Alabama Medicaid Not Going Forward with RCOs

on Tuesday, 15 August 2017. All News Items | AL Medicaid

A New Direction

If you are a provider in Alabama, you are likely familiar with the proposed changes to Alabama Medicaid that have been in implementation phase for several years.  Alabama Medicaid planned to transition from fee-for-service payments to a managed care plan consisting of Regional Care Organizations (RCOs).  After several delays, the RCO model was set to launch in about a third of Alabama's counties in October, 2017.  However, in late July the Alabama Medicaid Agency announced the RCO initiative will not move forward.  Instead the State will pursue an alternative to transform the Medicaid delivery system.

In the prior Governor’s term, a 2013 law mandated the switch to the new RCO model. The existing Alabama Medicaid program is a government-run fee for service model which is tremendously expensive.  The new plan would have divided the State into regions and Medicaid services would be delivered by healthcare provider owned RCOs which would generate cost savings through managed care.  The plan was not a traditional managed care plan where insurance companies are paid a set rate for each patient.  Under the proposed RCO model, payments would have gone directly to medical providers hopefully to result in more efficient care and improved health outcomes.

Not unexpectedly for Alabama Medicaid, the problem was money. Implementation of the new RCO program was extremely expensive.  Even though the State won a waiver from federal regulators and up to $700 million in grants to help implement the program, it wasn’t enough.  An additional $105 million from the BP oil settlement was set aside for Medicaid.  This additional funding would have only lasted until 2018, creating uncertainty for 2019 and beyond.

In the announcement, the Alabama Medicaid commissioner credited the decision to change course to known federal administration changes and potential congressional adjustments.  The announcement also stated, “Moving forward, the State will work with the Centers for Medicare and Medicaid Services (CMS) to create a flexible program which builds off the Agency’s current case management structure as a more cost-efficient mechanism to improve recipients’ healthcare outcomes.”

Alabama’s new governor, Kay Ivey supports Medicaid’s shift in reform strategy.  Governor Ivey said, “The RCO model didn’t fail; instead the alternative is a recognition that the circumstances surrounding Medicaid have changed, thus our approach must change.  Our end goal is clear – to increase the quality of services provided and protect the investment of Alabama taxpayers.”

Alabama hospitals and other providers will have to wait to see what new direction Alabama Medicaid will take.  For the over 1 million Alabamians who rely on Medicaid to cover their healthcare needs, we hope whatever the new direction is, it is successful.

Article by Debbie Rubio

Debbie Rubio, BS, MT (ASCP), is the Manager of Regulatory Affairs and Compliance at Medical Management Plus, Inc.  Debbie has over twenty-seven years of experience in healthcare including nine years as the Clinical Compliance Coordinator at a large multi-facility health system.  In her current position, Debbie monitors, interprets and communicates current and upcoming regulatory and compliance issues as they relate to specific entities concerning Medicare and other payers.  You may contact Debbie at This email address is being protected from spambots. You need JavaScript enabled to view it..

This material was compiled to share information.  MMP, Inc. is not offering legal advice.  Every reasonable effort has been taken to ensure the information is accurate and useful.

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