Skip to Content

Tennessee Health Care Innovation Initiative

Governor Haslam

“Over the next 5 years, the Tennessee Health Care Innovation Initiative will shift a majority of health care spending, both public and private away from fee for service to three outcomes based payment strategies…With these efforts, it's our hope that Tennessee will be at the forefront of a national trend that is expected to gain momentum in the coming years.”

-Governor Haslam's address to the National Governors Association, July 2014

Governor Haslam launched Tennessee's Health Care Innovation Initiative in February 2013 to change the way that health care is paid for in Tennessee. We want to move from paying for volume to paying for value. Our mission is to reward health care providers for the outcomes we want including,

  • High quality and efficient treatment of medical conditions, and
  • Help maintaining people's health over time.

We are bringing together health care providers and clinicians, employers, major insurance companies, and patients and family members to reform the health care payment and delivery system in our state.

Tennessee will lead by example with our TennCare program and our state employees benefits administration, and we are asking other stakeholders to join us.

Contact us at for more information.

Three strategies

The Tennessee Health Care Innovation Initiative has three strategies –primary care transformation, episodes of care, and long-term services and supports.

  • Primary care transformation focuses on the role of the primary care provider in promoting the delivery of preventive services and managing chronic illnesses over a continuum of time. The initiative is developing an aligned model for patient centered medical homes (PCMH), health homes for Serious and Persistent Mental Illness, and hospital and ED admission/discharge/ transfer provider alerts to be implemented statewide.

  • Episodes of care focus on the health care delivered in association with acute healthcare events such as a surgical procedure or an inpatient hospitalization. Episodes encompass care delivered by multiple providers in relation to a specific health care event. More information on episodes of care is available below.

  • The long-term services and supports (LTSS) The long-term services and supports (LTSS) component focuses on improving quality and shifting payment to outcomes-based measures for the QuILTSS program and for enhanced respiratory care.

In December 2014, Tennessee was awarded a $65 million State Innovation Models (SIM) grant from the Centers for Medicare and Medicaid Services. This grant award will further support the goal of the initiative: to make health care in Tennessee a value-based system focused on efficiency, quality of care, and the patient experience. To read the state's grant application click here. For a short presentation on the initiative click here.

Primary Care Transformation

Tennessee's Primary Care Transformation will assist primary care providers in promoting better quality care, improve population health, and will reduce the cost of care through total cost of care accountability with reporting and financial incentives.

Multi-payer Patient-Centered Medical Homes: Tennessee will build on the existing PCMH efforts made to date by providers and payers to create a robust PCMH program that features alignment across payers on critical elements. The major payers in Tennessee have agreed to adopt a multi-payer population-based approach and have signed a "joint Statement of Intent for Population-Based Models," committing to have 80% of members across books of business cared for through a population-based model within five years. The state will lead by example by requiring the three TennCare Managed Care Organizations (MCOs) to participate in a statewide joint PCMH program and the initiative will incorporate commercial payers starting with 12 practices in East and West Tennessee and building up to a statewide aligned commercial and Medicaid PCMH program.

Pediatric Patient-Centered Medical Homes: Tennessee is partnering with the Tennessee Chapter of the American Academy of Pediatrics (TNAAP) to implement a portfolio of quality improvement projects with Tennessee pediatricians that meet the distinct health care needs of infants, children and adolescents. Since 2008, TNAAP has collaborated with the Bureau of TennCare in a multi-year medical home implementation project to promote Pediatric PCMH implementation across the state.

TennCare Health Homes: Tennessee is working with providers to improve integrated and value-based behavioral and primary care services for people with Severe and Persistent Mental Illness (SPMI). TennCare SPMI members have higher rates of asthma, congestive heart failure, COPD, coronary artery disease, diabetes, hypertension, and stroke and have over twice as many Emergency Department visits as compared to other TennCare members. The state will leverage the enhanced federal match for Health Homes to offer prospective payments for care coordination and case management for two years, coupled with provider training and capacity building, and quarterly cost and quality reporting. While TennCare has already taken significant steps to integrate behavioral health and primary care within the MCOs, the development of Health Homes will help providers to integrate care and build practices' capacity to transition to value-based payment and delivery in the future.

Shared Care Coordination Tool: Tennessee is working with stakeholders to build the framework for a state Health Information Exchange (HIE). Tennessee's approach is to begin with a state-wide shared solution for the most impactful health information exchange: real-time or daily batch Admitting/Discharge/Transfer (ADT) data collected from hospitals and Emergency Departments and sent to a care coordination interface for attributed primary care providers. Over time additional functions and connectivity will be added to this shared solution to get to full HIE functionality.

Episodes of Care

Episode-based payment seeks to align incentives with successfully achieving a patient's desired outcome during an “episode of care”, a clinical situation with predictable start and end points. Episodes reward high-quality care, promote the use of clinical pathways and evidence-based guidelines, encourage coordination, and reduce ineffective and/or inappropriate care. Episode-based payment is applicable for most procedures, hospitalizations, acute outpatient care (e.g., broken bones), as well as some forms of treatment for cancer and behavioral health conditions (e.g., ADHD). Under the initiative, episode-based payment will be rolled out in waves every six months with the goal of implementing 75 episodes by the end of 2019.

Wave 1: In May 2014, the initiative launched three episodes of care: acute asthma exacerbation, perinatal, and total joint replacement. Over 500 providers statewide received reports from TennCare and commercial payers. For more information about the first three episode-based models designed under the initiative, click the links below:

The design of each episode was  developed with input from key stakeholders, including Tennessee clinicians and insurance companies. The design is consistent across all TennCare Managed Care Organizations, but there may be some variation in commercial payer episode definitions.

Wave 2: The state is currently implementing the next 5 episodes of care for implementation in Tennessee. Those episodes include acute COPD exacerbation, screening and surveillance colonoscopy, outpatient and non-acute inpatient cholecystectomy, acute percutaneous coronary intervention (PCI) and non-acute PCI. The initiative plans to begin reporting on these episodes in mid-2015. For more information about the definitions of the wave 2 episodes, click the links below:

More information about future waves of episodes is available here.

Other information:

Long-Term Services and Supports

Tennessee will implement quality- and acuity-based payment and delivery system reform for LTSS, including Nursing Facility services and Home and Community Based Services (HCBS) for seniors and adults with physical, intellectual and developmental disabilities (I/DD). The initiative's approach will combine a quality measure framework focused on the member experience that is consistent across care settings.

Quality- and Acuity-Based Payment for Nursing Facilities and Home and Community Based Services: Under the Quality Improvement in Long-Term Services and Supports (QuILTSS) initiative, Nursing Facility payment will be based in part on residents' assessed levels of need and adjusted based on quality metrics. HCBS payments will be adjusted to incorporate the same quality metrics when they apply across service delivery settings, along with modified and additional quality metrics specific to HCBS. These changes will reward providers that improve the member's experience of care and promote a person-centered care delivery model. For individuals with I/DD, Tennessee will apply quality and acuity-based payments to address inequities in the system, encourage appropriate high-quality and efficient care, and increase the number of people who can be served.

Value-Based Purchasing Initiative for Enhanced Respiratory Care (ERC): TennCare will revise its reimbursement structure for ERC services in a Nursing Facility, using a point system to adjust rates based on the facility's performance on key performance indicators. This will be combined with strengthened standards of care, and educational programs to promote quality and best practices.

Workforce Development: Through its extensive stakeholder input processes, Tennessee has identified that one of the most critical aspects of LTSS value pertains to the level of training and competency of professionals delivering direct supports—whether in a Nursing Facility or in the community. Therefore the initiative will invest in the development of a comprehensive training program for individuals paid to deliver LTSS. Since staff training will be an important quality measure and will also impact a provider's success across other measures, agencies employing better trained and qualified staff will be appropriately compensated for the higher quality of care experienced by individuals they serve.

More information on LTSS reform is available here

Meeting materials

The Tennessee Health Care Innovation Initiative continues to engage with Tennessee providers on health care delivery system transformation. To access materials presented to providers, employers, and the public on the initiative, click here.