GENERAL:

• The National Per Capita Growth percentage is used to baseline the rate tables for 2007. The rate is estimated at 6.9%. It is still not possible to predict the final impact on reimbursement with out knowing the other variables, like the Budget Neutrality and Coding Intensity factors.

PART C:

• The HCC model will be recalibrated for 2007 using 2002 and 2003 Fee For Service data. The current model is based on 1999-2000 data. It is expected that the new model will provide a more accurate prediction between health status and the costs associated with providing care. All segments will be updated (community, long-term institutional, new enrollee, and ESRD). There are no changes to the disease grouping in the model however coefficients (the higher the weight allocated to a grouping the higher the reimbursement). As a result of the recalibration of the HCC model, the frailty factor will also be recalibrated.
• The Fee For Service Normalization factor will be recalibrated for 2007 and will no longer be applied to the rate book but to the risk scores. The expectation is that mathematically the result will be the same. However between recalibrating the HCC model AND applying the FFS Normalization factor to the risk scores, the 2007 risk scores will be substantially different in 2007 and not really an apple-apple comparison to 2006 scores
• In 2007 Pain Management will be added (Medicare code 72) to the qualified specialty type and pain management has been added to the HCC model.
• 100% risk adjustment payments in 2007 for all MA plans except Social Health Maintenance Organizations (S/HMOs), Minnesota Senior Health Options (MSHO)/ Minnesota Disability Health Options (MnDHO), Wisconsin Partnership Program (WPP) and Massachusetts Senior Care Options (SCO) demonstrations who will be 75% risk adjusted in 2007.
• The budget neutrality factor will begin its’ phase out in 2007 with a 45% reduction.

DOWNLOAD THE CMS ADVANCE NOTICE HERE

In order to maximize reimbursement plans, groups and providers need to WORK TOGETHER to code accurately and completely capturing all of the diagnosis’s that pertain to a beneficiary. Any breakdown in the flow of information will result in lower payments. Here are some changes in the relationships between plans, groups and providers.

PLANS NEED TO SHARE INFORMATION DOWNSTREAM – Plans receive MMR and MOR reports from CMS with demographic, eligibility and HHC updates from CMS. In order for groups to also identify gaps in the data that CMS is paying on and the information in medical records, plans must share this information with groups and providers. The Industry Collaboration Effort (ICE) has issued a draft release of a reconciliation report that plans can provide to groups that share all of the key information that CMS is reporting. Groups will use this report to identify what diagnosis codes are in their qualified encounter data and is not showing up in the CMS data reported to plans. The best scenario is where plans and groups both adopt a standard communication format reducing the costs to managed the process.

COLLABORATION AND REVIEWS – We encourage all groups to work closely with each plan they manage beneficiaries for. In these meetings the plan and MSO need to review the impact of the collaborated effort in raising risk scores, identifying gaps in data adopt best practices from other groups and plans.

If you have any questions on how to design or implement a risk adjustment program we at Dynamic Healthcare Systems would be more than happy to meet with you and review your current efforts. You can contact us at info@dynamichealthsys.com.

Medicare advantage plans are private managed care plans that offer typically offer benefits beyond traditional fee for service Medicare. Plan bids outline the benefit packages offered to an area and the beneficiary contributions, if any.

By law, CMS is required to publish the Medicare Advantage payment rates for each county, which are used to compute the benchmarks, in April of the preceding year. The Medicare Advantage payment rates are based on a formula that reflects costs in the fee-for-service program and other adjustments.. Actual payments to each plan are further adjusted based on the reported health status of plan enrollees – “risk adjustment” – so that plans who enroll beneficiaries with chronic illnesses receive increased payments reflecting their higher expected costs.

Figure 1: Risk Adjustment Calculations

The payments to Medicare Advantage plans are also adjusted by a “budget neutrality” factor that was implemented to prevent health plan payments from being reduced overall while, at the same time, directing higher, risk adjusted payments to those plans whose enrollees had more chronic diseases. Congress intended to move to a clinically based risk adjustment model but not reduce the overall payments to Medicare Advantage plans. Knowing that the transition would require stakeholders in the current system to make adjustments in how information is captured and reported they implemented a budget neutrality factor that would give back the “saving” that the government would have realized because of the inefficiencies in the current system of capturing and reporting diagnosis information.

Smaller Expected Costs of Medicare Advantage Payment Adjustments for Budget Neutrality

There has always been a phase-out of the budget neutrality adjustment. The phase-out will begin in 2007 and will be completed by 2011, when plans will receive no budget neutrality payment adjustment. The reason why the Medicare Actuaries now expect the budget neutrality adjustments to be less costly over the 5-year phase-out period is because newer data shows a much smaller difference in the reported health status between enrollees in Medicare Advantage and those in traditional Medicare. The adjusted phase out has accelerated the step down in the budget neutrality adjustment as indicated in the chart below:

In Summary

The basis for accelerating the phase out of the budget neutrality factor is a result of higher reported diagnosis scores for beneficiaries than originally expected. Those organizations who have implemented a risk adjustment program that identifies missing or mis-coded diagnosis scores stand to survive and thrive in the new Medicare market. Those who are not maximizing risk scores and are not reimbursed the dollars thay deserve will struggle and likely not survive.

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?

Earlier we talked about industry collaboration and how it is essential in successfully manage your Medicare business. In California the group, Industry Collaboration Effort (ICE) has done an outstanding job of volunteer professionals working to develop information, processes and tools to better manage Medicare. Take a look at some of the amazing tools and information contained in their library. Also it is free to join and participate. Take a look how you too can get involved.