With the continued growth and expansion of Medicare Advantage (MA) plans, many health systems are considering the pros and cons of accepting financial risk for these patients. This is a compelling proposition for health systems, because providers are well-positioned to drive both the revenue and expense sides of the equation.
When evaluating the feasibility of entering into up and down risk arrangements with MA plans, these are eight things you need to consider:
Understand CMS’s Risk Adjustment Payment Model
The Centers for Medicare and Medicaid Services (CMS) uses their Medicare Risk Adjustment Factors score (MRA score) to adjust the premium paid to the plan based on the presumed risk of the enrolled beneficiaries. Diagnoses codes submitted by a patient’s provider(s) are organized into what CMS refers to as “Diagnosis Groups,” which are used to generate an MRA score. Prior to applying their risk adjustment methodology, CMS determines base capitation rates by county and by plan using their quality-based Star-Rating methodology.
Structure the Deal
Risk arrangements are generally structured as a percent of premium — the dollar amount per member per month (PMPM) the plan receives from CMS. This incentivizes providers to focus on increasing their patients’ MRA scores by spending the extra time to document plan beneficiaries’ true health profiles and capture each and every applicable diagnosis code.
Define Your Risk Trajectory
An organization’s risk trajectory heavily depends on how well positioned they are to:
- Drive revenue to the plan by increasing the plan’s Star-Rating and overall MRA score; and
- Reduce the total cost of care for the population at risk.
Most provider organizations begin their journey into risk by participating in shared savings (upside only) prior to accepting downside risk.
Assess the Risk Pool
A thorough understanding of the current cost structure for the targeted population is essential. Three things to consider are:
- Average PMPM spend;
- Utilization and associated costs across all care sites; and
- Utilization rates of high cost services (e.g. admissions, ED, etc.).
Bear in mind that a risk pool can be either too big or too small. For example, a risk pool of 1,000 lives isn’t large enough to change provider behavior and one high cost patient could easily blow the entire budget. Conversely, prematurely taking risk on a large population could subject the organization to too much financial risk.
Get Focused on Driving Revenue
As a provider organization, you need to assess your ability to improve the MRA score and drive revenue to the plan (remember, in a 50/50 up/downside risk deal you stand to gain as much as the health plan). A lower MRA score may be indicative of a truly healthier population and a higher MRA score may actually indicate members with increased health risks. However, opportunity exists when a lower MRA score falsely represents the true health of a population due to a lack of adequate chart documentation, complete and accurate coding and routinely seeing patients in a primary care setting. Your ability to address these issues will be valued by insurers.
Control Expenses
Once the cost structure elements are known, the next step is to develop solutions to control utilization of high-cost services. Combining targeted interventions to address specific problem areas (e.g. high ED use) with a comprehensive care management program are essential for ensuring patients receive cost effective care in the appropriate setting.
Partner with the Payer
Assuming financial risk requires partnering with the payer(s) and engaging in (and often driving) decisions that were previously made exclusively by the health plan. This includes benefit design. For example, the provider organization should be actively involved in the decision to impose a larger co-pay on plan beneficiaries for ED visits while advocating lower co-pays for urgent care visits to reduce unnecessary ED utilization.
Align the Provider Community
To manage the total cost of care for any population, clinical and financial interests must be aligned across the entire provider community. To achieve this alignment, we recommend developing of an organizational structure that facilitates clinical integration (as defined by the Federal Trade Commission) among employed and independent physicians, hospitals and other community partners who play a role in population health management. Without this infrastructure, providers will continue to move in opposing directions as they continue to operate under disparate reimbursement models aimed at achieving varying goals and objectives.
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