In its latest Executive Briefing, HealthScape Advisors examines the opportunity for providers to look at MACRA through an alternative, strategic, long-term lens.
Regardless of the participation tracks in the first year that allow for a delay in implementation, MACRA represents a compelling strategic opportunity for provider organizations to think differently about their business model and pursue sustainable growth and margin levels. However, success in the post-MACRA model will require advanced preparation and a new understanding of the concept of patient economics. Current patient economics looks at value as a snapshot in time, while long-term strategy must be improvement of patient economics through investments in analytics and other targeted strategies.
Moving forward, organizations should recognize that:
1. MACRA is significant and transformative; risk is a matter of when, not if, and providers face a critical decision point.
In an environment lagging behind CMS targets for alternative payment models, expect MACRA to drive increased provider consolidation, enhanced population health infrastructure, interest in financial risk transfer, and expanded focus on long-term patient population measures. Providers must determine which track (MIPS or APM) best suits their organization and develop a roadmap to address the risks posed by each path.
2. MACRA serves as a catalyst and establishes principles that will drive providers to establish a Senior Markets Strategy and harmonize this strategy across payers.
Since providers will be less able to rely on subsidization across payers, organizations will need to evaluate their patient portfolio across Medicare FFS, Medicare Advantage and commercial markets and strategically position themselves to minimize variation in risk contracts. There is no “one size fits all” approach to achieve portfolio balance; organizations may pursue strategies such as shifting revenue from Medicare FFS to Medicare Advantage, executing more advanced APMs with Medicare and/or non-Medicare payers, or consider merger, acquisition or partnership singularly or in combination (among many other strategic options).
3. Execution on strategy requires an understanding of the new patient economics both currently and in the longer term.
As data becomes increasingly available, organizations need to conduct analysis that cover the entirety of a patient’s cost and engagement profile – the patient-level income statement, which captures intra- and extra-organizational cash flows and weighs those payments against expense categories to achieve a total P&L view. Segmentation analyses can then be completed to determine drivers of financial performance in both the short-term and throughout the patient’s lifetime value. Organizational business models must evolve in order to deploy tactics that target patient segments qualifying as financially sustainable under this comprehensive view of patient economics.
Providers must begin to shift their focus from education and understanding of MACRA to strategic implications and strategy development. In order to do so, HealthScape offers the following recommendations and next steps:
1. Patient lifetime value is an important strategic frame of reference, and it is very different than traditional episodic management.
Organizations should take the next steps necessary in order to develop a patient-level P&L and balance sheet. Build the capabilities necessary to create a complete view of revenue and expenses and identify the main drivers of those categories. Ensure revenue integrity as well as the accuracy of expenses, including all fixed cost allocations and future state capture of extra-system costs. Leverage these activities to create a cumulative forecast for longitudinally delivered patient lifetime value.
2. Adopt a portfolio view to risk relationships and craft a road map to risk that recognizes the needed capabilities to deliver on patient lifetime value.
Organizations should inventory current payer contracts to understand the associated financial risk and characterize the variation among them. Based on this review, model scenarios for potential growth in financial risk and enrolled populations. Pursue opportunities that best align with organization growth targets.
3. Invest in building or outsourcing the capabilities to bend the cost and utilization curve over time.
Organizations should assess existing people, process, and technology competencies in order to begin to address gaps in current performance. Key strategies to consider as a part of this evaluation include: construct a business case to deliver on value-based care; evaluate consumer retention activities for populations enrolled in your network; cultivate consumer loyalty and engagement through a targeted product pricing, market placement, and clinical service offerings.
Read more here in our comprehensive Executive Briefing – MACRAnomics: Patient-Level Economics and Strategic Implications for Providers.
By: Brad Helfand, Managing Director, HealthScape Advisors (bhelfand@healthscape.com) & Alexis Levy, Director, HealthScape Advisors (alevy@healthscape.com)
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