State of Arkansas

A few years ago, Arkansas state officials had to find a way to improve the quality of medical care while cutting costs. They faced an 8% annual increase in Medicaid costs coupled with a potential budget shortfall of $140 million for the Division of Medical Services.

Hoping to fulfill both goals, the state launched the Arkansas Health Care Payment Improvement Initiative, which set up a value-based reward system. Providers that demonstrated value while delivering high-quality care would share 50% of the savings.

General Dynamics Health Solutions developed a data analytics application to measure each provider's success and then compare them to one another. "They constructed the risk-adjusted cost curve for each provider — with each provider having their own profile — an enormous process," says Dr. William Golden, medical director for Arkansas Medicaid.

The application taps multiple sources to collect client data, information about eligibility and enrollment status, provider demographics and tax files. It identifies incidents of care from claims data and then calculates quality scores based on claims and clinical data.

Providers receive detailed report cards showing how patients are spending healthcare dollars at their facilities. "We help the providers to distinguish where they may have high areas in cost of care that are different from their peers and that they need to work on," says Nena Sanchez, director of General Dynamics Health Solutions.

Launched in 2012, the program has helped save $720 million in Medicaid costs. Data quality is critical, says Golden, adding, "If we rewarded based on bad data, then the program would collapse."

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