Exploring the Differences Between Delegated Medical Groups and Health Plans in Medicare Advantage

Physicians and other senior-serving professionals trying to operate within the complicated Medicare ecosystem must be constantly learning, as the landscape, rules, tools, and vendors are in constant flux.
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• The Mastering Medicare Podcast is back from a long hiatus caused by both hosts taking W2 jobs during the COVID-19 pandemic.
• During their time away, they learned a lot about the changing landscape of Medicare, especially with the rise of AI and value-based care models.
• Value-based care was a particular focus in the discussion, with Dr. Mohseni sharing his experiences working at Optum and learning about the value-based care model, particularly within Medicare Advantage.
• Value-based care is touted as the future care model for the US healthcare system. It aligns incentives for patients, providers, and health plans, reducing waste and delivering more effective care at lower costs.
• The co-hosts contrasted value-based care with the fee-for-service model, pointing out that value-based care requires all parties to be financially invested in patient outcomes, incentivizing efficiency and effectiveness in care.
• They also highlighted the importance of collaboration and communication in value-based care, contrasting it with the disjointed nature of fee-for-service care, where different health providers often work in silos.
• An example of effective communication was shared from Dr. Mohseni’s time at Optum, where real-time notifications were used to coordinate care for patients who arrived at the emergency department, leading to better outcomes for the patients and more efficient care delivery.
• The speaker expresses curiosity about why the value-based healthcare system isn't prevalent, considering its beneficial aspects, such as better access to specialists and greater collaboration between healthcare providers.
• Questions are raised regarding the incentives for primary care doctors to transition from the regular fee-for-service model to a more complex value-based model, with no clear motivation at the moment.
• The discussion mentions gradual efforts by Medicare and CMS (Centers for Medicare and Medicaid Services) to encourage a move towards value-based healthcare, through strategies such as upside gain, share upside models, and ACOs (Accountable Care Organizations).
• The Medicare Advantage (MA) model, which has been fully at risk for some time, is described as an effective example of a value-based system.
• The complexity of intermediary programs in the fee-for-service model is noted, as many providers either can't understand the rules or choose not to participate due to the complexity.
• The speaker then elaborates on the workings of MA plans, wherein health plans are paid by the federal government per member per month to take full global risk on a patient for all of their professional medical expenses.
• These MA plans then delegate this risk to a selected medical group, which then uses the allocated funds to manage the patient's healthcare. The remaining difference between the allocated funds and actual healthcare costs becomes the medical group's profit.
• This model incentivizes medical groups to keep patients healthy and manage their costs efficiently.
• The allocation of funds enables medical groups to acquire services like dieticians or care managers, which are often missing in the traditional fee-for-service model. This allows for a more holistic, patient-centered approach to healthcare.
• The conversation discusses a situation where a patient contacts their doctor's office after hours, and rather than being directed to the emergency room, the doctor is willing to solve the issue over the phone. This is because the doctor is being compensated monthly, rather than by individual visits or treatments.
• It is stated that any company can start a Medicare Advantage (MA) plan and people can sign up for it. However, these companies often contract with groups like Optum to handle the provision of care. This is paid for by a fraction of the funding that Medicare provides to the MA plan.
• Doctors are incentivized to provide extra value in their services and keep costs low because they receive a chunk of money to provide the necessary services, and they keep the difference of what they don't spend.
• In the case of a patient with more serious health conditions, a system of risk adjustment is in place. This means that doctors annually document the patient's conditions, which contributes to their Health Condition Category (HCC) score. The higher the score, the more funding the medical group receives.
• The conversation suggests that the Medicare Advantage world has been increasingly focused on risk adjustment, given its substantial impact on revenue. However, this has raised concerns about gaming the system and potential fraud.
• In the future, it is suggested that there will be a greater focus on better patient outcomes and coordination to maintain profit margins, rather than on risk adjustment. This is expected to spur innovation and the creation of improved solutions for patients.
• The conversation discusses the idea of reducing healthcare utilization with a focus on reducing Emergency Department (ED) visits and hospitalizations.
• The speakers note that much of the current thinking centers on reducing the need for hospital care through better patient services, new tech, and addressing social determinants of health.
• Two additional areas of potential reduction in healthcare spending are identified: pharmacy (particularly unnecessary use of expensive brand name drugs when generics would suffice) and unnecessary surgeries or inefficient surgical procedures.
• The speakers emphasize that a lot of care currently delivered in hospitals could be effectively and more cost-efficiently delivered at home.
• The conversation then transitions to discussing how the home-based care trend can connect with value-based systems and the opportunities for innovation this brings. There's a focus on how different players in the healthcare system (from family caregivers to healthcare professionals to tech innovators) can collaborate to improve patient care.
• They mention the establishment of Medicare Advantage (MA) programs, where healthcare groups receive a capitated payment from Medicare based on a patient's Health Condition Categories (HCC) score.
• The speakers then introduce a new initiative, AgingHere.com, a newsletter focused on facilitating a community around aging in place and home-based care. They invite ideas and stories from their audience to share in this platform.