CMS and Massachusetts Advance Delivery System Reform with Approval of New 1115 Waiver

On November 4, 2016, the Centers for Medicare & Medicaid Services (“CMS”) sent word to the Massachusetts Executive Office of Health and Human Services (EOHHS, referred to here as “MassHealth”) that it approved a major amendment to Massachusetts’ section 1115 demonstration project through June 30, 2017.  At the same time, CMS also approved an extension of this same demonstration through June 30, 2022. Approval of Massachusetts’ waiver amendment comes after nearly a year of negotiations and may ultimately result in the transition of the vast majority of MassHealth enrollees into newly-formed Accountable Care Organizations (“ACOs”) operating under one three models, explained below.  A major success for the Baker administration, the waiver authorizes $1.8 billion over five years of new Delivery System Reform Incentive Program (“DSRIP”) payments, authorizes and sustains nearly $6 billion of additional safety net care payments over five years to hospitals and the health safety net for the uninsured and underinsured, and provides subsidies to assist consumers in obtaining coverage on the Massachusetts Health Connector (the state’s Exchange).

ACO Pilots

Prior to the launch of a statewide ACO reform 2018 (discussed below), MassHealth will implement a new ACO Pilot in fiscal year 2017 designed to build toward a transition to statewide ACO models in the future. Specifically, MassHealth will contract with ACOs for a pilot within the Primary Care Clinicians (“PCC”) plan.  Under the Pilot ACOs, provider-led entities (i.e. health systems or groups of healthcare providers) will contract with MassHealth to provide care coordination for certain PCC members and to take financial accountability for the cost and quality of care. The Pilot ACOs will be exposed to both downside risk, as well as potential asymmetric risk (i.e. if potential share savings exceed potential shared losses.) MassHealth may, at its discretion, establish Referral Circles for Pilot ACOs. Referral Circles are groups of providers within the network, for which MassHealth will eliminate the need for otherwise-required primary care referrals for ACO-attributed members, in order to facilitate increased access and coordinated care. The details of the ACO Pilot program are detailed in the Waiver Terms and Conditions, available here.

MassHealth ACO Transformation

Beginning July 1, 2017 MassHealth will begin implementation of a statewide ACO program designed to ultimately enroll nearly 1.3 million members out of MassHealth’s total population of 1.9 million members (only PCC and Managed Care Organization, MCO, members are eligible). ACOs will operate under one of three models, all of which will offer both upside and downside risk and will initially include covered physician health, behavioral health, and pharmacy services.  MassHealth is authorized under the 1115 amendments to offer lower cost-sharing for beneficiaries who choose ACO or MCO enrollment, as an incentive for those members to enroll in one of these models. MassHealth expects to introduce financial accountability for Long Term Services and Supports (LTSS) beginning on or about year three. The three ACO models are as follows:

  • Accountable Care Partnership Plan– An Accountable Care Partnership Plan is an ACO that is partnered with an MCO. Each Partnership Plan will have an exclusive group of primary care providers (“PCPs”), and all members enrolled in a Partnership Plan will receive primary care from these PCPs. Like a MassHealth MCO, the Partnership Plan will be paid a capitated rate for attributed members, and will be at risk for losses and savings beyond the capitation rate. Unlike MassHealth MCOs, Partnership Plans must also meet the requirements for ACOs, including provider-led governance and Health Policy Commission certification. Because the Partnership Plan is an MCO, it will perform many of the administrative functions that MassHealth MCOs perform (e.g., paying claims, maintaining the provider network, prior authorization, etc.). The Partnership Plan will communicate directly with enrollees regarding what it offers and how to access services. Unlike a MassHealth MCO, however, Partnership Plans will not have to cover an entire specified geographic region. Partnership Plans will define their service areas, with MassHealth approval, and will need to have network adequacy in those service areas.
  • Primary Care ACO – A Primary Care ACO is an ACO that contracts directly with MassHealth. Each Primary Care ACO will have an exclusive group of participating PCCs, and all members enrolled in a Primary Care ACO  will receive primary care from these PCCs. Unlike MassHealth MCOs and Accountable Care Partnership Plans (discussed above), Primary Care ACOs will not be paid a capitated rate to provide services. Instead, their attributed members will receive non-behavioral health care from MassHealth’s fee-for-service network, which is paid for directly through the MassHealth claims system. Members attributed to Primary Care ACOs will also be automatically enrolled in MassHealth’s behavioral health plan.. The Primary Care ACO is accountable through shared savings and losses payments based on Total Cost of Care (TCOC) and quality performance for the Primary Care ACO’s population of Attributed Members
  • MCO-Administered ACO– An MCO-Administered ACO is an ACO that is part of the primary care provider network(s) for one or more MassHealth MCO(s). An MCO-Administered ACO may contract with multiple MCOs; an MCO may also contract with multiple MCO-Administered ACOs as part of its network. Each MCO-Administered ACO will have an exclusive group of Participating PCPs. Members who enroll in an MCO may be attributed to an MCO-Administered ACO. Members attributed to an MCO-Administered ACO will receive care from their MCO’s network, which will be paid for directly by the MCO. MCO-Administered ACOs will be accountable to their MCOs through shared savings and losses payments. MassHealth must approve these financial arrangements and the associated requirements in the contracts between an MCO-Administered ACO and its MCOs in order for the MCO-Administered ACO to be eligible for DSRIP.

Community Partners

One key aspect of the newly approved 1115 amendment is the integration of newly formed ACOs with “community partners.” Under the amendment, ACOs will be able to invest in certain approved community services that address health-related social needs that are not otherwise covered under MassHealth.  As a condition of participation as an ACO, ACOs will be required to form linkages to state-certified Community Partners of Behavioral Health and LTSS in order to receive infrastructure funding. This funding, part of the $1.8 billion in DSRIP funding available over five years to improve integration of care and outcomes for members, may be used to address social determinants of health, including for certain approved community services, such as housing stabilization and supports and other health-related social services.

Changes to SNCP Funding

The amended waiver also substantially restructures the state’s safety net care pool (SNCP) funding, which was established in 2005 in Massachusetts for the purpose of reducing the rate of uninsurance, while providing residual funding for uncompensated care. In light of the progress in reducing the uninsured rate in Massachusetts, the SNCP funds are evolved in the new waiver to support delivery system transformation and infrastructure expenditures. The waiver authorizes and sustains nearly $6 billion of additional safety net care payments over five years to hospitals and the health safety net for the uninsured and underinsured, and for subsidies to assist consumers in obtaining coverage on the Massachusetts Health Connector.  The waiver also expands the number of safety net hospitals eligible for reimbursement for uncompensated care from seven to 15.

Much More

The Terms and Conditions of the recently released waiver run to nearly 500 pages and contain a variety of new and modified programs, including a new Pediatric Asthma Pilot Program, new streams of funding for PCPs at community health centers, and investments to reduce the boarding of members with substance use disorders and mental illness in emergency departments. For more on these and other programs, or to discuss what the waiver means for you and your organizations, contact Ross Margulies at

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