RADV Rules Show a New Era Dawning at CMS
After the market close last Friday CMS released its long-awaited methodology for conducting Risk Adjustment Data Validation (RADV) audits. It's a critically important document as for years President Obama has threatened in his budgets to recover billions in payments from Medicare Advantage plans. What it shows is that a new era is dawning at CMS, one brought about by the "tipping point" of Medicare Advantage exceeding 25% of all beneficiaries this year. Call it the era of "the open hand and the closed fist."
First, we have to acknowledge that the RADV methodology clearly reflects the intensive consultation CMS did with industry stakeholders to get their approach right. In a word, where we ended up is great, and CEOs and CFOs across the industry are heaving up sighs of relief this week.
There were four big developments in the announcement. The first: CMS says RADV audits will begin with plan year 2011, not retroactive to 2007, eliminating the four worst years of exposure for the industry as it figured out risk adjustment -- documentation is much better today than it was when the system launched in 2007. Essentially, CMS is saying "the sins of the past are absolved." They didn't have to do that, and we, hundreds of CFOs, and bankers up and down Wall Street and Madison Avenue are thankful they did. For plans that have already accrued for RADV for 2007-2010, like Aetna, there's the potential in the accrual for "found money" or a boost to earnings.
Second, CMS is introducing a "Fee-for-Service Adjuster." This mean the error rate found at individual Medicare Advantage plans will be reduced by the error rate of the traditional Medicare population. This was probably the biggest issue for the industry in the year's worth of negotiations since the draft methodology was released. Doctors generally suck at coding, regardless of whether a member is in a managed care plan or in traditional Medicare. Initially, CMS intended to compare error rates in managed care to 0, rather than comparing them to an error rate in the traditional Medicare program. If CMS had gone with its original approach, it could be argued that plans were being penalized twice. According to CMS, the estimated error rate at managed care plans is around 11%, down from the 2010 error rate of 14%.
Third, CMS will allow plans to submit multiple medical records to substantiate submitted codes, rather than requiring plans to only submit one best medical record. This will make it easier for plans to provide supporting documentation, as sicker members typically see several physicians, and the documentation from all of the treating physicians is rarely combined into a single medical record. The only disappointment here is that CMS will continue to focus audits on medical records and will still not allow alternative sources of clinical data like prescriptions.
Fourth, the audit results will be extrapolated only to the contract being audited. CMS will first determine the number of beneficiaries who are RADV eligible. The RADV eligible members are then ranked from highest to lowest based on their risk score and divided into three equal groups, with one group having the highest risk scores, another the lowest, and the remaining enrollees in the middle. CMS will then select 201 members to review medical records, with 67 enrollees randomly selected from each of the three cohorts. Plans will then submit medical records for these 201 members to support all the submitted codes. The resulting error rate is then reduced by the fee for service error rate, and the resulting figure is applied across the contract being audited only, not across the plan's entire book of MA business.
All in all, CMS made a number of concessions in the RADV methodology that they didn't have to, and which have the effect of significantly mitigating the risk and impact on the plans. They stated they're only after about $370 million in recoveries in 2012, much lower than the President's FY 2012 budget anticipated, and equating to about 0.3% of Medicare Advantage revenues, well below Wall Street expectations. RADV wasn't even mentioned in Obama's FY 2013 budget. Combine that with more favorable-than-expected draft 2013 rates for Medicare Advantage against the backdrop of the Age of Austerity we're in, and we see that these are big, important gestures that point to a new era at CMS: "the open hand and the closed fist." The open hand is that the Administration is now actively working to help plans where it can, especially on matters impacting revenues; the closed fist is the agency's continued willingness to take action against weak performers and the noncompliant. It's about as good as it's gonna get with this gang in the White House.
Medicare Advantage Hospital Readmission Rates Substantially Lower than FFS
An article in the American Journal for Managed Care found that Medicare Advantage (MA) patients experienced a much lower 30 day hospital readmission rate than FFS patients. The study found the MA readmission rate was 14.5 percent during 2006-2008, which was 22 percent lower than the FFS readmission rate. After adjusting for risk and excluding disabled beneficiaries, the study found that MA readmission rates were 13 to 20 percent lower than FFS. MA capitation rates provide a strong financial incentive for MA plans to reduce avoidable hospitalizations and readmissions, for example through the use of case management or network contracting arrangements. FFS has no incentives to control avoidable readmissions but that should change under a new program announced in 2011 that seeks to reduce FFS readmission rates by 20 percent.
How Doctors Die
Today's Wall Street Journal opinion page included a terrific op-ed on how physicians approach their own end of life care planning differently than most of their patients do, primarily because they actually understand the limitations of American medicine in prolonging life, and because they actually plan for the end.
The author, Dr. Ken Murray, a professor of family medicine at USC, wrote: "It's not something that we like to talk about, but doctors die, too. What's unusual about them is not how much treatment they get compared with most Americans, but how little. They know exactly what is going to happen, they know the choices, and they generally have access to any sort of medical care that they could want. But they tend to go serenely and gently. Doctors don't want to die any more than anyone else does. But they usually have talked about the limits of modern medicine with their families. They want to make sure that, when the time comes, no heroic measures are taken."
"Unlike previous eras, when doctors simply did what they thought was best, our system is now based on what patients choose. Physicians really try to honor their patients' wishes, but when patients ask "What would you do?," we often avoid answering. We don't want to impose our views on the vulnerable. The result is that more people receive futile "lifesaving" care, and fewer people die at home than did, say, 60 years ago. Nursing professor Karen Kehl, in an article called "Moving Toward Peace: An Analysis of the Concept of a Good Death," ranked the attributes of a graceful death, among them: being comfortable and in control, having a sense of closure, making the most of relationships and having family involved in care. Hospitals today provide few of these qualities. Written directives can give patients far more control over how their lives end. But while most of us accept that taxes are inescapable, death is a much harder pill to swallow, which keeps the vast majority of Americans from making proper arrangements."
I come from a family of doctors, and my Mom is an accomplished family physician specializing in palliative and end-of-life care. This is an issue we're passionate about in our family, and one I've pontificated on. And Dr. Murray nails the point here: those who know plan for the end, as we all need to.
But in the sudden resurgence of the culture wars during this GOP primary season, and the fact that at least two of the leading candidates -- Rick Santorum and Newt Gingrich -- had starring roles in the Terri Schiavo circus, it seems unlikely we'll get a meaningful discussion of end-of-life care as part of Medicare reform anytime soon. We live in an age of distortions like "Death Panels," where open dialogue on end of life is politicized and limits on what Medicare will cover are demogogued as rationing.
As I said back in October, Medicare Advantage plans are uniquely positioned to advance the cause of professional counseling for beneficiaries on their last wishes, preventing unnecessary surgeries based on the patient's preferences and likely clinical outcomes, and promoting the enthusiastic use of palliative care. A number of plans are leading quietly in this area, like UPMC in Pittsburgh, Excellus Blue Cross/Blue Shield in upstate New York (which actually has dedicated medical directors for end of life and palliative care), and any PACE site like On Lok in San Francisco.
We have much to learn from these end-of-life pioneers — they should be applauded and emulated for their courage in the face of the politics of end of life care.
Physician Engagement... What can you really do?
Health plans have tried a hundred ways to engage providers — incentive stipends, P4P, P4Q, capitation, clinical initiatives, episode of care payment, onsite coders, in office case management liaisons. But what works? Open communication, reasonable expectations, and simplicity.
Before CenseoHealth launches a patient evaluation program we meet with the community physicians to discuss:
1. Program Overview
2. Program Goals & Objectives
3. Community Customization & Clinical Opportunities
a. What are you doing well?
b. What do you need help with?
Often Censeo receives questions similar to those that follow:
• What are you doing with my patients?
• What can you really diagnose in the home?
• What do I receive from the Censeo clinical team?
• What if I want to participate?
Again, CenseoHealth shares the following:
• Program from launch to closure
• JAMA articles and clinical research & guidelines utilized in the Censeo programs
• Proprietary iPad tool and outputs for the evaluation
• Open Invitation to participate whether conducted in the office or home
As your internal metrics may highlight, between 8% and 30% of the membership may go to the physician's office for an evaluation, if encouraged. If the network physician has the same tool and the same time allotted for the visit, the outcome can be just as successful. However, if the physician's time is limited, the data collected is also limited. The averages results for an in-office evaluation completed in 25 minutes are approximately 1/3 of the information collected during an in-home evaluation; therefore the premium impact in the office is about 1/3 of the in-home impact.
How does CenseoHealth counter act the lower in-office results?
• invite the community physician to utilize the proprietary tool via iPad or paper
• educate network physicians on the HEDIS, STARs, HCCs, compliance, and accurate coding
• schedule in-office visits for the medical group to ensure the needed time is allocated for the experience
• completed quality assurance, coding, and analytics for the medical groups
• meet with both the health plan and medical to review reports and programs successes
We make your network part of the team and solution. Physicians are great team members when they are invited, respected, and given the premier instrument for success.
Let's Get the Ryan/Wyden Party Started!
This morning I was quoted in conservative standard-bearer Fred Barne's lead opinion piece in the Wall Street Journal on the Ryan/Wyden Medicare reform plan. Fred makes the point that Ryan is beginning to convince Democrats that his approach is reasonable.
I don't know if Ron Wyden, Jim Capretta and I make Ryan's new proposal "bipartisan", but the optimist in me has long hoped we can turn down the volume on the Medicare reform street-fight long enough to have a thoughtful discussion about it.
The pragmatist in me recognizes it's an election year and that nothing meaningful can happen on this issue this year -- but it will certainly be front and center in the big deficit reduction debate coming in 2013.
Garbage In. Clarity Out
So you may have bad, ugly, horrible, scary data and internally you don't have a means to lump it all together to give you a clear picture of what happened in 2010, 2011, and the challenges you are facing in 2012 with your members, your network physicians or your risk adjustment program.
You have twelve or more different revenue and quality initiatives and twenty different vendors supporting you. How can you combine these or give one clear picture? You need to build an internal repository for charts, claims, and risk adjustment data, which marries your claims and clinical data for each member and each network physicians' profile. Here is how we provide clarity for our clients:
1. Actionable Member Profiles: by combining Censeo Health's Advanced Evaluation, CareCurrent, and CareConnect analytics and reports, we can show you and your physicians the whole picture of the member's history, current conditions, plus what case management programs they have triggered, and the documentation strength of the codes recorded for the member. The complete and actionable member profile is a "must have" output from your risk adjustment and quality systems.
2. Comprehensive & Insightful Physician Profiles: through our service offerings, Censeo highlights coding strengths and weakness, compliance areas of improvement, support documents and elements for a patient's plan of treatment from labs to pharmacy to chronic conditions and possible gaps in care, clinical program and pathways needed, and a monitoring system for the resolution of condition or gaps in care by the community physicians. You need to support the network physician's plan of treatment by providing actionable and insightful tools for the physician as the patient navigates the care pathway.
These are not static report cards with a problem list but rather a dynamic instrument supporting your clinical success and engagement programs. If your system has these elements, fabulous - you are on top of your game. If you are developing these, wonderful - you are on the right track. If you cannot develop these internally, we can create this complete clarity for you in ten (10) business days through our mapping system and integration engine.
Memo on CMS Advance Notice and Draft Call Letter for 2013
CMS continues to refine operational policy for Medicare Advantage and Part D plans. View our summary of the 45-Day Advance Notice and Draft Call Letter for 2013 by clicking here. I was disappointed CMS did not finalize their proposed regulations prior to issuing this document. As a result some of the more significant policy changes will be reserved for the final rate announcement and final Call Letter.
I was struck by how complicated the payment formulas have become. While use of more recent data should make the formulas more accurate, there are so many other factors that can affect the bottom line in different directions that may be hard to predict, including the recalibrated MA and Part D risk adjustment processes. The new frailty adjustors for Fully Integrated Dual SNPs should provide an incentive for these plans to grow more rapidly, which is exactly the direction that CMS intends.
The number of quality measures continue to grow, with the most intriguing new measure being the net quality improvement at the Part C and Part D contract level. But I wonder how plans can keep up with all of the new measures and modifications to current measures each year. CMS continues to advance its value based purchasing agenda, including moving down the path of measuring performance of plans with less than 1,000 enrollees. This will pose some methodological challenges but should provide a more level playing field for plan comparisons.
Why Medicare Advantage is Here to Stay
If you want to understand why Medicare Advantage is now part of the firmament of the US healthcare economy, and will now weather almost anything Congress and the Administration can throw at it, you need only comprehend what Medicare contributes to the big players' bottom lines.
Since the exodus from the program that followed the Balanced Budget Act of 1997, and its resurgence with the Medicare Modernization Act of 2003, Medicare Advantage has become a monkey on the backs of the major payers that they just can't afford to quit, no matter how austere things get in the Capital.
Medicare has driven much of the industry's earnings growth over the past few years, as commercial risk membership has fallen and margins were pressured by rising cost trends last year. So even though Medicare may not contribute a lot on an overall basis, it has been a major contributor to earnings.
Carl McDonald, our good friend and uber-analyst at CitiGroup, shows in his EBITDA analysis of the "big 12" payers that Medicare Advantage contributed almost 23% of earnings on a weighted average basis, United at 28%, and 3 -- Universal American, HealthSpring and Humana -- deriving over 60% of their earnings from Medicare.
There are several reasons why MA is here to stay -- the reliance on capitation to bring stability to Medicare and Medicaid expenditures in our new Age of Austerity; the relentless march of American demographics and the Baby Boomers being more plan-friendly than the World War II generation; the consistent value proposition the "one-stop shop" MA offers relative to traditional FFS Medicare or the Medigap/Prescription Drug Plan combination; the migration of many delivery systems to MA, fleeing declining rates and rising expectations in FFS, to name a few.
But the real reason is that Wall Street is like Nikita Khrushchev at the Battle of Stalingrad, pointing a gun at his own comrades in the face of the Nazi onslaught: "Not one step backwards." Any of the big 12 exiting from the program would be inconceivable today. And that ensures robust participation in the program for the foreseeable future.
The Goat Rodeo
You hear a lot of interesting comments when you are meeting with health plans and large medical groups. One of my favorite phrases is "last year was a goat rodeo." The visual makes me laugh every time — goats, kids, and general goat chaos. However, in risk adjustment, you cannot afford an internal or vendor "goat rodeo."
If last year you had a risk adjustment goat rodeo, start taking notes and you may want to ask for some strategic planning assistance.
Here are the quick start metrics you should collect, map out, and monitor:
• 2011 Chart Review Volume, ROI, and projected timing of premium impact
• 2012 Hospital Data Feed Schedule from their HIMS database
• 2011 Member assessment volume, ROI and projected timing of premium impact
o Percent and impact by PCP
o Percent and impact in the SNF setting
o Percent and impact in the in-home
• 2011 Member data link to member services, case management, and PCP
• 2012 Chart review and member evaluation findings strategies linking to care
• 2012 Gaps in care closure program (outreach to documentation verification)
• 2011 HEDIS deficiencies and resolution success
• 2012 HEDIS program roadmap
• 2011 STARs goals and impact
• 2012 STARs roadmap
• 2011 & 2012 Claims based HCC analysis and documentation closure initiative
If you have a roadmap with timelines and an internal project leader for these aforementioned tasks you may still headed for a goat rodeo. The final pieces to ensure success are internal controls, plus a strong, efficient, and effective partner.
My Crystal Ball
IF the Supreme Court (SCOTUS) find the mandate unconstitutional, THEN the Exchanges begin to unravel.
And IF that happens, THEN the Dems will have an extraordinary issue to run on in 2012, which is as meaningful to Congressional races (remember: Congress holds the money) as it is to the Presidency.
But IF it doesn't, the GOP will have the same. It will look like this: "We're being turned into France! But without the French kissing!"
And IF they successfully take the house and hold the Senate—a scenario in which they likely capture the Big House too—then they can defund the exchanges even if they can't muster 60 votes in the Senate to overturn it.
Should be an interesting year.