Do Provider Service Networks Result in Lower Expenditures Compared with HMOs or Primary Care Case Management in Florida's Medicaid Program?

Medicaid programs struggle to control costs and many are experimenting with alternative delivery models. The Affordable Care Act includes several provisions related to Medicaid, such as Accountable Care Organizations, Medicaid Health Homes, bundled payments, and community-based collaborative care networks (U.S. House of Representatives 2010). For decades, Florida's Medicaid program has experimented with different reforms (Duncan et al. 2008), including the development of contractual relationships with organizations that include many of the functions and activities now envisioned for accountable care organizations (ACOs) and community-based collaborative networks. Through the past decade, these piloted models have converged into the current provider service networks (PSNs), and they are active in five counties through a Section 1115 waiver (Coughlin et al. 2008; Landry, Lemak, and Hall 2011). The waiver included risk-adjustment to HMO capitation rates and authorizing the PSN as option enrollees could select as their managed care organization (Agency for Health Care Administration 2005). Since 2005, Florida PSNs have been paid on a discounted fee-for-service basis with shared savings. Approximately 300,000 enrollees receive care through a mix of Medicaid HMOs and PSNs in the Demonstration being conducted through the waiver. The Florida Medicaid PSNs share many of the accountable care attributes identified in the literature and can be considered “ACO-like” organizations, specifically: the provision of care across a continuum to a defined population, the ability to support comprehensive performance measurement, the identification of specific performance targets, payment mechanisms that encourage quality improvements and cost reduction, strong primary care medical home base, prospective planning, and health information technology to support care coordination and quality improvement (Coughlin et al. 2008; Devers and Berenson 2009; Shortell, Casalino, and Fisher 2010). Like ACOs, each PSN is responsible for a defined patient population and held accountable for cost and quality performance. The organizational, financial, and legal requirements of the PSNs are nearly identical to those for Medicare Shared Savings ACOs and Pioneer ACOs. The state pays PSNs a per member per month administrative fee and pays PSN providers on a fee-for-service basis. If PSNs achieve cost savings in a particular time period, they receive additional payments (a portion of the savings). If PSNs do not achieve cost savings, they must return a portion of the administrative fees. Thus, PSNs are at risk for the administrative fees, not the total cost of care. This is similar in some ways to the Medicare Shared Savings ACO model in which ACOs share savings but are not at risk for losses (one-sided risk). Unlike ACOs, PSNs are not yet accountable for total cost of care and payments are not tied to quality performance. Like the ACO approach, however, the original PSN legislation called for PSNs to move to risk-adjusted capitation after a 3-year transition period (the same language is used for Pioneer ACOs). Subsequent Florida legislation allowed PSNs to remain fee-for-service. So far, no PSNs have moved to risk-adjusted capitation and no payments are based on quality performance measures. The PSNs are all not-for-profit entities that operate only in Florida and only enroll Medicaid beneficiaries. Their parent organizations are either safety-net hospitals or large physician group practices that predominately serve Medicaid patients. In summary, PSNs share some of the features of ACOs and the experience in Florida over the past several years is likely to be informative for the initial years of the Medicare ACO models being implemented nationally. In addition to the PSNs, Florida Medicaid beneficiaries in the Demonstration counties can choose Medicaid HMOs, which are paid a risk-adjusted monthly premium to provide all care to enrollees. The experience in Florida Medicaid provides an opportunity to examine these different organizational models (HMO vs. PSN). Differences in organization structure, reimbursement approach, ownership, and populations served could result in differences in expenditures across the two plan types. In particular, the PSN model is similar to many emerging ACOs, in that providers (either safety-net hospital systems or physician networks) are the owners and drivers of these plans. In addition, the PSN financial approach includes discounted fee-for-service payments with shared savings potential. Finally, in these organizations, quality measures were required and publicly reported by plan name and county during the demonstration. Across the rest of the state, Medicaid beneficiaries can also choose a Medicaid HMO or enroll in a primary care case management program (PCCM), called MediPass. Care for enrollees in MediPass is provided on a fee-for-service basis, with primary care providers serving as gatekeepers (Johnson et al. 2010). However, the gatekeeper function under MediPass is relatively minimal (compared with that in HMOs) as there are essentially no incentives for primary care providers to monitor referrals for specialty and other care. The HMOs in non-Demonstration counties are not paid risk-adjusted premiums as they are in the Demonstration counties. So, in the non-Demonstration counties, MediPass and HMOs are not subject to the same reimbursement mechanisms as in the Demonstration counties and, consequently, may have higher expenditures. Table​Table11 includes a summary of the characteristics of Florida PSNs, Medicaid HMOs, and MediPass. Table 1 Comparing PSN, HMO, and MediPass Models A previous study examining Florida's Medicaid's Demonstration compared per member per month (PMPM) expenditures in the Demonstration counties with those in non-Demonstration counties 2 years after implementation and found no significant impact of the Demonstration on PMPM expenditures (Harman et al. 2011), but it did not look at the effect of enrolling in a PSN versus an HMO in the Demonstration counties. In this study, we use a similar analytic approach to examine changes in PMPM expenditures 4 years after implementation for all Demonstration plans and specifically between PSNs and HMOs in the urban Demonstration counties and compare those changes in expenditures to those observed in two matched non-Demonstration counties.