Summary

of Health Management Associates Projected Savings Attributable to Health System Transformation through Coordinated Care Organizations
TheOregonHealthAuthoritycontractedwithHealthManagementAssociates(HMA)to conductanindependentanalysisofopportunitiestoreduceMedicaid/OregonHealthPlancosts throughthesuccessfulimplementationofhealthsystemtransformationsproposedinHB3650, whichcreatedCoordinatedCareOrganizations(CCOs). HMAisanationalresearchandconsultingfirmspecializingincomplexhealthcareprogramand policyissues.HMAhasledandsupportedthedesign,development,implementation,and evaluationoflargescalehealthprograms,includingmajornewinitiativesinMedicaid, Medicare,CHIP,longtermcare,behavioralhealth,specialpopulations,andprogramsforthe uninsured.Recently,HMAstaffcollaboratedwiththeOregonHealthLeadershipCouncilto exploreaninnovativeapproachtoservingMedicaidanduninsuredindividualslivinginthe metropolitantricountyarea. Findings:ConservativeprojectionsshowCoordinatedCareOrganizationmodelcansaveupto $3.1billionintotalcostsoverthenextfiveyears. HMAestimatedthelikelyeffectsofimplementingHB3650transformationinitiativesusinga conservativeapproachtohowquicklylocalhealthsystemsandstakeholderswillmovetothe CCOmodel.Iflocalsystemstransformmorequickly,theprojectedsavingswillcomeearlier. Theseestimatestakeintoaccountinvestmentsneededtocarryoutthechangesandonly reportsavingsthatcouldbeachievedafterimplementationcostsarecovered. HMAsmodelalsoconsidersthefactthatourabilitytoachievesavingswillbuildgraduallyover time.Evenso,theypredictthattransformationcouldsave$155to$308million($57to$114 milliongeneralfund)intotalcostsinthesecondyearofthecurrentbiennium.Thisrepresents 4.9%to9.7%savings. Table1:AnnualandBiennialProjectedCosts&PotentialSavings,($million)
StateFiscalYear/ Biennium 7/12to6/13 7/13to6/15 7/15to6/17 7/17to6/19 ConservativeSavingsEstimates ProjectedCost without Projected TotalFund GF Transformation(TF) Cost(TF) Savings Savings* $3,178 $3,023 $155 $57 $7,440 $10,019 $11,680 $6,571 $7,904 $8,712 $869 $2,115 $2,968 $322 $784 $1,101 HighEndSavingsEstimates Projected TotalFund GF Cost(TF) Savings Savings* $2,870 $308 $114 $5,903 $6,260 $7,062 $1,536 $3,759 $4,618 $570 $1,394 $1,713

*assumes2012FederalMedicalAssistancePercentagethroughouttimeperiod

OregonHealthAuthority

Atthelowendrangeofsavingsestimates,HMAfoundthatbyimplementingCCOs,Oregon couldsave$3.1billionintotalcostsforMedicaid($1.2billioningeneralfund)cumulativelyover afiveyearperiod.Thisrepresents15%ofwhatthestatewouldspendoverthesamefiveyear periodifCCOswerenotimplemented. Table2:CumulativeProjectedCosts&PotentialSavings,($million)

StateFiscalYear/ Biennium 7/12to6/13 7/13to6/15 7/15to6/17 7/17to6/19 ProjectedCost CumulativeSavings(Conservative) CumulativeSavings(HighEnd) without Projected TotalFund GF Projected TotalFund GF Transformation(TF) Cost(TF) Savings Savings* Cost Savings Savings* $3,178 $3,023 $155 $57 $2,870 $308 $114 $10,618 $20,636 $32,317 $9,594 $17,498 $26,210 $1,024 $3,139 $6,107 $380 $1,164 $2,265 $8,773 $15,033 $22,095 $1,845 $5,603 $10,221 $684 $2,078 $3,791

*assumes2012FederalMedicalAssistancePercentagethroughouttimeperiod

Withoutimplementingtransformation,HMAestimatesthatOregonsMedicaidcostswill continuetosurgeatanaverageof10%annualgrowthoverthenextsevenyearsduetoa combinationofenrollmentgrowth,increasedutilizationandinflationinthecostofmedical productsandservices.Thisgreatlyexceedstheprojectedgrowthrateofgeneralfundrevenue. Todeveloptheseestimates,HMAmodeledtheeffectsof coordinatingphysicalandbehavioralhealthcare, betterpreventingandmanagingchronicdiseases, utilizingpatientcenteredprimarycarehomes, improvingandaligningcareforindividualswhoareeligibleforbothMedicareand Medicaid,and anincreasednumberofeligiblemembersintheOregonHealthPlan.
Theseinitiativeswillcomplementeachothertoachievetheprojectedsavings.Forexample,the

integrationofphysicalandbehavioralhealthcarewilldependlargelyoncarecoordination carriedoutintheprimarycarehomesetting.HMAbelievesthatCCOswillbeabletoidentify additionalformsofsavingsthatwerenotincludedintheirestimates.

OregonHealthAuthority

Health Management Associates Annual Projected Savings Attributable to Health System Transformation through Coordinated Care Organizations Cumulative 108,000 7,000 6,000 5,000
$ Million 4,000
3,178 Projected Cost without Transformation Projected Cost with Transformation (Conservative) Projected Cost with Transformation (High-End Savings Model)

Year Savings
7,447

11,381 5,570 18,453

4,517

3,000 2,000
1,000 0

3,023

2,870

12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22
Costs w/o Transformation Costs w Transformation (Conservative) Costs w Transformation (High Savings) Annual Savings (Conservative) Annual Savings (High-End)

3,178 3,023 2,870 155 308

7,440 6,571 5,903 869 1,536

10,019 7,904 6,260 2,115 3,759

11,680 8,720 7,068 2,961 4,612

13,474 10,069 8,165 3,405 5,309

7,447 5,570 4,517 1,877 2,929

Source: Health Management Associates Notes: Health Management Associates' projections end in 2019. The 2019-2021 biennium and 2021-2022 state fiscal year were extended forward by the Oregon Health Authority by applying the growth rates in HMA's model. 1/12/2012