Time for an IT Check Up

Transcription

1 Time for an IT Check Up Preventive IT Care Supports a Healthy Future for Medicare Advantage Plans ORACLE WHITE PAPER JULY 2014

2 Disclaimer The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle s products remains at the sole discretion of Oracle. TIME FOR AN IT CHECK UP: PREVENTIVE IT CARE SUPPORTS A HEALTHY FUTURE FOR MEDICARE ADVANTAGE PLANS

3 Table of Contents Disclaimer 1 Introduction 1 A Complicated Relationship 1 Changes Are Coming 2 Sharpening Focus in a New Landscape 4 Eye on the Bottom Line 5 Checklist for Success 5 Conclusion 6 TIME FOR AN IT CHECK UP: PREVENTIVE IT CARE SUPPORTS A HEALTHY FUTURE FOR MEDICARE ADVANTAGE PLANS

4 Introduction Medicare Advantage (MA) plans, which cover approximately 28%1 of all eligible Medicare beneficiaries in the United States, are preparing for major changes as the Affordable Care Act (ACA) provisions begin to phase in. They will face significant declines in benchmark payments in the years to come, stringent medical loss ratio (MLR) targets, as well as the transition to a pay-for-performance model. Star Ratings and quality measures will be prominent in changes to plan and premium reimbursement. There is no question that the changes will present significant risk for many healthcare payers. The new era also, however, stands to yield newfound opportunity for forward-thinking organizations that prepare carefully. Those that improve operational efficiency and demonstrate better outcomes will benefit from enrollment growth as well as a stronger bottom line. Timely and accurate insight as well as business agility and operational efficiency will be the key to MA success under the ACA, and information technology (IT) will be front and center in this quest. As such, there is no time like the present for a timely IT check up. By carefully assessing current capabilities, vulnerabilities, and mapping a plan forward, progressive MA plans can build a strong foundation for continued health. A Complicated Relationship It s complicated. These few words aptly describe the relationship between the Centers for Medicare and Medicaid Services (CMS) and healthcare payers when it comes to MA plans. The plans are hardly new, coming onto the scene in the 1970s when Medicare beneficiaries gained the option to secure their benefits through private health plans. Renamed Medicare Advantage in 2003, approximately 28% of all eligible Medicare beneficiaries are enrolled in the program, which accounts for nearly a quarter (22%) of all Medicare spending an estimated $140 billion in Participation levels vary widely by states, with 49% of eligible Medicare beneficiaries enrolled in Minnesota and just 1% in Alaska. 3 As originally envisioned, MA plans and their predecessors were intended to generate savings via managed care. The plans originally paid on a capitated basis about 95% of what it cost for a traditional benefit. 1 Mathematica Policy Research Inc. and the Kaiser Family Foundation, Medicare Advantage 2013 Spotlight: Enrollment Market Update, June 2013, 2 The Henry J. Kaiser Family Foundation, Medicare Advantage Fact Sheet, Nov. 30, 2012, 3 Mathematica Policy Research Inc. and the Kaiser Family Foundation, Medicare Advantage 2013 Spotlight: Enrollment Market Update, June TIME FOR AN IT CHECK UP: PREVENTIVE IT CARE SUPPORTS A HEALTHY FUTURE FOR MEDICARE ADVANTAGE PLANS

5 Over the years, however, MA plans, in response to CMS policy shifts, began to offer expanded services and benefits to program members, which resulted in CMS paying private plans more per beneficiary up to 14% more than those enrolled in traditional Medicare 4. The relationship evolved into a process, whereby, if a plan s premiums were higher than what Medicare would reimburse, the healthcare payer would pass the cost along to enrollees. If the premium was lower, the payer shared the savings with Medicare. Healthcare payers were content with the status quo. CMS, however, facing spiraling costs and escalating sustainability questions as Americans age, saw the need for change. Enter the ACA of Changes Are Coming The ACA is bringing formidable changes to the MA program. (See Figure 1.) Among its many provisions, the ACA changed the reimbursement framework to reduce Federal payments to MA plans, eventually bringing them closer to the average costs of the traditional Medicare program. Figure 1. 4 Mark Taylor, Stars Align for Health System Medicare Advantage Plans, Hospitals & Health Networks Magazine, January 2013, G 2 TIME FOR AN IT CHECK UP: PREVENTIVE IT CARE SUPPORTS A HEALTHY FUTURE FOR MEDICARE ADVANTAGE PLANS

6 The act was to freeze 2011 reimbursement benchmarks at 2010 levels, with additional benchmark reductions phased in through 2018, at which time reimbursements would range from 95% to 115% of traditional Medicare reimbursements. In February 2013, CMS announced a 2.3% payment rate cut for MA plans for Two months later, after significant industry input, it reversed the cut and announced a 3.3% increase in payments for In addition, the ACA, supporting a move to pay for performance, established an $8 billion bonus program based on quality metrics tied to the Five Star Quality Rating System. (See Figure 2.) In 2012, payers with at least 4 stars received bonuses. They must use the bonuses to reduce premiums, provide additional benefits, or share out-ofpocket expenses. Moving forward, boosting or achieving a high star rating will be an increasingly important competitive advantage for payers as starting in 2015 only plans that achieve a 4 or 5 rating will be eligible for bonuses. Figure 2. 3 TIME FOR AN IT CHECK UP: PREVENTIVE IT CARE SUPPORTS A HEALTHY FUTURE FOR MEDICARE ADVANTAGE PLANS

7 Finally, the ACA requires large healthcare payers to maintain a medical loss ratio (MLR) of 85% or better starting in This means that they must spend at least 85% of premium dollars on claims and activities to improve healthcare quality. This rate falls to 80% for individual and small-group healthcare payers. Calculations will take into consideration medical cost activities that incorporate the tenants of evidence-based medicine and improve healthcare quality. Initiatives focused on controlling costs are considered administrative expenses. If a payer falls below the required minimum ratio, it must reimburse CMS for the amount of the shortfall. Healthcare payers not meeting the MLR for two consecutive years will have their enrollment suspended for three years. If noncompliance extends to five consecutive years, the payer would lose its contract with CMS. Some have contended that the ACA would lead to significant reduction in MA enrollment, but, so far, that has not been the case. Participation is up nearly 10% between 2012 and 2013 alone, and up approximately 30% since Regardless of future enrollment trends, changes under the ACA will almost certainly present complicated challenges to payers already struggling with rising costs, an aging population, and a growing compliance burden. Sharpening Focus in a New Landscape Insight, agility, and operational efficiency are the new watchwords for success as MA plans begin to navigate a transformed business environment under the ACA. Today, one cannot overstate the need to successfully capture data both structured and unstructured and then effectively and efficiently turn it into actionable information. Increasingly, healthcare payers must be equipped to quickly and accurately calculate the potential impact of various reimbursement scenarios as well as changes to membership numbers, demographics, and population health on their business and bottom line. Timely and actionable information will also be essential to managing emerging pay-for-performance requirements, monitoring and adjusting MLRs, boosting a payer s star rating, and identifying new opportunities for cost savings and quality improvements. The ability to manage and make sense of big data will become increasingly important for MA plans in the ACA era. To remain competitive and satisfy new requirements, payers will need to integrate and gain knowledge from data as diverse as lab findings, invoices, admissions and readmission information, outcomes, claims documentation, utilization, customer surveys, social media, as well as internal operating expenses. Security considerations, such as ensuring the privacy of protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA), will grow commensurately as payers expand their use of and access to vast amounts of data. As such, security must be baked into any big data initiative from its inception and be addressed at every level of the infrastructure. That said, payers who lay a solid and scalable foundation for supporting big data initiatives now will be well positioned for success as the ACA provisions move forward. As the business becomes more data driven, analytical reporting can no longer be the exclusive domain of the IT team, with line of business managers beholden to another department s schedule and priorities when it comes to reporting. Instead, payers must put the power of insight in the hands of line of business managers, allowing them to quickly and easily build and run both standard and ad hoc reports. Under the ACA, payers will require a compliance dashboard that helps them to identify issues before infractions occur for example, a dashboard alert would flag when payers near the deadline for sending required correspondence to a member. The five-star program also requires payers to have many types of data at their fingertips, including metrics on operations, enrollment and customer service, as well as forward-looking surveillance. 4 TIME FOR AN IT CHECK UP: PREVENTIVE IT CARE SUPPORTS A HEALTHY FUTURE FOR MEDICARE ADVANTAGE PLANS

8 Insight is not enough, however, if a payer cannot act quickly and decisively to implement changes required to improve performance, whether boosting quality, outcomes, operational efficiency, or profitability. As such, healthcare payers seek greater agility including in their IT systems, which support modern enterprises. Specifically, they require the ability to quickly introduce new plans as well as support efforts to reduce operating costs and take advantage of emerging opportunities. Many payers legacy systems, however, are decades old and require costly and time-consuming hard coding to make even simple changes, whether configuring plans or adjusting rates. Increasingly, payers seek and require rules-based systems that enable line of business managers to readily make changes to support new processes, requirements, and opportunities. As an example, Medicare Secondary Payer/Coordination of Benefits (MSP/COB) now requires healthcare payers to report data to a centralized COB coordinator instead of reporting data directly to CMS. To remain compliant, payers must create a new file structure to report data as well as to manage replies. They may also face changes to risk adjustment and the determination of risk scores for beneficiaries. One proposal would require healthcare payers to send evidence of care in addition to the diagnosis data required today to request a change to a risk score. If enacted, payers would need to adapt their systems, including creating new files for sending and receiving this new information. Eye on the Bottom Line Operational efficiency will be imperative as healthcare payers work to maintain required MLRs as well as boost or maintain their star ratings. Not only will IT and analytics play an important role in identifying opportunities for savings and tracking performance, payers will also look to control overall IT costs and seek to focus resources on core competencies. Driving down total cost of ownership (TCO) is vital as IT teams are increasingly held accountable not only for the cost of initial technology investments but the financial burden of integrating systems, maintaining those complex integrations, and managing and upgrading environments moving forward. As such, payers will be looking to improve overall IT efficiency and gain more predictable costs. A growing number of payers are considering cloud-based solutions for core IT requirements. Reliability, security, and TCO are key considerations when going this route. Payers must carefully consider an organization s reputation as well as the terms of the agreement, which might contain hidden costs related to management and upgrade projects. As a means to control TCO, healthcare payers are also looking to leverage engineered systems solutions that combine hardware and software optimized to work together. In addition, many seek more open as well as scalable solutions that can cost effectively expand to meet changing requirements. Checklist for Success As ACA provisions phase in, payers will require systems that can respond to rapid changes in policy, accept and analyze nontraditional data, help to control IT costs, continue to support HIPAA PHI requirements, and can be delivered in multiple ways, including the cloud. To manage MLR requirements and cost controls under ACA, payers will need provider contract applications and decision-support analytics that drive profitability. They should be configurable via rules-based modeling and accessible to the providers in the network, and account for periodic quarterly and annual bonus or incentive payments and reimbursement arrangements that include factors such as product, state, location, member, member s medical home, and diagnosis. 5 TIME FOR AN IT CHECK UP: PREVENTIVE IT CARE SUPPORTS A HEALTHY FUTURE FOR MEDICARE ADVANTAGE PLANS

9 Below is a checklist that healthcare payers should consider to successfully navigate changes under the ACA: Healthcare payers must decide what they can effectively operationalize at a price and value that allows them to grow and maintain their business in an environment where populations are growing, requirements are changing, and margins are shrinking. Conclusion With changes to MA plans inevitable under the ACA, healthcare payers are under immense pressure to transform their businesses to remain competitive. Those that take the next step in replacing their cumbersome legacy systems with scalable, efficient, and agile IT solutions will realize significant short- and long-term benefits, including enrollment growth and a stronger bottom line. 6 TIME FOR AN IT CHECK UP: PREVENTIVE IT CARE SUPPORTS A HEALTHY FUTURE FOR MEDICARE ADVANTAGE PLANS

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