Managed Care Success Think Tank Recap : When to Walk Away from Medicare Advantage

In an extended, 90-minute conversation with an esteemed group of panelists, the message regarding the MA contracting climate was clear: Continuing to accept “ancillary” contracting status is a tacit relegation of our role to commodity status – and that mindset is really out of synch in an industry with such constrained capacity and access. Based on our Nov. 16, 2022 discussion, the main goal moving ahead for home-based Medicare providers is to achieve tightly integrated partnerships of aligned payer and referral sources, with a secondary goal of maximizing the unit contribution of every caregiving resource.

Home health care providers have been baffled for years by payer stance that “% of spend” equates with “% of value.” But by contracting as an ancillary spend at rates significantly below Medicare, we’re complicit in this mindset. And now with a permanent carve-in on the radar in the upcoming years, hospice providers will also be facing the uncomfortable decision about being whittled to “% of Medicare.”

The road to ancillary/commodity status happened gradually, like a pot slowly warming to a boil, but the temperature has finally hit the point where many of your peers have reached a similar conclusion: Given the recruiting and retention climate, we owe it to our organizations to maximize the unit contribution (revenue minus direct expense) of every resource on our roster. Quite simply, plans that choose not to engage with us as value-adding partners should be terminated.

While we haven’t quite nailed the playbook in any depth, the four steps below are generally followed by those leading the way in our industry.

1. Payer/Referrer Alignment. Unequivocally, the best contracting circumstances exist when the payer and our referral source are tightly aligned. This is typically via direct ownership – as in a health system owning the plan (a.k.a. “provider-sponsored”) as well as facilities such as hospitals and SNFs. ACOs also qualify given the direct participation and alignment of providers. Alternatively, you may be able to use the leverage of a favorable hospital/system relationship to get to the table with the plan, or form a joint venture with that hospital/system.
   
   
2. Our Alignment. To truly align an integrate, we must understand both the economic drivers and language of the network we’re integrating with. How much is an avoided hospitalization worth? What’s the difference between “case rate” and episodic? Our aim is to be a trusted delivery partner for someone trying to control a larger bucket of spend than our own; we must understand how our cost of care (OCC) impacts total cost of care (TCC).
   
   
3. Reference Contract. It can be a dirty word, but we need to pilot and demonstrate success. Building a reputation as a clinically integrated partner is not an overnight proposition – it’s more of a long game. We need to be able to reference prior “proof points” to build a reputation for clinical integration. While it can be a long road getting to the independent plans, ACOs may be a soft spot because the fee-for-service chassis is an easier jumping off point.
   
   
4. Unit Economics. Even if you endeavor to provide a payer-agnostic stance, you still need to understand your unit economics. It’s tempting to think of the business as revenue and profits, but direct margin drives the enterprise, and we need to know the relative economics of payer X vs payer Y. To play in the game of value, every resource deployed has to be traceable to some pot of margin.

What does this mean for hospice and palliative care providers looking ahead to a national carve-in. The mechanics will be different, but the thought process is similar. Will you accept “% of Medicare” or refuse to contract? If you take less than Medicare, what’s the rationale? Some have said they may be comfortable opting for earlier “upstream” business to offset a hospice discount – others are saying No, there’s no compromising either our revenue or the hospice benefit. If there is any good news, it’s that home health has helped shed some light on the vagaries of the MA contracting environment.