PROVIDENCE – In the cartoon version of Madeline, Miss Clavel sings, sensing a premonition: Something is not quite right. Something is quite wrong… And it’s giving me a chill.

A similar premonition is building around Rhody Health Options and the delay in signing a Memorandum of Understanding with the federal Centers for Medicare and Medicaid, according to sources familiar with the situation.

The MOU represents the third leg of a stool for the Integrated Care Initiative, focused on Medicare, as part of an effort to combine care delivery and payment streams for dual eligible clients receiving Medicaid and Medicaid services, focused in large part on patients in nursing facilities. Once signed, the Medicare part of the program, known as Phase II, is planned to be implemented beginning in April of 2015. Phase I, with just Medicaid, began in November of 2013.

The premise of the program is that by better coordinating care and services, more people who are dually eligible can be kept out of long-term nursing facilities, and costs can be cut. The state of Rhode Island had contracted with Neighborhood Health Plan of Rhode Island as the sole provider to provide the case management services; Neighborhood Health Plan has been the only bidder to respond to the state’s Request For Proposals.

What looked good on paper, however, has not necessarily translated into cost savings. According to the most recently released case management statistics, during the last year, a total of only 84 patients had been transitioned back to the community from nursing facilities. Instead of saving money, the costs of transitioning those patients, including the administrative fees paid to Neighborhood Health Plan, may have increased costs by more than $2.82 million in the last year. 

No details have been provided about the 84 patients who were transferred: when were they transferred, how long did they stay in a nursing facility, what were the projected cost savings, and what was the level of care required? Without those details, it’s difficult to evaluate the metrics, the outcomes and the cost-savings of the program.

In Massachusetts, costs for a similar program were found to be high and enrollments low, according to a scathing Nov. 10 Boston Globe article, “Program for needy patients struggles.” [See link to story below.]

Mounting anxiety
The MOU had reportedly “arrived” in August and had been “awaiting” approval by the R.I. Executive Office of Health and Human Services, according to sources.

Since then, progress on the MOU seems to have stalled. Existing contracts with nursing facilities and home health agencies have evidently not yet been renewed, creating a level of anxiety.

Jacqueline Kelly, the chief legal officer for the agency, told ConvergenceRI that discussions are continuing around the MOU with CMS. “As in other states that have considered this demonstration, there are a number of complex operational and financial issues that need to be resolved to the satisfaction of all parties prior to the finalization of the MOU,” Kelly wrote in email in response to questions.

In response to whether the Gov.-elect Gina Raimondo and her transition team were now involved in the negotiations, Kelly did not directly answer the question, but responded by saying: “We are looking forward to working with the Governor-Elect’s transition team on this and all of the important initiatives underway at EOHHS.”

Further, Kelly said that the MOU had been jointly developed between CMS and EOHHS, and undergone review at CMS. “Prior to the final signature, the operational and financial details need to be resolved.”

Digging under the rock
It is not an easy task to cull financial details about Rhody Health Options from the Caseload Estimating handouts.

But, by applying the FY 2014 capitation rates to the FY 2014 member months [from the May estimating conference], the total amount paid to Neighborhood Health Plan was $113.56 million.

Then, by applying the FY 2015 capitation rates to the same number of member months, assuming the same mix of rate categories, Neighborhood Health Plan received a 5.5 percent increase from the state in June. Let’s round that up to 6 percent. 

However, few of the health providers furnishing care to Neighborhood Health Plan enrollees under this program received any increases. The non-profit health insurer, with more than $800 million in annual revenues, apparently did not share the wealth.

By transitioning elders back to the community and better coordinating care, the assumption of the program was that elders would be less expensive to care for. Any extra costs incurred by the state by having Neighborhood Health Plan process and pay claims was supposed to be made up in savings resulting from such transitions.

To discern the potential savings that Neighborhood Health Plan may have achieved through the transition of 84 nursing home residents during the first year, it required ConvergenceRI to do some additional digging.

The capitation rate for a nursing home resident receiving long-term services and supports in FY 2014 was $4,649 a month; multiply that figure by 84, and you get a total of $390,516 a month.

By comparison, the capitation rate for a resident receiving long-term care services and supports in the community in FY 2014 was $2,306 a month; multiply that figure by 84, and you get a total of $193,704.

So, the total projected savings achieved from transitioning enrollees would be the different between the two totals, or $196,812 a month.

[That total may not be accurate, of course, because the 84 individuals would have had to transition from day one, and stayed in the community for the full year, and obviously, that didn’t happen. Further, many providers have approached the 84 number with some skepticism, believing that several individuals were going to be discharged anyway. But, for purposes of math, given the lack of any clear details, let’s keep the 84 number.]

The bottom line
Whatever savings may have been achieved by the transition of 84 individuals to the community was offset by the “administrative component” of the capitation fee paid to Neighborhood, which includes a 2 percent premium tax, which the state claws back.

The monthly capitation fee for FY 2014 consisted of $4,238 for medical expenses, plus $318 for administrative expenses, and $93 for premium tax, for a total of $4,649. 

[In the calculations that follow, the administrative fee does not include the 2 percent premium tax.]

For 16,618 nursing home months, Neighborhood was paid a total of $77,258,910, of which $5,282,364 [16,618 x $318] represented administrative fees for nursing homes.

However, when you compare the extra $5.28 million in administrative fees, with the $2.36 million in alleged savings from the transfer of 84 individuals [$192,812 x 12], you are left with a deficit of $2.82 million in extra costs. Or, to put it another way, the state did not save any money in the transition of the 84 individuals; instead, it cost the state roughly an additional $28,116 per person.

The reality is that the transition of those 84 individuals might well have taken place under a program already in existence, instituted by EOHHS prior to the development of Rhody Health Options. It was a task that was already being performed under the global Medicaid waiver under the direction of the Nursing Facility Transition program begun in 2009. If Rhody Health Options had never been created, those 84 individuals may have been transitioned to the community by the existing team.

When Rhody Health Options began, it took over the work of the existing transition team for enrollees, rather than supplementing it. 

Moving forward
The incoming Raimondo administration will be facing a projected deficit of more than $21 million for the current budget year, FY 2015, as well as a $190 million projected budget deficit for FY 2016, according to most recent budget estimates by the state’s legislative and budget offices.

Whomever Raimondo appoints to the position of secretary of the Executive Office of Health and Human Services, the challenge will be to make the numbers work – not just from a pure cost analysis, or from an ideological perspective about the role of government, but from an accurate cost benefit analysis, one that reflects the changing demographics of Rhode Island as well as the culture change movement within Rhode Island’s nursing facilities.

It may require some additional tweaking – and redesign of the program, with an emphasis on health equity for patients and shared savings for providers – and not just for the state’s general revenue fund or health insurers.