3 Key Considerations for Medicare Advantage Investment Success

In April, CMS announced Medicare Advantage plans will see a 0.4 percent base payment increase in 2015.

However, the program still faces cuts ($156 billion from 2013 to 2022) under the Patient Protection and Affordable Care Act, and there's general consensus in the industry that Medicare Advantage plans will actually experience an average revenue reduction of about 3 percent in 2015, according to Krista Bowers and William Eggbeer, both managing directors at healthcare strategy consulting firm BDC Advisors.

Still, Medicare Advantage is still a sound investment under optimal conditions, Ms. Bowers and Mr. Eggbeer wrote in a blog entry responding to the 2015 payment rates.  "In the right situations, Medicare Advantage will continue to provide health systems with a better strategic and economic model than traditional fee-for-service and/or the Medicare Shared Savings Program," they wrote.

Medicare Advantage plans can still be successful if they consider the following three foundational requirements, according to Ms. Bowers and Mr. Eggbeer.

1. Geography. Medicare Advantage plan revenue varies significantly depending on geographic location. Therefore, Ms. Bowers and Mr. Eggbeer strongly recommend conducting county-level reviews for markets before taking on Medicare Advantage risk.

2. Revenue development. CMS star ratings and risk coding are the driving forces behind Medicare Advantage revenue development, according to BDC. After 2014, only plans with quality ratings of four or five stars will be eligible for quality bonus payments. Risk coding is used to calculate individual rates for Medicare Advantage members. Accurate coding can make a notable difference in terms of making or losing money, so ensuring physicians are coding correctly is crucial.

3. Care management costs. Successful Medicare Advantage plans must make sure a robust chronic condition management program is in place to address their members' total cost of care, from preventive services to post-acute care. "Having a care model designed to manage the senior population, specifically, is a prerequisite," Ms. Bowers and Mr. Eggbeer wrote. "We encourage a thorough capabilities review and adoption of a model that drives continual improvement when taking on Medicare Advantage risk."

More Articles on Medicare Advantage:
6 Observations and Things to Know About CMS' Final Medicare Advantage Payment Rates
5 Key Things to Know About Medicare Advantage Enrollment
CMS Proposes Medicare Advantage Cuts 


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