By Richard Jones

According to CMS, a record 22.4 million seniors will be covered by a Medicare Advantage (MA) plan in 2019, up 11.5 percent from 2018. One reason that MA plans are increasingly popular among consumers is because coverage typically includes a richer choice of benefits than traditional Medicare, often providing lower premiums and out-of-pocket costs.

However, the popularity of MA among seniors is only part of the story behind the MA market’s tremendous growth in recent years. To fully understand what’s driving the trend, it’s important to consider some of the additional market forces that are impacting payers, providers and consumers.

The fee-for-service model has resulted in unsustainable inflation and increases in total medical costs for our country and individuals, and provider reimbursement rates set by Medicare’s reimbursement are not increasing fast enough to meet inflation. Historically, provider revenues have been based on individual episodes of care, where clinicians are incentivized to maximize their billings in order to improve revenues. Payers, however, benefit financially when the cost of care is lower. The fee-for-service model has thus created friction between payers and providers because their revenue goals are completely opposite. This tension has resulted in payers pushing more healthcare financial risk to providers.

In recent years, CMS has increased funding to newer value-based care models, including MA plans. This transition has heavily influenced the growth of alternative healthcare delivery models such as value-based incentive contracting and collaborative partnerships, which are changing the traditional payer-provider relationship.

Forced innovation
The introduction of MA plans and other value-based care payment models has effectively forced payers and providers to adopt innovative behaviors in order to achieve their revenue goals. By aligning payments to the concepts of improved quality and outcomes for consumers, both payers and providers share financial goals and must now focus on the delivery of appropriate and cost-effective care that leads to improved outcomes and satisfied patients. Providers realize that better outcomes — and financial rewards — are not necessarily tied to maximized billings, and payers understand that they won’t automatically improve revenue or outcomes by simply eliminating unnecessary and wasteful medical services. Instead, payers and providers are forced to collaborate and cooperate with one another to drive financial and clinical success.

Collaboration is key
To achieve quality clinical and financial goals, physicians participating in MA plans need access to patients’ medical information from across the continuum, which is typically not included in an individual provider’s EHR. With a more complete medical record, the delivery of care can be safer and more effective, and costly duplications in service can be minimized.

However, physicians don’t always have ready access to comprehensive records from other providers — though payers do. With MA and other risk-based plans, payers and providers must collaborate so that physicians have access to critical medical information and are empowered to drive quality outcomes.

Providers also control access to payers, which is another reason payers should be motivated to collaborate with providers. However, in regions where a provider holds a large percentage of the market, the provider may be less inclined to cooperate with payers or participate in an MA plan. Instead, the provider may prefer to leverage the health system’s volume and hold onto their historical fee-for-service strategy, thus preventing collaboration with payers. A provider with a larger market share also has more power, which is one reason health systems continue to consolidate in many regions.

Compare that situation to the position of smaller second- and third-tier health systems with smaller market shares. These organizations are facing more pressure to move into value-based arrangements and are more likely to move forward and embrace models that require payer-provider collaboration. Smaller providers are at greater risk of seeing their margins erode because CMS reimbursements aren’t rising as fast as inflation and they do not have the market share to negotiate a higher rate from payers. They recognize that they are better-positioned for success if they enter the MA market in partnership with a strong collaborative payer that puts the patient first, is committed to the elimination of waste, and strives to deliver quality patient outcomes.

The pace of change is accelerating
Changing long-established routines and behaviors takes hard work and requires time. Payers and providers have been slow to collaborate, both fearing that a closer alliance could in some way jeopardize their success, based on their historic adversarial relationship.

But the pace of change is escalating. CMS continues to introduce initiatives that promote MA and other value-based programs. Outside investors and venture capitalists are becoming more interested in value-based opportunities and infusing new money into the market. Technology is also advancing and making it easy to liberate patient and population data from multiple sources.

These combined trends will continue to drive broader adoption of MA models that thrive on payer-provider collaboration and ultimately deliver clinical and financial outcomes that benefit payers, providers and consumers.

About the author: Richard Jones is the founding president and CEO of Essence Healthcare. He also leads Lumeris Healthcare Outcomes.