Episode Overview
Together, they discuss why provider organizations often struggle after entering these arrangements and outline the core capabilities required to perform effectively, from accurate risk capture and attribution to utilization and care management. This conversation offers healthcare leaders practical insights on aligning clinical operations with contract expectations to improve financial and clinical outcomes in value-based models.
LISTEN TO THE EPISODE:
Host:
Daniel J. Marino
Principal, ECG Management Consultants
Guest:
Doug Ardoin, MD
Physician Executive and Consultant
Daniel Marino:
Welcome to Value-Based Care Insights. I am your host, Daniel Marino. As we all know, Medicare Advantage continues to gain a lot of momentum across the country, certainly being pushed by CMS. year over year, Medicare Advantage continues to grow with many Medicare beneficiaries now shifting into Medicare Advantage. But as we all know, it's still under a lot of pressure. There's a lot of large health systems that have decided to not participate in Medicare Advantage. For a whole host of reasons, most of those reasons are really around the administrative costs and the administrative challenges that Medicare Advantage places on these organizations related to pre-authorizations and increased denials and so forth. I think that's, you know, it's all very relevant. But in today's episode, we want to dive into the… kind of the path to success as organizations that are participating in Medicare Advantage. How can they achieve a level of financial success on performing well and really putting in place some proactive interventions, and understanding the key concepts that really drive the level of performance that's needed to succeed under Medicare Advantage? And then there's a number of elements there. You know, if you're in a straight Medicare Advantage contract, you know, you're going to get reimbursed based on Medicare rates, or maybe a couple percentage points higher, but many of the commercials are commercial carriers that have the Medicare Advantage products are actually including now additional incentives. So you could have a performance incentive if you perform better than the elements that are inherent in the contract, or you may enter into a shared savings component, whereas if you're able to show that you can save money, you're splitting that with the payer. Others are moving into an upside-downside element associated with Medicare Advantage, but at the end of the day, it comes down to how you perform, right? It comes down to how you manage the population, understand the data. You know, driving the care to the patients that really need it based on their acuity level.
Well, I'm really excited today to have a colleague who I've known for many years, a true expert in the field, particularly related to value-based care and clinical integration, Dr. Doug Ardoin. Doug, welcome to the program.
Doug Ardoin:
Thank you, Dan. It's great to be here.
Daniel Marino:
Doug, I know you've done a lot of work around Medicare Advantage. You've, you know, you've built numerous CINs, and you've really helped position many physicians, many provider organizations around success of value-based contracts, as well as Medicare Advantage. In your opinion, why are organizations… why are they struggling so much to perform under the Medicare Advantage contracts?
Doug Ardoin:
I think there are a couple of reasons, Dan. I think, first and foremost, I think a lot of them don't really understand what they just got into when they sign a Medicare Advantage contract, especially if it has a lot of value-based elements to it, and performance elements that create, you know, financial incentives, or even financial downside. So I think a lot of times, they get into it just thinking that it's just another way to have a contract with a whole lot of lives that are going to be attributed to them. And that they're going to be successful if they've done what they've always done, in a fee-for-service arrangement, which isn't going to work very well at all in a value-based arrangement, especially with seniors with Medicare lives. So, I think for a lot of these organizations, it really is, have they built and do they understand their own internal capabilities and competencies for this type of a contract, or do they have access to the kinds of resources that are going to make them successful.
Daniel Marino:
Yeah, you're absolutely right. So when we think about the elements, or the performance drivers, let's call it, of a Medicare Advantage product. There's 3 or 4 key elements, right? I think the biggest one is medical loss ratio. And, you know, the government sets that standard at 86%, you know, there's some flexibility in the negotiations with that, but the MLR, I think, is an important driver. I think the other drivers that you look at is utilization, good versus bad utilization. The risk stratification that's associated with… with, managing the population, and… and quality. So, when we think about those four performance drivers, maybe we could talk a little bit about the medical… the MLR net loss ratio first. In your opinion, what are organizations struggling with? How come they're not doing a better job of influencing the MLR?
Doug Ardoin:
Well, first of all, I think they need to understand… make sure they clearly understand how that MLR is calculated. You know, once again, it is the expenses, you know, divided by the risk-adjusted Medicare revenue, and I think a lot of times, organizations pay a lot of attention to, or they think they know how to pay a lot of attention to the numerator focusing on, utilization. But I think they, a lot of times, forget the denominator, and they forget that, that risk-adjusted Medicare revenue is very important. And it's not particularly difficult to influence if you understand how that works. How you marry up a, you know, really solid documentation, very descriptive about the different illnesses that your patients have. Understand how to get very precise and accurate for diagnosis coding, getting an ICD-10 that's… that's very specific, not one of the ones that's, like, diabetes not otherwise specified, but very specific about, like, diabetes with renal or visual or other manifestations. And knowing how, when that comes together, How that precision helps drive more Medicare revenue into the denominator, because now the plan has a deep understanding of, kind of, how sick the population is you're taking care of. So, the MLRs, it's important to really understand what's driving the numerator, what's driving the denominator. And just quickly on the numerator side, yeah, I mean, you're gonna have all of your typical expenses, you know, office visits, and ER visits, and hospital visits, et cetera, et cetera. But a lot of times, what folks don't focus on also is pharmacy, and pharmacy expense, and really understanding…
Daniel Marino:
Pharmacy expense, just to jump in really quick, I mean, that's the biggest challenge. That's been going up higher year after year than the medical costs, right? The pharmacy spend is going up much higher, so you're right. I mean, that's a… that's a significant driver and a real challenge to the performance of some of these utilization costs.
Doug Ardoin:
I would agree, and I think that's a great opportunity, to be able to sit down with the payer that you're now in a contract with, and I will say this. The relationship with the payer in an MA contract is a lot different than in a typical fee-for-service contract. You are truly partners now with that payer. You both have the same incentives.
Daniel Marino:
Yeah.
Doug Ardoin:
Performance within that contract. So, aligning that is critical. And pharmacy spend is an area where you can align very closely with the payer to understand how you're going to manage pre-authorization for specialty drugs and certain oncologic drugs and things like that. Understanding how you're going to implement, say, stepwise therapy, to be sure that you don't jump to the most expensive pharmaceuticals and most expensive therapies at the beginning. And how you're going to manage that with your attributed population, with the patients. But you're right, Dan, pharmacy expenses is something that can quickly get out of control.
Daniel Marino:
Yeah, you're absolutely right. So I'm gonna go back to…the risk stratification point that you brought up, because I think it's really a good one. You know, understanding, the risk stratification of the population, and placing the population, different risk cohorts. You know, allows providers to really deliver care really based on the needs of the patient, right? Based on that acuity level. And yet, many organizations struggle with really risk-stratifying their attributed lives, their attributed population. And so I just wonder, is it because they don't understand, they don't have the means to be able to calculate risk stratification? They don't understand the scoring mechanism? Maybe they just don't get all of the data? Many of them just seem to be beholden to the payers and just… you know, take their risk score for face value. What are your thoughts there? What's really holding the providers back from calculating risk?
Doug Ardoin:
I think two things. I think…Number one is making sure they're getting the data for their attributed population, and I think… I think understanding attribution is… is a pretext to then knowing how to risk stratify, and we can… we can maybe get into that discussion a little bit. But on the risk stratification part, it's making sure that you've got the data for the… for your population that you can… you could…As simple as just dropping it into a spreadsheet, and maybe using some predictive analytics to help you sort through to figure out who has certain diseases, who has certain diseases with comorbidities, and start to create that list of maybe kind of more healthy to, you know, to rising risk, to chronic with high risk, and maybe those that are even frail and at the end of life, and being able to using your diagnosis codes, maybe even what you understand about what the pharmacy spend is for individuals, so that you can put them into these different risk categories. And then at that point, start to think about precision ambulatory care management, how you're gonna do… how you're going to manage these corridors, because you're not gonna manage them all the same. I think you gotta know how to analyze the data, put, you know, parse it and put it where it belongs, and then make that… then make that information actionable.
Daniel Marino:
If you're just tuning in, I'm Danny Marino, you're listening to Value-Based Care Insights. I'm here with Doug Ardoin, and we're talking about the performance drivers of Medicare Advantage. So Doug, just building on that really quick, you know, as we were working with one organization, and many of them, I think this is the case, they really under-represent the risk of their population. And as an example, you know, the average risk for a Medicare Advantage population, let's say, you know, the RAF score is 1.0. For this particular organization, they came in at a 1.03 as their calculation, but when we looked at the… we did the analysis of the community and Medicare and really getting in and looking at the claims data, they should have been closer to a 1.15, compared to a 1.03. Which, getting back to your point earlier on the calculation of the denominator of the MLR, that really under-represents the acuity factor and the cost threshold of this population. So, how much… you know, I guess I'm gonna put you out there on this question. How much is that really underrepresenting, then, the financial opportunity that the organizations have to really appropriately drive the right level of care? I think… no, I think it's extremely important, and I think… I think the impact is… is… is extraordinary, quite frankly. I believe for a lot of, organizations, provider groups that initially get into Medicare Advantage and have this type of an opportunity around the MLR, I think they're going to have to do a deep dive into how their physicians and advanced providers, how they diagnoses code. If they're noticing that there are a lot of not otherwise specified codes, they're going to have to address that almost individually with every one of their providers. I know of organizations that will not allow NOS or not otherwise specified ICD-10 codes anymore. They tell them, there's no such thing as diabetes not otherwise specified. You have to use one of the very specific codes, which could be diabetes with renal manifestations. There's no such thing as a heart failure, COPD, or CKD code that's not otherwise specified. Because those codes, they don't map to the correct risk adjustment, or the correct HCC, code that Medicare uses, then, to calculate RAF, or Risk Adjustment.
Daniel Marino:
Well, as I've heard… as I've heard you say time and time again, coding and documentation accuracy is critical, right? And it's just so underrepresented within organizations, but it has so much value attached to it, and being able to make sure you're accurately representing the risk of your population.
Doug Ardoin:
And receiving the proper amount of revenue, Medicare risk-adjusted revenue.
Daniel Marino:
Yeah, absolutely. So let's… let me shift, Doug, to utilization, because utilization is a big driver of cost, right? And in my mind, there's good utilization and there's bad utilization. The good utilization, is making sure that patients are seeing their PCPs. You've got your annual wellness visits coming in, you're managing your chronic diseases, within your primary care network, and so forth. The bad utilization is the over-reliance on the emergency department or the, you know, higher admissions through the ED, that sort of thing. How… when you think about performance drivers, how is… how is managing that bad utilization, how does that… how can organizations really begin to think through influencing that, so you're steering from that challenge of bad utilization to good utilization? Patients still need the care, and they're not getting it, right? So, how do organizations make that shift?
Doug Ardoin:
I think the best organizations do this through a multi-pronged approach to access. They begin to think of access differently and in different ways. Certainly, the traditional access point of a patient makes an appointment and sees their physician or APP is just one way of managing access, which then begins to manage utilization and prevent unnecessary ED visits or avoidable admissions to the hospital. That's just one way. And how you use that access point is important, that you definitely want to use it for your higher risk chronic patients that you may want to see once a month just to make sure that they're staying on their medications, they're doing what you're asking them to do, that their caregivers, their family members are engaged, and that they've got a tight connection with your ambulatory care management. But then from there, I believe you also have to use, you know, virtual visits, you have to use all the other access tools that you have available to you, you know, televisits, and I think you have to rely on your ambulatory care management team. And I stated earlier, and to use precision care management, you may want to have individuals on your team that are very interested in and are highly skilled at ambulatory care management for heart failure populations. You may want to use, wearables, you know, and other types of instruments, you know, out there to be able to do monitoring, right, of your patients. But I think you have to think about access and management and monitoring differently. And then. Lastly, maybe develop a really good relationship with the emergency room, so that when your patients do show up, they call you first, and explain…
Daniel Marino:
There's an advanced triage component.
Doug Ardoin:
Exactly. So there are lots of different ways, but you have to think about access differently.
Daniel Marino:
So, you know, kind of bringing this all together, right? Because, you know, if you think about access, the patients need the care, right? So they're going to go wherever they can go in order to get the care that they need, and I think for organizations to be proactive, reaching out to those patients and making sure that you're directing them to the care that they should be getting, and really where they should be getting the care. I mean, it does come down to risk stratification, right? We talked about that. But it also comes down to care management, and I love what you said around precision care management, because I don't think many organizations think about it that way.
Doug Ardoin:
No, I would agree. I don't think many of them do at all. Organizations that I've been in in the past, I… I believe that they had to… they had to grow into that model as they began to understand, as they took on more and more Medicare Advantage lives that were value-based or risk-based, and they realized that just kind of having a generalized blanket structure to care management wasn't doing enough to look at those individuals with certain diseases and very specific needs, that, that you could then tailor care management to. One area in particular, is behavioral health, and that's another area where you really need to have very specific, very precise care management for patients who struggle with behavioral illnesses.
Daniel Marino:
You know, for… I'll share a quick story. For one…client we were doing some work on, or work with, rather, they wanted us to come in and evaluate their care management program, and they were spending a lot of money on care management. When we benchmarked them against the market, they were actually coming in and spending about 10-15% higher on… both in terms of FTEs and cost than what would, you know, typically be with the amount of covered lives that… that they would have. And what we found was that it wasn't that they didn't have the programs. And it wasn't certainly that they didn't have the resources or the staff, but the folks were not deployed, and the programs were not focused on the right areas of the population to really drive the right level of performance. And it just gets back to what you said. You know. If organizations are really going to proactively manage the population, you have to understand, really, where you're driving the care, where to put the resources, right? And I just feel like so many organizations either don't really think about it that way, or maybe they just don't have the data and the insights to really understand where those level of programs need to occur.
Doug Ardoin:
I would agree with that. I do think it has a lot to do with the organization. I think a lot of organizations, if doing value-based care in an MA contract is a little bit of kind of playing around the fringes, and they really are truly more of a fee-for-service shop when it comes to everything else than they may not give the attention and time necessary to deeply understand how to utilize resources, like care management, and how to accentuate the competencies within. So that's… that's what I've seen a lot of, out there. Which is, you know, very different from, you know, some of the larger groups, whether they're mostly, you know, large primary care groups around the country, or even some of the health systems that have gone much more deep into value-based care, begin to understand the value of the focus needed to make sure that this works in a way that drives the level of precision that you need.
Daniel Marino:
Well, as I've said time and time again, if a value-based contract is the car, the engine's care management, right? And, you know, the more robust your care management, the more successful you're going to be with these contracts. Let's shift to the last component. I want to get your thoughts on quality, right? Because, and many of the contracts, you know, there's stipulations of the quality indicators, there's quality of performance in there. It seems to me, with many of the organizations that we've evaluated around the performance of their MA contracts. Quality is the one that is kind of stand out, or stood out, right? I mean, it seems any of the organizations have performed well on quality. Is that what you've seen as well?
Doug Ardoin:
I believe so. I think that quality measures have been around now for so many years, and whether it's a Medicare Advantage contract, or even a commercial contract, especially if it's a CIN contract. If you're… if you've been doing a Medicare Shared Savings Plan, ACO, for many, many years, then I believe that most organizations have gotten the message that how you manage and document quality for diabetes and blood pressure control and cancer screenings and all of that. All of that is so very important, and it gets looked at in just basically every contract.
Daniel Marino:
Yeah, and like you said, it's been around for a while, and folks have performed well on it. So real quick, Doug, I know we're coming up on time. For organizations that are maybe underperforming on their MA contracts, or really are seeking to perform much better, you know, real quick, any advice you'd give them?
Doug Ardoin:
I would say go back to the basics, first and foremost. Do you understand your attribution? Do you know who you have? Do you know how you get them? Is it retrospective, prospective? And we could spend too much time on that, but do you understand… can you put them… put your members, your patients, into risk corridors? So, go to the basics about understand your population. Understand, you know, how you're utilizing care management, and are you… are you driving toward precision, cohort-based, or even disease-specific-based care management? Are you educating your physicians and providers on how to accurately diagnose, you know, and get the right codes for, you know, and document for your patients? And then lastly, I would say, are you… are you meeting with the payer on a regular basis? Are you guys sharing information freely? And do you really feel like you're set up as a partnership for success?
Daniel Marino:
Yeah, really, collaborate. I mean, that is just such key, so key. You're absolutely right. Well, Doug, thanks for this. This is fantastic, and, you know, I'd love to have you back again. Maybe we can do a further deep dive on risk, or attribution, or any of those elements. I think they're so critical on the performance of MA. Really appreciate it. Real quick, if any of our listeners want to get in touch with you, do you mind sharing your contact information? Sure, yeah, they can reach me on LinkedIn, or through my Lumina HP email address would be fine. Either one of those would be great.
Daniel Marino:
Wonderful. Well, thanks again, Doug. Really appreciate your time. Great conversation. And to any of our listeners out there, thanks for tuning in. Without you, Value-Based Care Insights would never be as successful as it is. We'd love to hear from you. Please keep the comments coming. To learn about this topic or any others, please visit LuminaHP.com or ECGMC.com. Until our next insight, I am Daniel Marino, bringing you 30 minutes of value to your day. Take care.
About Value-Based Care Insights Podcast
Value-Based Care Insights is a podcast that explores how to optimize the performance of programs to meet the demands of an increasingly value-based care payment environment. Hosted by Daniel J. Marino, the VBCI podcast highlights recognized experts in the field and within Lumina Health Partners
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