Washington State’s Healthier Washington

March 26, 2015

To:                   Hospital CEOs, CFOs, Quality Leaders, and Government Relations Staff

From:               Claudia Sanders, Senior Vice President, Policy Development

                        Jacqueline Barton True, Director of Rural Health Programs

                        Chelene Whiteaker, Policy Director, Member Advocacy 

Subject:           Washington State’s Healthier Washington


This bulletin provides initial information on the state’s new plan to transform the delivery of care in Washington State, “Healthier Washington.” It also discusses WSHA’s actions to shape the decisions and how hospitals should engage in this multi-year process. 


The state’s efforts are intended to transform payment for care as well as the type of care delivered by hospitals, physicians and behavioral health providers to Medicaid patients, state employees and commercial insurers.  The efforts are also aimed to bolster public health efforts to improve the health of Washington residents. 


Hospital leaders need to engage in local efforts and understand the state’s work and goals.  The state will be purchasing coverage for more than a third of the Washington population and intends to influence private purchasers as well.  The goals in this project are large.  While it is uncertain they will be achieved over the next four years, the infusion of funds and the restructuring of care will have significant impact on care delivery in the state.   The state is looking for partnership and guidance as it sets the direction for this work.  Hospital leaders should be active in the local Accountable Communities of Health. 


In December 2014, Washington State was awarded a five-year, $65 million federal grant from the Centers of Medicare & Medicaid Innovation’s State Innovation Models program.  This infusion of funds enhances plans in place from the Governor’s office and his agencies to change health care. The state will spend this year in a planning mode and will be implementing many of these changes over the next several years

The focus of the state’s work is to change the health care system through an emphasis on population health, new payment models that reward value, and better integration of behavioral health and physical health.  By 2019, 90% of Washington residents will be healthier, all individuals with physical and behavioral health comorbidities will receive high quality care, and annual health care cost growth will be 2% below the national trend. The payment redesign intends to shift 80% of the market from traditional fee-for-service to integrated, value-based payment models. The plan assumes there will be $700 million in savings over the four years, based on a Mercer estimate. The 2014 legislature included $3 million in savings for fiscal year 2015 and $60 million in the upcoming biennium budget. 

The Health Care Authority (HCA) is the lead agency for this work with additional support from the Department of Health (DOH) and the Department of Social and Health Services (DSHS).  The Governor is appointing a leadership group with different stakeholder and state agency representatives to accelerate this work. The work will be accomplished through changes in four areas and through a fifth area that provides agency support:

I.   Community empowerment through Accountable Communities of Health (ACH): The grant will support local ACHs. These local communities will implement the plan for population health, link community supports with practice transformation and enhance data collection for local cost, quality and utilization. (Funded at $10.9 million)

II.  Practice transformation: The state intends to create a practice transformation hub within DOH. It will support providers as they learn how to better coordinate care and implement value-based purchasing.  It will also support evidence-based care through the Dr. Robert Bree Collaborative and develop and promote shared decision making tools. In addition, the state is looking towards aiding in workforce development, such as better use of community health workers and assessing needs of providers. (Funded at $14.0 million)

III. Payment redesign: The state will promote four different payment models.

  • Model 1, which may overlap with other payment models, will integrate state funds supporting mental health and physical health by eventually contracting with managed care organizations that can serve both needs. Currently the state contracts separately for acute mental health services through Regional Support Networks, substance abuse providers and Medicaid managed care plans.
  • Model 2 will develop new payment models for critical access hospitals along with rural health clinics and federally qualified health centers.
  • Model 3 and 4 will develop accountable care organizations and high value networks. (Funded at $5.1 million)

IV.  Analytics, interoperability and measurement: The state will support increased analytic capacity within state agencies, as well as, new data tools from the Institute of Health Metrics and Evaluation at the University of Washington, an all-payer claims data base, increased transparency and a shared core measure set. (Funded at $24.7 million)

V.   Project management: HCA, DOH, and DSHS are hiring new staff and will be working with consultants. (Funded at $10.3 million)


Area Funding

(in millions)

Community Empowerment $10.9
Practice Transformation $14.0
Payment Redesign $5.1
Analytics, Interoperability and Measurement $24.7
Project management $10.3
Total $65.0


WSHA Communication and Engagement Plan

We support the state’s efforts to develop a transformed system for care delivery. WSHA supported both the underlying statutory direction provided by HB 2572 on state transformation and SB 6312 on mental health integration, as well as, the grant application to CMS. We believe we need to actively partner with the state as it moves forward with this effort.

With the breadth of the state plan and aims, we intend to rely on our regular communication and governance structure for discussions, input and feedback with our members. We will be communicating through bulletins, newsletters such as Weekly Report and Fiscal Watch. These will be supplemented as needed on a monthly basis with webcasts highlighting major developments.

Our established engagement groups are well suited to provide guidance and direction, with discussions at the Rural Committee, the Public Policy Committee, the Public Policy Advisory Group, the Chief Financial Officer group, the Patient Safety Committee and our Board. This outreach may also be supplemented by gathering a group of members active in the governance of their local ACHs, a group to discuss practice transformation, and/or a group to discuss barriers to mental health integration. Please let us know if you are interested in any of these specific topics.

We will build on our already strong relations with both HCA and DOH to convey hospital input as they develop their transformation plans. We have been asked by HCA to lead the work on payment change for critical access hospitals. We are currently in discussions with them on the details.

Staff Contacts

Your input and involvement is essential to our state’s ability to build an effective and sustainable health care system. We look forward to hearing from you.

Overall Innovation Plan – Claudia Sanders, ClaudiaS@wsha.org

Rural Transformation – Jacqueline Barton True, JacquelineB@wsha.org

Behavioral Health Integration – Chelene Whiteaker, CheleneW@wsha.org


Additional Information on Healthier Washington:

Each of the major funding areas is described in detail below.


Community Empowerment:  Accountable Communities of Health (ACH)

The state plans to drive reform at the local level using Accountable Communities of Health (ACHs). As envisioned by the state, ACHs are “regionally governed, public-private collaborative tailored by region to align actions and initiatives of a diverse coalition of players in order to achieve healthy communities and populations.” They will act as conduits between the state and local regions, providing a forum for cross sector partnership and a regional voice in Medicaid purchasing. ACHs are charged with determining their own governance structure.

Representation includes employers, housing, criminal justice, education, health plans, primary care providers, specialty care providers, hospitals, public health, long term care, behavioral health, first responders, tribes and consumers. The ACHs themselves will be supported by a contracted organization that provides technical assistance with organizational development, sustainability, determining regional needs and engaging stakeholders.  HCA currently is in the process of selecting this contractor.

The state has initially agreed on nine local areas for these communities with a designated “backbone” entity in each. The geographic areas intentionally overlap with the regional service areas designated for behavioral health, in order to have local discussions deal with both physical and behavioral health.

In July, the nine area entities received planning grants of up to $50,000 each to help them begin to form, expand and/or accelerate health improvement collaboratives and community engagement efforts. These entities and the geographic populations they represent are noted on the map below. In January, HCA announced two organizations as the first ACH pilots. Each received up to $150,000 for the next six months. The remaining regions received up to $100,000 to continue their planning process.  HCA plans to designate ACHs in the additional areas by the end of 2015. 

The two selected ACHs were Cascade Pacific (backed by CHOICE Regional Health Network) and North Sound Accountable Community of Health (backed by the Whatcom Alliance for Health Advancement). North Sound is coordinating the work being done in case management across different agencies to further reduce unnecessary emergency room visits. Cascade seeks to identify school-aged children with behavioral health challenges in school and clinical care settings and connect them with community-based intervention and treatment services.


Practice Transformation Support

The state plans to establish a practice transformation support hub overseen by DOH. The hub is charged with contracting for the provision of training, tools, and technical assistance to primary care and behavioral health providers. Its focus will be aimed to those practices seeking assistance in revamping or adjusting their care delivery models. DOH will act as the initial convener and organizer of the practice transformation work. The hub will provide targeted assistance to facilitate practice transformation in the transition to value based reimbursement strategies; integration of physical and behavioral health; and team based care and community-clinical linkages. The focus may be on primary care practices that may not otherwise have the resources to identify best practices and training.

The hub will sub-contract (via an RFP process) with a variety of organizations with experience in clinical transformation to provide technical assistance to providers. It is not intended to supplant or replace current quality improvement initiatives.

Payment Reform: Paying for Value

Paying for value is a core strategy of the state and the grant.  HCA is driving accountable care and value-based purchasing strategies statewide in an effort to phase out traditional fee-for-service payment models. This includes aligning provider, payer and consumer incentives while rewarding value, quality, effectiveness and efficiency in the delivery of care.

Integration with Mental Health (Model 1 under the Grant)

Last session a new state law, SB 6312, set in place a transition to move the state to a contracting system which integrates its benefits for physical health and behavioral health services (i.e., mental health and substance abuse disorder services) under a single contract by January 1, 2020. Currently, our state provides separate financing for mental health services for the most acutely ill people living with a mental illness through the Regional Support Networks. Medicaid enrollees with less acute mental health needs receive mental health care through the traditional Medicaid managed care organizations. Medicaid managed care organizations provide physical health services for Medicaid enrollees in both groups.  The state’s Healthier Washington work will support this move towards full integration of benefits by 2020. 

SB 6312 has two pathways to a financial integration of physical and mental health, one for early adopters and the other for regions not yet ready to integrate on this faster track. Beginning in 2016, counties in the early adopter regions will implement a purchasing model in which benefits for Medicaid beneficiaries are delivered through a contract between the HCA and the managed care organizations for the full continuum of physical and behavioral health services. Counties in these areas may share up to 10% of the state savings. Counties in other regions not yet ready to fully-integrate purchasing in 2016 will work with DSHS to form a Behavioral Health Organization (BHO) to manage both mental health and substance use disorder services. The BHOs will receive a per-member per-month amount for mental health and substance abuse services for the Medicaid population. This is a major shift, since historically substance abuse benefits have been paid on a fee-for-service basis directly by the state.

HCA requested non-binding letters of intent from counties interested in pursuing the early adopter track in February. Currently, the Southwest region (Clark, Klickitat, and Skamania counties) is pursuing the early adopter track.  The timeline is ambitious and other counties may find it difficult to meet the deadlines.

Rural Redesign (Model 2 under the Grant)

Payment Model 2 reflects the state’s interest in driving transformation in rural Washington. Under this model, HCA will work with rural health clinics and federally qualified health clinics to develop and implement an alternative, value based payment methodology. Building upon a payment system developed in 2014, HCA will partner with the Washington Association of Community and Migrant Health Centers, the Rural Health Clinic Association of Washington and WSHA to develop this new model. Implementation will initially be voluntary.

Payment Model 2 also provides for the development of an alternative payment and delivery model for select critical access hospitals (CAHs). Participating hospitals represent Washington’s smallest and most remote communities with hospitals vulnerable to closure. Loss of a CAH in these communities would threaten access to essential health care services; this new model seeks to stabilize and sustain access to services across Washington State. The state has made it clear that WSHA is a key partner in this work. WSHA has convened a stakeholder group known as the Washington Rural Health Access Preservation Program (WRHAP).

Accountable Care/Request for Applications. (Models 3 and 4 under the Grant)

One of the state’s strategies to reform payment is to piggyback on current developments already in the marketplace, such as the Boeing movement to establish a choice option for employees under an accountable care framework. In December 2014, HCA issued a request for application for a Puget Sound Accountable Care Option for care to state employees and family members under the Public Employees Benefits Board (PEBB) program. The accountable care option will go into effect January 1, 2016 through December 31, 2020. The target group is the five county Puget Sound region, including King, Thurston, Pierce, Snohomish, and Kitsap. HCA is interested in expanding this option statewide by 2017, and will also consider applications that offer the option beyond this five county region.

The three organizations that were selected to enter into negotiations for this program are Providence, University of Washington Medicine and the Puget Sound High Value Network (a group that includes Virginia Mason, EvergreenHealth, Overlake Medical Center, Edmonds Family Medicine, CHI Franciscan Health, and the Everett Clinic). The program is looking for clinically integrated organizations or networks that offer primary, specialty and hospital care and can serve at least 50,000 members in the five county area. There are currently 160,000 non-Medicare PEBB members in this region. HCA will announce its final selections for contracting in April.

According to the requirements, the organizations selected under this process must guarantee the total per-member per-year costs will remain below the current predicted trends for the five year duration of the contract and that quality of care improves, based on standard measures of performance. The cost trends are provided in the accompanying chart. The participating organizations must show cost savings for both PEBB members who actively choose to enroll in their plan, as well as, members who are attributed to their plan, by use of services. The organization(s) are responsible for all costs incurred above the forecasted base line level and may share in savings up to half, if costs are below targets assuming quality targets are exceeded.

Year Financial Guarantee   Net Deficits Net Savings
  Designated Attributed    
2015 Base Cost Base Cost Base cost Base Cost
2016 101% 102% Cost over target ½ cost under target
2017 101% 102% Cost over target ½ cost under target
2018 100% 101% Cost over target ½ cost under target
2019 100% 101% Cost over target ½ cost under target
2020 99% 100% Cost over target ½ cost under target

Quality measures include a dozen performance measures ranging from blood pressure for diabetes patients, depression assessment, cesarean section rate and adherence to Bree total hip and knee replacement bundle. Applicants must also agree to implement all HCA endorsed Bree Collaborative recommendations and the decisions of the Health Technology Assessment program. Applicants must also demonstrate how they will incorporate the recommendations of the local accountable communities of health, as well as, the recommendations from other quality organizations, such as the Foundation for Health Care Quality with its recommendations on reporting for cardiac care, surgical care and obstetrics. Other requirements include adhering to a schedule for timely appointments for urgent and non-urgent primary and specialty visits and providing a dedicated website.

Analytics, Interoperability and Measurement

One of the largest areas of grant funding is in analytics, interoperability and measurement. The state grant application recognizes a key component is providing an enhanced state health information exchange. Even where behavioral health and primary care are collocated there are still barriers to exchange of information.

Funding will be provided to support the state’s all-payer claims data base, potentially with the Washington Health Alliance as its lead. The claims data base may be used to enhance measures available on quality. An initial quality measure set, intended to be a statewide core measure, has already been developed by the state’s work group. It will be revised on a periodic basis as more measuring tools become available.

Finally, the state will also provide funds to the University of Washington to evaluate the progress made through the grant.

Background and References

More information is available on the state’s Healthier Washington website

Prior WSHA bulletins from March and November 2014 


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