SummaryThe payer landscape continues to evolve for post-acute care (PAC) providers. Fueled by lower annual costs and expanded benefit options relative to the Medicare fee-for- service (FFS) program, Medicare Advantage (MA) is growing rapidly, now encompassing more than one-third of all Medicare beneficiaries. At the same time, nearly half the states have implemented managed care plans to provide Medicaid long-term care benefits.
The shift to managed care in Medicare and Medicaid poses significant challenges for PAC organizations. The threats include the potential for lower reimbursement rates, truncated lengths of stay, more rigorous utilization management, and the risk of network exclusion. Yet this evolving arena also presents opportunities for high-performing providers capable of delivering value in the form of more efficient, integrated care.
Nimble PAC providers are engaging in strategic partnerships with health plans to position themselves as essential components in the drive toward high-quality, cost-efficient care. While many of these collaborations are still in the early stages, some PAC organizations are benefiting from increased referrals. And an increasing number of post-acute providers are becoming payers to capitalize on continued growth in MA.
In 2019, total MA enrollment reached 22 million, representing an 8% increase (about 1.6 million people) from 2018 levels and more than double the MA enrollment 10 years ago (about 10.5 million). Expansion isn’t expected to slow anytime soon, with Avalere projecting MA plans will provide coverage for nearly two-thirds of all Medicare beneficiaries (64%) by 2028.
MA’s popularity is propelled by the plans’ lower annual beneficiary costs, as well as coverage for services generally not available with traditional Medicare. These include long-standing MA offerings like prescription drug benefits and vision, dental, and gym memberships. Additionally, MA plans recently began offering a range of new supplemental benefit options tailored to specific chronic illnesses and intended to address social determinants of health.
Some of the new benefits include meal services, transportation for non-medical needs like groceries, and home environment services such as pest control and indoor air quality to improve health or overall function. Other new services eligible for MA reimbursement also include companion care, nutrition therapy, and even social needs like community or plan-sponsored programs and events, clubs, and park passes. According to a recent Avalere study, at least 40% of MA plans offered new benefits in 2019.
MA plans will likely continue adding benefits in the years ahead. The Centers for Medicare and Medicaid Services (CMS), for example, recently proposed that MA eligibility be extended to those with end-stage renal disease (ESRD). The agency also intends to implement a hospice benefit demonstration starting in the 2021 plan year.
As MA plans have grown, so have managed care programs for Medicaid long-term care services. According to the CMS, 41 managed care long-term support service programs had been implemented in 24 states in 2017, providing coverage to about 1.8 million Medicare beneficiaries.
Thinking Like a Payer
Meeting the challenges imposed by managed care expansion requires that PAC providers transition from their traditional FFS mindset. This process should begin with the development of a clear picture of the Medicare and Medicaid managed care players active in the provider’s market or community. Specifically, providers should attempt to quantify plan enrollment and market share, define their existing networks, and understand the key plans’ strategic priorities.
Historically, most health plans have not focused much attention on PAC. This presents a unique opportunity for PAC providers to create a new value proposition that emphasizes the vital role they can play in integrating care, improving outcomes, and reducing the total cost of care for patients.
In particular, PACs should take advantage of their unique expertise in managing chronic illnesses to create solutions that offer plans new options for delivering cost-effective chronic care. This may include developing clinical criteria for admitting patients directly to skilled nursing facilities without a prior hospital stay to both eliminate hospital-associated costs and to help ensure the patient receives the appropriate care at the right time.
Similarly, PAC providers with significant experience in treating complex conditions like sepsis should present their care pathways as alternatives to extended, acute care hospitalizations.
By engaging with plans, PAC providers will gain an advantage over competitors in pursuit of high-value, narrow-network participation slots. Equally important, they’ll be well-positioned to enter into long-term risk-sharing agreements. Developing risk-sharing arrangements puts both organizations on the same page with respect to clinical and financial objectives and creates the possibility of additional financial rewards for the provider.
Becoming a Payer
The growing reliance on government-sponsored managed care also creates opportunities for PAC providers to become health plans. This is a complex task that involves many steps, including network development, benefit design, and plan marketing. However, for organizations with the necessary expertise and resources—or the willingness to partner with companies that can provide necessary support in exchange for a fee and a share of the newly created plan’s gains (or losses)—becoming a payer opens up new revenue streams and positions the provider as a long-term player in the growing managed care market.
Alternatively, providers may look to acquisition opportunities that extend their capabilities in ways that make them more attractive to payers. Given health plans’ focus on delivering care in the most cost-effective settings possible, many PAC providers are expanding their home health and home care footprint.
Improving collaboration between health plans and post-acute providers presents a significant, largely untapped opportunity for strengthening care across the continuum to improve outcomes, reduce readmissions, and enhance the patient experience. Additionally, it offers a path to sustainability for providers now being squeezed in the expanding managed care environment. To learn more about how your organization can capitalize on the Medicare and Medicaid market changes now underway, contact Avalere today.
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