Monday, 22 June 2015 19:44

Is Your Organization Ready for Risk? CMS Pushing for Modernization and Regulatory Consistency for Medicaid Program

Written by Steve Tutewohl, FSA, MAAA

s tutewohlFor the first time in more than a decade, the Centers for Medicare & Medicaid Services (CMS) has proposed a new rule in an attempt to modernize Medicaid and the Children’s Health Insurance Program (CHIP) managed care regulations. Currently, the Medicaid managed care system serves roughly 70 percent of all Medicaid enrollees, and the new rule could directly impact the 39 states and the District of Columbia that use managed care organizations for delivery of Medicaid healthcare benefits.

Today, states are responsible for deciding how to design and administer their individual Medicaid programs, making the managed care system extremely complex for provider organizations that are managing facilities in multiple states or several different lines of business. CMS’s proposed rule aims to create regulation consistency across states and similar programs, including Medicare and the commercial, state, and federal exchange health insurance sectors, with an overarching goal of improving quality and lowering costs.

While proposed enhancements will improve the Medicaid beneficiary experience, providers that serve these patient populations or are involved in Medicaid risk contracts also will see significant changes to care delivery requirements. The new rule sets minimum standards for network adequacy, provider screenings, and enrollment, as well as strengthens plans’ administrative procedures to help prevent, monitor, and respond to possible fraud. In addition, the rule promotes standard quality rating metrics that align with other lines of business, such as Medicare Advantage star ratings, and it increases transparency for members and consumers.

For the first time, CMS also is proposing a standard medical loss ratio (MLR) of 85 percent for Medicaid and CHIP managed care plans. Currently, these are the only two major federal healthcare programs that don’t have a standardized MLR, which is a calculation that dictates how much of the collected premium must be spent on actual healthcare services compared to other administrative costs and profits. While the new proposed industry standard does not enforce a rebate if MLR is below 85 percent, the MLR will be used in rate setting, and many states have programs to refund significant profits to deserving high-quality, lower-cost providers.

The Provider’s Role 

CMS’s proposed rule serves as yet another reminder that healthcare providers should continue to evaluate their roles in taking more financial control through provider-sponsored health plans or assuming risk contracts with existing payors. Today, while risk-assumption or value-based care is a more common concept, it’s important to remember that market dynamics vary between regions and play a significant role in dictating what value-based care strategies and models will work best for providers.

Here are three key tasks that hospitals, health systems, and physician organizations should consider as they analyze if Medicaid managed care is right for them:

  • Analyze your market share. In some markets, provider groups might offer a level of service or specialty that no other regional organization can. However, in many markets, providers are competing for patient loyalty. Knowing what market share challenges your organization faces and any potential threats to your patient base will help dictate your negotiating power with payors and your ability to partner with other regional providers.
  • Address – and strengthen – your primary care physician relationships. This step is key for academic institutions and children’s hospitals, which can be highly regarded for their specialties and overlooked as a primary care option. There are a lot of integrated delivery networks and other competitors that have stronger relationships with primary care pediatricians or physicians that keep referrals in-network, sometimes creating a challenge for children’s hospitals and specialists. A provider must have a strong primary care base in place, or face significant losses.
  • Evaluate new population health initiatives and technologies. In order to adopt effective payment models, whether it’s a new risk contract or launching a provider-sponsored health plan, a provider must be able to address its patient population’s broader health needs. As value-based models of care continue to become more common, it’s no longer sufficient to care for patients only when they arrive at the hospital. Instead, providers must work across their networks of affiliated healthcare professionals and the extended care team to leverage data and analytics to better understand and manage all aspects of a patient’s health – before, during, and after a hospital or office visit. Prevention and care gap closing are equally important.

Competition among healthcare providers and the pressure to lower costs while improving quality have never been more prevalent. Providers must stay diligent in identifying innovative ways to effectively manage their ability to take clinical and financial responsibility for their patients’ healthcare. Medicaid managed care has offered many provider organizations the opportunity to pilot a provider-sponsored health plan or accept a new risk contract. These pilot programs have, in turn, given all willing providers the ability to better control and anticipate revenues, remain competitive in the marketplace, and ultimately improve the health of the communities they serve.

Author’s Note

There’s still time to weigh in on CMS’s 653-page proposed rule. Providers, health plans, consumer groups, and others can provide public comment on areas of concern or propose solutions for CMS to consider by July 27, 2015.

About the Author

Steve Tutewohl, FSA, MAAA, is Valence Health’s strategic accounts officer. Steve has spent 15 years at Valence Health leading the company’s analytics and actuarial services, focusing on combining diverse healthcare data sources for the various needs of healthcare executives – creating the bridge between healthcare IT and business users. In his current role, he applies his experiences to advise all client types, including provider-sponsored health plans, accountable care organizations, co-ops, and clinically integrated networks to meet and exceed their own objectives.

Last modified on Monday, 22 June 2015 19:54