Surviving in today’s Medicare risk climate

Follow these 10 steps to better results

Over the past several months, some of the country’s largest health plans have chosen to opt out of certain Medicare markets, citing prospective losses as the reason.

Despite these unprecedented actions by some of the biggest players in the Medicare risk market, HCFA maintains that it has no plans to cut benefits or raise fees to erase the projected red ink of these Medicare risk HMOs.

This situation, in turn, has raised questions from many physician groups about the viability of creating provider-sponsored organizations (PSOs) or other entities to vie for the newly authorized Medicare+Choice business, which becomes available this January.

Charles A. Peck, MD, of Arthur Andersen’s Atlanta-based health care consulting group, says it is still possible to make a profit in many Medicare markets. "While there are select markets with unreasonably low adjusted average per capita costs or average per patient benefits Medicare will pay in a particular county, most markets’ rates are high enough for a plan to be viable, " says Peck.

"Many believe that medical costs are the problem, but management of these costs is the issue. The real root of these losses lies with medical management processes and the need for investment in the systems of care necessary to support these patients," says Peck.

According to Peck, there is adequate reimbursement for providers or health plans to operate profitably today, provided they properly structure their products and invest in programs that maximize preventive and intervention services.

Based on these concepts, Peck has developed this 10-step method for ensuring Medicare risk viability:

1. Improved risk assessment methodology. Remember the 80-20 rule: 20% of the current Medicare population generates 80% of the costs. "That makes it vital in the Medicare arena to identify the most vulnerable seniors in an HMO prior to their accretion into the program," says Peck.

2. Better-trained geriatric care managers, along with the institution of a geriatric assessment team. Seniors require specialized services and increased attention during their seventies and beyond. When they require hospitalization, it is common for their functional status to decline, which then increases their risk status upon discharge. A specialized geriatric team comprising a geriatrician, geriatric care manager, social worker, and pharmacist can help prevent functional decline by aggressively managing the inpatient stay.

3. More disease management programs. "Providers can benefit greatly by developing their own programs. Most providers need a program for congestive heart failure, diabetes, and oncology. Determining which programs to develop can be done by an assessment of the system’s high-volume and -cost diagnoses," says Peck.

4. More risk sharing. Financial incentives must be properly aligned across all providers for any risk program to be financially successful. "Physician groups that want to share upside bonuses must expect to also share downside risk," says Peck. However, risk should be balanced to achieve the desired outcome, and have enough upside potential to encourage behavior change as needed. Hospitals also must expect to share risk in Medicare risk arrangements with physicians.

5. Strong physician leadership. Simply put, "physician leaders must be capable of making the tough decisions that arise in regards to performance measurement and accountability, "says Peck.

6. Strong hospital leadership. Many hospitals have recently appointed physician chief operating officers to help their managed care organizations improve physician relationships. This process must continue because "a transformation of values from hard assets to relationships must occur for hospital-driven systems to be successful in the risk environment," contends Peck.

7. Physician- and administrator-friendly reporting tools. Both patient and financial information generated within the practice must be accessible, available, understandable, flexible, and relevant. "Real-time information transfer to the people running the business is critical to enable behavior change and make rapid course corrections when needed," says Peck.

8. Physician accountability for controllable outcomes and cost. Consistency of medical practice remains a challenge for all physician groups. Clearly agreed-upon practice benchmarks must be followed by everyone with clinical care responsibilities, and key performance measures for physicians must be clearly articulated and followed.

9. Openness to change. "Change causes fear, and fear leads to poor decision making," says Peck. Networks launching a new Medicare risk program should seriously consider providing change management training for their physicians and their other clinical and nonclinical employees.

10. A clearly communicated vision and mission. Once change has been confronted, new programs have been put in place, and systems of care have been made consistent across all specialties, the vision and mission of the organization must be clearly and repeatedly articulated by its leaders, says Peck.