SECTION 1.  a.  The office of Medicaid and the executive office of health and human Services (EOHHS) shall establish a 3 year Medicaid urban-area accountable care organization (ACO) demonstration project as provided in this act.  Urban ACOs approved for participation in the demonstration project shall be non-profit organizations formed through the voluntary participation of local hospitals, clinics, health centers, primary care physicians, nurses, and public health agencies for the purpose of improving the quality, capacity, and accessibility of the local health care system for Medicaid beneficiaries residing in the region.  Payments for services reimbursed by the Medicaid fee-for-service program to providers participating in an approved urban ACO demonstration-project shall be made to the urban ACO and distributed to the participating providers in accordance with a written plan approved by the office of Medicaid and EOHHS.  The urban ACO demonstration project shall be developed in consultation with managed care organizations and other vendors that contract with the Medicaid program to provide health care services to Medicaid beneficiaries.

b.  In developing the written plan for distributing payments for services rendered to Medicaid patients by participating urban ACO demonstration project providers, the office of Medicaid and EOHHS, shall consider payment methodologies that promote care-coordination through multi-disciplinary teams, including payment for care of patients with chronic diseases and the elderly, and that encourage services such as: (i) patient or family education for patients with chronic diseases; (ii) home-based services; (iii) telephonic communication; (iv) group care; and (v) culturally and linguistically appropriate care.  In addition, the payment system shall be structured to reward quality and improved patient outcomes, particularly for high cost, high needs patients.  The payment system may not increase costs to Medicaid for patients served by an ACO demonstration project beyond the benchmark cost of care for those patients if they were not served by an ACO.

c.  Nothing in this act shall be construed to limit the choice of a Medicaid beneficiary to access care for family planning services or any other type of healthcare services from a qualified health care provider who is not participating in the urban ACO demonstration project.

d.  The office of Medicaid and EOHHS shall begin implementing the urban ACO demonstration project no later than July 1, 2011.

e.  The office of Medicaid and EOHHS may certify up to five urban ACOs for participation in shared savings programs that promote accountability for patient populations residing in a designated urban area. Each such shared savings program will be operated as an urban ACO demonstration project designed to coordinate the provision of health care items and services paid for by Medicaid; to encourage investment in infrastructure and redesigned care processes for high quality and efficient service delivery; and facilitate the development of medical homes. 

f.   The office of Medicaid and EOHHS shall certify the urban ACO for participation in the urban ACO demonstration project following its determination that the urban ACO meets the requirements of this act and is designed to improve quality, cost, and access to health care by Medicaid beneficiaries.  Urban ACO demonstration project applicants must agree to be accountable for the quality, cost, and overall access to care of the Medicaid beneficiaries residing in the designated urban area for a period of no less than 3 years.  For purposes of this act, “designated urban area” shall mean a municipality or defined geographic area in which no fewer than 5,000 Medicaid beneficiaries reside, or other threshold that the office of Medicaid and EOHHS determine to be sufficient for reliable measurement of realized savings.  EOHHS, in consultation with the office of Medicaid, shall adopt regulations establishing additional criteria required for participation in the urban ACO demonstration project.

g.   An urban ACO demonstration project applicant must demonstrate that it is a non-profit entity that has established a mechanism for shared governance. The urban ACO must have a formal legal structure that allows the urban ACO to receive payments from Medicaid and any voluntarily participating Medicaid managed care organizations and distributes payments for quality improvement and for shared savings to participating ACO providers.  Before receiving payments, the urban ACO must submit a written demonstration project application for review and approval by the office of Medicaid and EOHHS on how the payments will be used to improve quality, expand access, and reduce cost for patients living in geographic region of the ACO. 

h.  The Medicaid fee-for-service program shall remit payment to the participating urban ACO after approval by the office of Medicaid and EOHHS of the ACO’s written demonstration project application for use of the funds and determination of the shared savings payment and approved by the office of Medicaid and EOHHS using the methodology developed under Section 1(b) above.

i.   The benchmark, against which savings are measured for each urban ACO, once established, may only be changed once every 3 years.  A portion of realized shared savings from the urban ACOs may be used to offset increased health care expenditures by the Commonwealth of Massachusetts and support the continued operation of this urban ACO demonstration project.  The percentage of shared savings to be (i) distributed to the urban ACO; (ii) kept by a participating Medicaid managed care organization or other third party payer; and (iii) kept by the Commonwealth of Massachusetts to support the administration of the program shall be determined at the start of the demonstration project and every 3 years. 

j.   The percentage-of shared savings to be distributed or kept as described herein shall be configured to: (i) ensure widespread participation by both urban communities and payers; (ii) ensure that the Commonwealth of Massachusetts realizes meaningful savings; and (iii) ensure that the demonstration project’s annual administrative costs can be covered by year 3.

k.   As used in this act:

“Primary care provider” includes, but is not limited to, a primary care physician, a registered nurse, a primary care professional medical practice, a federally qualified or community health center, and a primary care outpatient clinic operated by a general hospital.

2.    The office of Medicaid shall, with assistance from EOHHS, evaluate the urban ACO demonstration project annually to assess: whether cost savings are achieved through implementation of the urban ACO demonstration project; the rates of health screening; the outcomes and hospitalization rates for persons with chronic illnesses, and the hospitalization and readmission rates for the frail elderly.

3.   The secretary of EOHHS shall apply for such state plan amendments or waivers as may be necessary to implement the provisions of this act and to secure federal financial participation for state Medicaid expenditures under the federal Medicaid program.  The secretary of EOHHS may apply for participation in federal ACO demonstration projects that align with the goals of this act.

4.  The secretary of EOHHS shall report annually to the governor, and to the legislature, on the findings and recommendations of the urban ACO demonstration project.  After 3 years, if the secretary of EOHHS finds the urban ACO demonstration project was successful in reducing cost and improving the quality of care for Medicaid beneficiaries, the urban ACO demonstration project may be expanded to include additional underserved communities and shall become a permanent program.

5.  The secretary of EOHHS shall adopt such rules and regulations as the commissioners deem necessary to carry out the provisions of this act.

6.   This act shall take effect upon enactment and shall expire 3 years after the effective date, but the director of the office of Medicaid and the secretary of EOHHS may take such anticipatory administrative action in advance thereof as shall be necessary for the implementation of this act.