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
July 11, 2013Volume 19Issue 13
A big part of the future of provider entities that now participate in Medicare accountable care organizations (ACOs) under the health reform law may be in Medicare Advantage, according to a well-regarded consultant with a background in both programs. Bill MacBain, senior vice president, finance at Gorman Health Group, LLC, even asserts that MA may be a key part of the “exit strategy” ACO participants need when their programs either end or become financially infeasible.
His contention comes at a time when several provider organizations already are entering MA through acquisitions, joint ventures and their own startups (MAN 3/28/13, p. 1). Since ACOs represent a variation on the theme of payers sharing risk with providers, who focus on “execution risk (efficiency and quality of care of disease),” according to MacBain, it would be natural for those ACO participants to move on to MA — especially given some of the reward-limiting aspects of the ACO program itself.
Speaking at a June 25 AIS webinar on long-term strategies for risk-bearing provider organizations, MacBain pointed to some of the problems providers are experiencing in the ACO programs. CMS’s “Pioneer” ACO initiative, for instance, is a demonstration initiative with a maximum duration of five years — the initial contract is for only three of those years — so that an exit strategy is vital simply to replace the revenues after the demo ends, he said. Moreover, the new Pioneer options designed to overcome providers’ initial doubts about that program include CMS taking a 3% “discount” off the top of savings achieved in the ACO. And the portion of one of the options that exempts Pioneer providers from downside risk is available only in the first year of the contract, MacBain noted.
The other CMS ACO initiative under the reform law, the Medicare Shared Savings Program (MSSP), has its own pitfalls. The “retrospective” nature of beneficiary attribution under MSSP, said MacBain, means providers don’t know which beneficiaries they ultimately will be accountable for, and the benefit design doesn’t encourage use of ACO providers since there’s no penalty for beneficiaries who go outside the ACO network for care.
Perhaps even more importantly, he continued, the benchmark used for determining the amounts of savings that get shared with ACO providers in MSSP is reset every three years using the most recent three years of claims data. MacBain maintained that means “the more successful an ACO is at reducing costs, the lower its reset benchmark will be.” This “virtually guarantees that an ACO will eventually lose money,” according to MacBain.
He said those and other difficulties, such as reaching a point of “diminishing returns” on investments in care management under the ACO framework, leave Medicare ACOs with three options. They can, in MacBain’s view, simply give up on Medicare ACOs when the minuses become too big, or instead use the expertise they’ve gained by either negotiating risk contracts with MA plans or building their own MA plans.
MA risk contracts can be effective options, he said, since they replicate what’s best about ACOs but under a contractual arrangement that’s more flexible and help open the way to “real capitation” options that can involve retaining 100% of savings — albeit also of losses, of course. From the MA plan’s perspective, a Medicare ACO with a record of savings in this program “is primed to be a good risk-sharing partner,” he added.
MA Benefit Designs Can Aid Providers
Unlike Medicare ACOs, said MacBain, MA plans generally have benefit designs that “corral” beneficiaries within an HMO or PPO provider network. And more than in the past, MA plans are interested in “co-branding” with providers since the plans now recognize the importance of a provider “brand” for marketing a product and achieving good results in it.
The other option for providers outlined by MacBain, building their own MA plan, also makes use of the ACO experience in that a successful Medicare ACO “has already mastered the hardest part: care management.” This option, however, entails having to develop insurance capabilities and infrastructure, including a state license, substantial financial reserves, risk-adjustment know-how, sales and marketing expertise, transaction-processing skills and customer-service responsibilities.
And in either the risk-contract or go-it-alone option, “none of this works if it [i.e., the MA plan] isn’t priced correctly,” MacBain asserted.
But he defended MA, despite the payment-rate reductions the program will experience in the next few years under the health reform law, as “a star you want to hitch your wagon to.” Pointing to the Congressional Budget Office’s controversial recent forecast of 50% MA membership growth by fiscal year 2023 (MAN 5/23/13, p. 6), MacBain said baby boomers aging into Medicare are boosting Medicare rolls by 3% per year. Furthermore, he said, those age-in beneficiaries already are largely familiar with managed care and more likely than their predecessors to pay attention to MA plan quality ratings in which provider-focused plans often do well.
And once the MA payment cuts specified in the reform law are fully implemented in 2017, “MA rates will grow as fast as Medicare fee-for-service.” This “portends a growing [profit] margin for plans that can keep their per-member cost trends below Medicare FFS,” he explained.
There are some hidden risks for Medicare ACOs that move into MA, MacBain acknowledged in response to questions from webinar attendees. How the ACOs can take patients they’re now serving in the ACOs to their new MA plans, he said, for instance, is “the trickiest part” of the ACO-to-MA transition process.
Moreover, one attendee question pointed out that it may be hard for new provider-owned MA plans to compete in “benefit sets” against the “rich” MA benefit offerings now prevailing in hot MA service areas such as south Florida. MacBain also conceded, in response to another question, that a new MA plan would need at least “several million dollars” in reserves to be viable.
MacBain, along with colleagues Aaron Eaton, Pharm.D., and Regan Pennypacker, will discuss specifics about how to move from ACO-type arrangements to MA at an Aug. 8 AIS webinar. For more information or to register for How Provider Groups Can Move Into Medicare Advantage: Right and Wrong Ways to Do It, please call (800) 521-4323 or visit the MarketPlace at www.AISHealth.com.
http://aishealth.com/archive/nman071113-02
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