Accurate Encounter Data a Must For Medicaid MCO Quality Measurement

Jason Duhon

With more than 60% of all Medicaid beneficiaries now enrolled in comprehensive, risk-based managed care organizations (MCOs), state Medicaid agencies that want to measure quality of those plans must have quality encounter data. Encounter data capture the items or services received by the member; they are managed care’s equivalent of claims in fee for service. CMS also depends on encounter data submitted by state Medicaid programs to maintain the massive Medicaid Statistical Information System (MSIS), a database of claims, encounter data, and beneficiary eligibility information.

Medicaid as a share of states’ total budgets (including state and federal funds), 2014

Source: Medicaid and CHIP Payment and Access Commission

Poor encounter data can hinder quality measurement in multiple ways. Encounter data are the foundation that allow state health officials to evaluate the performance of Medicaid managed care plans, understand service utilization, and analyze health quality. States also use the data for budgeting, calculating capitation, and a variety of other payment rates. Fraud and waste-and-abuse investigations often hinge on encounter data.

Unfortunately, collecting and reporting encounter data has long been a trouble spot for both state-level health officials and CMS. The HHS Office of the Inspector General has issued two reports on the problem, the first in 2009 and the second in 2015, about the gaps in encounter data reporting. The 2015 report said that eight of the 38 states viewed did not report any encounter data on time and that another 11 passed on incomplete data.

In April 2016, CMS issued updated guidance on encounter data. The guidance suggested that the failure by states to submit timely, accurate, and complete data could result in CMS disallowing federal financial participation (FFP) on all or part of a state’s capitation payments to Medicaid MCOs. While CMS has not typically withheld state matching funds for deficient encounter performance in the past, CMS indicated it will use these sanctions to obtain encounter data in the near future. FFP accounts for 50% to 75% of the payments made by Medicaid programs to Medicaid MCOs. If CMS disallows even a portion of the federal match, state Medicaid programs can’t be expected to make up the difference.

If CMS does withhold matching funds to states, most states are likely to be more aggressive in taking steps to mitigate any risk to their Medicaid budgets, which are already growing at a phenomenal rate and gobbling up a growing percentage of state budgets. Not only are they more likely to pass down financial penalties, but they are also more likely to consider the long-term viability of MCOs that are out of compliance. Medicaid MCOs can expect tighter contracts, greater oversight and monitoring, and an increased focus on encounter reporting. They can expect states to develop more robust processes and procedures for monitoring MCO performance. Several states already impose penalties on contracted MCOs for failure to provide quality encounter data, such as Arizona, Louisiana, and Texas, among others.

Now is the time for state Medicaid programs to start focusing on collecting high quality encounter data. States need to get ahead of potential CMS sanctions through re-evaluating their contracts and oversight processes. But this shouldn’t be a question of only wanting to please the federal government and avoid financial consequences of some kind. Complete and up-to-date encounter data is absolutely essential for the proper oversight of Medicaid MCOs. Without it, states can’t know what they are getting for their payments to the MCOs, and the MCOs can’t be held accountable.

Jason Duhon is an associate director at Navigant Consulting, a consulting company headquartered in Chicago.

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