Rhode Island expects to benefit from rebate program

Like many state Medicaid directors, Elena Nicolella says that her biggest fiscal challenge is responding to an ever-increasing need for services with an ever-decreasing amount of revenue.

While the full fiscal impact of the drug rebate program included in the health care reform law isn't yet clear, Ms. Nicolella says that Rhode Island will benefit from the application of the rebate to drugs purchased through Medicaid managed care arrangements. "We will need to work closely with our Medicaid managed care organizations to ensure we are collecting the data that is required," says Ms. Nicolella.

However, there is an important caveat. "The benefits of that change will certainly be offset by any decreases we experience in our current supplemental agreements," says Ms. Nicolella. "We have initially estimated those losses to be at around 30%."

Ms. Nicolella adds, "We are fortunate that we adopted Medicaid managed care as a delivery system. If we had not, we would not experience any benefit from these changes."

The long-term impact of the rebate program on Rhode Island Medicaid, however, remains unclear. "We will always have a portion of our population for whom we are purchasing drugs directly," explains Ms. Nicolella. "The expanded drug rebate program essentially limits our ability to negotiate rebates above levels in existence before passage of the Affordable Care Act."

Since the majority of the population enrolls in a managed care delivery system, though, Rhode Island does expect to be among those states that see a fiscal benefit. "We will have to monitor how the drug manufacturers react to the new requirements," says Ms. Nicolella. "We may have to spend more time on dispute resolution."

Data will be integrated

"We are very excited about the recent roll-out of our data warehouse, CHOICES," says Ms. Nicolella. "Unfortunately, the recent floods in Rhode Island have delayed our ability to fully roll out in the time frame we had hoped."

Once it is fully operational, however, Rhode Island Medicaid will be able to quickly combine eligibility, claims, and utilization data from multiple state agencies. "This will allow us to evaluate all of our publicly funded programs from a more comprehensive perspective," says Ms. Nicolella. "This will enable us to understand the impact of Medicaid on state-only spending, and vice-versa."

Individual client data will be accessible from multiple programs across state agencies. This will improve coordination of health and human services programs, especially those funded by Medicaid.

The system also has a specific predictive cost-modeling component that can identify high utilizers, which should be operational within a year. This will improve the state's ability to forecast expenses and predict potentially high-cost cases. "Initially, we will be able to develop reports that identify high-cost cases or high utilizers based on indicators we use now," says Ms. Nicolella. "CHOICES will enable us to produce these reports quickly. It will also allow us to use data outside of the Medicaid program." This means that individuals can be identified who may not be utilizing services funded by one state agency at all, but may be over-utilizing services funded by a different state agency.

Other initiatives under way

Four other major initiatives will be implemented by Rhode Island Medicaid during fiscal year 2011. The first two involve reforming the way hospital and nursing home services are paid for. First, an acuity-adjusted rate for nursing homes will be implemented in July 2011. An APR-DRG payment system for inpatient hospital services is also being implemented.

"We intend these two payment reform initiatives to result in payments more closely aligned with the needs of Medicaid beneficiaries," says Ms. Nicolella. "These initiatives also seek to increase the transparency of how Medicaid pays for services."

Thirdly, Medicaid managed care contracts are being re-procured. As part of this initiative, the state is seeking to combine its two large separate managed care programs, one for children and families, and one for adults with disabilities, into a single program.

Lastly, Rhode Island Medicaid is setting out to improve the connection of its long-term care system to primary and acute care services. This will be based on the concepts of the primary care medical home.

"This initiative will seek to decrease the isolation that individuals and families can experience as they transition from setting to setting, from hospital to nursing home back to home," says Ms. Nicolella. "We want to ensure that care is coordinated through these transitions and that primary care practices are engaged."

Ongoing HIE efforts

Coming up with the necessary funding to implement health information technology, even with federal incentives, is one current challenge. "Even in good times, the 10% state match is frequently a limiting factor. It is especially hard to obtain the monies in hard times," says Ms. Nicolella.

The state work force head count has decreased due to an employee attrition program. This has led to an increased work load on the people remaining in Rhode Island Medicaid.

"Therefore, the Medicaid program must thoughtfully plan how to maintain the 10-year Electronic Health Records incentive program, by staffing it with personnel who have the requisite expertise to maximize implementation statewide," says Ms. Nicolella.

Rhode Island's small size means that there will be only one Health Information Exchange (HIE) statewide. "So, our medium- and long-term concerns of HIE interoperability are more interstate rather than intrastate," says Ms. Nicolella. "We recognize that implementing our HIE statewide will take considerable time and effort by us and many other parties in Rhode Island."

Rhode Island Medicaid is also working on modernizing its IT systems to the Centers for Medicare & Medicaid Services (CMS)' Medicaid Information Technology Architecture specifications.

"This has large implications for our integration with the state HIE and data exchange in general," says Ms. Nicolella. "We also have the challenge of devising a logical way to make the central HIE integrate with other systems." For example, the large hospital networks have Internet-based systems that extend to multiple providers.

Rhode Island's HIE efforts have been ongoing for several years, with the first implementation completed in the first half of 2010. As the regional health information organization and the Regional Extension Center for the state, the Rhode Island Quality Institute in Providence will play a major role in seeing the process through, along with the Medicaid agency and the Department of Health.

"The multiyear efforts mean stakeholders are well informed of the issues and have an awareness of the key players in Rhode Island," says Ms. Nicolella. "This core group of people will be called upon again to take the implementation to the next stage."

Ms. Nicolella says that CMS' proposed definition of "meaningful use" "appeared logical and well thought out, although the requirements are daunting. It starts out providers and hospitals with a relatively low qualification bar for Stage 1 that ratchets up to more stringent requirements in the ensuing years."

Ms. Nicolella says that at this stage, she expected more software vendors of electronic health records (EHRs) to be ready to meet CMS' requirements for Stages 2 and 3 of implementation. "However, we expect the EHR software companies will rise to the challenge, so the providers and hospitals will have a good range of choices when it comes time to buy," she says. "As to helping the providers qualify for incentives, Medicaid and the Rhode Island Quality Institute will collaborate to produce education tailored to assist the providers and hospitals."

[Contact Ms. Nicolella at ENicolella@dhs.ri.gov.]