Graduating to risk can be a tricky decision. One of the primary reasons healthcare organizations resist jumping into the risk pool is a perceived lack of readiness. One common question I often get is, “Can we make the move if we are not fully optimized?” I often answer with the adage “don’t let perfect get in the way of good.” There is a misconception among healthcare leaders that they must wait until their organization is more efficient and able to provide better care management programs before they take on more risk. But, this is not necessarily true, especially if they are considering a move from Medicare fee-for-service to a Medicare Advantage risk-based contract.

Your organization’s fee-for-service experience, its ability to change and drive future value under Medicare Advantage, as well as local market conditions should be your primary considerations in deciding to use Medicare Advantage as a springboard into risk.

Not all organizations are ready for risk. But for providers who are not being reimbursed to drive better outcomes in a market where the majority of providers are not at risk, now is the time to consider moving to Medicare Advantage risk-based contracting. Medicare Advantage is growing at 7 percent a year, but there are still a number of markets that do not have penetration. In fact if you are considering a move, its important to act now as the window to file for a network expansion with Medicare Advantage is just around the corner.

Practical first steps

The first critical move as you transition to Medicare Advantage is determining your organization’s readiness for managing the care of a senior population. Start by analyzing your fee-for-service claims data, as well as costs, performance data, governance structure and organizational and cultural readiness. You will want to make practical changes to improve on key performance indicators, including inpatient costs vs. the professional costs, length of stay (LOS), admission rates, readmission rates and ER admissions.

For example, if you have a high LOS, do you have the resources to put in a concurrent review program and decrease it? ER visits are another important metric to address. There is a strong connection between people presenting in the ER and being admitted to the hospital. Determine how many ER visits were avoidable under fee-for-service and what strategies you can implement to lower them. High-performing organizations often have intensivist programs in which physicians evaluate seniors in the ER and move them to appropriate care settings. Also, consider creating additional care access points, including urgent care and primary care to alleviate ER usage.

Making the organizational and cultural shift to risk

Your organization’s governance structure and culture also play important roles in successfully managing a Medicare Advantage population. For leaders more familiar with Medicare ACOs, there can be a disconnect on what risk entails under Medicare Advantage. Medicare Advantage requires a more process-based approach vs. one that is analytical when managing an ACO. Additionally, in an ACO, leaders are used to looking for patients who have gaps in care, or quality scores that stratify them as high-risk. Under Medicare Advantage, there is a deeper focus on organizational readiness. You must have the right processes in place to evaluate and move patients efficiently through different care environments in a timely manner.

There has to be a regular cadence in governance in which the right people come together to look at what is happening, daily, weekly and monthly. You must know at all times how the patient is being supported through every step of their care journey. Transparency and accountability can be a challenge for provider organizations.

As you measure physician performance and outcomes data, you must determine how you will address the outliers. It is much easier to set the governance structure before you have issues. Additionally, payers will be paying close attention to your ability to manage costs, meet access requirements, drive quality and provide a strong patient experience.

Getting past barriers

Moving into Medicare Advantage can be a smart move for organizations that are at a crossroads and looking for an easy entry into risk. Keep in mind that Medicare Advantage comes with heightened regulatory requirements, including an increase in measurement, documentation and communication. But this is not something to fear. Rather, success depends on your ability to be creative in monitoring and managing key levers such as utilization management, concurrent review, length of stay and appropriateness of care. It’s important not to rush your decision. Take a step back and bring together the right systems and support to avoid getting into regulatory hot water and added costs. 

Risk-based contracting vs. direct licensing

When considering Medicare Advantage, some organizations choose to bypass risk-based contracting and launch a provider-sponsored plan, which is a much riskier endeavor.

Taking risk from payers in the market will likely provide you an equal amount of upside risk but also potentially more downside risk. The vast majority of provider-sponsored health plans haven’t been successful. You will need to have a keen understanding of market dynamics, hold risk-based capital and have enough market share to make it financially viable. However, moving to a risk based contract with existing Medicare Advantage plans and membership in your market provides a way to quickly transition to risk. The right contracting strategy can lead to financial benefits and a stronger relationship with payers.