Picking the Value-Based Care Path: Is Medicare Risk Right for You?

Written by  Kai Tsai

Last month, the U.S. Department of Health and Human Services (HHS)released an independent evaluation report indicating that the Pioneer accountable care organization (ACO) model has generated more than $384 million in savings to Medicare during its first two performance years. For many, this is the beginning of the emergence of proof that the ACO model just may work – this, in addition to evidence that the Medicare Shared Savings Program (MSSP) ACO model also worked for some, having generated savings for 52 of the total 220 participants.

These results are encouraging, as the Pioneer ACO program was able to save an average of approximately $300 per participating beneficiary annually while still providing for the delivery of high-quality care to patients. But major decisions are on the horizon for the broader ACO landscape: by mid-2015, the first 220 ACOs to participate in the MSSP will decide if they will continue in the program or if they need to head in a different direction.
As providers successfully participating in risk-sharing arrangements stand at this precipice, they should consider not only whether to continue participation in their existing program – they should evaluate whether to expand to more financially rewarding choices. Because Medicare ACOs, both Pioneer and MSSP, already have made significant investments in clinical integration, network development, and redesigned care models, those providers that generated savings in either Medicare ACO model are uniquely poised to add a risk-based Medicare Advantage (MA) contract. And since shared savings measured against a provider's own past performance continuously deflates performance, a MA model will help enhance savings while continuing to increase care quality.
MA risk contracting offers three significant advantages for providers:

• The network is closed, allowing ACOs to focus further on improving quality and reducing costs.
• Patients are attributed as members to physicians, allowing ACOs to develop a patient-provider relationship that supports a comprehensive care model.
• Savings that are generated stay within the risk-bearing entity, which in this case is the ACO.

Healthcare providers all over the country are continuing to assess their ability to implement and deliver value-based care. To determine if they are ready to take on Medicare risk, providers should:

• Conduct a market assessment. Evaluate county benchmarks to understand your base payment rate and compare payments with those that other local MA plans and providers are receiving. Benchmarking MA penetration against national figures also can enable a provider to realize fully the opportunity that exists in the market.
• Establish comparable Medicare ACO and MA financials. While there might always be Medicare beneficiaries who opt for the open care delivery model in fee-for-service, providers should model how quickly fee-for-service beneficiaries might migrate to a MA plan to enhance budget planning, resource allocation, and capability development.
• Conduct an internal capabilities assessment. Quality programs, care models, and information technology infrastructure all should be evaluated to understand if the organization has the right systems in place to further reduce costs and manage care.

Providers considering adding a risk-based MA contract need to evaluate how four factors will impact the organization:

• Geographical county benchmarks will establish a base payment rate based on location. While current Medicare ACO benchmarks are determined by the assigned population's historical claims data, MA benchmarks are driven by county-level MA payment rates.
• Thoughtful, cautious risk adjustment yields the greatest opportunity under MA to increase a provider's revenue. The MA risk adjustment is recalculated each year and compared to the Medicare ACO risk adjustment, which is recalculated following every three-year contract period.
• Medicare leverages data from paid encounters, member satisfaction surveys, and health plan reporting to give plans an overall performance rating. These Star Ratings, which reflect factors such as outcomes and patient experience, determine what plans are eligible for a 5-percent payment bonus.
• Deep MA penetration may be advantageous, as provider practice patterns and behaviors likely already are well-aligned with MA incentives. A competitive MA market can give Medicare ACO leaders confidence that physicians in their market are well-acquainted with coding procedures and quality reporting activities. However, if a Medicare ACO operates in a market with little MA penetration, leaders should identify if there is resistance to managed care as well as consider planning for a longer ramp-up period to educate both healthcare providers and patients on the offering.

When it comes to MA plans, managing well-informed, well-planned risk is not as risky as it seems. There are a wide variety of tools and approaches available to providers that can limit the financial risk of arrangements they enter into – whether MA or others. Most importantly, advances in technology and predictive modeling have evolved to enable providers to apply proven actuarial analyses without maintaining a full staff of actuaries. Visibility into financial risk, and thus the ability to account for it, has never been more available and actionable for providers.
With a range of different health systems already positioned as MA providers, industry experts realize that just about any provider organization can be successful in this transformation. Those providers that move first to take clinical and financial control of their Medicare populations also likely will see a significant competitive advantage in their markets.

About the Author
Kai Tsai is Valence Health's vice president of consulting services and strategic initiatives. With deep expertise in Medicare and senior markets, he's responsible for leading the operations of the company's consulting practice and managing key client relationships, and is a government programs industry leader. Kai earned his master's of health services administration from the University of Michigan.
Contact the Author
information@valencehealth.com