which were informed by both the provider requirements defined within section 
3502 of the Affordable Care Act and other well-established chronic care models.  The State must 
describe in its SPA the methods by which it will support providers of health home services in 
addressing the following components:  
 
  Provide quality-driven, cost-effective, culturally appropriate, and person- and family-
centered health home services; 
  Coordinate and provide access to high-quality health care services informed by evidence-
based clinical practice guidelines;  
  Coordinate and provide access to preventive and health promotion services, including 
prevention of mental illness and substance use disorders; 
  Coordinate and provide access to mental health and substance abuse services; 
  Coordinate and provide access to comprehensive care management, care coordination, and 
transitional care across settings.  Transitional care includes appropriate follow-up from 
inpatient to other settings, such as participation in discharge planning and facilitating 
transfer from a pediatric to an adult system of health care; 
  Coordinate and provide access to chronic disease management, including self-
management support to individuals and their families;  
  Coordinate and provide access to individual and family supports, including referral to 
community, social support, and recovery services; 
  Coordinate and provide access to long-term care supports and services; 
  Develop a person-centered care plan for each individual that coordinates and integrates all 
of his or her clinical and non-clinical health-care related needs and services; 
  Demonstrate a capacity to use health information technology to link services, facilitate 
communication among team members and between the health team and individual and 
family caregivers, and provide feedback to practices, as feasible and appropriate; and   
  Establish a continuous quality improvement program, and collect and report on data that 
permits an evaluation of increased coordination of care and chronic disease management 
on individual-level clinical outcomes, experience of care outcomes, and quality of care 
outcomes at the population level.  
 
States are expected to describe the infrastructure in place to provide timely, comprehensive, 
high-quality health home services.  A State with established medical home provider standards 
wishing to submit a SPA is requested to describe how its existing standards align with the key 
health homes expectations listed above, and/or have been modified to address the specific health 
home services.  
   
 
Page 10 - State Medicaid Director 
 
Support for State Planning Activities  
 
In order to provide assistance to States that would like to receive support in planning their health 
home SPAs, in accordance with section 1945(c)(3) of the Act, CMS will use title XIX funding to 
support State health home planning efforts at the States regular, pre-Recovery Act, medical 
assistance service match rate.  Since the purpose of the planning opportunity is to develop a SPA, 
such requests will only be considered prior to a State submitting a health home SPA to CMS.   
 
Interested States should submit a Letter of Request of no more than two pages describing its 
health home planning activities, with an estimated budget for this non-competitive opportunity.  
The following categories would be considered by CMS as appropriate planning activities:  the 
hiring of personnel or contractors to determine feasibility and develop the health home program; 
outreach initiatives to obtain consumer and provider feedback; training and consultation related 
to designing components of any provisions of the SPA; the development of systems for reporting 
and other infrastructure building tasks; and travel to accomplish such activities.  A State may 
discover through its planning activities that a health home SPA is not feasible; under such 
circumstances, those planning activities are also reimbursable at the regular FMAP, in 
accordance with section 1945(c)(3)(B) of the Act. 
 
Upon CMS approval of a States Letter of Request outlining its health home planning activities, 
but not before January 1, 2011, we will authorize State applicants to spend up to $500,000 of title 
XIX funding for planning activities related to the development of a SPA.  If a State believes that 
it will require in excess of $500,000 for this planning opportunity, it needs to send additional 
justification beyond the two-page Letter of Request and estimated budget to CMS for review and 
approval.  If all States request funding above the $500,000 level, funds may be exhausted before 
all States have a chance to come in for this planning opportunity.  A State must report its 
approved planning activities and subsequent expenditures on a separate expenditure line on the 
CMS-64.10.  In accordance with section 1945(c)(3)(B) of the Act, this line will be programmed 
with each States pre-Recovery Act medical assistance services matching rate.  Therefore, for a 
State with a pre-Recovery Act FMAP of greater than 50 percent, its planning activities will be 
matched at the higher medical assistance service rate.   
 
States will also be required to submit changes to their Cost Allocation Plans (CAP) to 
accommodate these health home planning activities.  States could draw down the FMAP for 
planning activities before updating the CAP, as long as it is amended in a timely manner once the 
State obtains CMS approval for its health home planning activities.  OMB Circular A-87, 
Attachment D, stipulates the following:  State public assistance agencies are required to promptly 
submit amendments to the cost allocation plan to HHS for review and approval. 
 
Letters of request should be sent via email to healthhomes@cms.hhs.gov. There is no deadline 
for submissions, however only expressions of interest are expected. 
   
 
Page 11 - State Medicaid Director 
 
Coordination with SAMHSA 
 
Section 1945(e) of the Act requires States to consult and coordinate with SAMHSA in 
addressing issues of prevention and treatment of mental illness and substance use disorders for 
individuals who are low-income and/or have one or more chronic illnesses who are at greater 
risk of developing mental health and substance use disorders.  In addition, individuals with 
mental health and substance use disorders, especially individuals with a serious mental illness, 
have significantly higher co-morbid conditions than the general population.  When these chronic 
conditions go untreated, individuals often experience greater physical illnesses that require 
increased medical treatment, such as costly hospitalizations.  Therefore, health home SPAs 
should address how the proposed approach will assure access to a wide range of physical health, 
mental health and substance use prevention, treatment, and recovery services.  The approaches 
may include screening for alcohol and certain illegal drugs, identifying available mental health 
and substance abuse services, discharge planning, care planning that integrates physical and 
behavioral health services, person/family-centered treatment planning, referral and linkage to 
other specialty health and behavioral health treatment, and supports that promote recovery and 
resiliency.   
 
As such, CMS is requiring States to consult with SAMHSA as they develop their approaches to 
health homes, prior to submitting their State plan amendments.  States should send an e-mail to 
health.homes@SAMHSA.hhs.gov and include:  a brief overview of the proposed design of the 
health home; the specific areas for the consultation; the State contact person; and State 
timeframes and availability for obtaining the consultation.  SAMHSA will be sending letters to 
the States to further clarify the consultation process.  CMS and SAMHSA also encourage States 
to coordinate with their State behavioral health authorities regarding efforts they are currently 
undertaking regarding primary care and behavioral health integration.  It is important to note 
that, given the whole person approach to a health home, the behavioral health needs of 
individuals receiving services from a health home provider should be addressed through this 
model, regardless of the chronic conditions targeted by the State to determine eligibility into the 
health home. 
 
State Monitoring Requirements  
 
As described in more detail below, the impact of the health homes provision will be examined in 
both an interim survey of States and an independent evaluation.  Both the Interim Survey and the 
Independent Evaluation will be subsequently followed by Reports to Congress.  CMS expects 
States to collect and report information required for the overall evaluation of the health home 
model of service delivery, and recommends that States collect individual-level data for the 
purposes of comparing the effect of this model across sub-groups of Medicaid beneficiaries, 
including those that participate in the health home model of service delivery and those that do 
not.  This evaluation, and the data gathered for it, will provide States with information that can 
help inform continued improvement of a States health home model.   
 
     
 
Page 12 - State Medicaid Director 
 
As part of the focus on continued improvement and evaluation, section 1945(f) of the Act 
requires States that implement these health homes to track avoidable hospital readmissions, 
calculate cost savings that result from improved coordination of care and chronic disease 
management, and monitor the use of health information technology to improve service delivery 
and coordination across the care continuum (including the use of wireless patient technology in 
improving coordination, management of care, and patient adherence to recommendations made 
by their providers).  For the purposes of the overall evaluation, States are also expected to track 
emergency room visits and skilled nursing facility admissions.   
 
States will be expected to describe in their SPAs the methods they will use to track, calculate, 
and monitor all of the above-mentioned monitoring requirements.  However, in order to obtain 
comparable data for the evaluation, CMS plans to provide standardized methodologies for 
tracking avoidable hospital readmissions and calculating cost savings.   
 
Prior to the availability of standardized methodologies, CMS encourages States to consider the 
following as they develop their SPAs and determine their preliminary methodologies for tracking 
avoidable hospital readmissions and calculating cost savings:  
 
  In tracking avoidable hospital readmissions, States are encouraged to consult measures 
endorsed by the National Quality Forum.  States should consider constructing a 
denominator that counts the total number of hospitalizations for common conditions 
within the Medicaid population, and a numerator that counts the total number of 
hospitalizations within the denominator that were followed by another hospitalization 
within 30 days of the previous hospital stay discharge.  For both the denominator and the 
numerator, a transfer from one acute care hospital to another acute care hospital should 
be counted as one hospitalization rather than two separate stays.  For the purposes of 
comparison, States should consider calculating hospital readmission rates for health home 
beneficiaries and a comparable population of non-health home beneficiaries.  
 
  In calculating cost savings, States are encouraged to first define a comparison group. 
States may consider constructing a pre-/post-comparison of health home beneficiaries or 
an alternative comparison group of non-health home beneficiaries with similar chronic 
conditions and characteristics.  States are also encouraged to construct a calculation of 
cost savings that includes a tabulation of all Medicaid expenditures incurred for the 
health home group and the comparison group.  
 
Quality Measure Reporting Requirements 
 
In order for the State and its participating providers to assess progress, section 1945(g) of the Act 
requires designated providers of health home services to report to the State on all applicable 
quality measures as a condition for receiving payment.  When appropriate and feasible, quality 
measure reporting is to be done through the use of health information technology.  
 
     
 
Page 13 - State Medicaid Director 
 
As mentioned above, CMS plans to allow States to choose which health home provider 
arrangement(s) to offer.  States may choose to offer health home services through a designated 
provider, a team of health care professionals, and/or a health team.  The quality measure 
reporting requirements for health homes apply only to designated providers and the team of 
health care professionals, which is comprised of at least one designated provider.  The quality 
measure reporting requirements for the health team provider arrangement are separately 
identified in section 3502 of the Affordable Care Act, and include the collection and reporting of 
data on patient outcomes, including the collection of data on patient experience of care.  States 
planning to operate a health team provider arrangement, in addition to one or more of the other 
provider arrangements authorized in section 2703 of the Affordable Care Act, are expected to 
describe in their SPAs how they will align the quality measure reporting requirements within 
section 3502 of the Affordable Care Act and section 1945(g) of the Act.  
 
CMS will provide further guidance on these reporting requirements.  In consultation with States 
and others, we plan to provide States with a core set of quality measures for assessing the health 
home model of service delivery.  CMS expects the core set to include quality measures that 
assess individual-level clinical outcomes, experience of care outcomes, and quality of care 
outcomes.  CMS is currently working to align:  (1) the mandatory quality measure reporting 
requirements included within section 401 of the Childrens Health Insurance Program 
Reauthorization Act of 2009 (CHIPRA); (2) the voluntary quality measure reporting 
requirements within section 2701 of the Affordable Care Act; and (3) the mandatory quality 
measure reporting requirements within section 3502 of the Affordable Care Act. 
  
Until such time that CMS releases a core set of quality measures, States are expected to define 
the measures they plan to use to assess their health home model of service delivery.  The 
measures are expected to capture information on clinical outcomes, experience of care outcomes, 
and quality of care outcomes specific to the provision of health home services.  
 
Evaluation 
 
Section 2703(b)(2) of the Affordable Care Act requires the Secretary to survey States that have 
elected the health home option not later than January 1, 2014, for the purpose of preparing an 
Interim Report to Congress.  States will be required to report to CMS on the nature, extent, and 
use of the health home model of service delivery, particularly as it pertains to:  hospital 
readmission rates; chronic disease management; coordination of care for individuals with chronic 
conditions; assessment of program implementation; processes and lessons learned; assessment of 
quality improvements and clinical outcomes; and estimates of cost savings.  
 
Section 2703(b)(1) of the Affordable Care Act requires the Secretary to enter into a contract  
with an independent entity or organization to conduct an evaluation and assessment of States  
that have elected the option to provide a health home model of service delivery.  Not later than 
January 1, 2017, the Secretary is required to submit a Report to Congress on the independent 
evaluation and the effect of this model on reducing hospital readmissions, emergency room 
visits, and admissions to skilled nursing facilities.  States are required to cooperate with the 
entity/organization conducting the independent evaluation and assessment.  CMS will provide   
 
Page 14 - State Medicaid Director 
 
subsequent guidance on the evaluation design to States implementing the health home model of 
service delivery. 
 
We look forward to working with States, individually and collectively to provide assistance and 
to facilitate collaboration in implementing this new Medicaid State plan option.  CMS would like 
to reiterate that this option is but one tool in a broader arsenal that States can use to improve 
service delivery for all people, not just those with chronic conditions or those covered by 
Medicaid.  States interested in this option may develop a stand-alone initiative or embed it into a 
broader effort that promotes the goals of the health home.  
 
If you have any questions, please contact Ms. Barbara Edwards, Director of the Disabled and 
Elderly Health Programs Group, at 410-786-0325.  Questions or comments may also be 
submitted to the health home mailbox, at healthhomes@cms.hhs.gov. 
 
            Sincerely, 
 
            /s/   
 
            Cindy Mann 
              Director 
 
Attachment 
cc:   
CMS Associate Regional Administrators 
Division of Medicaid and Childrens Health 
 
Rick Fenton           
Acting Director 
Health Services Division 
American Public Human Services Association 
 
Andrew Allison 
President 
National Association of Medicaid Directors 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
   
 
Page 15 - State Medicaid Director 
 
Debra Miller 
Director for Health Policy 
Council of State Governments 
 
Christine Evans, M.P.H. 
Director, Government Relations  
Association of State and Territorial Health Officials 
 
Alan R. Weil, J.D., M.P.P. 
Executive Director 
National Academy for State Health Policy