Jul 26 2018 | Thought Leadership | By

Survey Says: Launching and Operating a Health Plan is Tough But Doing It Alone Is Tougher

Throughout this Perspectives series, we have examined why healthcare organizations should move to value and incorporate Medicare Advantage into their strategy. In this third and final segment, we discuss challenges with operating a Medicare Advantage plan and the critical elements for success.

Medicare Advantage (MA) is proving to be an essential and growing component of a health system’s value-based strategy. Provider-sponsored MA plans have the potential to be a particularly lucrative endeavor. So why don’t all interested health systems have one? Much of the answer lies in just how challenging MA plan execution can be.

A 2018 Lumeris survey of major health systems revealed that only 29 percent of organizations planning to launch a Medicare Advantage plan in the next four years feel confident in their organization’s ability to do so successfully. Among the capabilities required to succeed in value-based care, respondents indicate that acquiring payer expertise remains a significant challenge facing their organizations.


Foundational Elements and Considerations

When it comes to operating a health plan, providers must be ready to tackle several (perhaps unfamiliar) operational elements that are pivotal for success. Moreover, building a collaborative payer—one that aligns incentives, empowers the provider-consumer relationship, and enables delivery of high quality, cost effective care—requires a new operational model (read more: Launching a New Kind of Plan: A Provider-Sponsored Medicare Advantage Plan Built on a Collaborative Payer Model).

Organizational and Market Strategy

Survey participants indicated that the significant financial investment to launch a health plan was a top concern. Before launching a plan, health systems must evaluate their tolerance for risk and ability to capitalize said health plan. A strong brand reputation in the market is obviously crucial, but additive resources and significant infrastructure are also required. Organizations should also consider market dynamics and reactions from key players—competing systems, provider groups, and other payers—and how these factors impact their strategy as a differentiated plan offering in the market. A thorough analysis of local market dynamics is essential to understand the present and future senior market opportunity and to ensure the health system is positioned to capitalize on the opportunity.

Operational Experience

Surveyed health system executives also expressed concerns about their organization’s ability to develop internal capabilities for tasks traditionally associated with insurers. Considerable infrastructure is required for claims processing, actuarial analysis, and utilization management, among other payer functions. And in MA, expertise in Star Ratings, risk adjustment, sales and marketing, compliance, and plan design add further complication to successful operations. To build a collaborative payer foundation, provider-sponsored plans must focus on enabling the consumer-provider relationship, often requiring innovative processes on everything from data transparency and aligned incentives, to coordinated care management programs and shared governance.

Engaged Network

Core to a collaborative model is ensuring providers are aligned. We often hear that physicians are great at taking care of the patient in the room; it’s the ones not in the room where they struggle.  Managing a health plan requires providers to focus on improving patient outcomes and monitoring the entire patient population, not just the patient in front of them. Fostering the right network and governance, aligning incentives to create mindshare, sharing best practices and information, and supporting new workflows and behaviors are all critical to success in value-based care delivery.


Sobering Challenges

The above foundational elements are muscles that take time to develop, but many provider organizations have decided that the upside in controlling more of the Medicare premium dollar has made the reward worth the risk. And thus far, health systems that have created health plans have had decidedly mixed results.

Since 2010, provider organizations have established 37 new health insurance companies, about half of which sell MA products only, according to the June 2017 Robert Wood Johnson Foundation report, “Analysis of Integrated Delivery Systems and New Provider-Sponsored Health Plans.” Of the 37 examined, only four were profitable in 2015.  Five have gone out of business.

The report lists a variety of reasons for provider-sponsored plans’ failures. Among them is the inability to enroll enough people to achieve economies of scale. Another is the simultaneous pursuit of a health plan strategy in conjunction with the formation of a clinically integrated network, as opposed to developing those networks and cultivating the necessary care management capabilities beforehand.

The report cites the example of a provider-sponsored MA plan launched in 2014 that folded two years later after losing nearly $36 million. A few reasons for its collapse: insufficient membership, inability to meet challenging regulatory and financial requirements, and miscalculated risk scores due to inadequacies in its IT systems and documentation and coding processes—challenges familiar to many provider organizations.

Despite its inherent risks, the MA space holds vast potential for many health systems. Seniors and age-ins are increasingly choosing MA, meaning not only is the MA market growing significantly, but it is one of the few in the sector experiencing increases in payment. Coupled with the fact that MA currently enjoys bipartisan political support, it’s not hard to see why many organizations think it’s a risk worth taking.


But How to De-risk? Consider a Partner

Fifty-nine percent of our survey participants indicated that in order to mitigate risk, they’d likely seek the assistance of outside resources—including a vendor partner—to help build and operate their plans. This seems to be a growing acknowledgement that whether launching a new collaborative plan or managing an MA population in a value-based contract, working with an experienced operating partner with proven results can help health systems drive success more quickly than going it alone.

Starting a plan is by no means health system business as usual.  Organizations can spend years developing and refining their health plan management capabilities across domains such as practice change and physician alignment, accurate documentation and coding, data systems capacity, compliance, and total population management in general. Leveraging market-tested tools, playbooks, and processes can optimally position organizations for MA success, and enable them to share both the risk and accountability.

Extracting incremental value from a growing senior population through providing higher-quality care has proven to be a risk worth exploring for many health systems. But as this survey and countless examples across the country have shown, learning on the fly without the collaboration of a proven partner might just prove to be risky business after all.

press@lumeris.com

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