This document summarizes key points from a CMS 2015 Advance Notice regarding changes that will impact Medicare Advantage plans. It discusses factors that will continue to put downward pressure on plan revenues, such as normalization factors, benchmark trends, and quality rating adjustments. It provides examples of how these changes could impact two hypothetical plans differently, with estimated revenue impacts ranging from a 0.4% increase to over a 10% decrease. The document also examines areas of uncertainty around the new requirements for risk adjustment diagnoses.

1. CMS
2015
Advance
No2ce
March
19,
2014

2. TODAY’S
PRESENTERS
2
! Wanda
Kochhar
–
President
/
Senior
Advisor,
Outcomes
• All
membership
in
coun8es
that
are
2-­‐year
transi8on.
4.0
STAR
ra8ng.
No
historical
use
of
enrollee
risk
assessments.
• 3%
(Normaliza8on
factor)
-­‐
1.65%
(benchmark
trend)
-­‐
0%
(%
FFS
transi8on)
-­‐
0.25%(coding
intensity)
–
0%
(STARs
bonus)
–
0.7%
(industry
fee)
–
0%
(enrollee
risk
assessments)
=
Total
impact
Posi2ve
0.4%
• Ms.
Kochhar
received
her
BBA
and
MBA
from
the
Hugh
McColl
School
of
Business
at
Queens
College.
! Rolland
Ho
–
SVP,
Risk
Adjustment
Solu9ons
&
Analy9cs,
Outcomes
• Rolland
Ho
leads
the
design
and
development
of
risk
adjustment
solu8ons
that
support
Commercial/Marketplace,
Medicaid
and
Medicare
Advantage
plans
• Prior
to
joining
Outcomes
Health,
Rolland
served
as
Vice
President
of
Medical
Economics
at
Arcadian
Health
Plan
overseeing
risk
adjustment,
medical
analy8cs
and
bid
development.
• Rolland
graduated
Magna
Cum
Laude
from
Harvard
University
with
an
AB
in
Economics
and
obtained
his
Master
in
Business
Administra8on
from
Stanford
University.

3. 2015
ADVANCE
NOTICE
! Con2nued
revenue
compression
for
MA
plans:
• Change
in
FFS
normaliza8on
factor
methodology
(+3.0%)
• Combined
benchmark
trend
change
of
Nega8ve
1.65-­‐2.3%
(weighted
average
Neg
1.9%)
• Add’l
decline
in
average
benchmarks
with
transi8on
to
%
FFS
(weighted
average
Neg
2.3%)
• Coding
intensity
adjustment
increased
from
4.91%
to
5.16%
(Neg
0.25%)
• STAR
ra8ng
bonus
eliminated
for
<
4.0
STAR
plans
(Neg
3-­‐3.5%
for
affected
plans,
weighted
average
(Neg
1.6%)
• Increased
industry
fees
(Neg
0.7%)
• Requirement
that
risk
assessment
diagnoses
be
confirmed
in
clinical
sefng
(Neg
0-­‐3%
depending
on
plan
usage
of
risk
assessments)
However,
specific
impact
is
highly
variable
depending
on
plan
profile.
3

4. IMPACT
ON
TWO
DIFFERING
PLAN
PROFILES
! Plan
A
• All
membership
in
coun8es
that
are
2-­‐year
transi8on.
4.0
STAR
ra8ng.
No
historical
use
of
enrollee
risk
assessments.
• 3%
(Normaliza8on
factor)
-­‐
1.65%
(benchmark
trend)
-­‐
0%
(%
FFS
transi8on)
-­‐
0.25%(coding
intensity)
–
0%
(STARs
bonus)
–
0.7%
(industry
fee)
–
0%
(enrollee
risk
assessments)
=
Total
impact
Posi2ve
0.4%
! Plan
B
• All
membership
in
coun8es
that
are
6-­‐year
transi2on.
3.5
STAR
ra2ng.
Heavy
historical
use
of
enrollee
risk
assessments.
• 3%
(Normaliza8on
factor)
–
2.3%
(benchmark
trend)
–
3.3%
(%
FFS
transi8on)
-­‐
0.25%(coding
intensity)
–
3.5%
(STARs
bonus)
–
0.7%
(industry
fee)
–
3%
(enrollee
risk
assessments)
=
Total
impact
Nega2ve
10.1%
4
While
na2onal
average
impact
is
Neg
5%
on
average,
plan
specific
impact
can
range
widely
from
+0.4%
to
over
Neg
10%.

5. DANCING
WITH
THE
STARS
5
Termina2on
of
Star
bonus
demo
for
2015
may
materially
affect
the
market
compe22veness
of
many
plans

6. TRANSITION
TO
%
OF
FFS
BENCHMARKS
6
Much
less
variability
across
plans
in
terms
of
impact
from
transi2on
to
%
FFS.

7. THE
ENROLLEE
RISK
ASSESSMENT
WILDCARD
! Plans
will
likely
be
split
in
terms
of
support
for/against
new
rule
• Plans
that
are
heavily
invested
in
enrollee
risk
assessments
will
obviously
favor
con8nua8on
of
current
status
quo.
• Plans
that
currently
conduct
few
assessments
could
be
on
either
side.
Some
might
protest
rule
change
because
looking
to
counteract
benchmark
declines
with
expanded
assessment
program.
But
some
might
support
rule
change
to
cheaply
and
effec8vely
level
playing
field
against
compe8tors
who
are
more
heavily
invested
in
assessments.
! What
plans
and
vendors
are
likely
pushing
CMS
to
think
about
• Will
there
be
any
situa8ons
in
home
sefng
(POS=12)
that
qualifies
for
risk
adjustment
such
as
an
assessment
that
fulfills
Annual
Wellness
Visit
criteria?
Or
if
the
visit
is
conducted
by
member’s
assigned
Primary
Care
Physician?
• Does
each
specific
diagnosis
have
to
be
re-­‐documented
in
the
subsequent
clinical
sefng
encounter?
Or
is
having
the
clinical
encounter
itself
sufficient
to
make
diagnosis
valid
for
risk
adjustment?
• What
other
place
of
service
loca8ons
might
be
specifically
excluded
or
included?
Mobile
units
(POS=15)?
Retail
health
clinics
(POS=17)?
7

8. HOW
WILL
PLANS
ADAPT?
! High
likelihood
that
final
rule
is
substan2ally
similar
to
Advance
No2ce
• Plans
and
vendors
will
need
to
develop
the
required
links
to
clinical
follow-­‐up
treatment
which
will
increase
overall
assessment
costs
• Risk
adjustment
analy8cs
will
need
to
be
re-­‐tooled
to
beler
stra8fy
members
by
magnitude
of
opportunity
• Plans
will
need
to
enable
and
incent
provider
partners
to
perform
beler
diagnos8c
capture
via
tools,
P4P
programs,
and
revenue
sharing
! Assuming
the
proposed
rule
stands
as-­‐is,
couple
poten2al
scenarios:
• Plans
may
decide
to
subs8tute
Physician
Office
assessments
for
In-­‐Home
Clinical
Care
Visits
• Or,
Vendors
may
change
process
to
u8lize
a
lower
skilled,
lower
cost
clinician
(e.g.
RN
instead
of
NP/PA/MD)
to
conduct
the
ini8al
home
assessment
and
then
channel
those
members
iden8fied
with
a
new
HCC
to
a
subsequent
clinical
office
visit
• If
retail
health
clinics
are
allowed,
perhaps
assessments
are
structured
to
occur
when
member
next
fills
their
pharmacy
scripts
8

9. THE
PROPOSED
“DELETIONS”
RULE
! A
massive
sinkhole
that
may
engulf
unwary
plans
• CMS
recently
released
a
proposed
rule
outside
of
the
Advance
No8ce
process
that
would
specifically
require
MA
plans
to
review
chart
data
against
claims
and
submit
any
unvalidated
diagnoses
for
dele8on.
• For
aggressive
plans,
chart
review
typically
delivers
5-­‐6%
incremental
lin
to
risk
scores.
On
average,
claims
HCC’s
are
known
to
have
a
11-­‐12%
error
rate
affec8ng
the
45-­‐50%
of
revenue
derived
from
HCCs.
• As
a
result,
if
this
rule
is
implemented,
unwary
plans
may
effec8vely
eliminate
their
current
risk
adjustment
gains
from
chart
review
programs
due
to
the
high
percentage
of
unvalidated
diagnosis
data
in
claims.
! Implica2ons
for
plans
• Stra8fy
HCCs
by
dele8on
risk
and
take
dele8on
risk
into
considera8on
when
selec8ng
chart
review
targets.
• Develop
coding
systems
and
processes
that
allow
DOS-­‐specific
execu8on
of
chart
reviews.
• Track
provider
level
non-­‐valida8on
rates
and
incorporate
into
future
chart
targe8ng
decisions.
9

10. DELETION
RISK
BY
STRATA
ANALYSIS
–
Sample
10
! Shows
#
of
HCC
diagnosis
/
DOS
combina2ons
in
claims
! Shows
#
of
unique
HCCs
in
claims
! Shows
#
reviewed
in
charts
! Shows
#
not
validated
! Detailed
results
by
risk
strata
! Calculates
weighted
average
for
overall
valida2on
rate

11. EDS
VS
RAPS
! RAPS
will
survive
yet
another
year
as
CMS
proposes
to
use
both
EDS
and
RAPS
data
for
PY2015
risk
adjustment
• Essen8al
that
plans
use
this
coming
year
to
exhaus8vely
compare
and
test
their
EDS
risk
score
results
vs.
their
RAPS
risk
score
results.
• Any
discrepancies
need
to
be
hunted
down
and
fixed
to
ensure
that
final
switchover
to
EDS
occurs
without
a
hiccup
to
plan
risk
scores.
• EDS
rejec8on
volumes
can
quickly
overwhelm
available
resources
for
resolving.
Make
sure
analy8cs
are
in
place
to
quickly
iden8fy
those
errors
that
affect
acceptance
of
any
new/incremental
HCCs
so
that
they
receive
highest
priority
for
resolu8on.
• Plans
need
to
determine
policy
and
processes
for
submission
of
linked
vs.
unlinked
chart
reviews
11

12. WHAT
CHANGES
COULD
HAPPEN
IN
FINAL
NOTICE?
! Always
some
chance
that
one
or
more
items
may
be
revised
• CMS
could
poten8ally
announce
revised
trend
calcula8ons
that
bring
the
growth
rate
somewhat
closer
to
0%.
• Last
year,
CMS
decided
to
defer
changes
related
to
enrollee
risk
assessments.
Could
theore8cally
(though
unlikely)
do
so
again
this
year.
! But
plan
specific
factors
will
drive
substan2al
differences
in
impact
• Star
ra8ngs
(0-­‐3.5%
depending
on
plan)
• Enrollee
risk
assessments
(0-­‐3%
depending
on
plan)
• Distribu8on
of
membership
in
2
vs
4
vs
6
year
transi8on
coun8es
(0-­‐3.3%
depending
on
plan)
Important
that
each
MA
plan
develop
a
clear
understanding
of
their
specific
circumstances
and
adjust
strategy
accordingly.
12

13. OVERALL
STRATEGIC
IMPLICATIONS
FOR
MA
PLANS
! Achieving
4
Star
Ra2ng
is
a
must
• Qualify
plan
for
a
5%
increase
in
reimbursement
benchmark
• Qualify
for
65-­‐70%
rebate
instead
of
50%
rebate
in
bid
process
! Highly
accurate
risk
adjustment
is
essen2al
• Plans
can
no
longer
afford
to
leave
the
typical
20-­‐30%
of
retrospec8ve
risk
adjustment
reimbursement
on
the
table
(~1.0-­‐1.8%+
of
reimbursement)
• Restructured
deployment
of
prospec8ve
risk
adjustment
ini8a8ves
can
s8ll
deliver
addi8onal
risk
adjustment
reimbursement
opportuni8es
! Integra2on
of
Risk
Adjustment
and
HEDIS
Programs
will
differen2ate
the
winners
• 4-­‐star
plan
ra8ngs
are
the
new
standard
• Plans
that
successfully
cross-­‐leverage
risk
adjustment
ac8vi8es
to
boost
HEDIS/
Star
scores
and
vice-­‐versa
will
have
a
cri8cal
compe88ve
advantage
13

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