https://www.kaufmanhall.com/insights/blog/gist-weekly-june-28-2024

A health system CEO recently reached out to me with a specific complaint that’s become a hot-button issue for an increasing number of systems: 

“Medicare Advantage (MA) is no longer a good payer for us. When you factor in all the pre-auths and denials, we’re now getting four points less yield from our MA patients than from our traditional Medicare patients. 

But our market is swinging hard toward MA, and I know the program’s not going anywhere…so how can we rethink our MA business model to make it more profitable?

After more than a decade of rapid growth, MA plans are now running into headwinds that are reducing their margins and creating an even more contentious negotiating environment with providers. However, these heightened competitive pressures could also be seen as an opportunity for provider organizations. 

Rather than treating all of their MA payers as a monolith, a health system or other larger provider organization should be reassessing its MA book of business with the goal of identifying priority MA payers with which to pursue deeper, mutually beneficial partnerships. 

The first step here is usually for a system to undergo a holistic tiering or ranking exercise for all of their MA payers according to factors like market share, contribution margin, value-based incentives, overall relationship dynamic, and projected market growth.

This exercise will identify not only which MA payers may not be high-priority, long-term partners, but also which MA payers are suitable for developing deeper relationships with (e.g., simplifying administrative burden, better rewards for value-based care, creating a joint insurance product). 

If your system is facing challenges with MA and is interested in rethinking its MA portfolio strategy, please don’t hesitate to reach out.