One large healthcare provider says the CMS' new method for calculating patients' health risk scores in Medicare Advantage plans will hurt its bottom line.
Publicly traded DaVita HealthCare Partners warned investors last week that the 2016 Advantage payments will amount to a 2% rate cut, or a loss of about $50 million in 2016 operating income. The company, which operates a large multispecialty medical group in addition to its core dialysis business, said the CMS' new risk-adjustment model unfairly penalizes providers that focus on wellness programs and chronic disease prevention.
Last week, the CMS issued final Advantage payment rates that were above what industry observers had expected. The 1.25% rate increase is considered a win for insurers, who had aggressively lobbied against the 0.95% rate cut proposed in February. Moreover, CMS officials said they actually expect payments to increase an average of 3.25% because of higher risk- score coding.
The CMS' new risk-adjustment model eliminates some general disease categories and replaces them with a greater number of more specific categories, said Mandy Pellegrin, a legislative and regulatory analyst at Obsidian Testing Group.
The most controversial change involves eliminating categories for unspecified renal failure, early stage chronic kidney disease and nephritis, she said. Under the new model, proposed for 2014 and phased in incrementally, only acute renal failure and stage 5 kidney disease are recognized.
That change could penalize providers such as Denver-based DaVita by eliminating the incentive to intervene when patients first start showing signs of kidney disease, Pellegrin said.
The CMS said the changes make the payment system fairer. In a fact sheet, it said the 2014 model excludes diagnoses that have been “coded very frequently by the MA plans that have been most aggressive in coding.”
The agency cited 2012 data to show that the code for renal failure was used for 9.9% of fee-for-service Medicare beneficiaries, 14.6% of all Advantage plan members, but for 38.8% of Advantage plan members enrolled in plans it described as the “most aggressive in coding.”
DaVita said the new model “negatively affects the company and other providers like us who have differentially invested in wellness and prevention programs for patients with chronic conditions.”
Still, DaVita said the new rates overall would reduce its income losses by about half, compared with the rates proposed in February.