Lawmakers Discuss Medicaid Expansion, Meaning Of ‘Payment Reform’

The state House Finance Committee has spent several hours this week considering the Governor’s Medicaid expansion bill- HB 148. A lot of that time has been focused on finding a better way to pay for health care services. It’s called “payment reform” and it’s a big topic of discussion in the health care world right now.

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The Medicaid expansion bill allows the health department to consider using payment reform as one way to control costs in the state’s Medicaid program.

At a hearing this week, Representative Lance Pruitt, an Anchorage Republican, wanted to know more.

“I’ve heard and seen a lot about payment reform,” Pruitt said. “There’s even parts of the bill that say payment reform. But I don’t have a definition, from what I can tell, of what does payment reform exactly mean.”

Health Commissioner Valerie Davidson spent several minutes answering Pruitt. But her main point was that payment reform would involve reimbursing doctors based on patient outcomes instead of paying for every specific service. The idea is to give doctors incentives to provide the best care instead of a lot of care:

“Alaska is a fee-for-service state and quite frankly we are interested in changing that dynamic and quite frankly we have to,” Davidson said. “And we are interested in reforming Medicaid, not just for the expansion population, but for everybody. Because we don’t have a choice.”

At the federal level, Medicare recently announced it’s also moving away from fee-for-service.

And for more than last two years, the Center for Medicare and Medicaid Services has been funding a demonstration project at PeaceHealth Hospital in Ketchikan that offers a glimpse at what medical care might look like under payment reform. Matthew Eisenhower is director of community health development at the hospital.

“For the last 50 years, our healthy delivery system has been expert at how we fix people, but by and large we are not very good at keeping people healthy.”

Eisenhower is leading the demonstration project at PeaceHealth in Ketchikan. The hospital is spending about $700,000 a year in federal grant funding on a care coordination team. One big goal of the team is to prevent people from being readmitted to the hospital. Nurses and social workers follow up with patients who are discharged to make sure they’re taking their medication. They also check with the patient to see if they have financial stress, if they’re eating properly and if they have transportation to get to their follow-up appointments. It’s really social work, not medical care, but Eisenhower says it’s essential for keeping people out of the hospital:

“I believe it needs to be part of our responsibility, and the only way it will happen and be incentivized is through payment reform.”

Eisenhower says the project has reduced the hospital’s readmission rate by 45 percent. He is saving a lot in healthcare dollars by keeping those patients from returning to the hospital. But in the process, the hospital is also losing revenue. That’s why Eisenhower told lawmakers the payment system has to change.

“Most healthcare providers understand what needs to happen to keep people out of the hospital. Right now there is not incentive, you know the old adage, how do you herd cats? You don’t try to herd them in any other way than moving the food.”

The Health Department is hiring a contractor to look at the types of payment reform that have worked in other states to get a better idea of what could work in Alaska.

This story is part of a reporting partnership between APRN, NPR and Kaiser Health News.