One of the original founders of North Texas Specialty Physicians has branched into what has become a high-demand niche: risk adjustment for Medicare Advantage (MA) plans. That niche is about to explode as risk adjustment becomes an important element for health plans on the 2014 health insurance exchanges.
Dallas-based CenseoHealth sends primary-care physicians to patient’s homes to find diagnoses that are not being addressed. They dig deeply into what Jack McCallum, chief executive officer, calls “quality of life” and “quality of care” issues in addition to checking physical condition.
“We see who furnishes care in the home. We pull the medicines out of the cabinets to get an accurate medicine list. We get a sense of nutrition and risk of falls. We find a litany of chronic illnesses that aren’t being addressed,” he said.
McCallum practiced adult and pediatric neurosurgery in Fort Worth for nearly 30 years and served as health of the medical staff at Fort Worth Children’s Hospital prior to his current role.
McCallum said getting a true picture of a patient’s condition could mean an extra $2,000-$4,000 higher reimbursement to the MA provider. He said the company can demonstrate a decrease in beneficiary healthcare costs as a result of those visits because better care decreases emergency-department visits and 30-day hospitalization readmissions. The home evaluations cost about $400.
McCallum said he expect his company to do about 250,000 evaluations in 2013, compared with fewer than 100,000 in 2011. He has about 1,000 physicians working in 41 states. He also expects to have about 200 company employees this spring, which is nearly double the 2011 workforce. It recently more than doubled its office space at LBJ and Midway to 20,000 square feet and plans to add another 10,000 by April.
MA plans face significant headwinds heading into 2014. The Centers for Medicare and Medicaid (CMS) said last month it expects MA per-capita costs to decrease by more than 2 percent in 2014, which sent health-insurance stocks tumbling.
MA plans could see total payment reductions of more than 5 percent, considering they also face cuts from the Affordable Care Act (ACA) and from federal sequestration budget cuts.
McCallum remains optimistic. He said the MA approach to population health and reimbursement is consistent with the goals of the ACA. He said MA enrollment is holding up well, and will be fueled by baby boomers who seem to prefer MA over traditional Medicare.
The risk-adjustment method used by CenseoHealth grew out of CMS efforts to combat strategies by insurance companies to attract healthier enrollees, also called favorable selection. A new risk adjustment system was phased in between 2004 and 2007, along with limits on disenrolling beneficiaries with declining health.
The system is called the CMS Hierarchical Condition Categories (CMS-HCC) model, which adjusts payments to MA plans for clinical diagnoses as well as for demographic factors. The model includes 70 HCC categories, with each defined by one condition or combination of conditions and each condition defined by diagnostic codes.
For each MA enrollee annually, the model uses diagnostic information from the previous year to create a summary risk score for predicted spending predicted based on the enrollee’s conditions. This risk score is applied to an administratively set benchmark payment rate to risk-adjust payment for the enrollee.
The same model will be used to risk adjust spending targets for accountable care organizations in the Medicare Shared Savings Program and similar methods will be used to risk-adjust plan revenues in the health insurance exchanges in 2014—all of which fuels more business for CenseoHealth.
McCallum said, “The biggest difficulty is that the healthcare system is fragmented and unmanaged. This risk adjustment system makes the delivery model more management and provides measureables. It is a good model for the rest of the system to emulate.”
Steve Jacob is editor of D Healthcare Daily and author of the new book Health Care in 2020: Where Uncertain Reform, Bad Habits, Too Few Doctors and Skyrocketing Costs Are Taking Us. He can be reached at [email protected].
