Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care.
By James Gutman, Managing Editor
March 28, 2013 Volume 19 Issue 6
While it is hardly a major trend yet, and it may pale next to other new developments involving provider organizations, there is clear evidence that growing numbers of provider groups have decided within the past year that they want to buy or start Medicare Advantage plans.
The new moves stem partly from the increasing desire of numerous provider organizations to assume risk so that they have the potential for greater financial rewards. This is the same motive that has attracted many large providers to the Medicare accountable care organization (ACO) programs under the health reform law. The developments also reflect the similar care-integration objectives that recently have led lots of MA insurers to acquire or boost their ties with provider entities.
However, the timing of the recent provider moves may seem strange in light of the likelihood that MA plan payment rates will decline significantly in 2014. In fact, several providers got burned in the late 1990s when the Balanced Budget Act (BBA) resulted in payment cuts for — and subsequent loss-spurred market exits by — Medicare+Choice plans, which were MA plans’ predecessors and had some provider owners.
Whatever the reasons and cross-currents, recent developments include:
· FirstCarolinaCare Insurance Co., a unit of hospital system First Health of the Carolinas, entered MA this year with First Medicare Direct. It landed about 1,300 enrollees during the 2013 Annual Election Period (AEP) out of only about 50,000 Medicare beneficiaries in its service area, Ken Lewis, president of the insurance firm, tells MAN.
· Consulting firm Evolent Health, which has backing from the University of Pittsburgh Medical Center (UPMC), is working with MedStar Health, a large integrated delivery system in the Washington, D.C., area, and two Atlanta-area systems (Piedmont Healthcare and WellStar Health System) on entering MA in 2014.
· CarePoint Insurance Co., which is owned by New Jersey hospital systems, is trying to buy units of bankrupt MA insurer Universal Health Care Group, Inc. (see story, p. 1).
· Nationwide health system Catholic Health Initiatives this month completed the $24 million purchase of a controlling interest in Washington state MA plan Soundpath Health, the first time CHI will have a majority stake in an MA insurer (MAN 11/1/12, p. 1).
It takes “quite a bit of investment” to get into MA, and FirstCarolina gave a lot of thought before taking the plunge and doing “pretty well” in the AEP, according to Lewis. The insurer has been in the commercial market since 2001, he explains, and both it and the parent health system have seen Medicare starting to require the same kinds of focus on quality and prevention of hospital readmissions as they have adopted. Lewis says this helped give FirstCarolina the “comfort” to get into MA and become the only provider in the state owning an MA plan.
The changes Medicare has been making recently have led providers to look for new ways of doing things, he says. “Sometimes we push the envelope; sometimes we are pushed on the envelope,” Lewis tells MAN.
In FirstCarolina’s case, he notes, it seeks to be an MA provider just for its “community,” which consists of rural counties south of Raleigh, N.C. While its parent hospital system does have some — but “not a lot” of — other MA plan contracts, and First Medicare Direct does compete with an MA coordinated care plan and an MA private-fee-for-service plan, “we’re small,” so neither of the other organizations sees the new unit as enough of a competitor that the parent health system is likely to lose MA business as a result, he asserts.
Insurer Got No Contract Break From Parent Firm
Lewis adds that the parent firm did not give First Medicare Direct “any better deal” in provider contracting than it gives other insurers.
The enrollment results First Medicare Direct achieved were about what he expected, Lewis says, although FirstCarolina’s half-physician board of directors also had projections for both 500 and 2,000 enrollees. He says there are no projections yet for 2014, and the unit first wants to see how well it delivers results, including how its physicians fare in the shared-savings model used, before taking further MA steps.
Did First Medicare Direct expect the big rate cuts MA plans now figure to get in 2014 under the preliminary 2014 pay notice? Lewis responds that it is wise to “always expect the possibility of changes” when dealing with the federal government, and he cites the ups and downs that followed the BBA. Asked whether FirstCarolina would have made the same MA entry decision had it known the contents of the rate notice before, he replies, “It was the right thing to do for our community.”
The clients Evolent works with are reviewing their financial models in light of the preliminary rate notice and, depending on what the April 1 final notice says, may select different counties or enrollment goals for 2014, Seth Blackley, co-founder and president of that consulting firm, tells MAN. But he says the basic factors that are leading them to MA, including looking for ways to “move up the premium chain” and take advantage of the continuing growth in the government markets for health care, still apply. Not all of the provider organizations Evolent works with will start MA plans, but many of them believe the key “levers” for success in MA, including risk coding, are ones that “providers can impact, perhaps better than traditional payers,” he adds.
Blackley downplays the chances that the provider organizations Evolent works with will lose substantial business from other MA plans if they enter the MA market. He points to experience in California, where there hasn’t been a lot of “retaliatory behavior” and where there also have been substantial acquisitions of physician groups by payers, as indicating an ongoing “blurring of lines” between the two sectors.
Evolent itself lists UPMC along with consulting firm The Advisory Board Company as minority owners, but Blackley says there is no majority owner and that Evolent is “independent.” UPMC does supply clinical care software that Evolent’s clients can use as they move into the insurance market.
The general move by provider organizations toward taking more risk could include new ventures either partnering with MA plans or operating those plans itself, agrees Dan Lyons, M.D., CEO of Skippack Creek Consulting, LLC and a former senior vice president for government programs at Independence Blue Cross. This trend could help ACO operators “hedge their bets,” he tells MAN, especially since they don’t know yet how well the new Medicare ACO programs will fare in generating shared savings.
Lyons, who also serves as medical director for the provider-owned AtlantiCare Health Solutions ACO in New Jersey, notes that many MA plans with top CMS star quality ratings are provider sponsored. Moreover, he says, the degree of risk to their other business caused by a provider entering MA would depend substantially on the market involved. In situations where the provider is dominant in the market, it would be difficult for another MA insurer to cut that provider out of its network as punishment for starting a competitor, he contends.
Smaller providers that start MA plans, though, could lose business with MA insurers, according to Gary Jacobs, head of the government programs initiative at consulting firm PricewaterhouseCoopers. Jacobs, who until last year was a senior vice president at MA insurer Universal American Corp., says new provider moves into MA aren’t a trend yet, but he also acknowledges that he has one provider client looking at becoming an MA insurer.
It all relates, Jacobs tells MAN, to providers increasingly demonstrating both “appetite and capability” for risk assumption, as shown in ACO ventures. He adds that if providers want to get into the insurance business, MA is “always at the top of the list” because they already are familiar with furnishing services for Medicare beneficiaries and know that there is “a lot of money in that business.
http://aishealth.com/archive/nman032813-02
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