How Medicare Advantage could bolster the case for payer-provider integration

Integration of health insurance plans and healthcare provider systems could very well be the wave of the future, at least when it comes to treating the nation’s 58.6 million Medicare beneficiaries.

Spending discrepancies between Medicare Advantage (MA) enrollees and those enrolled in a Medicare Shared Savings Program (MSSP) point the way to a melding of entities, suggests an observational study published Tuesday in JAMA Network Open.

MA and MSSP are two key approaches to cost-effective care, and MA keeps growing. About 48% of Medicare beneficiaries currently belong to an MA plan, according to new data from the Kaiser Family Foundation.

In the study, researchers with the University of Pennsylvania found that care for MSSP enrollees in an accountable care organization resulted in substantially higher spending than for those enrolled in MA for four diseases. For diabetes, it cost $2,159 more per member per year to treat MSSP patients than MA patients. For congestive heart failure, the difference was $4,074; chronic kidney disease, $2,560; and for hypertension, $2,330.

One of the co-authors of the study is Ezekiel J. Emanuel, MD, the primary architect of the Affordable Care Act. He tells Fierce Healthcare that the study’s findings “show that there is a response to risk-based payments.  And yes, it may be that putting providers at risk does improve their performance. There is a lot we could do to improve the MA payments too.”

Overall, in an evaluation of 15,763 patients seeking care at Ochsner Health System (OHS) in Louisiana, spending was 22% to 26% higher for MSSP recipients than for MA beneficiaries. That’s “even when controlling for rich metrics of clinical risk,” the study found. Changes in program design and better accounting for unmeasured covariates might help close the gap.

Covariates that were taken into account include age, sex and the ZIP code of residents living below the poverty line. “Area-level race and ethnicity data were collected to account for known racial/ethnic disparities in enrollment between MSSP and MA,” the study said.

Another reason for the cost disparity may include design differences of the programs.

“For example, to assign patients to clinicians, MSSP requires use of primary care services, which at the time of this study included post-acute care,” the researchers said. “Such requirements were not present for MA.”

Health system participation in MA may also be more favorable than MSSP because of an inability to manage nonclinical risk factors. Better accounting for unmeasured covariates may help mitigate this disparity.

In a commentary accompanying the study, David J. Meyers, Ph.D., of the Brown University School of Public Health, argues that “there is a growing trend toward vertical integration between plans and health care systems in the MA program with health systems either creating their own plans or partnering with insurers to offer exclusive insurance products.”

Meyers adds that “under vertical alignment, health systems receive a fully-capitated payment to care for their MA enrollees, which may provide an even stronger incentive to reduce spending for their MA enrollees. If a health system performs well in reducing spending, they may stand to profit more than they could under the shared savings in MSSP alone.”

Which is what happened at OHS, according to the study. In 2013, OHS founded an ACO comprising 2,250 physicians in Louisiana and Mississippi. Since 2017, the ACO for MA recipients has consistently not spent above the benchmarks set by the Centers for Medicare & Medicaid Services (CMS), with the saved money rebounding to OHS as a result.

Meyers tells Fierce Healthcare that provider integrated health plans take on different shapes and sizes. “In some cases, it is organizations like Kaiser Permanente that are fully integrated and have been doing this for years,” says Meyers. “Broadly however, many other hospitals and health systems are creating their own plans, or affiliating closely with insurers in order to take advantage of the better care management that can come from that, as well as to keep more of the overall payments.”

Hospitals contract in a shared savings arrangements with ACOs under CMS guidelines. “Broadly however, many other hospitals and health systems are creating their own plans, or affiliating closely with insurers in order to take advantage of the better care management that can come from that, as well as to keep more of the overall payments.”

OHS is a large, academic, nonprofit health system that operates 40 hospitals and over 100 satellite centers and urgent care clinics. MA beneficiaries account for 58% of all Medicare beneficiaries at OHS, generating 56% of total Medicare revenue. Data for the study were collected from Jan. 1, 2014, to Dec. 31, 2018, and analyzed from January 2019 to May 2022.

The study’s corresponding author, Ravi B. Parikh, MD, an assistant professor in the Department of Medical Ethics and Health Policy and Medicine at the University of Pennsylvania, tells Fierce Healthcare that he doesn’t think that merging health plans and health systems is a “feasible generalized solution.” While it may work for some MA plans, not all of them have the ability pull it off.

“Our general point of the article was, even after accounting for very granular clinical risk factors and some socioeconomic factors, MA and MSSP beneficiaries (whose doctors actually had similar practice patterns) had very different spending,” says Parikh. “It suggests that there are limitations to risk adjustment that will be insurmountable with current data streams. Rather, it seems that setting alternative spending targets to account for the higher socioeconomic risk faced by FFS Medicare beneficiaries, may be necessary.”

One advantage that MA has over MSSP is that it has more “levers” it can use to control costs, the study found.

“MA plans can limit their enrollees to a limited set of potentially lower cost clinicians and facilities and also have the flexibility to enforce greater control over the care received through the use of prior authorization requirements,” the researchers said. “An ACO typically does not have as much control over what care their patients receive and where they receive that care, putting similar models at a disadvantage when trying to control spending relative to MA plans.”

In his commentary, Meyers says that CMS’ new ACO REACH program slated to begin next year might help better align incentives between MSSP and MA.

REACH stands for Realizing Equity, Access and Community Health, and CMS describes the program’s goal as improving “the quality of care for people with Medicare through better care coordination, reaching and connecting health care providers and beneficiaries, including those beneficiaries who are underserved."

“However,” Meyers writes in his commentary, “as long as MA plans still have a wider variety of cost controlling levers, imbalances will be likely to continue. With MA penetration on the precipice of becoming the dominant payer in Medicare, further elucidating the different incentives of MA plans, ACOs, and health systems in general will be imperative.”