Roundtable discussion at the 10th annual McKinsey Healthcare Conference

1. CONFIDENTIAL AND PROPRIETARY
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Medicaid risk in pediatrics
Edward Levine, David Nuzum, Alex Harris
Roundtable

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Pressure to deliver high quality care in a funding constrained
environment is driving the need for innovative risk models
Key question: How can children’s hospitals, states, and MCOs work together
to design the “best fit” risk-based model for a specific market?
Under both federal and state budget
pressure, Medicaid programs face
major changes in financing, and
potential cost pressures:
 Per-capita caps or allotments
 Increased patient cost-sharing
 Changes to supplemental
payments
Children’s hospitals play
an important role in
Medicaid networks, and
figure prominently in any
State’s efforts to ensure
financial sustainability while
preserving access to care
Options for States to contain costs:
▪ Shift costs to providers (e.g.,
reduced rates) – could decrease
provision and quality of services
▪ Shift costs to patients (e.g.,
reduce eligibility/benefits) – could
result in delayed care-seeking
▪ Innovative value-based
payment models that incentivize
productivity and efficiency

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These models are gaining traction across the country
Arkansas
▪ Active episodes incl. asthma, ADHD,
ODD, perinatal, and tonsillectomy
▪ Implemented PCMH program at ~125
family and pediatric practices with
support from private payers (e.g., AR
BCBS, Humana, Qualchoice, Centene)
Tennessee
▪ Launched 34 episodes incl. asthma,
perinatal, neonatal, otitis media,
tonsillectomy, and ODD; 18 more
episodes under development incl.
pediatric acute lower respiratory
infection
▪ Launched statewide PCMH program;
partnering with AAP to improve pediatric
quality
Ohio
▪ Partners for Kids, an ACO led by Nationwide
Children's Hospital partners with 5 Medicaid MCOs
▪ OH Medicaid implementing episodes (e.g., asthma,
perinatal, ADHD) and participating in primary care
models (e.g., CPC+, PCMH) that incl. pediatric care
Colorado
▪ Colorado Children's Healthcare
Access Program (CCHAP) supports
250 pediatric and family practices
develop and implement primary care
medical homes
California
▪ California Children’s Services (CCS)
partnered with 5 organizations, incl.
Rady and Children’s Hospital of
Orange County to manage care for
children with severe needs and take
on risk through ACO-like models
Massachusetts
▪ Boston Children’s is one of six
ACOs partnering with
MassHealth; piloting high-risk
asthma bundled payment
▪ MassHealth PCMH initiative incl.
~50 family and pediatric practices
Pennsylvania
▪ Level 2 ACO; Aetna’s
first pediatric ACO
▪ Level III PCMH
Recognition from NCQA
▪ Provider-owned HMO
that offers Medicaid and
CHIP coverage
Minnesota
▪ Children's Hospital and Clinics of MN
partnered with MN DHS to operate
an ACO demo project through the
Integrated Health Partnership
Texas
▪ STAR kids, Texas' children's
Medicaid managed care plan,
contracts with 18 MCOs
including Texas Children's and
Cook Children's Hospitals

4. 4
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There are four model archetypes being implemented in the
market on their own or in combination
Bundled payments / episodes of care
Risk sharing relative to performance against
thresholds for a specific episode of care,
either chronic or ambulatory
Pediatric ACO
Providers accountable for total cost and
quality of care for specific population
Medical home / health home
(e.g., advanced primary care, behavioral
health integration)
Primary care physician or behavioral health
professional receives care coordination
payments and shared savings / gain-sharing
based on total cost of care performance
Provider-owned or payer-provider JV
MCO
Providers launch own health plan – alone or
in partnership with a payer – to manage risk
for patients and experiment with innovative
care models

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The “best-fit” model and risk sharing arrangement depends on key
design decisions and characteristics of the providers involved
Provider
characteristics
Design
decisions
Key factors ImplicationExamples
Payment
architecture
▪ Level of risk provider is assuming▪ FFS
▪ Global budgets
▪ Capitation
Patient
population
▪ Model archetype▪ Adults and children
▪ Children only (e.g., well-children, exceptional kids,
perinatal)
Provider
network
▪ Network of provider partners▪ Closed network
▪ Open network
▪ Open network with referral circles
Cost position ▪ Risk-sharing model incl. methodology for setting
thresholds
▪ High-cost
▪ Low-cost
Market share/
competition
▪ Willingness to take on risk to secure patient volume▪ Opportunity to grow market share
▪ Little market share growth potential
Alignment
strategy
▪ Ability to influence physician behavior to effectively
manage risk
▪ Employed physicians
▪ Clinically integrated network
▪ Aligned or independent physicians
Capabilities ▪ Ability to take on risk and/or form MCO
▪ Support needed to build required capabilities
▪ Population health management capabilities
▪ Payer capabilities
Care delivery
footprint
▪ Appropriateness of model based on ability to influence
care delivery, control costs, and retain savings
▪ Acute care
▪ Primary care
▪ Behavioral health care
▪ Post-acute
▪ Long-term services
and supports

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Panelists
Daniel Tsai
Assistant Secretary
MassHealth
Keith Holtz
SVP, Talent
Management /
Strategic Marketing
Cook Children’s
Health Care System
Mallory Caldwell
Senior Vice
President
Texas Children’s
Hospital

7. 7
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Discussion questions
 What drove you to pursue a specific model or arrangement? What factors
influenced your choice of model?
 Which models (types or specific examples) do you think have been most
beneficial for BOTH the providers and payers involved, and why? What
have been the greatest challenges?
 What do you believe are the critical capabilities (both payer and provider)
required to support these models?
 Are there specific differences between patient populations – specifically has
there been anything surprising in terms of the experience with one population
vs another?
 What would it take to improve collaboration between children’s hospitals
and states/MCOs in designing risk-based models? How do you envision this
collaboration taking shape?

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Considerations moving forward
 How important are innovative payment models to your future success? To what
extent has your organization prioritized these models to date?
 What are the main factors that influence your decision to participate or not
participate in innovative payment models?
 If you were to pursue innovative payment models, which patient populations
would you prioritize?
 Given your capabilities, which specific model designs would work best for you?
 How can you leverage partnerships and partners’ capabilities to promote
collaboration throughout the development of new innovative payment models?