At the Helm

Why some providers fail at Medicare Advantage—and what you can learn from their missteps

We often hear clients talking about offering their own Medicare Advantage (MA) plan because it’s the "better option" compared to shared savings—with far bigger rewards if managed well. As national enrollment numbers continue to beat out all predictions, we don’t disagree.

But the reality is, offering an MA plan is not a slam-dunk for a provider organization. In fact, most organizations taking the plunge into MA are not achieving the results to justify such large and disruptive investment.

So, what prevents health systems from successfully executing an MA strategy?

They don't understand the limits of their brands

One of the key challenges in becoming a health plan is enrolling members—which may sound simple to many systems, particularly those with strong brands. But as much as a brand might mean something to patients on the care side, it is an entirely different story on the insurance side.

We see providers ambitiously planning to enroll thousands of members quickly, only to find that just a few hundred actually materialize within the first few years and with great expense at that. Unfortunately, they underestimate the challenge associated with competing against established insurance carriers who know a lot about sales and marketing.

Providers that step into this world are competing directly with powerhouses like Blue Cross Blue Shield, United Healthcare, and Kaiser Permanente—all of whom are well known by consumers. Medicare Advantage is an individual sale, and winning consumers at that level—particularly those with established relationships already in place—is an incredibly difficult proposition.

That’s why smaller entrants need to think long and hard about the sales and marketing process—and design an outreach plan that’s targeted to specific audiences and markets, with sufficient resources allocated to achieving critical mass.

At the end of the day, this outlook can help set realistic recruitment targets so the overall investment can support those requirements. And these considerations can help determine whether it’s best to enter as an independent plan, partner with an established entity that brings the right capabilities, or to take delegated risk from a health plan for an attributed population.

They don't know their patients inside and out

Unlike in shared savings, MA offers more flexibility in customizing risk-based contracts and designing consumer-centered care models. But to maximize the benefits, providers need to know exactly what patients are attributed to the plan—and fiercely manage each and every individual accordingly. For the sickest and riskiest patients, that means delivering care differently—more targeted and coordinated across points of care—to drive savings in a major way.

Most provider-turned-health plans are at least somewhat well-positioned to improve the quality and reduce the cost of patient care across a network if incentives are appropriately aligned; this of course is fundamental to running a profitable plan.

However, a separate piece—and arguably one of the most critical for making money as a health plan in MA—is risk adjustment of the patient base to score beneficiaries with accuracy. The best plans go to great lengths to learn and document every last issue about their patients to get this right, and then receive higher payments from CMS for those riskier patients.

It’s a science unto itself, and depends on participation across the board from administration to the providers on the front line.

They don't 'shoot for the stars'

This April, CMS announced that benchmark payment rates for MA plans will go up by 1.25% in 2016—so the rationale for pursuing an aggressive MA strategy keeps getting stronger.

But despite the incentives, there is another factor standing between the health plan and maximum payment from CMS: the Star Ratings program. This program measures five dimensions of performance, and each star received by a plan is directly tied to the bonus amount—and also correlates with enrollment numbers.

Even if an MA plan has done everything possible to maximize payment through proper risk adjustment and coding, a low score in the quality ratings means massive financial consequences. When it comes to Medicare payments, these few percentage points translate to huge dollars and potentially the entire margin. Starting this year plans earning three stars or less will not be eligible for quality bonus payments.

Those who can raise the bar on performance and achieve high star ratings will reap the benefits: bigger payments for enrollees, larger quality bonuses, and for five-star players—the ability to enroll beneficiaries year-round rather than just during the open enrollment period.

Thinking about an MA strategy?

The first-year performance results for Medicare Shared Savings Program (MSSP) are a compelling reason for many providers to at least consider MA. My research colleagues found that only about half of MSSP participants generated savings, and of those, only half kept spending low enough to receive any rewards.

While MA ultimately has higher potential for reward than MSSP, the risks are also much higher.

Providers shouldn’t overlook MSSP, but consider it a training ground for taking on risk and managing the health of a Medicare population. And for those that do it right, it can also be the staging area for building and fortifying relationships with Medicare beneficiaries (i.e. future enrollees) and establishing the processes needed to win in Medicare Advantage.

If an MA strategy is in your future, don’t focus on the potential for reward without acknowledging the barriers to getting it—and consider shared savings your first stop on the journey.

Your primer on Medicare Advantage

Health Care Advisory Board members can download our white paper to assess whether Medicare Advantage is the right approach for your population health strategy.

Get the research

Not a member? Fill out a brief form to download a complimentary excerpt.