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NC Medicaid Managed Care Transition—Despite CMS Final Rule, Quality and Performance Measures Still Unknown

NC Medicaid Managed Care Transition—Despite CMS Final Rule, Quality and Performance Measures Still Unknown

Health Care Law Note
(June 13, 2016)

Last September, the North Carolina General Assembly passed a law requiring North Carolina Medicaid to transition from a traditional fee-for-service model to a capitated, managed care structure administered by private contractors ("prepaid health plans" or "PHPs").1 Under this structure, capitated contracts are to be built on "defined measures and goals" for risk-adjusted health outcomes, quality of care, patient satisfaction, access, and cost.2 The capitated rates paid to contractors must be tied to the achievement of quality and outcome measures.3

Also, unlike current Medicaid reimbursement, providers cannot expect payment on a fee-for-service basis. Instead, PHPs are encouraged to enter value-based network provider agreements, such as incentive plans for achieving quality or performance measures and/or sub-capitation arrangements.4 Therefore, providers also have a strong incentive to meet quality and performance targets.

In March 2016, North Carolina Department of Health and Human Services ("DHHS") identified a set of guiding principles for the selection of performance measures for PHPs and for providers, but North Carolina has not yet determined what those measures will be or the specific data on which they will be based.5 Centers for Medicare and Medicaid Services ("CMS") issued a Final Rule May 6, 2016, overhauling the Federal Medicaid Managed Care regulations,6 but it specifically declined to adopt a set of common performance measures for quality assessment and performance improvement ("QAPI"). Instead, CMS predicted only that it might identify national QAPI performance measures in the future and gave no timeframe for doing so.7

Despite this uncertainty, it is likely that North Carolina's Medicaid measures will include measures familiar to providers and commonly required for Medicare Advantage plans and/or Accountable Care Organizations, such as NCQA's HEDIS8 measures, CAHPS9 survey data, and/or HOS10 survey data, and could encompass consensus-driven measures such as CMS and AHIP's recently announced core performance measures.11  Clinician-oriented measures may include some or all of the same measures to be included in CMS's proposed Merit-Based Incentive Payment ("MIPS") system.12 Consequently, providers' performance on these or similar metrics will be critical to their ability to negotiate favorable network provider contract terms or possibly even to join a particular PHP network. 

As the relevant quality and performance measures are determined, providers must consider a number of factors; for instance:

  • Are they currently capturing and accurately reporting encounter data relevant to quality and performance measures?
  • Will their electronic health records ("EHR") system and vendor contract accommodate potentially unexpected data collection and reporting requirements?
  • Does their historical performance on quality measures and cost of providing care suggest the provider should negotiate a risk-sharing arrangement with PHPs (such as sub-capitation)?
  • Would their performance on quality measures differ between their Medicaid only patients and dual-eligible patients (dual-eligible are excluded from Medicaid Managed Care).13

During this period of uncertainty, providers that do not already track quality metrics extensively should consider choosing a limited set of quality metrics to begin tracking for internal self-evaluation and to develop experience and operational processes to enable the provider to adjust to future quality metrics. Providers that develop the knowledge and processes to meet quality targets before their payment depends on it will be much better positioned to succeed under the anticipated new Medicaid managed care model.


1  See NC Sess. Law 2015-245 (

2  See NC Sess. Law 2015-245, Section 4(7).

3  See NC Sess. Law 2015-245, Section 5(5).

4  See NC Medicaid and NC Health Choice Draft Section 1115 Waiver Application, pp. 13-14.

5  See NC DHHS Legislative Report (, pp. 23-24.

6  See 81 Fed. Reg. pp. 27498-27901.

7  See 81 Fed. Reg. p. 27677.

8  Healthcare Effectiveness Data and Information Set.

9  Consumer Assessment of Healthcare Providers and Systems

10  Health Outcomes Survey

11  See

12   See Proposed Rule

13   See NC Sess. Law 2015-245, Section 4(5).

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