We recently used machine learning techniques to understand key drivers of Medicare Shared Savings Program (MSSP) financial performance. Of the 190-plus objective accountable care organization (ACO) features reviewed, ACO baseline efficiency proved to be the most important financial performance driver we identified. Another way of putting it is that MSSP rewarded inefficient ACOs more than ACOs that have attained efficiency.
You may be asking, “How did you measure baseline efficiency?” The chart below tells an interesting story.
We analyzed ACO baseline efficiency by reviewing ACO baseline expenditures that were unadjusted, risk-adjusted, and geographic-risk-adjusted. Risk-adjusted per capita expenditures were adjusted to account for each ACO’s average risk score and mix of entitlement categories. Geographic risk-adjusted per capita expenditures were adjusted to account for Medicare reimbursement levels in each ACO’s area.
Below are a few interesting notes:
1. Despite adjusting for risk levels, mix of entitlement categories, and reimbursement levels, there is still significant variation in baseline per capita expenditures. See the third column above for this wide range of variation.
2. The Centers for Medicare and Medicaid Services (CMS) has already made MSSP rule changes that balance the rewards between ACOs at different levels of starting efficiencies. Past financial performance in MSSP agreement period 1 may not be a strong indicator of performance in agreement period 2. ACOs should understand how these rule changes affect them.
Beyond baseline efficiency, we found that several other features were strongly associated with gross savings:
1. National fee-for-service (FFS) trends higher than local market trends
2. Location in the Southeast and south central regions
3. Low performance year expenditures for short-term inpatient admissions
4. High baseline per capita expenditures, unadjusted
5. High CMS-hierarchical condition category (HCC) risk scores
However, we also found that these features still explained less than half of the variation in gross savings across ACOs. This may indicate that ACO care management efforts are accounting for some of the remaining variation.
The full report is posted at Milliman Insight and includes a deeper dive into research conducted by Jill Herbold, Cory Gusland, and myself.
Milliman has released its annual report on the commercial health insurance market’s financial results, which provides a clear picture of health insurers’ financial experience in a given year. The report, based on medical loss ratio data submitted to the Centers for Medicare and Medicaid Services (CMS) and released in the fall of 2016, provides a final accounting of insurers’ financial results after “3R” transfer payments have been completed. Today’s report details results for 2015, the second full year of implementation of the Patient Protection and Affordable Care Act (ACA). The report also summarizes estimated effectuated insurance marketplace enrollment through 2016 and corresponding federal expenditures on premium and cost-sharing assistance. As the United States approaches a potential new round of healthcare reform, Milliman’s report is a helpful tool in analyzing the effect of current ACA financial assistance components to consumers and the impact on the health insurance industry from the insurance marketplaces and “3R” programs.
Key takeaways from Milliman’s report include:
• Underwriting margins in the individual market deteriorated from a 6.0% earned premium loss in 2014 to a 9.6% loss in 2015. The 2015 underwriting losses were due in large part to the risk corridor program funding shortfall.
• With no funding currently scheduled, the cumulative risk corridor payment shortfall has reached $8.3 billion, with nearly 90% owed to insurers in the individual market.
• Since 2013, individual market enrollment has increased from 10.9 million to 17.5 million, driven by the introduction of the insurance marketplaces and associated premium assistance. Conversely, the fully insured small group enrollment has shrunk from 17.3 million to 14.7 million, which is attributable primarily to fewer small employers offering coverage.
• The insurance marketplaces continued to take on a greater role in the individual health insurance market, with 56% of estimated 2016 market-wide enrollment attributable to coverage purchased in the marketplaces, relative to only 36% in 2014.
• From 2014 to 2016, the percentage of individual market enrollees receiving premium assistance has increased from 31% to 47%. Similarly, enrollment in cost-sharing reduction plans is estimated to have increased from 21% to 32% of national individual market enrollment.
Milliman’s overview of financial results provides a comprehensive look at insurers’ financial experience as well as the number of Americans impacted by marketplace subsidies under the ACA. As new healthcare proposals are debated in Washington, we believe this report provides a valuable tool for policymakers and insurers looking to better understand how insurance markets may react to future regulatory and legislative changes.
To receive regular updates of Milliman’s healthcare reports, contact us at here.
The skilled nursing facility (SNF) industry is an important area for Medicare accountable care organizations (ACOs), Medicare Advantage health plans, and other Medicare programs. How can these organizations appropriately benchmark performance to provide efficient healthcare and reduce spending for SNF services?
Milliman’s Jill Herbold and Anders Larson offer some perspective in their report “Performance of skilled nursing facilities for the Medicare population.” The report highlights several utilization and expenditure metrics for measuring SNF performance. It also explores SNF performance levels across the United States and provides a quantitative assessment of the opportunities to reduce spending for SNF services.
The commercial health insurance markets in the United States in 2014 experienced a significant change relative to prior years. These changes were most dramatic in the individual health insurance market, with the conversion from medical underwriting to adjusted community rating in many states, as well as the implementation of the federal and state insurance marketplaces, facilitating premium assistance to many Americans who were previously uninsured. The 2014 edition of Milliman’s annual report on the commercial health insurance market provides an overview of financial results in the individual and group insurance markets. The report also focuses on enrollment changes in the individual market and the impact of the Patient Protection and Affordable Care Act of 2010’s (ACA) risk adjustment and risk corridor programs.
Organizations that employ provider performance metrics can position themselves better for long-term success as provider reimbursement continues to transition from pay-for-volume to pay-for-value. In her article “Evaluating healthcare provider performance,” Milliman’s Jill Herbold discusses how healthcare organizations can select the best metrics to increase the overall performance of their organizations.
Here is an excerpt:
There are many types of providers involved in the delivery of healthcare—tertiary hospitals, primary care and specialty physicians, skilled nursing facilities, and home health providers, to name a few—and each plays a unique role. Though there are commonalities, a unique set of metrics is often useful to evaluate the performance of different provider types.
The specific metrics selected should depend upon the quality and robustness of available data, the ability of providers to control or influence the metric, and the ability to compare the metric across providers in an objective manner. Ideally, metrics address each component of the triple aim (cost, quality, and access) and are aligned with the organization’s financial and other goals. It is important to ensure metrics are appropriate for the particular value-based payment arrangement, the organization’s circumstances, and the population that care is being provided to. For example, skilled nursing facility utilization is an important metric for an aged Medicare population but not for a pediatric Medicaid population. It is helpful to use metrics that can be compared over time so changes can be monitored. Comparison of metrics across peer groups and to targets or benchmarks can potentially be helpful to motivate and drive performance improvements….
To achieve financial and other goals, some organizations are using performance metrics when selecting preferred providers to partner with and driving performance improvements across the organization. More specifically, adjusted performance metrics can be useful as part of:
• Evaluating physician groups and other providers for participation in a narrow network, accountable care organization (ACO), or other affiliation of providers
• Identifying post-acute care and other providers with whom to develop preferred relationships
• Identifying preferred specialty physicians to whom primary care physician can refer patients
• Rewarding participating providers via incentive compensation programs
• Driving performance improvement across hospitals, primary care physicians, specialty physicians, and other providers
Shared savings arrangements attempt to tie provider reimbursement to performance or quality measures and reductions in the healthcare expenditures for an assigned population of patients. The most common form of these arrangements involves networks of providers that form accountable care organizations (ACOs). The practical task of measuring improvements by providers isn’t easy, especially measuring reductions in expenditure levels that are due to actions by providers. Milliman consultants Anders Larson and Jill Herbold provide more perspective in this healthcare reform paper.