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Minnesota’s nation-leading Medicaid reform initiative delivers $10.5 million in savings during first year

July 14, 2014

Minnesota’s new, nation-leading approach to delivering quality health care more efficiently for low-income individuals and families is paying off. In the first year of a program announced by the Department of Human Services and Governor Mark Dayton in 2013, six health care providers serving 100,000 Minnesotans spent $10.5 million less than projected – cost savings that will benefit Minnesota taxpayers.

Governor Dayton today applauded these results, thanking health care providers for partnering with the state on the Integrated Health Partnerships (IHP) initiative – a project focused on providing better health care at a lower cost. The initiative has implemented a new payment model that priorities quality, preventive care and rewards providers for achieving mutually agreed-upon health goals.

“Some people talk about reform. We do it,” said Governor Dayton. “Minnesota is the first state in the nation to implement these cost-saving reforms – and we have proven that this new approach delivers results. I thank the health providers who have partnered with us on this initiative, making it possible to deliver better care to over 100,000 Minnesotans.”

The traditional payment system pays providers for the volume of care they deliver, rather than the quality of care they provide. This system results in misguided incentives for providers – rewarding them for the number of procedures they deliver rather than the preventive care Minnesotans need to live healthy lives. With new payment reforms made under the IHP program, participating providers instead receive financial incentives for reducing the total cost of care for Medicaid enrollees while maintaining or improving the quality of care patients receive.

Preliminary results for the first year show that the results-based approach is fulfilling the promise of delivering better care at a lower cost. The IHP demonstration gives participating providers financial incentives to manage the total cost of care and better coordinate medical care for patients enrolled in Medical Assistance, Minnesota’s Medicaid program. Providers who meet a threshold for savings are eligible for a share of the savings; beginning in the second year, they also share the downside risk if costs are higher than projected.

“Delivering health care at a lower cost is critical, and our efforts are paying off,” said Human Services Commissioner Lucinda Jesson. “Because of the common-sense approaches these providers are taking, the people we serve in the Medical Assistance program are getting better, more coordinated care.”

The positive results for the first year are particularly encouraging because the demonstration runs for three years.

Three of the providers – Children’s Hospitals and Clinics of Minnesota, North Memorial Health Care and Northwest Metro Alliance (a partnership between Allina Health and HealthPartners) – are eligible for interim payments, based on initial calculations showing that they met the threshold for savings in the first year. Final results from the IHP’s first year will be calculated in early 2015.

These examples show how participating providers are coordinating care in innovative ways:

  • High-risk patients served by North Memorial are getting home visits from community paramedics, who help them avoid the emergency room by providing care in coordination with their doctor’s offices and clinics. North Memorial uses data from the Department of Human Services to identify those who are most at risk and includes them in its groundbreaking community paramedic program.
  • At Children’s Hospitals and Clinics, every family in the IHP whose child has complex, high-risk needs is matched with a care coordinator to provide a hands-on approach to their medical care. The coordinator is selected based on the child’s medical needs. Children’s has also made it easier for families to get primary care and avoid the emergency room by extending evening hours for its St. Paul general pediatric clinic.
  • The Northwest Metro Alliance, a partnership between Allina Health and HealthPartners, is pursuing multiple strategies. These include opening urgent care sites with evening and weekend hours, having pharmacists follow up with patients who haven’t picked up their medications for chronic conditions, addressing obesity among children, and establishing case management services for hundreds of patients with complex conditions.

Minnesota was the first state to implement a Medicaid payment and delivery demonstration that shares savings and risk directly with provider organizations. After Minnesota’s program began in 2013, similar programs have started or are in the process of beginning in Vermont, New Jersey and Maine.

Minnesota’s IHP has expanded since its first year, with three providers joining in 2014, bringing the total number of MA enrollees in the demonstration to 145,000. More providers are expected to join in 2015. The IHP, originally known as the Health Care Delivery Systems (HCDS) demonstration, is one of the key components of a $45 million federal State Innovation Model (SIM) grant Minnesota received for health care reforms.

The SIM grant provides funding for a joint effort by the Department of Human Services and the Department of Health to develop new ways of delivering and paying for health care and creating healthy communities using the Minnesota Accountable Health Model. Building on the IHP demonstration, this initiative aims to improve health in communities, provide better care and lower health care costs.

“This latest information provides even more evidence that coordinating care and using community resources can result in improved health at lower cost,” Health Commissioner Ed Ehlinger said. “We are excited about the benefits this approach can offer the state, and we appreciate the many health care providers who have partnered with us in this effort.”