3 common pitfalls health systems encounter when offering their own Medicare Advantage plans

Many healthcare providers have pursued Medicare Advantage plans because they believe they can offer more substantial rewards than shared savings if managed well. However, many organizations diving into Medicare Advantage are not achieving the positive results needed to validate such a large investment, according to The Advisory Board Company.

There are three key factors preventing health systems from successfully executing a Medicare Advantage strategy, according to The Advisory Board Company.

1. They don't accurately anticipate the number of members they will enroll. Providers' projections about how many members they will enroll are often much higher than reality. Often, health systems plan to enroll thousands of members quickly, then find just a few hundred actually sign on during the first few years. While their brand on the patient care side might be strong, they still need to establish a brand image on the insurance side.

Additionally, health systems underestimate the challenge of competing against powerhouse insurance carriers like Blue Cross Blue Shield, United Healthcare and Kaiser Permanente.

According to The Advisory Board Company, smaller entrants into the insurance world need to design their sales, marketing processes and outreach plan to target specific markets. This outlook can help health systems set realistic recruitment targets so their investment can support the necessary requirements.

2. They don't manage each Medicare Advantage patient closely enough. Medicare Advantage plans offer more flexibility in customizing risk-based contracts, but to maximize benefits, providers must vigorously manage every individual attributed to the plan. This means delivering more targeted and coordinated care for the sickest patients to drive savings, according to The Advisory Board Company.

While most provider health plans are at least somewhat prepared to improve quality and reduce the cost of patient care if incentives are properly placed, many fail to risk adjust the patient base and score beneficiaries as accurately as possible. According to the report, the best plans make the necessary efforts to record every relevant issue about their patients, and then receive higher payments from CMS for those high-risk patients.

3. They receive low quality score ratings. CMS' Star Ratings program measures five dimensions of performance, with each star tied directly to bonuses, and is also correlated to enrollment numbers, according to the report. A low score in quality ratings leads to significant financial consequences, even if a Medicare Advantage plan has taken every possible step to maximize payment through risk adjustment and coding. Effective this year, plans earning three stars or less will be ineligible for quality bonus payments.

According to The Advisory Board Company, "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."

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