WORTHINGTON, Minn. - Any lingering questions about why Minnesota is a health care pioneer should have been put to rest by the confident, let-us-take-a-shot-at-this banter that filled a YMCA conference room here recently.

Nationally, even experts come up short when it comes to finding savings in Medicaid, the critically important federal-state program covering care for the poor and disabled. But in Minnesota, officials from 12 southwest counties boldly believe they've found one solution for reining in the program's soaring costs without compromising care. Their plan: joining up with local providers to run the program themselves, at least in that corner of the state.

On Aug. 10, county officials publicly debuted their Southern Prairie Community Care proposal, an initiative that aims to tackle Medicaid reforms in much the same way rural residents lit up the countryside with electricity decades ago -- by banding together and taking action instead of waiting for someone else to solve the problem.

With state Department of Human Services Commissioner Lucinda Jesson in attendance, excitement quickly built in the YMCA room as Murray County Board Member Kevin Vickerman, Nobles County Board Member David Benson and others weighed in on the benefits of taking greater control of the millions in federal and state medical assistance dollars that flow to the region. The idea is to draw on the region's rural medicine expertise to weave together its social services, public health programs and caregivers to better serve patients and the bottom line.

Peg Heglund, Yellow Medicine County's feisty family services director, drew smiles around the room with her confident we'll-take-that-on-too comments about going beyond traditional medical care to tackle nursing home costs. That's a tough assignment to volunteer for, but Heglund's got the right attitude. If you want it done right, do it yourself.

Key operational details are still being worked out with the state. But Southern Prairie's enthusiastic backers deserve credit not only for forging rare common ground on health reform, but for understanding that the medical system needs to enlist social services, public health and citizens to pull off the systemic transformation that will keep people healthier and care affordable.

"Our 12 counties are an ideal group to start an initiative like this. We all know each other. We know our neighbors. We've served in the area and we know our system and where the local investment opportunities are and whether we can coordinate care in ways that aren't happening now," said Southern Prairie Executive Director Mary Fischer, a longtime health care and county social services veteran from the region.

"This is an opportunity to change the system on the local level. That is what is so exciting to me."

It's because of the welcome new openness to grass-roots innovation at Jesson's agency -- and at the state and federal levels more generally -- that in mid-2013 Southern Prairie could become a reality and potentially a new Medicaid management model to be replicated elsewhere. Other medical organizations in the Twin Cities that want to innovate with some of the $8 billion in Medicaid dollars spent in the state annually -- a sum that's grown more than 75 percent since 2002 -- also stand to benefit. Nationally, Medicaid spending stands at around $400 billion a year.

While many other states are simply planning to cut Medicaid or shift enrollees into managed-care plans in the hope of saving money, the Minnesota Department of Human Services is trying an alternative: directly contracting with medical providers or county-based groups like Southern Prairie to care for medical assistance patients.

In general, the agreements will involve the state setting spending targets for enrollees, with any savings shared by both the state and the contractors. If targets aren't hit, the organizations initially won't be liable for the difference, but will gradually assume risk for it in later years.

In early August, the federal agency that runs Medicaid granted its approval. Several other states are pursuing this, but Minnesota is the first to get the statewide go-ahead for demonstration projects.

That sounds like an achievement only a health policy nerd could love, but it's a big deal. Understanding why requires delving into health policy weeds. It's worth the trip.

Before the new approach was approved, Minnesota historically had paid for medical assistance bill-by-bill or had outsourced the program mostly to the state's urban-based managed-care plans. Rural officials in particular have long been concerned that their areas' health challenges (such as an aging population) weren't being met by remote management.

But previous gubernatorial administrations have lacked enthusiasm for testing new approaches or expanding an alternative model with a promising track record in rural Minnesota: the state's unique county-based health plans. These publicly run HMOs focus on government health programs and put an admirable priority on plowing savings back into local care.

Direct contracting offers a new type of flexibility and control that rural officials have long sought, but without requiring them to become a county-based HMO, though it could be a step toward that. It also offers new avenues along which metro-based provider organizations might innovate.

If it works, it should allow those closest to patients -- such as the providers and community aid workers -- to have a greater influence in how care is delivered and how any savings realized are invested back into local care or the health system. In short, direct contracting is another opportunity to find out how best to achieve a key component of health reform -- paying for value, not for volume.

Nine other medical organizations in addition to Southern Prairie are working with the state to become Medicaid direct contractors. A coalition of 10 Twin Cities community health clinics, who care for some of the metro's poorest clients, is on track to become one of the first such groups in the nation to do this. Large providers -- such as Children's Hospitals and Clinics, Fairview, Mayo and CentraCare -- are also talking with the state.

The success of the county-based plans inspires confidence that direct contracting is an especially promising approach for county-based organizations and safety-net providers such as the community health centers. Itasca Medical Care in northern Minnesota regularly ranks high in quality measurements, has expanded access to dental providers and, in 2011, had the lowest hospitalization readmission rate in the state for Medicare enrollees.

Hennepin Health, a county initiative similar to Southern Prairie that's underway in the metro, also has found early savings by harnessing social services and medical care to take better care of poor patients. Particularly promising: focusing on preventive care to keep patients healthier and reduce frequent use of expensive emergency rooms.

As a county organization, Southern Prairie has the same ability as Hennepin Health to rapidly intertwine medical and social services, which may give it an edge among the new direct contracting groups in realizing this new care delivery model's potential. It also has a backer who is a passionate believer in the savings that could come from cutting red tape.

"What would be really great is if we could get rid of this damn paperwork," said Heglund of Yellow Medicine County. "We do forms for three different payment systems. It's a nightmare."

There are no slam dunks in health policy, and direct contracting is no exception. Questions remain about how the patient care spending targets will be set, providers' readiness for financial risk, what role the managed-care plans will have and how the information technology will be paid for. Direct contracting could also lead to greater consolidation among providers, which might undermine the more localized problem-solving approach that's a key part of direct contracting's appeal.

But it's an experiment worth trying because it gives new tools to new groups of Minnesotans willing to step forward and tackle the era's most complex and pressing challenge: health care reform. It may not yield a blanket solution, but it could yield reforms customized to communities' and regions' unique needs.


Jill Burcum is a Star Tribune editorial writer.