What 2007 Holds For Risk Adjustment Reimbursements?

Medicare Advantage (MA) Plans are beginning to plan for all of the anticipated changes in payments and reimbursements and there are many planned in 2007. Here are just a few factors that will determine who wins and loses on the battle for MA plan reimbursements:

• 100% Risk Adjustment – 2007 will be the first year that Medicare Advantage Plans will be reimbursed using 100% of the risk adjustment model since it was introduced in 2000. There will be no reimbursement based on the demographic model in 2007. Take a look at how your reimbursement would have looked last year if there was no demographic payments…nervous? This is the reality in 2007. Those with healthier populations (or appear to be because ICD9 codes are lost or miscoded) stand to lose.
• Expected Increase In National Base Payment Rate – CMS is expected to announce an increase in the national base payment rate for specific service areas in April 2006. Many experts assume a “reasonable” increase would be 5%. This will affect everyone the same way. The most significant variable is how much…wait till April to find out.
• “Budget Neutrality” Factor Going Away – Last year CMS announced that they have accelerated the phase out of the Budget Neutrality Factor over a five year period starting in 2006-2007 reducing the factor by 45%! The adjustment factor is currently 13.05% and would be reduced to approximately 7% in 2007.
• Shorter Final Submission Deadline for 2005 Data –Plans have been allowed approximately 1yr 5 months to make final risk adjusted data submission to CMS. For data with a data of service in 2005, the deadline will be reduced by five months, the final submission due date is 1/15/2007. So much for the 2006 holiday season!

The Winners Will Be:

When taking a look at who will be positioned to best take advantage of the changes in 2007; here is what the winners may look like:

• Plans with Sicker Than Average Populations – Plans with sicker populations stand to actually see a slight increase in their average PM/PM payments from CMS where plans with healthier populations may see a reduction because of the 100% RA payments and the phase out of the budget neutrality factor.
• Plans / MSOs Who Manage And Mine Data – Those that do not have a handle on the quality of data captured and sent to CMS may appear to have healthier populations than they really are managing and paying for. Now is the time for investments in tools, processes and training to maximize payments in 2008 and beyond.
• Turning Information In To Action – Many companies have made investments in data management and informatics to understand their data and anticipate where there are gaps. Their challenge now is to turn these mountains of data in to action at the provider level. Now is the time to investigate how to motivate providers, partner with them and offer incentives that will change their view of the data and their actions. Adopt best communication practices and technologies that include the provider in the solution at the point of service. Retroactive actions are more costly, disruptive and can reduce the quality of care rather than providing information and additional solutions at the point of service.
• Those Who Educate / Support Providers – Providers are the absolutely essential in solving these challenges. Winners will have partnered with providers and provided adequate support, training and tools to provide the best quality of care and documentation possible. Never underestimate the investments made at the provider level…P4P will become an additional piece of the MA space and providers will be key to those changes.

Are you ready for 2007?