Back in April I did a four-part AHCCCS 101 series explaining how Arizona’s Medicaid program actually works. This post sheds some light on some of the behind-the-scenes administrative mechanics of how AHCCCS works in real life.
Part 1: AHCCCS’ Origin Story – Why Arizona Built Medicaid Different
Part 2: Waivers, State Plan Amendments and Who Decides
Part 3: Contract Management & Accountability
Part 4: From Coverage to Care – The Member Experience
Right now one of the biggest managed care organizations that AHCCCS contracts with is Mercy Care, which is owned in part by a nonprofit called Ascension. Ascension then contracts with (for profit) Aetna, who oversees many of the day-to-day operations of Mercy Care.
A couple weeks ago Ascension said they want to sell their ownership stake in Mercy Care to Aetna (which is owned by CVS Health – obviously a for profit organization). Here are the organizational basics:
Mercy Care is an Arizona nonprofit corporation/not-for-profit managed-care organization. Its audited financial statements filed with AHCCCS shows it as a nonprofit.
Ascension is a nonprofit Catholic health system. Its Mercy Care ownership interest is held through nonprofit entities.
Dignity Health/CommonSpirit, Mercy Care’s other owner, is also nonprofit.
Aetna is for-profit and is owned by CVS Health. Aetna has administered Mercy Care’s day-to-day operations since 2002, but the proposed transaction would shift all of Ascension’s ownership to Aetna.
Arizona built its Medicaid program differently from most states when AHCCCS started in 1982. Rather than having the state pay doctors, hospitals and other providers directly for each service, Arizona built the program around managed care.
AHCCCS contracts with a few health plans (including Mercy Care) and pays them a fixed amount of money per member per month. The plans then build provider networks, authorize services, pay claims and manage the healthcare for their members.
AHCCCS plays an oversight role as the regulator and actual buyer of the healthcare (on behalf of AZ taxpayers). In a nutshell, AHCCCS’ main job is contract management.
Mercy Care 101
Mercy Care currently covers over 300,000 Arizonans across its Medicaid and Medicare/Medicaid programs. Statewide AHCCCS currently has about 1.7 million people enrolled in its various health plans – so Mercy Care covers a big chunk of the total. In other words – a big contractor for AHCCCS
Among those Mercy Care’s members are folks covered for low-income adults, kids and families for regular doctor’s visits, hospitalizations, medically necessary surgery and primary care. It also has responsibility for physical and behavioral healthcare for people with much more complicated needs, like persons with developmental disabilities and folks with a serious mental illness etc.
Mental Health
Within that system are roughly 50,000 Arizonans designated as having a Serious Mental Illness. In Central Arizona, Mercy Care is the Regional Behavioral Health Agreement (used to be called authority) responsible for that population.
Long Term Care
Then there’s ALTCS – the Arizona Long Term Care System. About 26,000 Arizonans are in the ALTCS Elderly and Physically Disabled program. These are folks who meet nursing-facility-level-of-care criteria, but who often receive services at home or in community settings instead of a nursing home. Mercy Care is one of the ALTCS-EPD contractors in Maricopa, Gila, Pinal and Pima Counties.
Then there are people with intellectual and developmental disabilities. Arizona’s Division of Developmental Disabilities serves more than 59,000 Arizonans. Many qualify for ALTCS and receive extensive home and community-based services like attendant care, habilitation, respite, day programs, employment support and residential services.
Note: ADES/DDD manages most of those home and community-based services and contracts with the providers that deliver them. Mercy Care is one of the health plans DDD uses for physical and behavioral healthcare and certain other services – all through AHCCCS.
So, What’s Changing?
Ascension and Dignity Health have jointly sponsored Mercy Care, which was founded in 1985. Now Ascension wants to sell its ownership interest to Aetna, a subsidiary of CVS Health/Aetna.
Aetna has actually administered Mercy Care’s day-to-day operations for more than 20 years. So this isn’t like some completely new company suddenly showing up.
But – it’s definitely a significant ownership change from a nonprofit parent company (Ascension) to a for profit company (CVS/Aetna).
I’m not suggesting that Mercy Care will be worse under the new ownership structure – but it does mean that AHCCCS, whose main job is contract management – should be on the lookout after the sale to ensure that the new ownership structure doesn’t end up compromising the network or care.
You can read more about the transaction here: Ascension Sells Ownership in Arizona Medicaid Plan to Aetna
Regulatory Approval
The buyout isn’t a done deal yet and there are some regulatory boxes that will need to be checked before this actually happens for real.
AHCCCS would still need to approve the buyout. Mercy Care can’t simply change ownership and continue its AHCCCS contracts without AHCCCS approval. AHCCCS contract provisions specifically say that a proposed “merger, reorganization [or] change in ownership” requires prior AHCCCS approval and may require amendment of the Medicaid contract.
The Arizona Department of Insurance and Financial Institutions (DIFI) regulates insurance-company acquisitions and changes of control, and Arizona law requires regulatory review of acquisitions involving control of insurers. Under A.R.S. §20-481.07, the DIFI director examines such things as whether the acquisition could jeopardize the insurer’s financial stability, reduce service to policyholders, lessen competition, or result in management that isn’t in public interest.
For now, this is something worth paying attention to – and I’ll track this for us and write future posts about how things progress.
