Consumer Financial Protection Bureau proposes ban on medical bills from credit reports

Posted on by • Posted in Consumer Financial Protection Bureau (CFPB), Credit Ratings, Credit Report, Fair and Accurate Credit Transactions Act, FICO Score, Medical Debt, No Surprises Act • Leave a comment
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The proposal would attempt to stop credit reporting companies from sharing medical debts with lenders.

The Consumer Financial Protection Bureau (CFPB) has proposed a rule intended to remove medical bills from most credit reports, increase privacy protections, help to increase credit scores and loan approvals and prevent debt collectors from using the credit reporting system to coerce people to pay.

The proposal would attempt to stop credit reporting companies from sharing medical debts with lenders and prohibit lenders from making lending decisions based on medical information. 

CFPB framed the proposed rule as part of its efforts to address the burden of medical debt and what it called manipulative credit reporting practices.

WHAT’S THE IMPACT?

In 2003, Congress restricted lenders from obtaining or using medical information, including information about debts, through the Fair and Accurate Credit Transactions Act. But federal agencies then issued a special regulatory exception to allow creditors to use medical debts in their credit decisions.

The CFPB is proposing to close the regulatory loophole it said has kept vast amounts of medical debt information in the credit reporting system. The proposed rule is intended to ensure that medical information does not unjustly damage credit scores, and would help keep debt collectors from coercing payments for inaccurate or false medical bills.

Internal research from CFPB shows that a medical bill on a person’s credit report is not a good predictor of whether they will repay a loan. In fact, the analysis shows that medical debts penalize consumers by making underwriting decisions less accurate and leading to thousands of denied applications on mortgages that consumers would repay.

Since these are loans people will repay, the CFPB expects lenders will also benefit from improved underwriting and increased volume of safe loan approvals. In terms of mortgages, the CFPB expects the proposed rule would lead to the approval of approximately 22,000 additional, safe mortgages every year.

In December 2014, the CFPB released a report  showing that medical debts provide less predictive value to lenders than other debts on credit reports. Then in March 2022, it released a report estimating that medical bills made up $88 billion of reported debts on credit reports. In that report, the CFPB announced that it would assess whether credit reports should include data on unpaid medical bills.

Since the March 2022 report, the three nationwide credit reporting conglomerates – Equifax, Experian and TransUnion – announced they would take many of those bills off credit reports, and FICO and VantageScore, the two major credit scoring companies, have decreased the degree to which medical bills impact a consumer’s score.

Despite these voluntary industry changes, 15 million Americans still have $49 billion in outstanding medical bills in collections appearing in the credit reporting system.

The complex nature of medical billing, insurance coverage and reimbursement, and collections means that medical debts that continue to be reported are often inaccurate or inflated, CFPB said.

Additionally, the changes by FICO and VantageScore have not eliminated the credit score difference between people with and without medical debt on their credit reports. CFPB expects that Americans with medical debt on their credit reports will see their credit scores rise by 20 points, on average, if the proposed rule is finalized.

Specifically, the proposed rule would remove the exception that broadly permits lenders to obtain and use information about medical debt to make credit eligibility determinations. Lenders would continue to be able to consider medical information related to disability income and similar benefits, as well as medical information relevant to the purpose of the loan, so long as certain conditions are met.

The rule would also prohibit credit reporting companies from including medical debt on credit reports sent to creditors when creditors are prohibited from considering it. Additionally, it would prohibit lenders from taking medical devices as collateral for a loan, and bans lenders from repossessing medical devices, like wheelchairs or prosthetic limbs, if people are unable to repay the loan.

THE LARGER TREND

The CFPB began its rulemaking in September 2023 with the goals of ending coercive debt collection practices and limiting the role of medical debt in the credit-reporting system. 

The CFPB also published in 2022 a report describing the effects of medical debt, along with a bulletin on the No Surprises Act to remind credit reporting companies and debt collectors of their legal responsibilities under that legislation.

Supreme Court to hear challenge of DSH payment calculations

Posted on by • Posted in 2002 Becerra v Empire Health Foundation, American Hospital Association (AHA), Dept of Health and Human Services (HHS), Lawsuit, Medicare Disproportionate Share Reimbursement, Supreme Court • Leave a comment
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The current HHS formula costs hospitals more than a billion dollars each year, says AHA.

The Supreme Court has agreed to review a case challenging how the Department of Health and Human Services calculates Disproportionate Share Hospital payments. 

In February, the American Hospital Association and five other hospital organizations had urged the court to review the case. The current formula costs DHS hospitals more than a billion dollars each year, according to the AHA.

“The AHA is pleased that the Supreme Court agreed to consider this case,” said Chad Golder, AHA general counsel and secretary, by statement. “As we explained in our amicus brief urging the Court to grant certiorari, it is critical to hospitals and health systems that HHS interpret the DSH fraction consistently across the statute. The agency’s longstanding failure to do so has cost hospitals more than a billion dollars each year, directly harming the hospitals that serve America’s most vulnerable patients. We look forward to the Supreme Court rectifying this legal error next term.” 

WHY THIS MATTERS

This case, and one heard by SCOTUS in 2002 called Becerra v. Empire Health Foundation, can be viewed as being two sides of the same coin. Both deal with a different portion of the DSH fraction that determines payment. The Empire Health case dealt with the Medicare portion. This latest case is about the Supplemental Security Income portion. 

The AHA and other organizations have argued that HHS incorrectly adopted the view that a patient is entitled to Supplemental Security Income benefits only if the patient actually received cash SSI payments during a hospital stay. This interpretation is inconsistent with the court’s reasoning in Becerra v. Empire Health Foundation, the AHA said. 

That 2022 decision said that patients are entitled to Medicare Part A benefits for purposes of the DSH formula if they qualify for the program, even if Medicare is not paying for their hospital stay. 

“This case concerns a question that is critical to calculating the Medicare DSH fraction: When are patients ‘entitled to’ SSI benefits and so counted in the numerator? Is it when they are eligible for SSI benefits, or when they are actually receiving cash SSI benefits,” the AHA and other organizations wrote in their brief to the court. 

THE LARGER TREND

In February, the American Hospital Association and five other national hospital associations representing hospitals urged the Court to review the case challenging how HHS applies Congress’ formula for calculating Disproportionate Share Hospital payments.. 

“The correct interpretation of the DSH formula is vitally important to America’s hospitals,” the brief said. “Although HHS has refused to share the data that would allow hospitals to accurately count the SSI-eligible patients whom the agency’s approach excludes, the available estimates suggest that hospitals will lose more than a billion dollars each year in DSH funds. What’s more, a hospital’s eligibility for DSH payments affects its entitlement to other federal benefits designed to help hospitals ‘provide a wide range of medical services’ to vulnerable populations. HHS’s error thus has far-reaching implications for hospitals, patients, and the American healthcare system.” 

Becerra v. Empire Health Foundation was a United States Supreme Court case that in 2022 clarified calculations for the Medicare fraction — one of two fractions the Medicare program uses to adjust the rates paid to hospitals that serve a higher-than-usual percentage of low-income patients, according to SCOTUSblog. Those individuals “entitled to [Medicare Part A] benefits” are all those qualifying for the program, regardless of whether they receive Medicare payments for part or all of a hospital stay, the court ruled.

In Becerra v. Empire Health Foundation, the court ruled 5-4 that HHS had properly interpreted the underlying statute and reversed and remanded the decision of the United States Court of Appeals for the Ninth Circuit.

Is Corporatization Killing Primary Care?

Posted on by • Posted in Corporatization of Primary Care, High Value Care, Physician Employment, Physician Incentives, Physician Independence, Primary Care, Primary Care Delivery Model, Quality of Care • Leave a comment

One emerging model brings hope for independent primary care in a rapidly transforming healthcare landscape.

More than 48% of all U.S. physician practices and nearly 70% of physicians are now owned or employed by either hospitals or corporate entities, according to the latest research.

Add to this shift the recent news of Amazon’s new One Medical benefit, billed as delivering access to high-quality primary care and 24/7 on-demand virtual care to the company’s more than 160 million Prime subscribers, and it’s clear that the corporatization of primary care is showing no signs of slowing.

As two primary care physicians committed to providing the best possible care for our patients, we have a front-row seat to the threat that corporatization poses to the very essence of independent primary care. We also have hope.

One emerging model is successfully embracing the tenets of independent primary care, shining a light on the path to better patient health in a rapidly transforming healthcare landscape.

Defining high-value primary care  

High-value primary care relies on maintaining its independence. Independent primary care physicians (PCPs) excel at providing personalized care by fostering meaningful relationships with patients, ensuring that medical decisions are tailored to individual needs, and focusing on prevention to avoid health catastrophes and improve overall health. They often integrate with community leaders, influence local health policy, and mobilize community resources to help patients facing socioeconomic challenges.

In the independent setting, patients of these PCPs benefit from a continuous relationship with the same PCP over time, leading to better health outcomes born of a deeper understanding of their unique healthcare needs.

Notably, these PCPs (and their patients) are less likely to be influenced by the economic incentives that perversely drive patients back to hospitals and health systems in search of expensive but preventable or unnecessary care.

In fact, primary care owned or employed by a hospital is often seen as a loss leader for downstream revenue generators. Hospital-based PCPs are also more likely than their independent peers to experience a loss of autonomy over patient care decisions.

A recent survey from the Physicians Advocacy Institute found that 60% of physicians believe that the trend away from private practice ownership has reduced care quality, largely due to a lack of clinical autonomy and an increased focus on cost savings by facility leadership. These collective factors are obstacles to the sacred physician-patient relationship in service of a hospital-driven agenda and slow-moving bureaucracy.

Collaboration over corporatization

Maintaining independence in primary care has become increasingly difficult due to powerful industry headwinds that often lead previously independent practice owners to sell their businesses in defeat. Fortunately, PCPs have more options beyond joining hospitals, health systems, or emerging corporatized healthcare, where financial and operational pressures can form barriers to better care.

Collaborative primary care networks, also known as “enablers,” are entities that combine the strengths of independent primary care with the bargaining power and economies of scale associated with larger corporations. These network groups offer a viable way for practices to maintain independence by working together under a federated body to pool resources and improve infrastructure, thereby reducing administrative burden on the practice and bringing in new technologies and care coordination capabilities. These enablers also help independent practices negotiate collectively to secure better payer contracts, which ensure sustainable revenue streams without sacrificing their patient-centered approach. 

Collaborative primary care networks are effective because they embrace the power of consolidation crucial to the success of corporatized care models while preserving practice autonomy, divorced from upstream economic incentives, which place patient care at risk. Such groups are financially rewarded for keeping patients healthy and out of the hospital, which is ultimately what independent primary care does best. 

Incentivizing value alignment 

Only time will reveal Amazon’s impact on care, but the rise of corporate primary care doesn’t have to spell the death of patient-centered care. What we do know is that primary care innovations deliver true value only when the right incentives are in place, as demonstrated by independent primary care. 

When corporatized primary care organizations function independent of misaligned financial incentives, success can instead be defined through health and well-being. When aligned with the values of independent primary care, corporatized primary care can invest in robust multidisciplinary teams, focus on preventive care, and use technology to improve efficiency in a new model of care delivery that combines the best of what corporate and independent primary care each have to offer.

When independence is maintained, high-quality, personalized primary care will retain a meaningful place within the U.S. healthcare system and continue to help patients live healthier, longer lives. And that gives these two veteran physicians more hope for a brighter future.

Why Walgreens’ US Health President Is ‘Bullish’ on the Role of Retail in Healthcare

Posted on by • Posted in Consumer Care Consumption Patterns, Consumer Engagement, Consumer Experience, Consumer Marketing, Consumer Preferences, Consumerism, Convenience, Convenient Access, Patient Experience, Patient Satisfaction, Primary Care, Primary Care Delivery Model, Primary Care Strategy, Retail Clinic, Retail Healthcare, Retail Pharmacy, Value Proposition, Walgreens • Leave a comment

During a fireside chat at AHIP 2024, Mary Langowski, executive vice president and president of U.S. healthcare at Walgreens Boots Alliance, said she sees a bright future for retail in healthcare.

Retailers are facing several headwinds in healthcare in 2024. Walmart and Dollar General both recently ended healthcare endeavors, and CVS Health is reportedly looking for a private equity partner for Oak Street Health (which it acquired in 2023). VillageMD, which is backed by Walgreens, is shuttering numerous clinics.

Still, Mary Langowski, executive vice president and president of U.S. healthcare at Walgreens Boots Alliance, sees a strong future for retailers in healthcare.

“I happen to be very bullish on the role of retail in healthcare and frankly, having a very central role in healthcare,” she said. “And part of that is because over 80% of people want health and wellness offerings in a pharmacy and in a retail setting. Consumers want the ease, they want the convenience of it. And those are important things to keep in mind, that demand is there.”

Langowski, who joined Walgreens in March, made these comments during a Tuesday fireside chat at the AHIP 2024 conference held in Las Vegas. She added that what the industry is seeing is not an “evolution” of whether retailers will exist in healthcare, but a shift around what the “right model is going to be.” 

“We really think that if you take our core assets, … we can be a really good partner to not just one provider entity but many, many provider entities and payers across the United States,” Langowski said. “We’re everywhere. We’re in the community, we’re digitally inclined. I think a strategy for us is less capital-intensive, capital-light and very scaled models.”

She also told the health plans in the audience that she wants to collaborate more. She said she sees retail as a “really critical entry point” in the healthcare system.

“We have people using their pharmacists two times more than any doctor and Medicare patients see us eight times more than their physician,” Langowski declared. “We’re not doing enough together to take advantage of those moments where we can engage people and we can create interventions way earlier in their healthcare disease state.”

Langowski noted that insurers are under a lot of pressure, including rising costs, regulatory issues and challenges contracting with providers. However, Walgreens’ assets are “highly complementary” to insurers’ assets, she said. 

“We aren’t going to do what you do. You don’t do what we do, but we work really well together,” she said. “And what it will take is being clever about the commercial and economic model and I believe there are multiple ways to create win-win scenarios where everybody does well. Most importantly, patients get healthier and they have a much better and much more seamless experience with the system.”

The Healthcare Economy: Three Key Takeaways that Frame Public and Private Sector Response

Posted on by • Posted in American Hospital Association (AHA), Congressional Budget Office (CBO), Consumer Price Index (CPI), Cost Management, Cost Reduction, Forecast, Health Policy, Health System, Healthcare Industry, Healthcare Market, Healthcare Price Index, Healthcare Reform, High Cost Therapies, High Deductible Health Plans, High Drug Prices, High Premiums, Highly Specialized Drugs, Hospital, Hospital Industry, Market Outlook, Market Trends, Out of Network, Out of Pocket Expenses, Prescription Drugs, Value-Based Contracting, Value-Based Healthcare • Leave a comment
The Healthcare Economy: Three Key Takeaways that Frame Public and Private Sector Response

Last week, 2 important economic reports were released that provide a retrospective and prospective assessment of the U.S. health economy:

The CBO National Health Expenditure Forecast to 2032: 

“Health care spending growth is expected to outpace that of the gross domestic product (GDP) during the coming decade, resulting in a health share of GDP that reaches 19.7% by 2032 (up from 17.3% in 2022). National health expenditures are projected to have grown 7.5% in 2023, when the COVID-19 public health emergency ended. This reflects broad increases in the use of health care, which is associated with an estimated 93.1% of the population being insured that year… During 2027–32, personal health care price inflation and growth in the use of health care services and goods contribute to projected health spending that grows at a faster rate than the rest of the economy.”

The Congressional Budget Office forecast that from 2024 to 2032:

  • National Health Expenditures will increase 52.6%: $5.048 trillion (17.6% of GDP) to $7,705 trillion (19.7% of GDP) based on average annual growth of: +5.2% in 2024 increasing to +5.6% in 2032
  • NHE/Capita will increase 45.6%: from $15,054 in 2024 to $21,927 in 2032
  • Physician services spending will increase 51.2%: from $1006.5 trillion (19.9% of NHE) to $1522.1 trillion (19.7% of total NHE)
  • Hospital spending will increase 51.6%: from $1559.6 trillion (30.9% of total NHE) in 2024 to $2366.3 trillion (30.7% of total NHE) in 2032.
  • Prescription drug spending will increase 57.1%: from 463.6 billion (9.2% of total NHE) to 728.5 billion (9.4% of total NHE)
  • The net cost of insurance will increase 62.9%: from 328.2 billion (6.5% of total NHE) to 534.7 billion (6.9% of total NHE).
  • The U.S. Population will increase 4.9%: from 334.9 million in 2024 to 351.4 million in 2032.

The Bureau of Labor Statistics CPI Report for May 2024 and Last 12 Months (May 2023-May2024): 

“The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3% in April… Over the last 12 months, the all-items index increased 3.3% before seasonal adjustment. More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4% for the fourth consecutive month. The index for food increased 0.1% in May. … The index for all items less food and energy rose 0.2% in May, after rising 0.3 % the preceding month… The all-items index rose 3.3% for the 12 months ending May, a smaller increase than the 3.4% increase for the 12 months ending April. The all items less food and energy index rose 3.4 % over the last 12 months. The energy index increased 3.7%for the 12 months ending May. The food index increased 2.1%over the last year.

Medical care services, which represents 6.5% of the overall CPI, increased 3.1%–lower than the overall CPI. Key elements included in this category reflect wide variance: hospital and OTC prices exceeded the overall CPI while insurance, prescription drugs and physician services were lower.

  • Physicians’ services CPI (1.8% of total impact): LTM: +1.4%
  • Hospital services CPI (1.0% of total impact): LTM: +7.3%
  • Prescription drugs (.9% of total impact) LTM +2.4%
  • Over the Counter Products (.4% of total impact) LTM 5.9%
  • Health insurance (.6% of total) LTM -7.7%

Other categories of greater impact on the overall CPI than medical services are Shelter (36.1%), Commodities (18.6%), Food (13.4%), Energy (7.0%) and Transportation (6.5%).

Three key takeaways from these reports:

  • The health economy is big and getting bigger. But it’s less obvious to consumers in the prices they experience than to employers, state and federal government who fund the majority of its spending. Notably, OTC products are an exception: they’re a direct OOP expense for most consumers. To consumers, especially renters and young adults hoping to purchase homes, the escalating costs of housing have considerably more impact than health prices today but directly impact on their ability to afford coverage and services. Per Redfin, mortgage rates will hover at 6-7% through next year and rents will increase 10% or more.
  • Proportionate to National Health Expenditure growth, spending for hospitals and physician services will remain at current levels while spending for prescription drugs and health insurance will increase. That’s certain to increase attention to price controls and heighten tension between insurers and providers.
  • There’s scant evidence the value agenda aka value-based purchases, alternative payment models et al has lowered spending nor considered significant in forecasts.

The health economy is expanding above the overall rates of population growth, overall inflation and the U.S. economy. GDP.  Its long-term sustainability is in question unless monetary policies enable other industries to grow proportionately and/or taxpayers agree to pay more for its services. These data confirm its unit costs and prices are problematic.

As Campaign 2024 heats up with the economy as its key issue, promises to contain health spending, impose price controls, limit consolidation and increase competition will be prominent.

Public sector actions

will likely feature state initiatives to lower cost and spend taxpayer money more effectively.

Private sector actions

will center on employer and insurer initiatives to increase out of pocket payments for enrollees and reduce their choices of providers.

Thus, these reports paint a cautionary picture for the health economy going forward. Each sector will feel cost-containment pressure and each will claim it is responding appropriately. Some actually will.

PS: The issue of tax exemptions for not-for-profit hospitals reared itself again last week.

The Committee for a Responsible Federal Budget—a conservative leaning think tank—issued a report arguing the exemption needs to be ended or cut.  In response,

the American Hospital Association issued a testy reply claiming the report’s math misleading and motivation ill-conceived.

This issue is not going away: it requires objective analysis, fresh thinking and new voices.  For a recap, see the Hospital Section below.

Medicare Physician Payment Not Keeping Up

Posted on by • Posted in Consumer Price Index (CPI), Inflation, Medicare Economic Index (MEI), Medicare Physician Fee Schedule (MPFS), Medicare Reimbursement, Operating Margin, Physician, Physician Compensation, Physician Practice Management, Physician Practice Margins • Leave a comment

https://www.kaufmanhall.com/insights/infographic/medicare-physician-payment-not-keeping

Following the US Senate Finance Committee’s recent white paper on Medicare physician payment reform, the graphic above shows how Medicare payments to physicians have not kept pace with inflation. 

The Medicare physician fee schedule conversion factor, which is used to assign dollar amounts to relative value units, decreased by eight percent between 2000 and 2024. 

Over the same period, the Medicare Economic Index (MEI), which measures practice cost inflation, and Consumer Price Index rose 57 percent and 83 percent, respectively. Reductions to the conversion factor contributed to a 20 percent decline in Medicare physician pay relative to practice cost inflation from 2000 to 2021. 

Physician practice margins in general have also worsened since COVID, not just due to Medicare payments. 

Although net revenue per physician at system-affiliated clinics increased about 10 percent from 2020 to 2023,total expenses per physician rose about 27 percent, driven by a per physician clinical staffing expense increase of nearly the same amount. 

Both the Senate Finance Committee’s white paper and a recently introduced House bill suggest tying the Medicare physician fee schedule conversion factor updates to the MEI, either partially or fully, but immediate legislative action in an election year appears unlikely. 

In the meantime, physician practices continue to face a difficult operating environment with costs rising faster than revenues.

Preparing for Medicare Advantage’s Make-or-Break Moment

Posted on by • Posted in Health Insurance Industry, Health System, Hospital, Hospital Industry, Medicare Advantage, Medicare Advantage Denials, Out of Network, Value-Based Contracting, Value-Based Healthcare • Leave a comment

https://www.kaufmanhall.com/insights/article/preparing-medicare-advantages-make-or-break-moment

In recent years, the Medicare Advantage (MA) program enjoyed both rapid membership growth and positive attention from healthcare organizations and advocates. As of the beginning of 2024, 33.4 million Americans were enrolled in MA, up 7% from 2023.

More than half of all Medicare-eligible individuals are now enrolled in MA.

Interest and growth in MA has been buoyed by a number of factors: a growing eligible population as Baby Boomers continue to age into Medicare eligibility; affordable benefit packages with low or zero monthly premiums; regulatory changes providing for more flexibility in plan and member design; consumer-centric programs and care models tailored to the needs of beneficiaries; increased marketing and sales efforts through direct mailings, telemarketing, and online advertising.

The program has also delivered meaningful value to members, who are more likely than traditional Medicare beneficiaries to have an annual income less than $40,000. In addition, the average monthly premium for Medicare beneficiaries enrolled in an MA plan has dropped by almost one-third in the last four years, reaching $18 per month in 2023.

Ideally, success in MA can take the form of a virtuous cycle: an improved margin on MA for a plan enables reinvestment in related products to grow membership and better manage health outcomes, which leads to further reinvestment (Figure 1). Sustained success is contingent on meaningful collaboration between payers and providers.

FIGURE 1: The Virtuous Cycle of MA Success

MA Hits Headwinds

However, after several high-growth years, payers and providers are currently confronting multiple MA-related challenges. Many providers have recently posted losses as their contractual yields decrease and authorizations for care have become more restrictive. The bar for risk adjustment and Star Ratings is also rising. Only 6% of plans received a 5-star rating from the Center for Medicare & Medicaid Services (CMS) for 2024, down from 22% in 2023. CMS also recently confirmed plans for rate cuts in 2025, with critics arguing that benefits for beneficiaries may become more limited. Providers are also reeling from related bureaucratic headaches.

As a result of these concerns, some providers are going out of network from MA plans, while some have asked CMS to investigate administrative denials. Nineteen percent of health system chief financial officers stopped accepting one or more MA plans in 2023—and 61% either plan to do so in 2024 or are considering doing so—according to a recent survey by the Healthcare Financial Management Association and Eliciting Insights.

Current MA members also have expressed concerns with the program’s trajectory. While roughly two-thirds of MA and traditional Medicare beneficiaries recently surveyed by the Commonwealth Fund said their coverage has met their expectations, MA members were more likely to report delays in care while awaiting prior approval (22% vs. 13%) or difficulty affording care due to copayments or deductibles (12% vs. 7%).

Some industry experts are warning senior citizens about the costs associated with switching back to traditional Medicare after enrolling in MA plans. Their concerns are creating political and regulatory scrutiny.

Collaborating for Value

Despite current challenges, many providers and health plans believe they need to continue to participate in and/or prioritize MA, given the program’s scale and overall benefits to their organizations and the communities they serve.

For instance, the success of MA risk contracts predicated on collaborating around delivering healthcare value suggests a possible path forward.

According to a JAMA study of more than 300,000 Medicare Advantage beneficiaries, members in value-based care MA arrangements with risk for both payers and providers had lower rates of inpatient admission, emergency department visits, and readmissions. In addition, CMS’s robust risk scoring model ensures that providers are paid fairly for the true cost of providing care to the populations they serve.

Percent of premium contracts, where payers delegate a share of the premium to providers to manage, are predictable, align payer and provider interests, easy to understand, and increasingly common.

In addition, the high cost of caring for Medicare enrollees makes the population health focus on VBC arrangements economical. Medicare members have the highest utilization of any insurance class, so intensive services like care management, disease management, and care coordination are more likely to have a positive return on investment.

Successful VBC arrangements share several core tenets, grounded in the need for close collaboration between participating parties (Figure 2).

FIGURE 2: Core Tenets of Successful Payer-Provider Value-Based Care Models

However, VBC arrangements are not the only option. Value-centric collaborations can take on a wide range of forms, depending on the amount of risk providers are willing to assume and the partnerships’ risk-related capabilities. The full continuum of value-centric collaborations runs the gamut from shared savings contracts with no downside risk for providers to full vertical integration into a single organization (Figure 3).

FIGURE 3: Understanding the Continuum of Value-Based Care Arrangements

Looking Into the Crystal Ball: Three Future State Scenarios

As the MA market confronts new headwinds after years of growth and favorable attention, we anticipate three possible future state scenarios. These possibilities can be applied to both the outlook nationally, as well as the actions of payers and providers within specific markets.

Scenario 1: A renewal of growth

In this scenario, better sense prevails, and plans and providers collaborate to address the core issues facing the program. A pause/adjustment in the market is followed by a period of renewed growth. From a national standpoint, this scenario is contingent on neutral to favorable regulatory treatment.

Scenario 2: Uneasy stabilization

In this scenario, contention is partially resolved through some degree of collaboration between payers and providers. This scenario is also dependent on neutral to favorable regulatory treatment.

Scenario 3: Implosion

In this scenario, high levels of contention continue, and more providers go out of network. Middle-income Medicare members opt out of MA and go back to traditional Medicare when feasible. This scenario accounts for heightened regulatory pressure on risk adjustment and utilization management practices, which further pressures margins.

Conclusion

Despite MA’s recent, publicly documented challenges, the program now accounts for more than half of all Medicare beneficiaries—a patient population that every healthcare organization must engage in some form or fashion.

As providers and payers decide how to approach the program—and each other—amid uncertainty and contention, the path forward can appear unclear. However, healthcare leaders seeking to emerge from the current environment of MA contention have an opportunity to shape the future of MA and will play a major role determining which of the three scenarios outlined in this article comes to fruition.

Ultimately, organizations must be able to develop a business model that both delivers quality care and manageable per capita costs—and critically, find ways to work through today’s pressing concerns with other MA stakeholders and partners.