The Arizona Long Term Care System ALTCS University

The Arizona Long Term Care System (ALTCS) University of Maryland Center on Aging Medicare/Medicaid Integration Program July 8, 2004 1

Capitation Rate Development Process • AHCCCS pays Program Contractors a monthly amount for each member for the purpose of contracting with providers to deliver ALTCS services. This amount is a “capitation rate. ” • AHCCCS contracts with independent actuaries to develop capitation rates that are actuarially sound. • On an annual basis, the actuaries review various data that support rate increases or decreases. • Based on that review, capitation rates are then adjusted for each county. 2

Items Considered in Capitation Rate Development • Historical Utilization of Services • Program Contractor Financial Experience • National and Local Inflation Trends (including AHCCCS FFS rate increases) • Program Changes • Percentage of members in different placement settings (nursing facilities, HCBS) 3

Capitation Rate Components 4

Capitation Rate Calculation Example 5

Program Contractor to Provider Reimbursement 1. Program Contractors establish networks that are adequate to meet the service needs of its members. 2. Contracted rates are negotiated with the providers. 3. Capitation rate increases from AHCCCS to Program Contractors are factored into reimbursement when Program Contractors renegotiate their provider contracts. 6