Is 'doing business differently' enough to help cash flow?

There is no question that states are working hard to get better value for their Medicaid dollar by implementing various quality initiatives with an eye toward reducing long-term costs. "They are constantly trying to work on program integrity issues. But the problem with some of the quality things, in particular, is that it's hard to see overnight savings," says Robin Rudowitz, a principal policy analyst for the Kaiser Commission on Medicaid and the Uninsured in Washington, DC. "States are still implementing those things. But when states are facing cash flow problems, that's not going to help them with that."

Michael P. Starkowski, commissioner of Connecticut's Department of Social Services, reports that the agency recently lost 250 people as a result of a retirement program for state agencies. This means that fewer people are there to take the state's exponentially increasing number of Medicaid applications.

"Everybody is stepping up to the plate to do more with less," says Mr. Starkowski. "Having been here many years, I've been through this at least two other times. At the end of the day, it's a wake-up call for doing business differently. Now you have to; there is no choice. In times like this, there are real opportunities to change the system. And that's what we are trying to do."

Here are some of the ways Medicaid programs are saving dollars:

• Doing a better job of detecting fraud.

Connecticut has developed a data warehouse, funded partially through enhanced CMS funding, which enables real-time "data mining" of claims submitted to the department. These are analyzed to check for any unusual expenditures, aberrations in trends, or substantial increases. "We will work with providers to see if we can weed out fraud, or at least be a sentinel out there to discourage fraud," says Mr. Starkowski.

• Moving ahead with health information technology (HIT).

Utah Medicaid is looking closely at the potential fiscal impact of HIT incentives for providers. "I think it will help some provider groups more than others," says director Michael Hales. "The biggest thing we are looking at is the requirement that the physician practice's client base has to be 30% Medicaid in order to qualify for the funds. We probably aren't going to have quite as many qualify for that as we'd like. But in terms of infrastructure, we are doing a number of things."

To facilitate the sharing of data, Utah Medicaid is drawing on the strength of the state's regional health information exchange, called UHIN. An all-payers database is being built with a clinical health information exchange. "Those initiatives were under way well before the stimulus package came out. Now we are just looking at how the incentives can help to support that infrastructure," says Mr. Hales.

Mr. Starkowski explains that Connecticut Medicaid already has taken advantage of some of the earlier transformation grants that were available from the federal government. "We are now starting to roll out our e-prescribing program. We will be rolling out our EMR and e-health records programs in the next six to eight months," he says. "We are working closely with our department of public health, as they are the entity designated to accept the dollars for enhancements. We've got our hands in everything to do with HIT."

A group of stakeholders has been convened to work out how the federal incentives for providers will be distributed. "It's difficult for a small provider to bear not only the expense of getting the equipment in, but also to get the staff trained. And we've been pretty proactive in that arena. That is why we moved right into e-prescribing right when the dollars became available," says Mr. Starkowski.

• Changing what constitutes "medical necessity."

To make care more cost-effective, Connecticut Medicaid received authorization to change its definition of "medical necessity" to be consistent with the definition used by Medicare. "If there happens to be a new procedure approved yesterday requiring a $15,000 payment and there is a proven procedure used for years that will get the same results and costs $3,000, we now have the ability to say, 'Even though the doctor requested Procedure Y, we will approve Procedure X.' This provides the same quality of services at a lower cost," Mr. Starkowski explains.

• Implementing a return prescription drug program.

Connecticut Medicaid has implemented a prescription drug return program with skilled nursing facilities to redispense available medications if a patient leaves the facility or is deceased. "On an annual basis, we probably save about a million-and-a-half dollars, and we are doing a push to save even more," says Mr. Starkowski.

• Expanding the Preferred Drug List (PDL).

Connecticut's Department of Social Services' pharmaceutical and therapeutics committee recently expanded its PDL. The PDL originally covered only the Medicaid fee-for-service program covering elderly and disabled individuals. It is now being expanded to the Husky A, (Medicaid for families and children), Husky B, (the state's SCHIP program) and the State Administered General Assistance (SAGA) programs. "We have a very robust PDL with pretty much all of our manufacturers participating," Mr. Starkowski says. "Once we coalesced our pharmacy under one umbrella, it was easier to go to the manufacturers, and say, 'Here's the population that your drug can now be going to. Here's the volume that will be administered in a particular year. What can you do for a supplemental rebate?' That's worked fairly well for us."