CMS Network Adequacy Changes & the Impact to Medicare Advantage Plans

The Centers for Medicare and Medicaid Services (CMS) has afforded Medicare Advantage (MA) plans flexibility in terms of meeting provider network adequacy. These changes lower the percentage of beneficiaries needed to meet adequacy in CEAC, Rural and Micro counties, offer credit towards states with Certificate of Need (CON) laws, and provide the ability for plans to achieve adequacy by expanding telehealth in twelve specialties. The updated adequacy changes will open doors for plans to provide services in counties that would have otherwise proven difficult to meet the network adequacy standards.

As we begin a series of discussions over the next few months, Gorman Health Group (GHG) will explore the impact that the lessening adequacy changes will have on MA plan strategy (including product and benefit design strategy), provide a review of the new requirements, offer an exclusive opportunity to have GHG review your network to determine how the changes could affect your MA footprint, and finally, circle back to a deeper dive into telehealth and how the changes impact a plan’s network operations, clinical operations, and the impact to risk adjustment and Stars. Today, we start with the importance of aligning your network and product strategy.

Network Development & Product Strategy Alignment

As more health systems and provider organizations successfully manage the shift from volume-based patient care to value-based population health management, health plan strategic planning should blend network strategy with product strategy as a key factor in the ability to achieve clinical and financial goals. The majority of providers are savvy at managing pay-for-performance and upside risk arrangements, and as providers have seen margins narrow and plateau, they are more willing to step out into more advanced risk-sharing deals. Plans have had to adapt and move beyond simply incentivizing for behavior change. Systems that have ventured into managing downside risk and percent of premium arrangements with measured success have an appetite for more.

Certainly, moving up the food chain from a provider to a payer has been a topic of conversation among Chief Executive Officers of large integrated delivery systems. They have worked hard to align referral networks and build physician trust, develop relationships with diverse community support organizations, forge strong brand recognition in their local communities, and negotiate contracts with health plans that have met and exceeded care and cost containment goals.

Historically, health plans have based a large majority of decisions regarding expansion areas on the financial feasibility of the markets. Understanding the desire and direction of health systems in general, coupled with the alliances plans have worked hard to develop in their current markets, has encouraged the trend of including a network assessment as part of the new market feasibility. Many factors can play a significant part in determining a new or expansion market as well as its success or failure:

  • Local players and their appetite for risk
  • Hospital alliances formed
  • Accountable Care Organizations (ACOs) in the market
  • Local demographics such as city and road expansions
  • Development of retirement communities and the effect they have on patterns of care and plan expansion
  • Modeling the potential partners against the updated CMS network adequacy standards

As we have met and strategized with provider systems from their baby steps into pay-for-performance incentives to negotiating their first risk deal, there has been, and still is, a strong reliance on health plans to set clinical pathways and benchmarks. From the provider perspective, the reporting, transparency, and willingness to share in the financial successes with the plan partners are key considerations when deciding with whom to collaborate.

Systems are starting to explore the administrative support organizations available and realizing stepping out to become their own health plan doesn’t seem as scary as it may have been five years ago. From the plan perspective, the need to partner with providers and health systems with a depth of understanding in risk adjustment, Stars, the clinical skill set, and non-clinical support services to truly provide a holistic approach to patient care has never been more critical to success. The directive of new network adequacy requirements and more telehealth options will allow room for plans to become even more innovative with their benefits. Thus, the ability to blend network strategy and product strategy will likely be evident of how successful plans are.


As we delve further into the adequacy changes and the potential impacts, GHG product and network strategy subject matter experts stand ready to assist you in developing a customized strategy to place your MA plan in front of the curve. Contact us to learn more.