Strategy 3
Align Services with Value-Based and Alternative Payment Models
Many state Medicaid programs have moved away from simple fee-for-service (FFS) reimbursement. Greater utilization of managed care allows states to take advantage of innovative payment and benefit opportunities such as Value-Based Payment (VBP), In-Lieu of Services (ILOS), and Value-Added Benefits (VAB).
VBP arrangements link MCO payments to performance on key metrics, creating powerful financial incentives for MCOs to seek partners who can achieve improved health outcomes and reduced costs through effective care coordination. Many states are now requiring MCOs to implement VBP arrangements with social service providers. For instance, Nebraska’s managed care contract requires MCOs’ VBP arrangements to include strategies for localizing care management, addressing social needs gaps, and addressing health disparities.34 In Massachusetts, MCOs are rewarded through Quality and Equity Incentive Programs for achieving specific performance goals, such as improving hypertension control rates among Black members, leading one plan (Tufts Atrius) to offer medically tailored meals after screenings identified nutrition as a key barrier to better health.35 To secure sustainable funding, SSOs/CBOs must adapt their services to fit payment models that reward improved outcomes and cost-effectiveness.
In-Lieu of Services (ILOS) allow managed care plans to offer medically appropriate and cost effective substitutes for covered services.36 Value-Added Benefits (VABs) allow MCOs to offer services in addition to those covered by Medicaid and often address non-medical services. 37 Unlike ILOS, VABs do not need to meet any cost benchmarks, but they are typically funded through an MCOs administrative dollars and are thus excluded from the capitation rate-setting process.38
States and managed care plans utilize these pathways to provide services that address drivers of health such as nutrition or education. Opportunities may exist for SSOs and CBOs to form partnerships to provide these services to Medicaid members.
In Florida, MCO contracts require plans to contract with SSOs/CBOs to provide a wide range of pre-approved expanded benefits like family support services, food assistance, and respite care, all of which fall under the umbrella of VAB.39 Meanwhile, in California, the state’s CalAIM Medi-Cal transformation program encourages MCOs to provide ILOS like Enhanced Care Management (ECM) and Community Supports (CS) (described in further detail below).
States and MCOs recognize partnerships with SSOs and CBOs are necessary to control costs and improve outcomes. Therefore, SSOs and CBOs must proactively evolve their service offerings and payment expectations from transactional (FFS) to relational (VBP), where their success is aligned with MCOs’ success.
To maximize success, SSOs/CBOs should consider actions appropriate to their current stage of readiness.
Entry Points
- Explore ILOS and VAS Opportunities: Investigate “In-Lieu-of-Services (ILOS)” and “Value-Added Services (VAS)” that MCOs are authorized or mandated to offer in state contracts (e.g., housing navigation, utility assistance, medically tailored meals). These services offer clear opportunities for reimbursement if SSOs/CBOs are willing to reach out to MCOs to offer their partnership.
Advanced Pathways
- Monitor State Contracts and Waiver Renewals: Proactively track Medicaid procurements and state plan amendments (SPAs) or Section 1115 waiver proposals. This includes monitoring state Medicaid agency releases for new/existing contract requirements where an SSO/CBO may be a value-add and proactively reaching out to MCOs with tailored proposals demonstrating how SSO/CBO services can make the MCO’s bid more compelling to the state Medicaid agency. Despite the federal guidance on HRSN waivers being rescinded, there will still be opportunities to offer related services that are packaged in a waiver or SPA more aligned with the current administration’s priorities. CMS keeps lists of approved 1115 waivers 40 and SPAs41 (sortable by date of approval) on its website for SSO/CBO monitoring.
- Be Open to Shared Risk: Be prepared to negotiate contracts that include shared savings and outcome bonuses, positioning the SSO/CBO as a risk-sharing partner committed to the payor’s financial goals, rather than merely a vendor. To prepare for such partnerships, explore available financial modeling tools to help calculate tolerable risk.