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
April 25, 2013 Volume 19 Issue 8
Medicare Advantage plan sponsor Universal American Corp. is building a potentially substantial new business helping rural providers start MA plans of their own, sometimes in areas where the company itself has MA operations. Universal American will be supplying capital, taking risk and performing insurance-related functions in return for 50% of the net profits in an approach linked partly to aiding the providers as managed care business for Medicare-Medicaid dual eligibles develops.
The company is not the only MA sponsor directly involved in this new form of provider ownership of MA (UPMC Health Plan is among the others, working with the MedStar health system in the Washington, D.C., area). But it probably is the largest-scale participant, intending to start MA Special Needs Plan (SNP) joint ventures in four states in 2014 and perhaps at least four others in 2015 and beyond, according to Stephen Wood, senior vice president, development for Universal American.
Wood tells MAN that the potential 2014 states are Arkansas, Kansas, New York and South Carolina. Targets for 2015 and beyond, he says, include Alabama, Georgia, Iowa and Tennessee. The only joint MA SNP already launched is in Oklahoma, where Universal American partners with Oklahoma nursing home operator Tom Coble, who is working with the company as a consultant and will own varying percentages of the other SNPs, Wood adds.
Coble himself tells MAN that the new business grew out of an arrangement he has had with Universal since 2004. In that year, says Coble, who is president of Elmbrook Management Co., a third-party administrator (TPA) for nursing homes, he sold to Universal American an insurance company he had started nearly 10 years earlier to foster his concept of models of care that would allow nursing-home patients to avoid unneeded hospitalizations. Universal American then worked with Coble on starting an institutional MA SNP in Oklahoma in 2005 and broadening the concept to serving Medicare-Medicaid dual eligibles via a SNP.
Long-term care providers in general are candidates for such partnerships, Wood explains, because they realize their business (including Medicaid and duals) is moving toward a managed care “platform, whether they like it or not.” While they don’t necessarily want to become managed care organizations themselves, “they’re gunning to be masters of their own destiny,” asserts Wood. He says they know how to operate under the regulatory and payment systems of their individual states and don’t want outsiders changing that situation.
So they are receptive, according to Wood, to Universal American’s concept of building dual-eligible SNPs (D-SNPs), which the insurer generally prefers to chronic care (“a little out there”) or institutional (“too narrow”) SNPs. The level of interest among these providers is strong enough that they did not back off when the preliminary 2014 MA notice issued Feb. 15 suggested a major additional coming reduction in MA pay rates (MAN 2/28/13, p. 1), he says.
Providers that now seem to be interested in taking risk (MAN 3/28/13, p. 1) have a different approach from providers that had largely negative experiences when they tried to do this in the 1990s, notes Wood. Their concept now, he says, is partnerships in which they are the care-delivery organizations that can help avoid hospitalizations.
Approach Works Best in Rural Areas
Wood says states like this approach for rural areas since there are not enough long-term support services to keep beneficiaries needing care out of the hospitals otherwise. And the nursing homes like it because they “want to stay in business,” and “they realize they can’t be a Motel 6 for old people” and make enough money by doing so, he tells MAN. While nursing homes have to realize they’re in the health care delivery system and not just custodial care providers, he acknowledges that the strategy may not work as well in urban areas, where providers are plentiful.
But he also says that the MA partnership strategy may work for community health centers as well as nursing homes.
The duals market is particularly attractive for a partnership strategy because some providers fear they will lose fee-for-service payments and perhaps have a less desirable patient mix under managed care for that population. Universal American is pursuing this business and not just in the states of CMS’s Financial Alignment Demonstration for duals, Wood notes. Some states are approaching duals care from the Medicaid side (MAN 2/14/13, p. 1), and Universal American is looking at that business via its recently acquired APS Healthcare unit as well as via the MA side, he says.
This doesn’t mean, however, that the company doesn’t have to overcome provider suspicions of insurers, Wood concedes. However, he says Universal American can prevail over such suspicions because the providers realize that in the current environment “you can’t not manage care and stay viable.”
The resulting partnerships, he acknowledges, include ones in the insurer’s own markets so that it may appear Universal American is competing against itself. Wood, though, says it would be serving different populations in those markets, and the company has a successful track record in aligning itself with providers.
One reason the partnership appeals to providers, he continues, is that the capitalization needs for them can be pretty large. Universal American’s model agreement is for five years and involves a 50-50 split on the net profits. Wood adds that the insurer’s split can go down after five years and in some cases could be as low as 30%.
Being in an MA partnership with an insurer such as Universal American in theory might hinder providers’ ability to get included in networks of other MA plans, but Wood says that isn’t likely in the small markets where the company is using this strategy. “The markets we’re looking at don’t have any alternatives” to the providers involved, he asserts, since they basically are “very rural.”
How big a business might this become for Universal American? Wood responds, “I hope we’ll have a dozen of these [partnerships] within 36 months.” And while some of the additional ones may be small, others could be big because of the coming business in managing care for duals, he says.
The concept of insurers helping providers starting MA plans is not unique to SNPs. Pittsburgh-based UPMC, for instance, via its Evolent Health joint venture with The Advisory Board Co. (MAN 3/28/13, p. 1), helped large integrated delivery system MedStar Health start a non-SNP MA prescription drug plan this year, notes John Lovelace, president of MA unit UPMC for You. The new plan has only 66 enrollees so far, somewhat less than expected, Lovelace acknowledges, but MedStar, which operates in the Washington, D.C., and Baltimore areas, sees the venture as part of its strategy to expand to northern Virginia and start a SNP for duals.
UPMC, he tells MAN, has no direct equity stake in the new plan (it does have a stake in Evolent, which owns part of the new plan) but it’s paying claims, operating the call center, and aiding in marketing and enrollment during this first year. This work with providers is in keeping with UPMC’s interest in growing its TPA business with health plans, adds Lovelace. He notes that MedStar had already been active in managed Medicaid, desires to get further into the insurance business and wants to align itself more closely with providers and consumers.
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