Healthcare providers and health plans continue to integrate vertically through consolidation and virtually through accountable care organization (ACO) risk-sharing arrangements. In this article, Milliman’s Dave Liner discusses how providers and health plans can improve their financial performance by considering strategies that optimize regulatory capital.
Healthcare providers can improve their financial performance under value-based contracts by implementing an effective contracting strategy. Milliman consultants David Williams, David Liner, and Colleen Norris discuss how providers can accomplish that by prioritizing and measuring operational and contractual elements against three core pillars: transparency, stability, and control. Here is an excerpt from their article “Building a successful value-based payer contracting strategy.”
Providers prioritize each pillar and attribute to create weights for each cell. Contractual elements are then evaluated against those pillars to produce a score for each cell. This can be either a subjective evaluation or a more rigorous analytic evaluation depending on the nature of the element. The weighted scores can be used to prioritize areas of administrative concentration and to compare payer contracts on a similar basis. This prioritization is a critical step to a successful contracting evaluation process….
…The exercise of scoring the grid identifies high-risk elements and compares contract structures from different payers that require revisions. When performed rigorously, this process brings focus that allows management to spend more time on contracts with the greatest risk and potential for improvement. Applying each pillar to specific payer contract elements identifies specific risks and creates areas of focus for providers during negotiation. However, this analysis alone does not enable providers to easily compare value-based contracts in their entirety.
The complex evaluation process is illustrated below in a simplified form. The intent of this illustration is to highlight important aspects of the decision-making process required to effectively manage complex payer relationships.
First, the contract is scored for each pillar and element cell in the scoring grid. Each contract is evaluated separately and may contain different elements. The provider may require independent help.
Second, the provider weights each cell in the grid based on priorities. These weights would likely be consistent across contracts. The provider may counsel with outside help to prioritize, but ultimately will be responsible for the focus of their efforts.
Finally, the total score is calculated by applying weights in each cell based on prioritization of the contracting elements. Figure 2 illustrates this contract-scoring approach.
The Medicare Payment Advisory Commission’s proposed modifications to the Part D federal reinsurance program could change the financial dynamics for Plan D plan sponsors, particularly if appropriate updates are not made to the risk score model. This paper by Milliman consultants David Liner and Nicholas Johnson outlines key considerations for plan sponsors as they prepare for proposed changes to the Part D program.
This article is part two of a two paper series. Read paper one about considerations for Part D stakeholders.
The Patient Protection and Affordable Care Act (ACA) includes risk mitigation programs, also known as the 3 Rs, for individual and small group health insurance markets. The 3 Rs include a permanent risk adjustment program, a transitional reinsurance program for the individual market, and a temporary risk corridor program. The transitional reinsurance and temporary risk corridor programs span from 2014 through 2016, while risk adjustment is a permanent program. The intent of these programs is to mitigate adverse selection and enhance market stability. The 3 Rs also affect financial reporting, and ACA health plan issuers faced many challenges when estimating the financial impact of the 3 Rs on 2014 financial statements. Our research suggests that ACA health plan issuers developed 2014 financial statements in a particularly uncertain environment. In this paper, Daniel Perlman and Dave Liner summarize 2014 3R estimates compared with actual amounts published by the Center for Consumer Information and Insurance Oversight (CCIIO).
The Patient Protection and Affordable Care Act (PPACA) is changing the landscape of U.S. healthcare and will create the need for new entities that can take on and manage financial risk. Captive insurers have experience in this area already, and may find that implementation of the PPACA and healthcare reform (HCR) brings them significant new opportunities. Dave Liner and Kathleen Ely examine this dynamic in a new paper.