Press Release  Audit Determines MassHealth Making Progress to Implement New Payment Methods Mandated by Healthcare Law

Boston — Auditor Suzanne M. Bump today released the results of the first audit of state agency activity under Chapter 224 of the Acts of 2012, the Commonwealth’s healthcare cost containment legislation. The audit reviewed MassHealth’s progress in adopting alternative payment methodologies (APM) as called for in the law. APMs, an alternative to the traditional fee-for-service method that shifts the way providers are paid for services to encourage coordinated care and efficiency, are intended to help improve quality of care, expand access and control escalating healthcare costs.

The audit found that MassHealth initially focused on only the cost containment component of implementing APMs, but the expansion of the initiative to include quality and access, plus obstacle identified by providers, have slowed implementation and prevented it from reaching the adoption rates required by Chapter 224. As of July 1, 2014, MassHealth was required to move 50 percent of its members into APMs; however, at the time of the audit, it had reached only 29 percent. The audit reviewed implementation of APMs from August 5, 2012, when the legislation was signed into law, through June 30, 2015.

“With MassHealth accounting for over one-third of our annual state budget, it is critical that we take steps to address cost increases while improving care,” Bump said. “MassHealth agreed with many of our findings in this audit and reported that it has implemented a plan to address hurdles slowing implementation of APMs and achieve the benchmarks established in the legislation.”

In response to the audit, MassHealth indicated that it has already begun to work with its Managed Care Organizations (MCOs) to set clear expectations and definitions for APM implementation and data integration, and to develop a consistent methodology for tracking APMs from year to year. MassHealth reported to OSA that it has incorporated some of these requirements into the MCO’s contracts.

MassHealth provided OSA with a copy of its plan to reach 80 percent adoption of APMs in accordance with the benchmarks established by Chapter 224. The plan includes expanded stakeholder engagement, and investments in infrastructure and technical assistance, however the plan did not include a timeline for doing so. That plan is included as an appendix in the audit report.

MassHealth’s contracted MCOs, which are working with the agency to establish APM contracts with providers, noted various obstacles they encountered to implementing APMs, including healthcare providers lacking the required infrastructure to implement an the model (actuarial experience, technical skills, and strategic planning), and insufficient funding to effectively implement a sustainable APM program.  

The Massachusetts Legislature passed Chapter 224 with the goal of controlling costs, expanding access and improving quality of healthcare services.  The benchmarks established in the law are outlined below:

• 25 percent by July 1, 2013
• 50 percent by July 1, 2014
• 80 percent by July 1, 2015.

Chapter 224 requires the Office of the State Auditor (OSA) to review the impact of the legislation on healthcare payment and delivery systems, healthcare consumers, the healthcare workforce, and the general public and present findings and recommendations to the Legislature by March 31, 2017. In addition to that report, the OSA is conducting an ongoing series of audits related to different initiatives resulting from of the legislation. This audit, while not required by law, is intended to provide a progress update on the implementation of this key aspect of that law.

In fiscal year 2015, MassHealth paid healthcare providers $13.6 billion. Massachusetts receives a reimbursement from the federal government for 50 percent of most services provided to MassHealth members. MassHealth expenditures account for roughly 38 percent of the state’s total annual budget.

The Office of Medicaid (MassHealth) - Progress to Implement Alternative Payment Methodologies audit is available here.

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