Sifting Through the Nuances Around Medicare Advantage Strategic Issues for Providers

April 21, 2021
Should hospital-based integrated health systems establish provider-sponsored health plans? Or move more quickly into risk-based contracts with health plans? The Chartis Group’s new report offers clues

It was fascinating to delve into the report published on March 29 by The Chartis Group, the Chicago-based consulting firm. Entitled “As Medicare Advantage Enrollment Booms, Healthcare Entities Need to Plan Around Key Trends: 2021 Medicare Advantage Competitive Enrollment Report,” it was written by Chartis’s Nick Herro and Julianna Wokurka.

On April 12, I published my interview with Nick Herro, who offered a broad number of insights into the current landscape. But first, let’s look at the core revelations in the report itself. The report examines the latest trends in the Medicare Advantage program, in which CMS, the federal Centers for Medicare and Medicaid Services, contracts with private health plans to provide Medicare enrollees with care management and other services. As the report’s introduction notes, “Medicare Advantage is experiencing several meaningful competitive shifts, as results from the 2021 plan year make clear. The percentage of Medicare-eligible beneficiaries enrolled in Medicare Advantage continues to climb. This year, 42 percent of Medicare-eligible beneficiaries are enrolled in a Medicare Advantage plan, up from 32 percent just five years ago. We continue to see an accelerated concentration of market share into for-profit plans at the expense of non-profit health plans, which continue to struggle to find competitive growth. We studied this impact on non-profit plans across both non-profit Blue-branded health plans, referred to simply as “Blues” in this report, and other non-profit health plans, which are either provider-sponsored or independent regional plans. Meanwhile, for-profit plans are making rapid share gains, accelerated by successful entry into new markets and the emergence of startup venture-backed plans.”

And Herro and Wokurka note several key revelations:

"This year, 42 percent of Medicare-eligible beneficiaries are enrolled in a Medicare Advantage plan, up from 32 percent just five years ago."

Ø Medicare Advantage grew 9.6 percent this year, while enrollment in Original Medicare fell 2.6 percent, pushing Medicare Advantage penetration to 42 percent.

Ø  For-profit plan growth continues to outpace Blue and non-profit plans. For-profit plans now account for 71 percent of all enrollees, up from 69 percent last year.

Ø  Among for-profit plans, UnitedHealthcare and Centene saw the greatest gains, adding 1.6 million lives between the two, and pushing their combined share up 4 points.

Ø  Smaller Blue and non-profit health plans saw promising enrollment gains through outsized share growth this plan year. This may be a sign that these plans can continue to become more competitive in the future.

Ø  New market growth continues to pay dividends for national for-profit and venture-backed health plans. Entry into new markets successfully converts into greater enrollment growth over time.

Ø  Venture-backed health plans now account for approximately 241,000 lives (1 percent of national enrollment) and collectively added 64,000 lives, more this year than any year prior.

What’s more, as Herro told me in our interview, “I think, broadly, that the MA market is a really attractive market to beneficiaries and to health plans. There’s a robust market of plans, and as we see year over year, the iterations keep becoming more attractive, and the plans are adept at enrolling new beneficiaries. For health plans, it’s a very profitable product; it’s the perfect product for realizing value from value-based care efforts. And those plans that really have doubled down on value-based care, are set to benefit the most. So it’s a self-reinforcing phenomenon; it’s the perfect coverage for the broader themes within healthcare right now.” What’s more, though most of the recent growth in MA has been among for-profit plans, he told me that “We hope that non-profit MA enrollment can turn around. The growth has been in the smaller plans; and it’s the newer, more novel, provider-sponsored plans. So your local health system decided they wanted to be in that market. And they’re investing in population health and care management, and value-based plans. So that may be an opportunity for future growth.”

In other words, the key going forward, Herro believes, is the conscious, and successful, creation of increased, enhanced value, for payers, that will be the key—not surprisingly.

And, in all this, Herro sees both opportunities and challenges for the leaders of hospitals, medical groups, and health systems. On the one hand, provider organizations will absolutely benefit from whatever closeness—sometimes called “stickiness” by healthcare marketing people—in their relationships with patients. That really is an ace card in this game. On the other hand, integrated health systems could also end up being triangulated out of market share going forward. He put it this way: “First and foremost, they need a plan; that doesn’t necessarily mean investing in and doubling down on, an MA product; but they need a plan. And this has meaningful implications for the entire healthcare system, because it’s causing a shift in access and in use rates. And what was previously very consistent, reliable volume through traditional Medicare, is now being administered through a third party. And some of the significant for-profits are building sizeable assets through this book of business. So that could be impactful. United HealthCare is the largest single employer of physicians in this country.”

So, there you go: both the opportunity and the threat. Provider leaders need to think carefully, thoughtfully, and strategically about all of this. From where I stand, participation in contracting with health plans engaged in Medicare Advantage seems like an absolute win-win, as long as one’s organization is ready to take it on: many provider leaders have testified to the fact that MA contracting provides a relatively benign way to learn how to manage a variety of contracts well. Meanwhile, hospital-based organizations, though they cannot contract directly with the Medicare program as pure providers, can get involved as provider-sponsored health plans; and if they have sufficient network range, they can potentially do well through those provider-sponsored plans.

The risk is that providers unwilling to move forward to develop provider sponsored plans could end up being disintermediated. The fact that United HealthCare is now the largest single employer of physicians in the United States is a significant fact on the ground; equally important is the fact that the independent, multidisciplinary physician groups that are taking on risk-based contracts and succeeding them, are leaving hospitals and health systems behind, as they build expertise and contracting power with health plans over time, and most hospital-based organizations remain stuck in fee-for-service-based thinking—and operations.

And of course, Nick Herro shared some thoughts with me on this. Will learning about these trends push hospital leaders into risk-based contracts with plans or into creating their own plans? His answer: “Indirectly. You know,” he told me, “the most advanced hospital-based systems—if everything around them is shifting, it will amp up the pressure for them to do the same. And a lot of them are doubling down, but they can’t move as fast as a privately equity or venture-backed practice can. And there are luminaries like OakStreet, Iora, VillageMD, ChenMed, that have incredible growth expectations, with business models built around this concept. And as those models proliferate throughout the country and they meet their performance goals, it’s going to change what table stakes are in markets, and health systems will need to have a response—a reason to do or not do something new.”

And, not surprisingly, he told me, the first thing that the leaders of hospital-based health systems need to do, is this: “I think it starts with just recognizing the trend broadly, and the threats and opportunities that the trend creates for them. In the context of healthcare, every decision is local. What’s good for a health system in Florida might not be good for a health system in Illinois, or even germane,” he told me. “But broadly speaking, these trends are accelerating, and have all the fuel to continue accelerating. So I think there’s an acknowledgement of that. And I think there’s careful planning around whether to embrace or choose not to embrace the trends.”

Indeed; every patient care organization’s leaders will need to think through these trends. But whether or not they establish a provider-sponsored health plan or not—and, it goes without saying that that is a significant decision to make—or whether or not they decide to move forward more quickly into risk, this report makes it clear that some things are shifting right now in the U.S. healthcare landscape.

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