MLR: A USEFUL TOOL FOR PROVIDER ALIGNMENT ELLIE M MARTIN SENIOR DIRECTOR, PROVIDER INNOVATIONS

MLR: A USEFUL TOOL FOR PROVIDER ALIGNMENT ELLIE M MARTIN SENIOR DIRECTOR, PROVIDER INNOVATIONS

WHO IS GORMAN HEALTH GROUP? Gorman Health Group is the leading solutions and consulting firm for government-sponsored health programs. Government Programs Leading enterprise of national consulting services and software solutions for payers and providers. Our Mission Our mission, as the industry s most active professional services consultancy and provider of technology-based solutions, is to empower health plans and providers to deliver higher quality care to beneficiaries at lower costs, while serving as valued, trusted partners to government health agencies. Washington, DC Headquartered in Washington, DC with more than 200 staff and contractors nationwide with over 2,000 combined years of Government Programs experience. Leadership Deep payer and provider knowledge coupled with Centers for Medicare & Medicaid Services (CMS) regulatory expertise. Privately Owned Founded in 1996 2

BROAD SERVICES Our clients have one-stop access to expert advice, guidance, and support, in every strategic and operational area for government-sponsored programs, across seven verticals. CLINICAL Changing how you approach Medical Management, Quality and Stars COMPLIANCE Offering guidance and support in every strategic and operational area to ensure alignment with CMS PHARMACY Leading experts in Part D, PBM, formulary and pharmacy programs HEALTCARE ANALYTICS & RISK ADJUSTMENT SOLUTIONS Implementing cross-functional risk adjustment programs for medical trend management and quality improvement PROVIDER INNOVATIONS Supporting network design and medical cost control implementation OPERATIONS Bringing excellence to every aspect of your implementation from enrollment to claims payment STRATEGY & GROWTH Leading experts in Marketing, Sales and Strategy development that create short and long-term profitable growth 3

MEDICAID SERVICES Dedicated to assisting Medicaid Managed Care Organizations achieve strategic, operational and quality goals across five verticals. CLINICAL Blending medical and pharmacy to improve care coordination, outreach and utilization management to meet the complex needs of your membership. FINANCIAL ALIGNMENT Providing health economic solutions for the needs of the Medicaid population including long-term care, behavioral health, and chronic condition management. STRATEGIC POSITIONING Analyzing and evaluating organizational adaptability, and readiness for change in new policy and population management environments. QUALITY PROGRAM OVERSIGHT Guidance and support to achieve the results your members and regulators expect while attaining compliance with State and Federal rules. OPERATIONS Creative solutions to maximize cost effectiveness, and deliver lasting results from eligibility to provider contract management, and claims. 4

Loss Ratio EM-A-LAR WHAT IS IT? o In the insurance business, the ratio of insured losses to earned premiums Medical Loss Ratio (MLR) o Used to be simple: The ratio of a health insurer s incurred medical claims to earned o Now it s not: In post-affordable Care Act (ACA) health insurance, MLR is the ratio of medical claims plus quality improvement costs, divided by earned premiums minus federal and state taxes and fees and payments in lieu of taxes 5

MEDICARE ADVANTAGE MLR C + B + R + Q Numerator o Incurred claims The regulation has over 60 elements to what s in and what s out in calculating incurred claims for a Medicare Advantage Prescription Drug (MA- PD) plan o Capitation payments (100% allowable) o Money paid to subsidize Part B premiums o Rebates deposited into Medical Savings Accounts (MSAs) for highdeductible MSA plans o Cost of activities designed to improve quality (intent is important) 6

WHAT DOES DESIGNED TO IMPROVE QUALITY MEAN? Improve health outcomes o This can include redesigned utilization review, if the redesign is prospective and focused on quality rather than cost Prevent hospital readmission Improve patient safety and reduce medical errors Wellness and health promotion activities Health information technology expenses related to healthcare quality Allowable ICD-10 expenses (allowable up to 0.3% of the adjusted revenue in the MLR denominator) Costs allocated based on generally accepted accounting principles (GAAP) 7

WHAT DOES DESIGNED TO IMPROVE QUALITY MEAN? The Four Gotta Be Design Criteria (all four required): 1. To improve health quality 2. To increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements 3. To be directed toward individual enrollees or incurred for the benefit of specified segments of enrollees or provide health improvements to the population beyond those enrolled in coverage as long as no additional costs are incurred due to the non-enrollees 4. To be grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized professional medical associations, accreditation bodies, government agencies, or other nationally recognized healthcare quality organizations 8

WHAT DOES DESIGNED TO IMPROVE QUALITY MEAN? To demonstrate that an activity is designed to improve quality o Have quality-related targets o Measure and report accomplishments in relation to those targets o Demonstrate actions taken to strengthen effective programs and improve sub-par programs o If cost is addressed at all in measurement, make it a secondary byproduct of quality metrics o Base metrics on sound evidence o Document: job descriptions, meeting agendas, and minutes 9

EXCLUDED FROM QUALITY ACTIVITIES These are the regs 1) Those that are designed primarily to control or contain costs. 2) The pro rata share of expenses that are for lines of business or products other than those being reported, including but not limited to those that are for or benefit self-funded plans. 3) Those which otherwise meet the definitions for quality improving activities but which were paid for with grant money or other funding separate from premium revenue. 4) Those activities that can be billed or allocated by a provider for care delivery and that are reimbursed as clinical services. 5) Establishing or maintaining a claims adjudication system, including costs directly related to upgrades in health information technology that are designed primarily or solely to improve claims payment capabilities or to meet regulatory requirements for processing claims, including ICD- 10 implementation costs in excess of 0.3% of total revenue under this part, and maintenance of ICD-10 code sets adopted in accordance with to the Health Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. 1320d-2, as amended. 10

EXCLUDED FROM QUALITY ACTIVITIES 6) That portion of the activities of health care professional hotlines that does not meet the definition of activities that improve health quality. 7) All retrospective and concurrent utilization review. 8) Fraud prevention activities (but you only have to deduct recoveries from claim expense to the extent they exceed the cost of fraud prevention). 9) The cost of developing and executing provider contracts and fees associated with establishing or managing a provider network, including fees paid to a vendor for the same reason. 10) Provider credentialing. 11) Marketing expenses. 12) Costs associated with calculating and administering individual enrollee or employee incentives. 13) That portion of prospective utilization review that does not meet the definition of activities that improve health quality. 14) Any function or activity not expressly permitted by CMS under this part. 11

WHAT S IN THE DENOMINATOR? C + B + R + Q P - (T + F + G + CB) - EHR Earned premiums (including rebates, low income subsidies) LESS: o Most state and federal taxes and fees (see the regulation) o Guarantee fund assessments o Costs of community benefit activities up to 3% of premium revenue or the state s highest premium tax o Electronic Health Record (EHR) incentive payments for meaningful use 12

THE GOLDILOCKS RULE Low MLR is no longer a sign of strength. Goal is MLR = 85% = just right. MLR less than 85% is a marketing opportunity: reduce premiums, increase benefits. MLR greater than 85% is a drag on earnings, may force higher premiums or reduced benefits. 13

MLR AND PROVIDER/ NETWORK ALIGNMENT What are the MLR cost drivers and how will the knowledge of these drivers lead to provider alignment? 14

MLR COST DRIVERS Overall medical utilization o Impacted by medical management o Impacted by clinical protocols o Impacted by risk management o Impacted by out-of-network (OON) referrals o Driven by clinical performance standards Inaccurate coding o Results in retrospective impact on MLR o Impacts accurate representation of member acuity Network outliers include: o Poor-performing providers within participating network and/or within market peer group o Services not provided within network 15

MLR COST DRIVERS OON referrals and leakage (especially PPO benefit designs) conflict between established provider referral patterns, patient/provider relationship, and plan network configuration Inappropriate use of specialist services: o Can be constrained by improved treatment plan coordination between PCP and specialist o Can benefit from improved inpatient discharge planning o Can benefit from periodic utilization management (UM) reviews with providers 16

MLR COST DRIVERS Use of ER about 60% of all ER visits are non-emergent Home-based services proper discharge referrals Pharmacy management o Monitor drug shopping o Establish pain management protocols Claims configuration issues minimize work-arounds Encounter reporting errors 17

KNOWLEDGE OF THE COST DRIVERS WILL LEAD TO: 1. Development of forward-looking budget assumptions for benefit premiums, project clinical utilization and provider reimbursement budgets 2. Trend projections medical spend over time 3. Development of clinical and financial performance metrics designed to bring performance in line with expectations 4. Strategies around how to best impact provider practice patterns access, treatment, referrals, and coordination of care 5. Network modifications based on clinical and financial performance 18

KNOWLEDGE OF THE COST DRIVERS WILL LEAD TO: 6. Performance-based payment provider reimbursement benchmarked to clinical and financial outcomes metrics 7. Medical expense management strategies/plan forward-looking, actionable medical management and provider management initiatives intended to address performance outliers such as inappropriate referrals, duplicative procedures, inappropriate coding, claims payment inaccuracies, ER utilization, etc. o Can be, and should be, guided by Stars program adherence. 19

DECISIONS, DECISIONS, DECISIONS HHS announced in January its expectation that alternative reimbursement models that currently comprise 20% of Medicare payments rise to 30% in 2016 and to 50% by 2018. This aggressive timeframe leaves no doubt that plans and providers are moving towards three key areas: Transparency Accountability No Outcome, No Income 20

HOW DO YOU MEASURE PERFORMANCE, AND HOW WILL YOU BUILD THOSE METRICS INTO PROVIDER REIMBURSEMENT? Decide what quality benchmarks align with your strategic plan Decide how your plan will enable providers to achieve the benchmarks Align reimbursement to outcomes achievement 21

GREAT PARTNERSHIPS Who are the best partners for our plan? Choose providers wisely 22

WHAT CHALLENGES CAN WE EXPECT?

MEMBER CHALLENGES Tendency to self-refer: Assist PCPs in strengthening their relationship with assigned members High-risk population: Assist PCPs in managing the clinical and social needs via a navigator Patient non-compliance: Evaluate the patient engagement platforms that will motivate your members Change lifestyle behavior to support healthy living 24

PHYSICIAN CHALLENGES Non-communication and lack of ownership: Providers want plan transparency in order to have the kind of buy-in that will produce change Asking providers to change their practice style: A joint effort Lack of staff to support the administrative burden: Joint plan to support the care coordination effort Declining per-patient reimbursement at a time of increased outcomes expectations 25

SYSTEM CHALLENGES Reimbursement: Movement from fee-for-service (FFS) to valuebased Do we have the analytics to support these changes? Facing the impact social services and behavioral health have Aging in of 76 million baby-boomers into Medicare at a time of budget constraints o Requires better management of resources by all parties 26

PROVIDER NETWORK REGULATORY CHALLENGES Call Letter guidance around provider networks Medicare-Medicaid Plan (MMP) network adequacy pre-checks prior to September Health Services Delivery (HSD) submission Anticipation of CMS pilot for network adequacy Anticipated reduction in Medicare reimbursement 27

NEGOTIATING THE BALANCE GHG IS HERE TO HELP

GHG SUPPORT MLR Analysis Model of Care (MOC) Development Provider Integration Strategies Reimbursement Strategies Risk Assumption Strategies Network Adequacy and Development 29

QUESTIONS

ELLIE MARTIN Senior Director, Provider Innovations T 281-827-1916 E emartin@gormanhealthgroup.com Gorman Health Group, LLC (GHG) is a leading consulting and software solutions firm specializing in government health programs, including Medicare managed care, Medicaid and Health Insurance Exchange opportunities. For nearly 20 years, our unparalleled teams of subject-matter experts, former health plan executives and seasoned health care regulators have been providing strategic, operational, financial, and clinical services to the industry, across a full spectrum of business needs. Further, our software solutions have continued to place efficient and compliant operations within our client s reach. GHG offers software to solve problems not addressed by enterprise systems. Our Valencia software reconciles the capitation payment of more than six million Medicare beneficiaries and continues to support customers participating in the Health Insurance Exchanges. Nearly 3,000 compliance professionals use the Online Monitoring Tool (OMT), our complete Medicare Advantage and Part D compliance toolkit, while more than 45,000 brokers and sales agents are certified and credentialed using Sales Sentinel. In addition, hundreds of health care professionals are trained each year using Gorman University training courses. We are your partner in government-sponsored health programs 31