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3rd Quarter MCO Performance Evaluation Report

Tuesday, October 28, 2014

Message from the Director:
Attached for your information is the 3rd quarter performance report for the District’s three full risk-based Medicaid managed care organizations (MCO).  The data utilized for this report are generally from the time period of January through March 2014, with some information based on data collected as late as June 2014.  While the previous two quarterly reports were limited by the fact that the data covered a short period of time since the beginning of the MCO contracts in July 2013, this reporting period consisted of nine months of data from which to base our assessments of MCO performance.  As with the earlier reports, this document contains information on the financial condition, administrative performance, case management activities, and the medical spending of the District’s three full risk based health plans.
Similar to findings in the previous reports, the MCOs are, in general, financially stable and they continue to receive high marks for their performance in the execution of the basic administrative requirements for health plans -- maintaining an adequate provider network, reasonable administrative spending, timely payment of claims, and development of robust patient encounter data systems.
In terms of spending on beneficiaries’ medical care, all three health plans continue to meet or come close to the 85% Medical Loss Ratio - the threshold requirement for spending on health care services.  Nonetheless, there are significant differences in the medical expenses across MCOs that cannot be readily explained by differences in their beneficiaries’ health profiles.  Given DHCF’s new policy to risk adjust rates based on relative MCO differences in beneficiary risk, health plans with lower member risk scores but persistently high beneficiary medical costs will be placed in an untenable position over time.
We continue to be encouraged by the high primary care utilization rates by adults and children, although the rate for adults has diminished slightly.  And, for the first time since the contract year began in July 2013, we are seeing positive growth in the MCO mental health spending data.  This suggests that the plans are making real progress in addressing some of the access issues that have plagued efforts to increase the mental health penetration rate for children and adults who need this type of care.  For certain there is more work to be done in this area but the observed higher level of spending is encouraging.
With three quarters of data for each of the health plans, we now possess sufficient information to support a more detailed analysis of the progress MCOs are making with efforts to better coordinate their members’ care.  More sophisticated measures have been constructed to track low acuity hospital admissions, readmission rates for persons being treated for the same illness, and the use of the emergency room for routine care.  Here the numbers are less encouraging as the data point to continued struggles by the health plans with beneficiary care coordination and management.  Some of the specific findings in the report are as follows:

  • The rate at which beneficiaries continue to use the emergency room for routine care remains high -- from 63 to 72 percent of all visits to the emergency department.  Based on additional analysis, the health plans should be expected to prevent from 16 to roughly 20 percent of these visits.  The failure of the plans to do so created $5.9 million in additional cost.
  • Analysis of claims data reveal that collectively for every 12 Medicaid “index hospital admissions” paid for by the District’s MCOs, they encountered and paid for one readmission for the same illness at a cost of $10.7 million.  Evidenced based research suggest that a significant proportion of these readmissions are preventable.
  • Combined these problems -- emergency room use for low acuity illnesses and potentially avoidable hospital admissions  and readmissions -- cost the MCOs more than $22 million in the nine months of the first contract year.

Going forward,  DHCF has a number of initiatives planned for managed care, including a pay-for-performance program.  This effort, which we hope to implement in FY2016, will require the health plans to achieve a certain level of performance on some of  widely recognized and key health metrics or face a reduction in their monthly payment rate.
Please take a moment to peruse this important report.  I hope you find it useful.  
Wayne Turnage