Flat Fee
Flat fee is a payment structure that involves set fees such as a per member per month (PMPM) administrative fees paid to a DM vendor or provider for administrative expenses for the targeted patient pool. These fees include the cost of all administrative services provided to patients under their care for DM related activities. These activities do not include direct patient care services such as physician visits, prescribed drugs, etc. Examples of administrative and management activities covered by flat fees include:
- patient education materials,
- phone interventions and patient surveys,
- monitoring patients via phone or home visit,
- provider consultations regarding treatment guidelines and drug regimens,
- patient database management and tracking of clinical and cost data,
- Providing member services including procedures for enrollment, disenrollment, complaints and grievances
- Assessing and defining patient severity/acuity levels
- Disseminating treatment protocols and educational materials to recipients and providers
- Delivering case management services
- Monitoring provider compliance in delivering care congruent with the protocols
- Monitoring patient compliance in receiving care congruent with the protocols
- Monitoring patient outcomes and patient satisfaction associated with the protocol-driven care
- Conducting claims analyses
- Providing accountability/performance reports back to providers and patients for continuous compliance and improvement
Flat Fee Plus Incentive
Flat fee plus structures involve paying the set administrative PMPM fee and then providing an additional monetary incentive to DM vendors or providers based on meeting pre-determined clinical and economic objectives of the program. These could include lowering the average hospitalization rate, ER rate and improving clinical parameters such as blood glucose control in diabetics, improved peak flow meter rates in asthmatics, etc. In this model, the DM vendor is not required to achieve set minimum savings goals and the health plan assumes the risk of losing the administrative fees if no savings occur.
Performance Based (Total Risk with Shared Savings)
Many health plans apply total risk parameters if program objectives are not met and cost savings do not at least off set the administrative fee costs. In this case, the DMO is liable for repayment of all administrative fees if the minimum savings are not realized. Shared savings are available in this structure to the DM vendors/providers, but there are detailed methodologies established for baselines costs, shared savings cost calculations, and annual reconciliation procedures.
The following excerpt is taken from the Florida Medicaid Agency 1998 ITN for Diabetes
Total Risk and Shared Savings Model:
DMOs may receive payment in the form of shared savings. Savings available to be shared is the difference between actual Agency payments on behalf of DMO enrollees (including specified claims payments and MediPass case management fees) and the baseline payment. The DMO's proposal must include calculations of the requested percentage of shared savings to be received by the DMO. The rationale for the requested amount must be clearly explained in the proposal.
- Establishing the Baseline Payment: The baseline payment reflects an estimate of the level of per recipient costs the Agency would expect to incur in the absence of implementing the disease management demonstration. The baseline payment will be derived from a claims analysis involving eligible Medicaid recipients. These recipients will meet the Agency's criteria for having characteristics of diabetes.
For the identified recipients, the number of Medicaid recipient case months will be calculated for the 1996-1997 fiscal year (defined as the baseline period). Paid claims for these recipients will be aggregated to determine total expenditures for the baseline period. The number of case months and the paid claims will be excluded for those months when recipients are in categories ineligible for disease management services. These expenditures will be divided by the total number of case months for recipients eligible for disease management to obtain a dollar expenditure amount per recipient per case month. This dollar expenditure amount per recipient per case month will be inflated based on yearly Medicaid budget adjustments and will be referred to as the baseline payment per recipient case month. This will be used in the calculation of the baseline payment.
Fiscal year 1996-1997 dates of service will be used to establish the baseline payment for the DMO's first operational year. Fiscal year 1997-1998 dates of service will be used to establish the baseline payment for the DMO's second operational year.
- Annual Reconciliation: The reconciliation for the first contract year will be made after the first quarter of the second contract year, in order to factor in the delayed submission of claims. The reconciliation for the second contract year will be made after the first quarter of the third contract year. A final reconciliation will be made a year after the end of the second operational year, to precisely adjudicate the final claims totals for service dates during the first 24 months of the contract period and with payment dates encompassing the last twelve months of the contract.
All reconciliations will be made on a DMO-specific basis. Savings from one DMO project will not be used to offset losses experienced by another DMO. The reconciliation will have the following components:
- the identification of a baseline payment
- the determination of whether cost savings exist
- the determination of the amount of the DMO's share of cost savings, if any, that will be paid by the Agency to the DMO
- the determination of the amount, if any, that must be repaid by the DMO to the Agency
- Cost Savings Calculation: Paid claims of all recipients enrolled with the DMO will be identified. Only claims with service dates during periods of DMO enrollment will be used. Paid claims will be aggregated to determine the expenditures for the identified recipients for all Medicaid service categories. Total cost savings will be calculated as follows: The DMO's baseline payment, which includes MediPass case management fees to primary care providers, for the contract year, minus all Medicaid paid claims, including MediPass case management fees to primary care providers, made on behalf of DMO enrollees, for dates of service during the contract year and including only claims incurred during periods of DMO enrollment.
- Potential Repayment of Monthly Administrative Advance by DMO: The Agency does not intend for paid claims for enrolled recipients to exceed the total baseline payment. However, if the total actual payments exceed the baseline payment, the DMO will refund its monthly administrative payment to the Agency, as necessary, so that Agency payments do not exceed the total baseline payment. In a worst-case scenario, the DMO would refund its entire monthly administrative advance. The DMO will submit payment to the Agency within 90 days of notification that a refund of monthly payments is required.
- Shared Savings Payments: If total cost savings exist in a given contract year, these savings will be shared with the DMO based on the negotiated percentage of shared savings to be received by the DMO. The DMO's proposal must include calculations of the requested percentage of shared savings to be received by the DMO. The rationale for the requested amount must be clearly explained in the proposal. It is the intent of the Agency that the DMO portion of savings will be reasonable and related to DMO costs and not reflect a disproportionate share of the cost savings.
- Reconciliation Overview: Two scenarios are shown in Exhibit 1, demonstrating the interplay between the baseline payment and monthly administrative payments.
Exhibit 1: Reconciliation Overview - Two Scenarios |
Plan Costs: Paid Claims per Case Month* |
Status of Monthly Administrative Payments to the DMO
|
Possibility of Shared Savings with the DMO |
Above the Baseline Payment |
Returned to the plan to equal baseline payment
|
None.
Shared savings do not exist
|
Below the Baseline Payment |
Retained if DMO's shared savings are equal to or exceed the total monthly management payments |
Yes.
If DMO's shared savings are greater than monthly management payment. DMO allocation determined by size of savings |
*Including Primary Case Management Fees |
Pharmaceutical manufacturers may offer to fund disease management programs for Medicaid beneficiaries. Such funding would be considered a supplemental rebate under section 1927 of the Act, and, in accordance with the September 18, 2002, State Medicaid Director letter, the state needs to report an offset in the amount of Federal funds claimed based on the value of what the state received from the manufacturer. |
