As the Medicare Advantage landscape evolves, the success of health systems hinges on their ability to adapt and excel in key areas such as star ratings and appropriate coding.
Health systems' greatest opportunity is to enter into full-risk arrangements with health plans, shifting the focus from managing illness to maintaining wellness. However, many systems have not made the necessary investments to thrive in this value-based care model, often missing out on its potential benefits and driving ambivalence toward the MA program, according to SCAN Group CEO Sachin Jain, MD.
"Success in MA is predicated on whether or not health systems are making the requisite changes," Dr. Jain told Becker's. "To be successful in MA, there needs to be an exquisite performance in both stars program as well as appropriate coding. When health systems engage in both, they have the opportunity to perform well."
The other dynamic is whether or not they're entering into full-risk arrangements with health plans or if they’re operating in fee for service, according to Dr. Jain.
"The greatest opportunity that health systems have is to actually enter into full risk arrangements in which they assume full risk for a population of patients and focus on keeping them healthy rather than managing them when they're sick," he said.
Excessive prior authorization denial rates and slow payments from insurers are some of the well-documented challenges providers face with MA, but Dr. Jain argues that many health systems do not invest in the appropriate areas to effectively manage care in a full-risk environment.
"They're getting paid to essentially do the same thing they might do in traditional Medicare. That's a real missed opportunity and why you're seeing so much ambivalence around MA," Dr. Jain said. "MA works when health systems are operating in a full-risk environment and doing their level best to actually manage the care of patients — to invest in chronic disease management and hospital avoidance for ambulatory-sensitive conditions. These are the kinds of things that really make a difference between systems that perform well in MA and those that struggle."
Though health system-owned MA enrollment has grown overall recently, it has underperformed with respect to the largest payers and comprises 13% of the MA market, compared to 17% in 2019.
MA is also a different animal than traditional Medicare — where many systems aim to provide as many services as they can — but creates the right incentives for providers that prioritize the health and wellness of their populations as opposed to sick care of their populations, according to Dr. Jain.
Another factor is that some health systems do not have a clear view of their line of business by contract profitability. Many providers are not profitable in MA, but it is critical to explore why.
"Because MA is relatively new to some systems, there isn't necessarily the contracting sophistication, which some MA plans are taking advantage of," Dr. Jain said. "Rather than fighting to get the right kind of contracts, many systems are walking away from the program altogether, which is unfortunate because MA is the plan of choice for many lower income, older adults."
Dr. Jain argues that it has evolved into a collision of mission versus margin for many providers.
"Health systems need to do the work to be successful in MA," he said. "Some of the most frail and vulnerable populations in their communities are turning to MA because traditional Medicare is actually inadequate in the coverage that it provides for many beneficiaries."
Some health systems push back against this claim, pointing to the fact that most MA carriers have faced allegations of billing fraud from the federal government and are being probed by lawmakers over their high denial rates.
"It's become a game of delay, deny and not pay,'' Chris Van Gorder, president and CEO of San Diego-based Scripps Health, told Becker's last year before terminating MA contracts for its integrated medical groups.
SCAN was one of the MA payers that Scripps terminated with this year.
"Providers are going to have to get out of full-risk capitation because it just doesn't work — we're the bottom of the food chain, and the food chain is not being fed," Mr. Van Gorder said. "If other organizations are experiencing what we are, it's going to be a short period of time before they start floundering or they get out of Medicare Advantage. I think we will see this trend continue and accelerate unless something changes."
Ultimately, it's the patients who lose out, as MA provides coverage to 51% of the nation's seniors, almost 33 million people.
To compound this issue, MA plans typically receive positive patient satisfaction scores, with high ratings in areas such as trust, ease of doing business, and meeting product and coverage needs, according to an August 2023 study published by J.D. Power.
"The reason for that is there is a higher degree of predictability in out-of-pocket costs. Every MA plan in the country has an out-of-pocket maximum like commercial insurance has, and that affords people a higher degree of predictability in terms of their healthcare expenses," Dr. Jain said. "When you're on a fixed income, it's really important to have that level of predictability in terms of what your costs are going to be, and traditional Medicare doesn't necessarily offer that level of predictability to people."
A survey of hospital CFOs published by the Healthcare Financial Management Association in January found that 16% of health systems plan to stop accepting one or more MA plans in the next two years, while another 45% said they were considering the same but have not made a final decision.
Dr. Jain argues that health systems need to make a firm decision: "Are you in the sick care business or are you in the healthcare business? If you're in the healthcare business, you should be striving to prevent acute care utilization, not driving more of it. And you want to be in a business model that's aligned with preventing acute care utilization, and MA is that model."
Providers need to update their business models to align with being financially rewarded for keeping populations healthy, and there are certainly some investments that are required to make this pivot.
"But the order of magnitude in terms of the investment necessary and the reserves of some health systems is de minimis," he said. "It's really about getting the type of leadership you need in place and empowering those leaders to really manage the population's health."
Dr. Jain argues that the MA program genuinely makes a difference in the lives of older adults — something he says is missing from some systems' value equations.
"If you're a health system exec that's thinking about terminating a program that's used by 51% of the nation's seniors, you have to ask, 'Who is it that you're actually serving, and who are the people that you're trying to serve through your system?' I think a lot of systems thinking about terminating MA aren't necessarily thinking about their mission through that lens."