Executive insights                                                                                                        ...
Executive insights                                        Figure 1                             scores. According to L.E.K....
Executive insights      1.	 Identify the Most Influential Star Ratings Criteria                                           ...
Executive insights                                                                                                        ...
Executive insights       However, the focus on quality has a broader application in the              L.E.K.’s approach to ...
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How Much is a Star Worth in the 5-Star Quality Rating System to Medicare Advantage Plans?


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One federal strategy to improve healthcare is to strengthen the link between patient care outcomes and reimbursement levels. To that end, the Centers for Medicare & Medicaid Services (CMS) has established its 5-Star Quality Rating System, which provides Medicare Advantage (MA) plans with quality rating metrics and associated bonus payment criteria. MA plans can capture significant incremental revenue by meeting certain thresholds through CMS’ star rating system.

L.E.K. Consulting has outlined its approach to becoming a rising “star” in a report to help health plans capture added performance incentives while helping to improve healthcare delivery. The report includes:

* How to quantify the value of high MA star quality ratings
* A three-step approach to improve your health plan’s star ratings:
- How to identify the most influential star ratings criteria scores to change
- How to compare relative “contribution” across cohorts
- How to rank the improvement opportunities
* Practical examples for improving star ratings

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How Much is a Star Worth in the 5-Star Quality Rating System to Medicare Advantage Plans?

  1. 1. Executive insights Volume XIV, Issue 14 Quality in the Healthcare Marketplace: Becoming a Rising ‘Star’ A basic tenet of federal healthcare reform is promoting higher • Consumer Assessment of Healthcare Providers and Systems quality care and improving outcomes. One emerging strat- (CAHPS) egy to achieve these goals is to strengthen the link between patient care outcomes and reimbursement levels. The Centers • Healthcare Effectiveness Data and Information Set (HEDIS) for Medicare & Medicaid Services (CMS) is a major proponent • Hospital Outcomes Survey (HOS) of this initiative and has established its 5-Star Quality Rating System, which provides the quality rating metrics – and associ- To a lesser degree, CMS also considers administrative data such ated bonus payments – for Medicare Advantage (MA) plans. as member complaints and appeals, and problems getting The MA star rating program was created as part of the Patient services. All plans receive a rating based on a 1-5 scale, with Protection and Affordable Care Act (PPACA) and was adopted 5 stars being the highest quality, and these ratings are made in March 2010. public to ensure that this information is readily available to consumers. MA plans can capture significant incremental revenue by meet- ing certain thresholds through CMS’ star rating system. To CMS has proposed 51 performance measures for 2013 to help health plans address the challenge of increasing quality in rate MA plan quality. At a high level, CMS scores each plan healthcare delivery, L.E.K. Consulting has outlined its approach vs. national and regional benchmarks at the H-contract level to becoming a rising “star.” (product and service area) and grades on a “curve” based on the performance of all other MA plans. So, a MA plan that maintains its performance levels year over year may actually Outlining the 5-Star Quality Ratings see its rating decrease if a significant percentage of other MA Program plans continue to increase their individual scores. This provides MA plans with added incentive to continually improve care In 2011, there were approximately 48 million Medicare eligible effectively. seniors, and about 12 million of this group were enrolled in MA plans, representing an approximately 25% penetration. The MA star rating program provides an overall measure of plan Quantifying the Value of High Star Quality quality and is a cumulative indicator of care quality, access to Ratings care, plan responsiveness and beneficiary satisfaction. The data MA plans with higher star quality ratings benefit financially in that underpins these measures is primarily based on plan and two ways. First, MA plans that submit bids below the county or beneficiary information collected through three surveys: Quality in the Healthcare Marketplace: Becoming a Rising ‘Star’ was written by Joe Johnson, Senior Manager and Martin Graf, Vice President, both in the Healthcare Services practice of L.E.K. Consulting. Please contact L.E.K. at healthcare@lek.com for additional information.L.E.K. Consulting / Executive Insights lek.com
  2. 2. Executive insights Figure 1 scores. According to L.E.K. analysis, moving from a 3 to 4 star Rebate and QBP Structure by Star Rating MA plan is worth roughly $50 per member per month (PMPM). MA plans that are not operating at bonus threshold levels are Base Rate Bonus leaving money on the table and could benefit from a systematic Savings Star Rating 2012-2013 2014 2015 review of plan performance across star ratings measures. Rebate % <3 0.0% 0.0% 0.0% 50.0% A Three-Step Approach to Reach for the 3 3.0% 3.0% 0.0% 55.0% (5) Stars 3.5 3.5% 3.5% 0.0% 65.0% Drawing from our extensive work with health plans and provid- 4 4.0% 5.0% 5.0% 65.0% ers, L.E.K. has developed a star ratings analytical model that identifies how MA plans can take clear steps to improve their 4.5 4.0% 5.0% 5.0% 70.0% star ratings. L.E.K.’s research and model for star ratings shows 5 5.0% 5.0% 5.0% 70.0% that not all changes in star ratings measures are created equal. Source: CMS L.E.K.’s three-step approach determines the relative attractive- regional CMS benchmark are eligible for a “rebate payment.” ness of changes across individual measures and provider cohorts This rebate payment is a percentage of the difference between to develop a prioritized list of quality improvement initiatives the bid and the benchmark. The percentage of the rebate that that can yield the most benefit for MA plans (see Figure 2). is retained by the MA plan is tied to a star “grade” based on the 5-Star Quality Rating System. MA plans that receive higher Figure 2 star ratings retain a larger portion of the rebate. However, the Prioritization Approach for Star Quality Improvement Initiatives rebate must be used exclusively to enhance benefits for benefi- ciaries or for reducing premiums required of beneficiaries. 1. Identify the most attractive criteria for change Second, the quality bonus payment (QBP) is another incen- tive created by the PPACA that offers high performing plans additional revenue for achieving certain star rating thresholds (see Figure 1). Regulations proposed in late 2010 offer QBPs to 2. Compare relative “contribution” across cohorts all plans that perform at 3 stars or above and offer exceptional bonuses to 5-star plans, with bonuses ranging from 3-5% of premiums. Star rating bonuses began being awarded in 2012 based on quality measure performance data collected in the 3. Rank-order criteria 2009-2010 timeframe. and cohort specific list Due to the incentives created by the 5-Star Quality Rating Sys- tem, MA plans have enacted quality improvement campaigns targeted at members and have refocused on provider network performance to drive star ratings. And these efforts are paying Prioritized List of Quality Improvement Initiatives off: based on the 2012 plan ratings, the average star rating weighted by enrollment for MA contracts is 3.44, compared Source: L.E.K. Consulting to 3.18 in 2011. These star rating improvements will accrue as L.E.K’s approach determines relative attractiveness of changes across cohorts & criteria to aid incremental revenue gains to the MA plans that are raising their strategic planning.Page 2 L.E.K. Consulting / Executive Insights Vol. XIV, Issue 14 lek.com
  3. 3. Executive insights 1. Identify the Most Influential Star Ratings Criteria Figure 3 Scores to Change: In order to have any measurable impact on Cohort Analysis Example for “Managing Chronic Conditions: Osteoporosis & Diabetes” the plan’s overall rating, a single criterion’s score must improve enough to move that metric to the next star rating threshold. 100 Therefore, the most attractive criteria for change are those that 90 are closest to the next star bonus threshold. 80 70 2. Compare Relative “Contribution” Across Cohorts: A 60 member cohort’s impact on the MA plan’s score is directly linked to two factors: its size and the magnitude of improve- 50 % Score ment needed to change the overall score. To improve star rat- 40 ings of particular measures and domain areas, MA plans need 30 to drill down to the provider level to understand where provid- 20 ers who deliver care for a significant share of plan membership 10 are underperforming relative to other providers within a given star ratings criteria (see Figure 3). 0 Osteoporosis Diabetes – 3. Rank the Improvement Opportunities: Criteria-cohort in Women Cholesterol with Fractures combinations can be rank-ordered by quantifying the relative degree of potential positive economic impact of all the pos- Mean Score 13% 30% sible improvement opportunities. This calculation controls for Star Rating 1 1 current scores relative to the next threshold, cohort size and Provider Cohorts criteria weight. By ranking the possible improvement initiatives Cohort A Cohort B Cohort C Cohort D on a relative basis, the organization can focus on the greatest Cohort E Cohort F Cohort G Cohort H financial opportunities first (see Figure 4). 3, 4 & 5 Star thresholds 5% of total qualifying members This cohort-specific analysis helps augment the development Source:  L.E.K. Analysis of quality initiatives by providing new levels of actionable detail It is critical to drill down to the provider level to improve a plan’s “Manag- ing Chronic Conditions” ratings. In this graphical representation of cohort- across operational processes, member outreach and provider level analysis, the provider that manages member Cohort B is underper- forming in osteoporosis management and diabetes care chronic conditions engagement initiatives. Examples include: management. This large medical group would be a logical provider to target in quality improvement initiatives. • Operational Processes: Improving processes that impact multiple member segments are likely to generate a larger • Member Outreach Initiatives: Targeting specific popula- return on investment (ROI) than initiatives targeted at tions with mailings, telephone and other forms of specific population segments. L.E.K.’s approach and model outreach can be effective ways to improve scores in assesses ongoing performance and highlights correlations specific, low-scoring cohorts. L.E.K.’s approach and model across cohorts that should help develop process improve- accounts for the size of cohorts and their relative distance ments with the broadest impact. This includes reviewing to the next star level to prioritize improvement opportuni- complaint patterns across medical groups and identifying ties and maximize the plan’s star rating. Examples include a process shortcoming or systemic customer service failures focusing patient education on large membership cohorts or particular to a provider steering patients in particular geographies toward specific medical facilitiesL.E.K. Consulting / Executive Insights lek.com
  4. 4. Executive insights Figure 4 Ranking Criteria-Cohort Opportunities for Improvement 3.5x 3.2x relative to the 10th most impactful initiative 3.0x Impact ($ / PPT of improvement) 2.5x 2.2x 2.0x 1.6x 1.6x 1.6x 1.5x 1.5x 1.3x 1.0x 1.0x 1.0x 1.0x 0.5x 0.0x Health Care Overall Plan Getting Getting Care Health Care Osteoporosis RA Colorectal Health Care Osteoporo- Quality Rating Needed Care Quickly Quality Testing Management Screenings Quality sis Testing Provider A Provider A Provider A Provider A Provider B Provider B Provider C Provider A Provider D Provider E Current 1 2 1 1 1 3 2 3 1 3 Star Rating Cohort 12% 12% 12% 12% 4% 13% 7% 12% 1% 7% Size* (%) Note: *Qualifying members in the specified cohort as a percent of total plan qualifying members for the specified criterion Source: L.E.K. Analysis By ranking the initiatives on a relative basis, the organization can focus on the greatest financial opportunities first. Improving the rating for Healthcare Quality for Provider A can be expected to have a 3.2 times greater impact (in terms of dollars per percentage point star rating improvement) relative to improving the rating for Osteoporosis Testing for Provider E. • Provider Engagement Initiatives: Incenting providers Taking Next Steps through contract clauses and customized pay structures (e.g., pay-for-performance) can be a powerful tool to improve Health plans are undertaking a variety of initiatives to drive quality ratings. L.E.K.’s approach and model identifies under- higher MA Star Quality bonuses. Internally-focused organi- and over-performing cohorts (e.g., medical groups) that can zational innovations are becoming more common such as be used as a fact-base to inform provider engagement and cross-functional programs to identify the largest addressable contracting decisions across the network. This could entail gaps among the star quality dimensions being measured and creating financial incentives for specific, poorly performing implement specific programs to address the gaps. providers or creating profit sharing goals with a medical group based on quality ratings created from published Additionally, provider networking and engagement innovations provider report cards among health plans are taking root. Health plans will want to exclude consistently poor-performing providers. Likewise, high- Armed with this information, an organization’s star quality im- quality providers will not want to be “mixed-in” and reimbursed provement team can evaluate opportunities for implementation with mediocre providers, which will lead to new models to – including effort and cost – and create a roadmap of initiatives rank, stratify and incent providers to build a “quality network.” for implementation. Therefore, it will become increasingly important to identify and engage “best and better” providers to deliver high quality, cost- effective care by aligning incentives and quality performance.Page 4 L.E.K. Consulting / Executive Insights Vol. XIV, Issue 14 lek.com
  5. 5. Executive insights However, the focus on quality has a broader application in the L.E.K.’s approach to understanding how to drive quality healthcare arena than just the 5-Star Quality Rating System. improvements at a cohort level can also be applied to these We have also seen a greater emphasis on quality in commercial other areas where quality improvement initiatives need to be health plans, which is expected to impact innovations across identified and prioritized to maximize reimbursement. As quality commercial and government-products oriented health plans performance is increasingly tied to revenue, health plans have alike: the proliferation of new care delivery models such as an opportunity to develop and manage programs that capture Patient Centered Medical Homes (PCMHs), Accountable Care added performance incentives while helping to improve care. Organizations (ACOs), and other forms of preferred provider networks / tiered provider reimbursement constructs. L.E.K. Consulting is a global management For further information contact: International consulting firm that uses deep industry Boston New York Offices: expertise and analytical rigor to help 75 State Street 1133 Sixth Avenue Auckland clients solve their most critical business 19th Floor 29th Floor Bangkok Boston, MA 02109 New York, NY 10036 Beijing problems. Founded nearly 30 years ago, Telephone: 617.951.9500 Telephone: 646.652.1900 London L.E.K. employs more than 900 profes- Facsimile: 617.951.9392 Facsimile: 212.582.8505 Melbourne sionals in 20 offices across Europe, the Chicago San Francisco Milan Americas and Asia-Pacific. L.E.K. advises One North Wacker Drive 100 Pine Street Mumbai and supports global companies that 39th Floor Suite 2000 Munich are leaders in their industries – includ- Chicago, IL 60606 San Francisco, CA 94111 New Delhi ing the largest private and public sector Telephone: 312.913.6400 Telephone: 415.676.5500 Paris Facsimile: 312.782.4583 Facsimile: 415.627.9071 organizations, private equity firms and Shanghai emerging entrepreneurial businesses. Los Angeles Singapore L.E.K. helps business leaders consistently 1100 Glendon Avenue Sydney 21st Floor Tokyo make better decisions, deliver improved Los Angeles, CA 90024 Wroclaw business performance and create greater Telephone: 310.209.9800 shareholder returns. Facsimile: 310.209.9125 L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2012 L.E.K. Consulting LLCL.E.K. Consulting / Executive Insights lek.com