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New Jersey’s Approach To Medicaid ACOs Is An Experiment Worth Watching

By: Joan Randell – Health Affairs

article166As the July issue of Health Affairs recognized, Medicaid has become a hotbed for health care transformation, with states increasingly turning to Accountable Care Organizations (ACOs) and medical homes to reduce costs and improve care delivery in their Medicaid programs. New Jersey joined the ranks in July by certifying three of six applicants for the New Jersey Medicaid Accountable Care Organization Demonstration Project – the Camden Coalition of Healthcare Providers, the Healthy Greater Newark ACO, and the Trenton Health Team.

Although the New Jersey ACOs were authorized by a 2011 law signed by Governor Chris Christie, this approach to care for Medicaid patients did not originate within state government, and the state did not invest in their formation. Rather, this approach grew out of work by Dr. Jeffrey Brenner and the Camden Coalition of Healthcare Providers, famously chronicled in Atul Gawande’s 2011 The New Yorker article, “The Hot Spotters.” Brenner and his colleagues analyzed local hospital claims data and discovered that a small percentage of patients were responsible for a substantial proportion of hospital costs. These findings were a wake-up call for the need to implement a new model of health care delivery for the state’s Medicaid enrollees. Subsequent advocacy by Brenner and other stakeholders led to the 2011 legislation.

A Community-Based Approach To ACOs

The legislation requires each Medicaid ACO to be a nonprofit corporation. Their governing boards must include “general hospitals, clinics, private practice offices, physicians, behavioral health care providers, and dentists; patients; and other social service agencies or organizations.” The board must include voting representatives from at least two consumer organizations that advocate for patients.

Following the law’s passage, community representatives, advocates, health and social service providers, and foundations worked with the Camden Coalition and several other community-based health care coalitions to prepare them to become successful ACOs. The Nicholson Foundation invested considerable resources in a program of complementary projects to develop and strengthen the coalitions. This included direct support for the coalitions’ infrastructure, care coordination activities, business plans, and health information exchanges. The Foundation also commissioned data analyses to identify opportunities to improve care and reduce costs and funded a statewide learning network so the health care coalitions could support and learn from each other.

How these three community coalitions fare in the three-year demonstration project bears watching for two reasons. One is that their community-based approach offers an exciting new model for providing care to Medicaid recipients. This approach can be seen in the geography, composition, and governance structure. The ACOs must service a specific locale they define and it must include at least 5,000 Medicaid recipients. They must include all hospitals within their defined area, even if the hospitals are competitors, as well as 75 percent of Medicaid primary care providers and at least four qualified behavioral health providers.

The second reason to pay attention to this Medicaid demonstration project is its potential to align quality objectives with payment incentives. The ACOs must have a strategy to enhance outcomes. These outcomes incorporate the quality and efficiency of health care; patient safety; and patient satisfaction for all 5,000-plus Medicaid recipients in the designated area. The hope is that the ACOs will be able to engage and coordinate services for the most complex and costly patients. Similar to national data, in New Jersey just 5 percent of Medicaid beneficiaries account for more than half of all Medicaid spending and 1 percent account for more than 25 percent of total spending.

If the ACOs are able to meet these performance improvement targets while reducing costs, the law allows them to keep a share of any Medicaid savings. The ACOs can reinvest these savings to fund additional service improvements.

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About the Trenton Health Team
Trenton Health Team (THT) is an alliance of the city’s major providers of healthcare services including Capital Health, St. Francis Medical Center, Henry J. Austin Health Center and the city’s Health Department. In collaboration with residents and the city’s active social services network, THT is developing an integrated healthcare delivery system to transform the city’s fragmented primary care system and restore health to the city. THT aims to make Trenton the healthiest city in the state. Support for the Trenton Health Team was provided in part by a grant from The Nicholson Foundation. For more information, visit