One-Star Improvement Can Increase Medicare Advantage Revenue by 17%

HealthLeaders Media

Improvement in the Centers for Medicare & Medicaid Services (CMS) ranking metric can also boost enrollment by 8-12% as provider-owned plans compete ever more acutely with traditional payers.

A one-star improvement in CMS star ratings can increase revenue from rapidly growing provider-based Medicare Advantage (MA) plans, according to new research from Guidehouse.

Approximately one-third of current Medicare beneficiaries participate in MA plans versus traditional Medicare, which has grown from only 13% of beneficiaries in 2004. But competition for those patients is acute. With ongoing expansion by traditional payers such as Anthem, Aetna, Humana and UnitedHealth Group, provider plans must look to distinguish themselves not only to attract patients, but also to gain other benefits available by regulation based on CMS star rating, the researchers said.

MA represents a competitive landscape between payers and providers largely because both see the plans as a good way to move toward capturing the premium dollar and transitioning toward a more value-based form of reimbursement.

According to Guidehouse, providers and payers like MA for different reasons, but they are compelling.

Providers like MA because:

  • Benefit design strongly favors in-network utilization, helping providers reduce inpatient and outpatient leakage
  • It offers additional upside opportunity to improve quality by closing gaps in care, which feeds directly into determining plan’s star rating)
  • It improves coding accuracy (ensures appropriate funding from CMS for assigned members’ conditions)
  • It lowers unnecessary utilization
  • Shares in rebates, which reduces certain expenses
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