shows a red cross with the word Medicaid printed on it, in front of a pile of dollar bills. For Medicaid transformation

A long-awaited report shows Community Care of North Carolina reduced costs for Medicaid patients.

By Rose Hoban

A new report from the state auditor shows the program created to manage the care of many of North Carolina’s Medicaid patients has been successful at saving the state hundreds of millions of dollars over a decade.

Between 2003 and 2012, Community Care of North Carolina, or CCNC, saved about $312 annually for each Medicaid recipient, while keeping people out of the hospital. The report also shows CCNC had success in reducing visits for asthma and diabetes and readmissions to the hospital after treatment.

The report comes as lawmakers say they plan to work through the weekend to resolve issues on the way to a state budget. Chief among those issues is the fate of Medicaid, the program providing health care for about 1.8 million poor children, pregnant women, some people with disabilities and the low-income elderly.

And the fate of CCNC hangs in the balance of those negotiations, as budget writers in the Senate have indicated they’d like to eliminate North Carolina’s contracts with CCNC.

Case management

A number of states have moved to replicate CCNC, which pioneered the use of patient-centered medical homes, a doctor’s practice that’s responsible for all the care of patients. CCNC provides physicians’ offices with care managers to monitor things like a patient’s emergency room visits and how well they’re managing chronic conditions such as diabetes, heart disease and asthma.

The program also forms networks of doctors who work together to develop best practices for patient care and consultation. The guiding idea is that by keeping people healthy, the state saves money on more expensive care for the sick.

North Carolina has one of the highest Medicaid participation rates for physicians, and doctors say that’s because they’re given autonomy under CCNC to improve their practices and not be told what to do by insurance companies.

“Today, over 90 percent of our state’s primary care physicians serve Medicaid patients. They do so in part because of the efficient delivery system we’ve built,”  wrote Thomas White, president of the North Carolina Academy of Family Physicians in a press release after the report was made public. “This audit report once again proves this is a system worth saving, no matter what Medicaid reforms are ultimately implemented in North Carolina.”

CCNC also makes extensive use of data to identify patients who use a lot of care and doctors who order too many services. But instead of an insurer penalizing physicians whose patients cost too much, the program employs peer physicians to consult with doctors whose practices are not the most efficient and assist them toward providing better care.

The report showed upwards of $122 million in savings in the first year and a 9 percent reduction in spending over the entire time period, which works out to more than $320 million in 2012 alone.

In 2012, Medicaid costs were about $13 billion, with the state paying one-third and federal dollars accounting for the other two-thirds.

Last year, CCNC cost the state about $150 million, according to Tom Wroth, president and chief medical officer of CCNC. He explained CCNC handles about $36 million that goes directly to health departments to do case management, while the rest stays with CCNC to pay for the informatics, care managers and administration to support 1,850 practices in the state.

“Our spend is a minuscule part of the overall budget,” Wroth said. “Everything in Medicaid is of such a big scale [that] it sounds like a lot of money, but it really isn’t.”

Savings back to the state

Several other reports have also found CCNC saved money. But lawmakers, in response to seeming cost overruns for the Medicaid program, were skeptical.

The 2013 budget ordered that the auditor “engage nationally recognized medical researchers to perform a scientifically valid study” on CCNC.

The study, performed by Harvard health policy professor Michael Chernew, looked at 38 quarters starting in 2003, when the program had 1,076,000 beneficiaries along with 100,000 children in the State Children’s Health Insurance Plan. The study period continues through the economic downturn and into 2012, when the program had expanded to 1,589,000, plus another 100,000 children on SCHIP.

Sen. Ralph Hise (R-Spruce Pine), who teaches statistics at Mayland Community College, argued that CCNC hasn’t produced that much in savings recently, indicating that some of the numbers show higher patient costs later in the study period.

However, the figures Hise pointed to are not “statistically significant,” meaning they could have been produced by chance.

The study author wrote of the later results that “it is simply harder to detect an effect in this more recent period” because so many Medicaid patients were part of CCNC by 2012 and there were too few in the control group to make a good comparison.

“I think we’ve got the savings we can get out of the system we currently have,” Hise said in response to the audit. He continued to argue that it’s now time for the state to move to commercial managed care in order to get more savings out of the Medicaid program.

But Wroth pushed back, saying the savings produced by CCNC revert back to the state.

“Our administrative costs are low,” he said. “We’re not seeking profits to go to shareholders, but rolling those savings back into state coffers.

“This is clearly an approach that’s benefited the state.”

CCNC’s Paul Mahoney, who used to work in the managed care industry, said there’s a reason commercial companies want to come to North Carolina.

“There’s a lot of money to be made by taking over North Carolina Medicaid,” he said. “There are more companies that are self-insured; that’s a small-margin business for insurers.”

“But there’s a lot of government programs. There’s potential for new bodies to cover, and this is an area for new growth,” Mahoney continued. “We have the unfortunate problem of being good at what we do and being in the way of the big insurance companies.”

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