Four Reasons Your Medicare Advantage Payer Contracts are Holding You Back

June 14, 2018 Ken Wood

As a provider, there are three avenues to accept risk for Medicare beneficiaries:

  • Participating in value-based Medicare Advantage (MA) payer contracts with major health plans;
  • Participating in Medicare ACO programs which focus on FFS Medicare beneficiaries; or
  • Developing and owning a provider-owned MA health plan.

In our experience the vast majority of provider organizations pursue MA payer contracts given the relative ease and low cost of entering these arrangements. Some provider organizations (mostly health systems) have developed their own MA health plans. However, over the past five to seven years these plans have had a very mixed track record with many failing to grow to adequate scale and/or become financially strong.

Our work across the country with leading provider organizations has led us to believe that traditional MA contracts are not optimized to help high-performing provider organizations succeed in managing MA risk. 

Here are four reasons we believe traditional MA contracts are holding high-performing provider organizations back:

  1. Top-performing providers end up subsidizing lower-performing providers in broad MA networks

    Most legacy MA plans use broad networks of providers in attempt to address consumer appeal. When a high-performing provider organization participates in these broad networks, their superior clinical and financial results cannot be fully rewarded. This frequently takes the form of a legacy MA health plan being unwilling to move to full-risk arrangements or “rebasing” the clinical savings target, resulting in the high-performing provider organization not being fully compensated for their real contribution.

  2. Risk transfer schedule does not reflect providers’ ability and readiness to take on full risk

    Particularly among national payers, deal terms tend to be standardized in a given geography to simplify the payer’s administrative environment and to support their broad networks. While the payers are acutely aware of their high-performing providers groups, few are willing to offer full-risk arrangements, citing a lack of provider readiness, which is often unfounded. In our experience developing business plans for over 100 organizations, providers must seek full-risk Medicare contacts in order to generate a sustainable financial return under Medicare. In the end, provider organizations can only succeed if the have the tools and support to effectively delivery quality care and great access while economically benefiting when unnecessary care is avoided.

  3. Payers impose various clinical programs (from population health to 24/7 primary care access, etc.) across all providers in a network rather than investing to help a provider develop a more sophisticated, fully-integrated capability

    Payers have not taken a collaborative approach to building provider capabilities for primary care access, disease management and to manage population health. In fact most declare these overlay programs as “consumer innovations” when in reality they simply confuse the consumer, disenfranchise front line physicians and fragment the medical record for these patients.

  4. Experimentation with “Joint Venture” (“JV”) narrow networks is undermined by other payer MA products in the same market

    Even when traditional MA payers have been willing to develop narrower MA “JV” network offerings, they typically undermine the success of these programs by marketing them alongside a broad network product with similar benefits and costs. Thus, a provider co-branded “JV” products often compete against PPO offerings from the same payer with only a marginal benefit and price differentials. This can result in sluggish growth in membership for the provider-branded product which limits financial returns and ability to manage risk across a meaningfully sized population.

Given these challenges, providers that want to take the next step in their MA risk journey are left with the option of launching their own plan (and having the ~$30M in capital to do so) or seeking out a new approach to MA partnership that addresses these shortcomings.


True Health – Evolent’s Innovative MA Partnership Program

To support providers who want to move up the MA risk continuum and do not have the capital to launch their own plan, Evolent has established our True Health MA partnership program which maximizes returns to our provider partners and builds upon their unique strengths and market knowledge. Relative to traditional payer partnerships, this model offers the following benefits:

  • Long-term partnership model to ensure strategic alignment.
  • Superior economic terms which reward our provider partners for delivering great results (access, quality, STAR ratings) with maximum efficiency.
  • Investment of administrative health plan revenue into physician-patient engagement programs to drive long term patient loyalty.
  • Achievable MLR targets that help your organization achieve early successes, lean in and grow.
  • Opportunity to move to full risk at pace that reflects provider readiness.
  • Exclusivity in service area to maximize membership.
  • Collaborative approach to build clinical programs, primary care access, disease management and population health infrastructure that can be applied across risk populations.

With True Health, we are convinced that high-performing provider organizations can thrive, both clinically and financially, as their commercial customers age into Medicare over the next decade. Ready to learn more? Contact us.

About the Author

Ken Wood

Ken Wood serves as the Chief Executive Officer of True Health. Prior to joining Evolent, Ken served in numerous leadership roles in health care where he focused on the transformation of both health plans and delivery systems. He spent a total of 13 years at Blue Shield of California (serving both as Chief Marketing Officer and Chief Operating Officer) and drove the companies meteoric growth from 1.4 million members to over 3 million members. Over 90% of this growth was organic driven by the development of superior products, high performance provider networks, and deep consumer engagement. Ken’s passion for simplicity, transparency and provider-centered care helped Blue Shield of California simultaneously grow and achieve sustained profitability with the plans RBC score growing from 450 to over 700 during his tenure. In addition to leadership roles at Travelers, Lincoln National, FHP/TakeCare and BCBS of Massachusetts, Ken served as President and CEO of North Hawaii Community Hospital (NHCH), a 39 bed hospital on the Big Island of Hawaii with 22 employed physicians and 4 nurse midwives. During his tenure, he led the development of a Native Hawaiian team-based primary care program that uniquely served one of the largest populations of Native Hawaiians in the state. NHCH ultimately merged with the Queens Health System. Ken also helped launch Covered California, the most successful ACA exchange in the country, where he drove the development of standard products which revolutionized the consumer purchasing experience. Ken is a graduate of Wesleyan University in Middletown, CT and resides in the San Francisco Bay Area with his family.

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