CMS's Star Ratings Firing Squad Gets Squirt Guns
Last week, in a surprise move, the Centers for Medicare and Medicaid Services (CMS) reversed its threat to terminate all Medicare Advantage and Part D health plans with 3 or fewer Stars for more than 3 consecutive years. Roughly a dozen health plans were lined up in front of the firing squad as an example to the industry for months -- and then CMS issued squirt guns to the executioners.
It's a one-year stay of execution, with the one year of course being an election year. Importantly, CMS said it will terminate contracts if plans do not achieve at least a 3-star rating by 2016. Our favorite agency maintains the authority to deny applications submitted by poor performers, and to deny an application if it has terminated an MA or PDP contract within the past 38 months. There is a 14 month "grace period" for new plans to comply.
CMS Medicare Chief Sean Cavanaugh made the surprise announcement (beginning at 20:30 on the YouTube video) Thursday along with a September 8 policy letter that went to a handful of media outlets, but strangely isn't posted on the CMS website or communicated to Medicare plans via the Health Plan Management System. The memo noted:
"In delaying the terminations of these low performing contracts, CMS expects all contracts that have for at least three years received...a Rating of less than 3 stars to concentrate on improving the quality of care provided to their enrollees. These contracts must focus on the overall health care needs of their individual enrollees, including improving enrollee experiences and ensuring that their enrollees receive needed clinical care. These efforts should improve CAHPS, HEDIS, HOS, patient safety, and adherence scores. Organizations and sponsors should focus on all areas where the contract has received less than 3 stars. Organizations and sponsors must take into account their enrollee populations and target any interventions to improve quality to the specific needs of their enrollees. In many cases, a one-size-fits-all approach for interventions will not work.
"CMS may be following up with contracts designated as having a low performing icon (LPI) to discuss their performance and will determine whether enforcement or compliance measures other than contract termination pursuant to §§ 422.510(a)(4)(xi) and 423.509(a)(4)(x) should be utilized to ensure that the contract comes into compliance with CMS' requirements."
Barclay's eminent analyst Josh Raskin pointed out that "WellCare is the biggest beneficiary of this change with 9.5% of its total Medicare Advantage members enrolled in plans with consistently (i.e., three consecutive years) less than 3-stars." Raskin looked at how publicly-traded Medicare Advantage plans' 2.5 and 2.0 star enrollment trended over the past two years. He concluded over 200,000 Medicare Advantage lives are at risk when the stay of execution is over next year. "Among the companies with the greatest risk, Centene is most exposed, with roughly 19% of its membership in plans below three stars, followed by Universal American with 16% and WellCare with roughly 12% of its membership in plans below three stars," he said.
On the positive side, Raskin noted Humana continues to makes strides with the company's "at risk" enrollment declining from roughly 550K lives in 2011 to 25K last year, and that Molina has also made progress, improving the rating of its sole 2.5-star plan above the 3.0-star threshold last year. All of UnitedHealth's sub 3-star plans increased to a 3-star plan last year, leaving the company with very little "high risk" enrollment.
So, we'll have to wait another year for a public hanging in Star Ratings Square. But all of this serves as further evidence of what a game-changer Star Ratings have become in government programs, from the crappy consumer information tool they were just 4 years ago.
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Why Medicare ACOs Were Always a Bad Deal, and Why They Need an Exit Strategy
Last week, the tenth of 32 Medicare Pioneer ACOs dropped out of the program. Others are expressing reservations about entering or continuing given the experience of Pioneers and the hundreds participating in the Medicare Shared Savings Program (MSSP). To be clear, it's not all bad news...but most ACOs will need an exit strategy, fast.
Medicare ACOs were never a fair deal. As I pointed out last week, the problem with the Pioneers, and in fact with all Medicare ACOs, is that the rules tilt the playing field toward CMS, often to the detriment of the ACO. Most significantly, the downside risk, as required by CMS, is irrational. Any ACO incurs substantial downside risk in the form of its investments to participate and its operating costs.
A rational deal would be: the ACO incurs operating costs, and it gets a share of any savings it generates. The risk is that savings are not enough to cover costs. Your reward is that you keep any excess over operating costs, although CMS couldn't resist putting a ceiling on that, too. Adding a financial penalty if costs exceed the benchmark doubles down on the downside, giving the ACO two ways to lose money, and only one way to make money — by generating savings in excess of costs. Losses incur a penalty, in addition to operating costs. Small gains still leave a loss if operating costs are not covered -- so only large savings offer a profit. This is not a fair deal, especially for ACOs in already-efficient markets like Sharp in San Diego.
In the CMS math, the "losses" that incur downside risk, and require refunds to CMS, result from per capita costs for Part A and B services for assigned beneficiaries exceeding a benchmark. The benchmark is supposed to represent the per capita cost for these bennies if the ACO did nothing. Costs below the benchmark represent the degree to which the ACO has succeeded in doing something effective.
I can think of only two scenarios in which costs would exceed this benchmark cost of doing nothing. One is collusion by the ACO providers to increase Medicare billings. That is illegal, and already carries stiff penalties, and nobody would try it in a public demonstration. That leaves only one other explanation: the benchmark is supposed to represent the per capita costs if the ACO does nothing. If the ACO does something and still incurs a loss, that means that the benchmark is defective. CMS does a poor job of incorporating risk adjustment into the benchmark, and, as in the case of Sharp, the benchmark is not necessarily adjusted year to year at a rate that reflects local market changes. That means the downside risk imposed by CMS is really a penalty for its inability to get the benchmark right. That is not a fair deal.
In addition to the problems with the downside risk requirement, even if you do generate large savings, your share of those savings will be reduced unless you achieve near perfection on 33 quality metrics selected by CMS. The ink is barely dry on the first set of metrics, and CMS is already proposing to change half of them. When one party to a deal keeps shifting the goal posts, it is not a fair deal.
So as we see it, as many as three-quarters of Medicare ACOs need an exit strategy, and fast. Many Medicare ACOs' 3-year demos will wrap up in 2015-2016, so as early as next year dozens will look at the significant investments in time and treasure and nonexistent ROI and say, "what's next?" They have three major choices:
- Go back to traditional fee-for-service Medicare with a hole in their budget and scars on their asses. Pursue commercial ACO arrangements that are attractive, and effectively flush the investment in Medicare management down the toilet.
- Enter, or go deeper into, contracts with one or more Medicare Advantage plans in the market, leveraging infrastructure and experience into a channel where money can be made and quality rewarded. Most MA plans recognize that a Medicare ACO with a record of savings and quality is primed to be a good risk partner.
- Build your own Medicare Advantage plan and move up the food chain. A successful Medicare ACO has already mastered the hardest parts of eldercare: care management and an engaged network of high-performing providers. What's missing is insurance functions, which can be built or bought.
Those Medicare ACOs that choose the latter path have good reason to do so: Medicare Advantage remains a sound investment opportunity in most markets for 5 big reasons:
- Beginning in 2017, the MA benchmark is guaranteed to grow at the same rate as FFS Medicare, whereas the Medicare ACO benchmark resets every 3 years, confiscating most hope of shared savings.
- Medicare ACOs have to be good diagnostic coders to avoid losing revenue, whereas in MA that's an enormous financial advantage under risk adjustment.
- ACOs share their savings with CMS; MA plans keep theirs. Boom.
- Medicare ACOs with demonstrated quality watch CMS keep less of what they've already earned, while quality gets MA plans a bonus -- and new entrants automatically start with a 3.5 Star Rating and a 3.5% bonus.
- Medicare ACO beneficiaries are "free range". There is no lock-in and the same level of benefits for any Medicare provider. The MA benefit design is a lock-in that favors in-network utilization. Free range is only tastier when referring to carnivorous treats, not capitalist ones.
Those Medicare ACOs that choose the latter option need to move fast. To evolve into a Medicare Advantage plan, a Medicare ACO needs to have confirmed its market's financial viability, and then build or arrange for:
- state licensure and financial reserves, and must hold 100% of risk net of reinsurance;
- a highly developed function to manage Federal and state regulatory requirements;
- a sophisticated and accountable sales and marketing structure;
- transaction processing like eligibility, enrollment and claims;
- a member-centric member service operation.
These capabilities can be homegrown, obtained from the health plan down the street or from third-party vendors like TMG Health, or some combination thereof. But either path takes time, and sound health plans aren't built during a fire drill. A Notice of Intent must be submitted to CMS in November and application made in February for the following contract year -- so at this point you're talking 2016 entry at the earliest, 2017 most likely.
If you're a health system watching this all unfold, let me suggest this: instead of investing in a Medicare ACO, take your money to Vegas or to Medicare Advantage -- in either place you know the rules and the odds.
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Em El AR Passive Statistic or Call to Action?
For many, the medical loss ratio (MLR) is the ratio of the health plan's incurred medical claims to the total premiums earned. However under the Affordable Care Act and for government health programs, the MLR is the ratio of medical claims plus quality improvement costs divided by earned premiums minus federal and state taxes and fees and payments in lieu of taxes.
This is not the time or place to get into a discussion about the rules for what is included in the calculation of the Medicare Advantage MLR, but rather focus on what are some of the drivers of the medical spend which makes up the greatest proportion of the MLR and what health plans should be focused on to control that medical spend without sacrificing the quality of services provided or the expected outcomes.
Most payers and provider sponsored health plans collect data based on provider submitted claims, and in most cases translate the data into an annual statistic referred to as the MLR. That is where the common ground begins to turn into quicksand. Why? Because not every health plan has either the capability or knows what to do next with the data that is being collected. Some plans will ask the questions related to what are the drivers behind the MLR, such as: what are the medical utilization outliers; are the providers coding inaccurately; are the referrals and referral patterns from PCP to Specialist or from Specialist to inpatient settings appropriate? What about the use of the ER, or the use of pharmaceuticals? Is the claims configuration process and adjudication process supportive of the provider contracts that have been negotiated? And so it goes.
The point is that even the more sophisticated Plans at times, are at a loss to identify all the drivers that impact the MLR, and therefore Plans are not able to address completely all the existing outliers that drive the MLR. Without that information, a Plan's success in developing short, intermediate and long term strategies and initiatives focused on population management, medical management and financial planning is not fully realized.
A comprehensive understanding of the various elements that drive medical expenses and hence the MLR will enable Plans to develop forward looking assumptions regarding premiums for lines of business, projections on utilization of clinical services, and provider contracting budgets, just to name a few. Recognizing specific drivers of medical expense can assist health plans in transitioning from fee for service (FFS) driven contracted networks to "value based" networks as well as working proactively to lead a transformation of population management .
Such understanding can lead to health service initiatives around how to best impact provider practice patterns regarding member access, coordinated treatment planning, appropriate referral patterns and improved coordination of care via elimination of duplicative or unnecessary procedures.
Ultimately, the goal should be the development by the Plan of a medical expense management plan that is characterized by a forward looking and dynamic approach to proactive medical management and includes provider initiatives supported by performance based measures.
The bottom line is that for many of the health plans, the issue is not lack of data but how to ask the right questions of the data in order to create actionable efforts that lead to improved performance by the plan and provider and results in improved outcomes to the member.
And sometimes it takes an outside objective partner with a fresh approach to data analysis and understanding of industry best practice to interpret what the data implies. That is where we at the Gorman Health Group can help. Contact us today. You will be glad you did.
Resources
On September 26, Join John Gorman, GHG's Founder and Executive Chairman together with colleague, John Nimsky, Senior Vice President of Healthcare Innovations, as they discuss the vehicles for achieving what could be characterized as a reengineering of the health care delivery process and its effectiveness. Register today >>
On Tuesday, August 19, GHG's Senior Vice President, Bill MacBain and Senior Vice President of Healthcare Innovations, John Nimsky, explored the drivers and trends in cost and revenue which affect your MLR. Access the webinar recording by becoming a member of the Point >>
In addition to our continued work launching new entrants into the MA market, we are helping many experienced plans develop smart networks: accountable care, shadow capitation, and payment bundling within their current service areas and networks. Contact us today to learn how we can help you >>
Save the Date for the Gorman Health Group 2015 Forum. Join us April 7-9, 2015 at the Gaylord National Resort and Convention Center in National Harbor, MD. Learn more about the event >>
The Medicare ACO Demos Are a Mess. Here's What it Means for Health Plans.
This week, another Medicare Pioneer Accountable Care Organization Demonstration site, longtime GHG client Sharp Healthcare in San Diego announced it was dropping out. It was the tenth Pioneer to quit the trail, and not for lack of trying. Many of the Pioneers did great on improving quality and reducing costs -- the issue is not the performance of Pioneers. It's CMS' methodology, with its requirement for Pioneers to bear risk in the third year, and benchmarks calculated to make any gainsharing impossible.
The deck was stacked against them from the beginning, including inability to control beneficiary out-migration, inability to generate meaningful savings if the network was already highly efficient, and the beneficiary at-will opt-out. It's left dozens of Medicare ACOs in both Pioneer and the more than 330 in the Medicare Shared Savings Program (MSSP) scratching their heads and wondering how to monetize the millions they've invested in population health and complex case management -- the "hard part" of Medicare managed care.
I think many will conclude it's time to move up the food chain and become Medicare Advantage plans, and we'll start seeing them next year, with a mini-surge to follow in 2016 and 2017. Look at it this way: Even if only 10% of all Medicare ACOs decide to jump into the elder insurance game, we could be talking as many as 40 new Medicare Advantage plans entering the program over the next three years. All of them local and/or regional powerhouses with loyal followings to command those thousands of "assigned" beneficiaries. At a minimum, a Medicare Advantage contract of their own would command big leverage in negotiations with competing plans they may already be in business with.
To participate in Pioneer or MSSP, health systems needed to develop sophisticated reporting structures to meet CMS demands, as well as the significant investments needed to better manage their elderly frequent flyers. They assembled more integrated, coordinated providers and held them to tough quality standards, and for the most part, they delivered. But for all the hard work of evolving their delivery systems, most -- we estimate as many as three-quarters -- won't see a penny from either demonstration.
Many of these ACOs will look at the health plans they contract with in Medicare Advantage, flip the model on its head, engage the plan or a vendor like TMG Health to operate "back office" insurance functions like enrollment, and enter the market in 2016 or 2017 as private-label senior plans.
They'll have a great story to tell, loyal followings, brand recognition, and -- hugely -- will enter Medicare Advantage with the newbie default 3.5 Star Rating, including the 3.5% bonus. And let's not forget 2016 and 2017 are when the worst is over in the Medicare Advantage rate cuts from the Affordable Care Act, with MA benchmarks being pegged at the traditional Medicare growth rate. These two factors, not to mention a health system's inherent advantage in collecting risk adjustment diagnostic codes, should provide a substantial tailwind to these new entrants. Disappointed Medicare ACOs will reinvent themselves as MA plans making an entrance in 2016-2017 like Beyoncé at the Video Music Awards.
This mini-surge of provider-sponsored MA plans should be considered by many sectors of our industry, from provider relations execs and health plan strategists, to pharmacy benefit managers and other vendors hunting new prospects. Disruptive events like the Affordable Care Act have ripple effects, and one will be the evolution of ACOs into full-risk insurers seeking to control their own destiny. And we need to look no further than members of the Health Plan Alliance, systems like Geisinger Health Plan, or UPMC, or Security Health Plan to see the impact they can make.
If you're a Medicare Advantage Plan with a Medicare ACO in your neighborhood, or worse in your network, start sleeping with one eye open. It's now time to keep your friends close and your enemies closer.
Resources
Our team of veteran executives can help your ACO evaluate the options, manage the workflow to achieve either a Medicare Advantage contract with CMS or a risk contract with an existing MA plan, and continue to achieve improved outcomes. Learn more about how GHG can help >>
Save the Date for the Gorman Health Group 2015 Forum. Join us April 7-9, 2015 at the Gaylord National Resort and Convention Center in National Harbor, MD. Learn more about the event >>
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Health Plan Strategists: Fish Where the Fishes Is -- in LTSS
One of the best pieces of advice I ever got in business was to "fish where the fishes is", and for health plan strategists it holds up. In this Golden Age of Government-sponsored Health Programs, one of the biggest fishing holes is Long-Term Services and Supports, and a new primer from KFF lays out the opportunity beautifully. And the hazards: patients who require LTSS are of course the most vulnerable and complex patients in the entire US health system, literally the final frontier for health plans and coordinated care. Huge risk, huge rewards.
LTSS -- often totally unfamiliar to both Medicare and Medicaid plans, and requiring new types of providers in-network -- help the elderly and disabled with activities of daily living, and include nursing home care, adult day care, transportation, and caregiver supports. As a nation in 2012 we spent $368 billion on LTSS, 40% of that from Medicaid, and 20% from Medicare, and likely to be around $400 billion today. That's way more than what we're spending on ObamaCare's exchanges and subsidies on an annual basis. It's unsustainable already, and is now a top-2 item in most state budgets. And with seniors 85+ now the fastest-growing segment of the US population, and their needing LTSS at four times the rate of their younger cohorts, the urgency to convert these vulnerable patients to a coordinated care environment has never been greater, and it's happening fast.
Most LTSS reforms occurring at the state level involve transitioning frail elders and the disabled from the human warehouses of nursing homes and rehab hospitals to home and community-based settings, often under a capitated financial arrangement. With a year of nursing home care costing $90,000+ but a home health aide or adult day care running about $20,000, it's not hard to see why 45 cash-strapped states are pushing this transition.
The catch is that with the complexity of these populations, and the growing resistance of beneficiary advocates, especially for the developmentally disabled, this transition will involve an unprecedented degree of transparency and accountability from health plans. If you think Medicare Advantage Star Ratings measures are tough, you ain't seen nothin' yet. Many quality standards for the frail and disabled, like provider visit timeliness and drug adherence, haven't even gotten off the drawing board yet, and they often vary by state. What's clear is that service and coordination expectations of regulators will be far more robust for very old and disabled beneficiaries. That means more emphasis on data-driven case management and coordination, in-home and in-community interventions, robust reporting for regulators and actionable clinical intelligence for providers.
So strategists should "fish where the fishes is" and plan to participate in these groundbreaking programs -- but come equipped.
Resources
Gorman Health Group can provide guidance and support in every strategic and operational area in Government sponsored health programs. Contact us to learn more >>
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Part D and Hospice Rules Mucking Up Beneficiaries' Last Days
Last week the Centers for Medicare and Medicaid Services (CMS) met with 30 hospice & healthcare organizations about suspending a new rule intended to avoid duplicate payments for hospice medications. This is a very big deal and the new rule is mucking up many beneficiaries' last days. The National Hospice and Palliative Care Organization described the meeting as "an important first step at righting the wrongs being faced by dying Medicare patients."
Previously, hospice (under Medicare Part A) paid only for the drugs that patients needed for palliation and management of the terminal illness and related conditions, and Medicare Part D covered drugs for hospice patients' unrelated conditions. Under the new rule, CMS requires a beneficiary level prior authorization process for all hospice and Part D providers to determine responsibility of drug coverage, and hospice must cover medications related only to the hospice diagnosis.
CMS' expectations are unrealistic. Putting prior authorizations on everything adversely impacts beneficiary access to drug therapies and causes agonizing delays at the point of service. Consider this: first, it has to be determined if the drug in question is covered under Part A or D. If Part A, then you have to figure out if it's even covered under the hospice formulary and beneficiary refuses to try formulary equivalent first or drug is not reasonable or necessary per the hospice provider if not and the beneficiary wants the drug, it will be self-pay. If it's neither Part A nor D, then the beneficiary must self-pay. If covered under Part D and the prescriber is not hospice affiliated, the sponsor has to jump through hoops, including what to do if the prescriber is unable or unwilling to coordinate with the hospice provider.Then, if the drug has prior authorization on Part D it would have to satisfy those requirements. Plans have to be able to accept and save proactive determinations from hospice. It's an administrative nightmare. For 2014 only, CMS is universally allowing Plans to treat hospice coverage determinations as exceptions. That in and of itself shows that they are not sure how best to handle this mess.
With end-stage patients (the only kind you get in hospice), it is often difficult to discern which drugs are used for symptom management and what drugs are really for chronic conditions that if in hospice should not be treated, such as diabetes or hypertension meds. The hospice industry has reported widespread confusion and disputes that have made it harder for patients to get their drugs.
Seventy senators signed onto a letter circulated by Sens. Jay Rockefeller (D-WV) and Pat Roberts (R-KS), calling for CMS to suspend the rule. "We ask that CMS immediately suspend the Guidance and begin a process to develop an alternative approach which will ensure both that the right individual or entity pays for the hospice patient's medications and that the patient get the medication that he or she requires without interruption," they write.
We agree and hope CMS goes back to the drawing board on this rule. Calm and freedom from pain should define a beneficiary's last days, not administrative hoops and preauthorizations.
Resources
If you've just submitted your HEDIS data, now is the time to analyze that data for gaps and identify interventions for your health plans, providers and members. On July 17 join John Gorman, Executive Chairman at GHG, Jane Scott , Senior Vice President of Clinical Services and Anita McCreavy, Senior Consultant, for a webinar on HEDIS reporting, the new measures and what's next. Register now >>
The rapid changes to Part D regulations make the tracking and implementation of these CMS requirements exceptionally difficult — to say nothing of actually managing to them. Contact us today to learn how we can help >>
Follow the Leader: United Health Group's Outlook on Government Health Programs
Ralph Giacobbe at Credit Suisse is a leading health industry analyst and is doing the best work of his career. Today he produced a fantastic recap of his discussion with United Health Group CEO Steve Hemsley and several of his top executives. It included some fascinating insights into the market leader's strategy for government health programs:
â– 2015 Earnings Growth: Management reiterated its focus on growing operating earnings in 2015. While Medicare rate pressures remain (-3 to -3.5%), the company is optimistic of better MA enrollment in 2015 as it does not expect the same level of market disruptions with more limited network reconfigurations...Medicaid is expected to remain a positive contributor. Additionally, UNH has $90B in medical costs and $20B in administrative costs from which to drive savings, which was stressed by management during the meetings...cost creep has backfilled previous administrative cost savings. Management is now "acutely focused" on applying more rigorous standards to general reinvestments in the organization.
â– Medicare Star Ratings and Renewed Focus on Performance: While the management team noted that performance as a whole has been "good", there was clearly a sentiment that performance needs to improve. Hemsley noted that too many of UnitedHealthcare's recent issues have been "self-inflicted," especially Medicare Stars. As a result, UNH is in the process of narrowing its networks to steer patients to high performing providers in an effort to improve quality. Additionally, a greater focus will be placed on leveraging data to stratify members in order to quickly identify and place high acuity members in appropriate care management programs. As the largest player in the market, UNH has several metrics under its control and is expected to perform at high levels. According to management, it took UHC too long to figure out that STAR ratings place significant emphasis on serving both the healthcare and social needs of members. While corrective steps are encouraging the improvement in STAR rating won't be evident until 2017 at the earliest given the lag time in measuring criteria.
â– Network Reconfigurations Continue: As a result of MA rate pressures, UNH significantly adjusted its networks during the 2014 annual enrollment period for which it received scrutiny. Management reiterated that network reconfigurations will continue, but will be guided by insights gained during 2014. Last year UNH narrowed its Medicare networks by 10-15% and management expects some continuation into 2015, although changes will be made more on a continuous basis vs. occurring all at once and therefore should be less disruptive. Overall, network configuration remains a significant component of managing trend and should not be underestimated as narrowing networks to higher performing facilities/providers can save on medical costs. MA rate pressures for 2015 were evident when management reiterated that the final rate came in below their expectation of flat. UNH sizes the impact in the range of -3% to -3.5%. We would expect network reconfigurations to be an ongoing process, as management believes it is only in the 2nd or 3rd inning, but again, don't expect big disruption like 2014.
â– Reform Update: While UNH's exchange participation in 2014 was limited, it is inclined to increase its involvement in 2015. UNH is currently in the process of evaluating markets, products, regulations, and first year pricing. While it continues to appear that the company is likely to increase its exchange exposure in 2015, it has until September to finalize its decisions.
â– Medicaid: Expansion also appears to be tracking well, as management now expects Medicaid growth to exceed the high end of guidance (+350-450K lives). While the dust has yet to settle, expectations were to see 65% of expansion enrollment 1Q, followed by more moderate enrollment in the middle of the year and a reacceleration around year end. It is still early, but at this point UNH has not seen anything alarming in terms of utilization and feels comfortable about its ability to effectively manage new Medicaid members. Additionally, UNH is getting paid appropriately higher rates for Medicaid expansion members.
â– Optum: Management's new goals are "8 by '16" (8% operating margins, 10 new large relationships, double digit top and bottom line growth, and doubling 2013 op earnings of $2.3B). With a backlog of $7.2B, Optum has an abundance of opportunities at its fingertips...Optum's role as a system integrator for HealthCare.gov was an important building block in establishing its reputation. Management also conveyed a new level of confidence that scrutiny around Optum's association with UNH has subsided, as payors and healthcare systems appear to have gained comfort that the appropriate firewalls are in place for Optum to maintain its independence from UNH.
Resources
On May 7, Gorman Health Group Executive Vice President and former regulator Steve Balcerzak joined Vice President of Provider Network Management Craig Lyon for a deep dive into CMS expectations. Attendees got their their take on what to expect and how to prepare. Access the webinar recording here >>
From ACO-type incentives to bundled payments and contract capitation, to full professional and global capitation — where the potential is promising, we can help design and implement these arrangements. Contact us for more information >>
The 2015 Medicare Advantage Final Call Letter = Unicorn Rainbow Farts
The Center for Medicare and Medicaid Services' (CMS) release of the final 2015 Call Letter for Medicare Advantage (MA) Monday after the close was a "unicorns farting rainbows" moment. Unicorn rainbow farts bring happiness and joy to all those that observe them, and then dissipate quickly. After a beating at the hands of the ever-more powerful insurance lobby for another draconian draft released in February, CMS reversed itself yet again and proclaimed a 0.4% increase in MA benchmarks. Lobbyists and Wall Street analysts rejoiced...only to find after a closer look that there are some nasty hooks in the pie CMS put on the windowsill.
We've tried for days to replicate CMS' math to get to a 0.4% increase, and can't, because it's vapor, magical horse methane. The truth is, we're looking at an average cut of at least 3% for MA next year, and our logic follows below:
Others agree: DeutscheBank says -3.5%; Morgan Stanley projects -3.1%, Bank of America says -3.3%. And that ushers in a two-year march in the desert for Medicare plans following the 6% hit they took in 2014. There will be wide variation among plans, with lesser negative impact for plans which can continue to bid below the benchmarks.
The trends by themselves cut the benchmarks a lot, to the tune of almost 8%. And there's a ripple effect there, on Star ratings of all things: the -4% trend on the old benchmarks lowers the ceiling, and the effect is to truncate Stars bonuses in almost half of US counties. Ironically, high-performing plans take a hit, especially in double bonus counties, in this final rate announcement.
CMS's second consecutive reversal of its proposed ban on diagnostic codes for risk adjustment from home visits was a huge win for the industry, and as we see it, the one ray of light in the final call letter. CMS delayed the change until 2016, and that delay makes up for most of the impact of the negative trends in the benchmarks. But this isn't an equal across the board fix. Given that the FFS normalization factor places a 4% multiple on every point of a plan's risk adjustment factor (RAF) score, plans have an even greater incentive to identify and document every diagnosis that maps to an HCC.
This is further amplified by the decision to roll back the phase in of the new HCCs. On average, the new HCC scores would cut about 2.6% out of MA plans' payments. In 2014, CMS is blending new and old HCCs, with new scores given a 0.75 weight. For 2015, they are rolling that back to a 0.33 weight. That's worth 109 basis points by our calculation. So, compared to 2014, one RAF point is worth 1.05 points in 2015. Given the deferral of the home risk assessment rule for at least another year, plans should be doing home visits intensively this year, and working to evolve their programs to be more clinically meaningful, e.g., a care plan for every diagnostic code submitted from a home visit, and making the house call into more of a "mobile medical home" including mobile labs, imaging and drug therapy counseling.
CMS also makes clear in the final call letter that Medicare Advantage plans ranked 3 Stars or less for 3 consecutive years will be nonrenewed. This means termination notices could be going out as early as August given plans have to execute 2015 contracts with the agency in September, before the Annual Enrollment Period. Many plans will choose to nonrenew rather than be publicly shut down by CMS for poor quality. Dozens of plans are now dead men walking, including several of the publicly-traded Medicaid plans and several Blue Cross/Blue Shield organizations. So in a matter of weeks, a Hunger Games-style "reaping" will occur that will change the face of this industry.
So the long walk in the desert for Medicare Advantage begins. Forward-looking plans will prepare by ramping up their risk adjustment operations, ensuring their Stars programs have the resources they need to keep scores moving up, revisiting their service models, and working daily on closer collaboration with their provider networks.
Resources
On April 11 GHG Comments on the Final Rate Announcement in a webinar hosted by Gorman Health Group Founder and Executive Chairman John Gorman, financial expert and former health plan CFO, Bill MacBain, and former regulator and industry-renowned policy expert Jean LeMasurier. Register for the webinar >>
Listen in as John Gorman shares his reactions to the 2015 Final Call Letter from CMS. He covers the implications of the final rates, as well as what the pull back on risk adjustment means to MA plans this year, and beyond. Click here to download the podcast >>
Join Gorman Health Group May 1 — 2 at the Red Rock Casino and Resort in Las Vegas for the 2014 GHG Forum. This two-day event builds on the success of past GHG Forums and is designed to provide best practices for the decision makers of organizations serving Medicare members, Exchange beneficiaries, and the Dual eligible population. Register now >>
Lighting the Path in the Golden Age of Government-Sponsored Health Programs: Join Us for the GHG Client Forum
More than 300 guests will convene on May 1-2 at the Red Rock Casino in Las Vegas for the 2014 Gorman Health Group Forum, our annual strategic retreat for leaders in government-sponsored health programs. This year's gathering promises to be the most actionable, content-packed conference you could attend on how to succeed in this new Golden Age of government business. And when the learning and planning is done for the day, we will celebrate this unique moment in health care history as only GHG can in Vegas. Here's what's happening this year and why you've got to join us:
- The event features 27 content-charged sessions, including multiple presentations on Star Ratings tactics, quality improvement, risk adjustment, and compliance challenges unique to Medicare Advantage and Part D, Medicaid, and the ObamaCare exchanges
- A keynote presentation from CMS leadership
- An expert roster of presenters from Gorman Health Group and leading health plans in government-sponsored programs. No fluff, no sales pitches, no history lessons -- it's all about what to do NOW
- Approved for up to 12 continuing education credits from the Compliance Certification Board
- The perfect off-the-strip venue to minimize distractions during the day, but close enough to the action to make plenty of bad decisions in the evenings. ;)
Based on feedback from last year's Forum, I'm speaking in three separate sessions on overall strategy and implementation planning for government programs. If you've heard my "state of the industry" presentation before, you may think you know what to expect from me on stage. Think again. This is my favorite gathering of the year, and I'm building three brand-spankin' new presentations that are focused on specific steps and mileposts your organization needs to reach this year in care management innovation, risk adjustment, Star Ratings, and operational performance improvement. In each session I'll drill down to specific steps, and we'll leave you with a self-assessment tool in our closing session to help track your progress.
Many of our clients use the Forum as an offsite retreat for their government programs executive teams, and so we offer huge group discounts to encourage it. It's a unique opportunity for team-building and action-oriented planning and budgeting.
If government-sponsored health programs are central to your company's future, do yourself a favor and join us in Vegas. You'll come back tired, happy, and ready to win in this crazy new environment of health reform.
Don't believe me? Hear what last year's attendees thought about the event, and why they keep coming back for more.
Resources
Register today for The Annual GHG Forum held May 1-2 at the Red Rock Casino and Resort in Las Vegas. This two day event is designed to provide best practices for the decision makers of organizations serving Medicare members, Exchange beneficiaries, and the Dual eligible population.
On April 11, Bill MacBain and Jean LeMasurier will be back, and this time joined by John Gorman, Executive Chairman of GHG, to offer insight on the Final Rate Announcement from CMS. You will walk away from this session with critical to-do items and issues to tackle in order to ensure your success in 2015 and beyond. Register now >>
Zombies in Washington!
Zombie: (a) a will-less and speechless human only capable of automatic movement who is held to have died and been reanimated. (b) The Sustainable Growth Rate.
By means of the Balanced Budget Act of 1997, Congress created the Sustainable Growth Rate, or "SGR" to us who know and love it, a will-less and speechless rule whose automatic movement seeks to annually wreak havoc with Medicare payments to physicians. This inane auto-pilot tries to link total physician payments under Medicare to the growth rate in the overall economy. Why Medicare physician payments, as distinct from other Medicare payments, should grow in lock step with all of the other, unrelated, components of the nation's economy, has never been stated. What has often been stated is the fact that Congress, in what passes for its collective wisdom, wishes with all of its collective heart that it could drive a stake through the heart of the SGR. Every year it threatens to cut physician payment rates by 20% or more. But the Congressional Budget Office, who is charged with calculating the cost of such things, finds that ridding us of this zombie would have a ten-year cost of $139 billion (with a "b"). And that assumes that the docs get a pay freeze for those ten years. Any raises would up the cost.
In another mindless act, Congress requires itself to offset new spending with an equal amount of either tax increases or other spending cuts, or some combination. Since it's impossible to get a majority of both houses to support either (a) tax increases in the house or (b) payment cuts in the Senate, nothing can happen, and the SGR lives on, annually "fixed" by kicking the can down the road a year, only to arise reanimated the following year.
Some observers of the optimistic persuasion believed that, maybe this time, the SGR might have met its match. We have a conference committee meeting to reconcile differences between House and Senate budget proposals, and maybe, just maybe, they would include a permanent fix to the SGR in their bargain. Any dreams of a grand bargain have long ago died, but there lingered the hope for a mini-bargain that might include the SGR. That hope is now dead, as time has essentially run out for a fix before the SGR kicks in January 1, 2014. The best one can hope for now is a repeat of the annual can-down-the-road kicking exercise.
What does this mean for Medicare Advantage? Well, actually, not much. Until this year's political pressure enlightened the calculation of the annual increase to Medicare Advantage plans, the SGR had a depressing impact on Medicare payments to private plans. Until this year, CMS had always assumed that the SGR's pay cuts would actually happen. They calculated payments to Medicare plans accordingly. When Congress did the inevitable, and postponed the SGR cuts by a year, CMS corrected the following year's payments, but by then, the SGR was back and cutting more. So, over time, payments to Medicare Advantage lagged more and more as they continued to be included in the calculation and only fixed a year later. However, the 2014 rates, for the first time, include the assumption that Congress will do what it has done the past eleven years, and fix the SGR cuts, at least for one year. The rates were increased accordingly. Maybe you didn't notice, since the SGR impact was offset by other cumulative corrections that decreased rates to make up for prior year miscalculations and overpayments. But the SGR is now gone from Medicare Advantage benchmark calculations.
So, as long as Congress keeps fixing the SGR one year at a time, there will be no impact on Medicare Advantage rates. The fix is already baked into the rates. And a permanent doc fix will also have no impact.
But the SGR is still an annoyance. Nobody wants it. Nobody expects it to ever save Medicare a dime. Everybody knows Congress will fix it one year at a time. Yet every member of Congress knows that to approve a permanent doc fix without offsetting taxes or cuts will be branded a "budget buster" by opponents, super-PACS, and tax exempt social welfare organizations all too eager to educate us on the evils of whoever is running against the incumbent. And tax increases or cuts to Medicare will provide even more fodder for election season TV commercials. So it lives on. And on.
Resources
Listen as GHG expert Bill MacBain dives in to what the Sustainable Growth Rate is, why it matters and how we can measure its impact. Access the podcast >>
Join us December 11 from 2:00 — 3:30 pm ET for a lively session with Gorman Health Group strategy and data analysis experts who will discuss actual case studies that show how plans can mine data for precious insight that can help improve performance. Register now >>