MedHOK Strategic Insights August 26: Value-Based Purchasing Comes to the Fore

While many see the major expansion of Medicaid and the creation of the federal and state Exchanges as the biggest health care headline in the past decade, we view the emergence of a national accountability model centered on value-based purchasing as the biggest game changer. Stand out

For sure, the two go together. Without a focus on value and outcomes, the expansion of health insurance coverage would be destined for failure on both a policy and financial front. The drive toward a national accountability model and value-based purchasing had its roots decades ago with various initiatives. But it came to the fore in the late 2000s in Medicare and has seen significant advancement with the implementation of various Affordable Care Act provisions across all lines of business — Medicare, Medicaid, and commercial. Whether it’s the Star program in Medicare, the drive to improve quality in many states’ anemic Medicaid programs, or the fast-emerging accountability dictates in the Exchange arena, value-based purchasing is sure to define health care well into the future.

In many ways, the emerging value-based model was forged as a compromise between Democrats and Republicans some time ago. Many Democrats, frustrated with the inability to pursue a one-payer system, signed on to using the private delivery system as long as a strong federal lead role prevailed. For their part, Republicans agreed to a strong central role, believing that the private sector should prove its worthiness if it was to be the main vehicle of healthcare delivery in the nation. The huge unfunded liabilities of the Medicare and Medicaid system forced lawmakers to forge ahead on private models and at least push through value-based reforms in the legacy fee-for-service (FFS) systems.

The Centers for Medicare and Medicaid Services (CMS) will drive the move toward value at a national level as it now controls all healthcare policy. The agency directly controls Medicare; it holds the financial purse strings for Medicaid and directs its policies. Finally, it is now in the lead role for Exchanges and directly controls policy in about two-thirds of states.

So what is value-based purchasing? It is the subject of much debate, but in our minds it focuses on three areas:

Compliance accountability. In many ways, CMS and policy-makers see compliance with published regulations and guidelines as the first step in the value-based healthcare world. Without compliance, you can’t get to step two. CMS has finely tuned its regulatory regime in Medicare, and this approach will ultimately be rolled out to all lines of business, including Medicaid and Exchange. Indeed, a plan’s, provider’s or other entity’s inability to show compliance can be a death knell. You literally can be put out of business if the myriad of regulations and policies are not followed. How so? It’s not so much the bite of civil monetary penalties and sanctions (which can be quite severe), but the reputational impacts of non-compliance as well as the suspension of enrollment and marketing that regulators are more and more willing to put in place quickly. With monthly member attrition in government programs somewhat substantial, non-compliance can mean plan enrollments dwindle quickly to unsustainable levels.

Tying revenue to quality. CMS crafted an extremely successful Medicare Advantage Star program in just a few short years. The number of plans with a 4 or greater Star rating has now reached 40%, and savvy Medicare enrollees are now migrating to the best quality plans (over 60% are enrolled in 4- or 5-Star plans). But CMS is not resting on its laurels. The Star program is constantly being refined to push plans to the next level. Indeed, recent changes point to the increasing difficultly of plans to reach and maintain 4- and 5-Star status. About a third of all measures today tie to Part D performance, forcing plans to integrate medical and pharmacy management. About two-thirds of all measures soon will emphasize holistic member experience, not one time closure of given clinical measures during the year.

Lastly, measures are becoming increasingly complex and hard to attain. For example, plans are already grappling with working with providers to reduce hospital readmissions. In the 2016 Call Letter, CMS signaled its intent to soon introduce a measure that will hold plans responsible for preventable hospital admissions. In addition, Star and quality measures are increasingly tied to the level of member benefits. In the past, when plans were simply rewarded with some additional revenue for performance, few took notice as the cost of boosting scores may have out-weighed the added revenue. But in Medicare and soon other lines, the quality bonuses are passed through to members in the form of better benefits. Now, plans must take notice as ignoring quality performance puts them at a significant disadvantage in the marketplace.

Aligning payments with population acuity. In addition to rewarding plans with quality bonuses, CMS and state policy-makers are more and more convinced that the financing scheme must recognize documented acuity in patient populations. With state and federal coffers over-burdened, regulators are seeking to transfer dollars from plans with lower than average risk to those with significant acuity. Thus, risk adjustment has emerged in all lines of business. The hierarchical condition categories (HCC) and RxHCC risk adjustment is long established now in the Medicare Advantage and Part D world. Some 30 states or so utilize various risk adjustment strategies tailored to the Medicaid population, the most popular of which is the Chronic Illness and Disability Payment System (CDPS). And, the Exchanges now have a variant of the Medicare HCC system. Indeed, base bids are becoming extremely tight in all lines of business, making the revenue from risk adjustment a critical part of a plan’s financial success or failure. In addition, concerned with the potential to game the system, regulators are introducing data validation audits that can mean huge financial recoupment if plans cannot document diagnoses submitted to the federal and state governments.

It is difficult for a plan to excel at just one of the three trends outlined above, much less two or three. But unless plans begin to focus on them soon, their very survival over time is in question. In the end, regulators are looking for a Darwinian solution. Poor performers will be rooted out, while others will thrive under these new aligned incentives.

08.26.15 | Blog, CMS, Exchange Marketplace, Medicaid, Medicare, Risk Adjustment, Star Rating, Value-based purchasing

MedHOK Strategic Insights: CMS Audits & More


Strategic Insights March 2013


CMS increases focus on Appeals and Grievances, Coverage Determinations

A review of 2012 CMS Medicare Advantage Audit results reveals that the most significant problem areas for contractors were in the area of Organizational Determinations and Appeals and Grievances (ODAG),

and Coverage Determinations and Appeals/ Grievances (CDAG).

More specifically, the majority of outliers were due to:

  • Failure to follow National or Local Coverage Determinations
  • Failure to send proper Denial Notices/ Appeal Rights
  • Misclassifying Org Determinations/Appeals as Grievances
  • Failure to effectuate overturns or approvals
  • Failure to auto-forward adverse reconsideration cases (including cases not adjudicated within the timeframe) to the IRE as required.

In 2013, CMS plans to perform a total of 32 routine and two Ad Hoc audits.  Audits will extend to two weeks as opposed to the previous one week process.  The key focus of the audits will be to ensure that any deficiencies with potential to cause medical or financial harm to members are quickly identified and corrected.  The areas of CDAG, ODAG and Part D Formulary Administration are thought to contain the greatest risk for these types of deficiencies.   Due to the complexity of these processes, many health plans and their pharmacy benefit managers are moving towards more robust and integrated technology platforms that support compliance with built-in alerts.


Significant Changes to Managed Care Manual

Effective 2/22/13 CMS issued many significant changes to their Managed Care Manual and Prescription Drug Manual.  This month our focus is on Chapter 18- Part D Enrollee Grievances, Coverage Determinations, and Appeals.  We will summarize changes to other key chapters in upcoming issues of Strategic Insights.

Key Changes to Chapter 18:

Added new sections 40.3.5 (Written Notification of Favorable Decisions), 50.5.2 (Written Notification of Favorable Decisions), 70.9.2 (Favorable Standard Redeterminations) and 70.9.4 (Favorable Expedited Redeterminations) based on revised regulatory requirements that plan sponsors must issue written notification for all favorable coverage determinations and redeterminations. See 42 CFR 423.568(d), 423.572(a), 423.590(a)(1), (b)(1) and (d)(1).

Revised section 30.2.1 (Tiering Exceptions) The revisions eliminates the previous requirement that tiering exceptions be limited to brand-to-brand or generic-to-generic substitutions, with the exception of a tier which contains only generics. Under the revised guidance, an enrollee or the enrollee’s prescriber may request a tiering exception for a brand to generic drug if all lower cost tier alternatives approved for treating the same condition would not be as effective for the enrollee, would have adverse effects for the enrollee, or both.

Updated sections 40.1 (How to Request a Standard Coverage Determination) and 70.2 (How to Request a Standard Redetermination) which requires plan sponsors provide instant access to their coverage determinations and appeals processes via the plan’s internet website.

Revised Sections 40.3.4 (Written Notification of Adverse Decisions) and 50.5.1 (Written Notification of Adverse Expedited Decisions) revised based on new requirement that plan sponsors include a copy of the CMS Model Redetermination Request Form (new Appendix 16) with all Notices of Denial of Medicare Prescription Drug Coverage.

Appendices 4, 12, 13 and 15 updated, a new Appendix 16 was added.  This is just a sampling of the changes.  For full information please refer to:…/downloads/PartDManualChapter18.pdf


Congress’ Sequestration Means 2% Cut for Medicare Payers and Providers

Unless Congress passes an alternate deficit-reduction package, Medicare provider payments and Medicare Advantage contractual payments will be cut by 2 percent beginning April 1, 2013 as part of the spending reductions required by the Budget Control Act of 2011.

The cuts will be applied to provider payments for services administered under Medicare Hospital Insurance (Part A) and Medicare Medical Insurance (Part B) and contractual payments to Medicare Advantage Plans (Part C) and Medicare Prescription Drug Plans (Part D), according to the Congressional Budget Office (CBO).

The sequestration percentage is capped at 2 percent for payments for individual services under Parts A and B and for monthly contractual payments to Part C and Part D providers.  Exempted from the cuts are low-income subsidies and additional subsidies for beneficiaries whose spending exceeds catastrophic levels in Part D. Other mandatory program spending for benefits and administrative costs are subject to the same reduction rate as non-exempt mandatory spending, according to the CBO.

That means about 90 percent of Medicare spending is limited to 2 percent in cuts, and 8 percent is completely exempt from sequestration. The remaining 2 percent of Medicare spending would be subject to a 7.6 percent cut in 2013 because it falls under non-exempt nondefense mandatory programs, according to the White House Office of Management and Budget (OMB).           

In a letter to Congress sent Sept. 12, 2012, the American Medical Association and more than 100 other provider lobbying organizations wrote, “The combination of the sequestration cut and looming Medicare Sustainable Growth Rate (SGR) payment cut would not only impede improvements to our health care system, it could lead to serious access to care issues for Medicare patients as well as employment reductions in medical practices.”


Healthcare Exchange (“Marketplace”) Update:

Previously known as the Healthcare Exchanges, the Department of Health and Human Services now refers to these emerging state and federally run health insurance offerings as the Health Insurance Marketplace.  (HHS) Secretary Kathleen Sebelius announced that more states are moving forward to implement the health care law, with HHS conditionally approving Iowa, Michigan, New Hampshire, and West Virginia to operate State Partnership Marketplaces, which will be ready for open enrollment in October 2013.

“HHS will continue to work collaboratively with all states to build the Marketplace,” Secretary Sebelius said.  “Working together, we will be ready in seven months when consumers will be able to use the new marketplace to easily purchase quality, affordable health insurance plans.”

March’s conditional approvals bring the total number of states that have been conditionally approved to partially or fully run their Marketplace to 24 states and the District of Columbia.  In addition, several other states have suggested their own approaches to contributing toward plan management in their Marketplace in 2014.  HHS will continue to provide all states with the flexibility, resources, and time needed to support the establishment of the new health insurance marketplace.

For more information on the new Health Insurance Marketplace, visit:

03.26.13 | Blog, CMS, Medicaid, Medicare, Medicare Advantage

MedHOK’s Technology Platform Positions CMS Comprehensive Primary Care Initiative Participants to Improve Care Coordination, Share in Savings

TAMPA, Fla. – Oct. 3, 2012 – MedHOK, one of the healthcare industry’s fastest growing software companies, announced today that its integrated care, quality and compliance platform positions Comprehensive Primary Care (CPC) initiative participants to improve coordination of care provided under the program. The CPC initiative includes 500 primary care practices representing more than 2,000 primary care physicians and nurse practitioners in seven markets across the country. 

Under the CPC initiative, the Centers for Medicare and Medicaid Services (CMS), in conjunction with qualified commercial and state insurance plans, will pay participating practices a care management fee to provide enhanced and better coordinated care to Medicare fee-for-service beneficiaries.  This includes ensuring access to care, improving management of high-risk patients, delivering preventive care, engaging patients and care givers, and coordinating care across the healthcare continuum. In addition to the management fee, CPC providers will also share in any savings they generate after two years.

“Much like Accountable Care Organizations, the CPC initiative is a way for physicians and other providers to work together with payers to enhance care coordination, which will ultimately result in improved quality and lower associated costs,” said Anil Kottoor, president and CEO, MedHOK. “Historically, the challenge has been in connecting primary care physicians with specialists to ensure everyone has the information they need to manage patients, particularly those with high risk. MedHOK’s comprehensive platform overcomes these challenges and positions primary care practices to improve coordination and share in potential savings.”  

MedHOK offers fully NCQA-certified software for HEDIS®, pay-for-performance (P4P) and disease-management-performance measures. Its comprehensive platform integrates patient information in real time and makes it immediately available to all participants in the healthcare continuum. The disease and case management modules allow primary care physicians to better manage care for high-risk patients, reducing unnecessary utilization and encouraging improved patient self-management.  Quality performance modules allow physicians and practice staff to monitor performance in real time and continuously improve quality scores.

MedHOK’s integrated platform facilitates improved clinical outcomes and care coordination while enhancing quality measures, compliance and financial performance. It accomplishes this by:

  • Providing real-time access to Star, HEDIS, P4P, and proprietary quality and performance measures, helping plans and providers to accurately monitor in real-time the data they need to achieve and maintain high-quality ratings
  • Triggering interventions when care gaps are identified, in particular for patients with multiple comorbidities and chronic conditions
  • Utilizing predictive analytics models to generate profiles based on clinical, quality and financial data for member, provider and local populations
  • Calculating risk scores for every member, enabling timely predictions of those at the highest risk and more accurate forecasting of care costs and utilization
  • Continuously monitoring for and addressing regulatory changes from CMS and state Medicaid agencies, ensuring clients stay ahead of the compliance curve

“MedHOK provides primary care practices with the end-to-end solution they need to improve coordination and care and successfully participate in the CPC initiative,” said Kottoor.”Our platform is cost-effective and can be rapidly deployed across the practice, so time and resources can be focused on what’s important—improving patient care and reducing associated costs.”

About MedHOK

Tampa, Fla.-based MedHOK has more than 23 million lives in production and expects to double that number within the next year, making it one of the healthcare industry’s fastest-growing software companies. It offers a cloud-based integrated software platform for care management, quality and compliance that enables physicians, ACOs, PCMHs, payers and TPAs to manage and measure care against national quality standards for optimal outcomes. Its innovative modular software helps healthcare organizations meet quality, care and compliance objectives across business lines by facilitating real-time information sharing with all stakeholders to address disease management and care coordination, clinical quality and utilization review, and quality and financial measures. ICD-10 compliant, HIE-ready and securely accessible on any device, the MedHOK platform is user-friendly, rapidly deployed and easily configurable for a low total cost of ownership and rapid return on investment. It holds 2012 HEDIS®, Pay for Performance and Disease Management performance measures certification.

10.03.12 | Blog, CMS, Comprehensive Primary Care Initiative, Medicaid, Medicare

MedHOK’s 360ACO® Positions ACOs to Reduce Hospital Readmissions, Benefit From Shared Savings

TAMPA, Fla. – September 5, 2012 – Accountable care organizations (ACOs) that deploy 360ACO® from MedHOK, one of the healthcare industry’s fastest-growing software companies, are well-positioned to reduce hospital readmissions and meet quality outcomes as required to benefit from shared savings under the Centers of Medicare and Medicaid (CMS) program.

Read more

09.05.12 | ACOs, CMS, Medicaid, Medicare, Press Releases

PPACA, Medicaid and Medicare Updates


Governors question PPACA progress

Governors are increasingly expressing frustration with the lack of clarity related to setting up the state Exchanges and Medicaid expansion under the Patient Protection and Affordable Care Act (PPACA).  This was made clear at a July closed-door meeting in Washington, D.C. of the National Governors Association (NGA).  The NGA compiled about two dozen threshold questions involving PPACA’s Exchange and Medicaid expansion rollout.  Read more

08.07.12 | ACOs, Blog, CMS, Medicaid, Medicare, PPACA

Medicaid Becomes Political Football

Last week, we discussed the budding debate over the Medicaid Maintenance of Effort (MOE) and whether the mandate remains in force in light of the Supreme Court’s ruling regarding the Patient Protection and Affordable Care Acts (PPACA). The ruling effectively barred the federal Department of Health and Human Services (HHS) and Centers for Medicaid and Medicaid Services (CMS) from penalizing states if they do not expand Medicaid pursuant to health reform. But the MOE requirement, which stops states from reducing eligibility in the program through 2014 for adults and into 2019 for children, was left in limbo. As we told you, the Congressional Research Service (CRS) concluded that the MOE is still in force. Read more

07.31.12 | Blog, CMS, Health and Human Services (HHS), HHS, Medicaid, Medicare, PPACA

PPACA and Medicare Updates Part 2

Medicare FFS Hospital Readmissions Aren’t Dropping

Despite an intense effort to reduce readmissions at hospitals, new data from the Centers for Medicare and Medicaid Services (CMS) show that seniors and disabled in the Medicare program are still returning to hospitals at an alarming rate.

CMS says that readmissions are a major cost driver in the Medicare program, resulting in $17.5 billion in additional inpatient spending each year. About 10 million beneficiaries are readmitted each year within 30 days. Last week, CMS announced that its latest three-year trend study (from July 2008 through July 2011) showed that 19.7 percent of heart attack patients were readmitted within 30 days of discharge, a drop of only 0.1 percentage point. For those with congestive heart failure, 24.7 percent were readmitted in the same timeframe, again only a 0.1 point decrease. Readmissions for pneumonia were 18.5 percent, a 0.1 percent increase. Read more

07.24.12 | ACOs, Blog, CMS, Medicaid, Medicare, PPACA

PPACA and Medicare Updates

Medicaid Expansions And Exchanges In Limbo

As we told you last week, in light of the Supreme Court’s declaration that states couldn’t be penalized for not implementing the Patient Protection and Affordable Care Act’s (PPACA) Medicaid expansion, advocates and the federal government are worried that many states will refuse to implement the higher income thresholds or only partially adopt them. Some states, too, oppose implementing the state Exchanges. This throws PPACA’s goal of a uniform healthcare access and subsidy system into limbo. Read more

07.17.12 | Blog, CMS, Healthcare Reform, Medicaid, Medicare, MedPAC, PPACA

Supreme Court PPACA Fallout

The 10 days since the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA) have been a combination of frenzied activity on the part of the federal government and anxiety for states and many stakeholders.

With polls still showing a public bitterly divided over health reform, the Obama administration and the Department of Health and Human Services (HHS) quickly went on the offensive to show momentum toward implementing PPACA.  HHS Secretary Kathleen Sebelius announced new grants to aid states in implementing the Insurance Exchanges, which must be operational by January 1, 2014.  In reality, HHS has said the Exchanges need to be certified as ready in early 2013 and a majority of states are at risk of missing the deadline. Read more

07.10.12 | ACOs, Blog, CMS, Health and Human Services (HHS), Healthcare Reform, HHS, Medicaid, Medicare, Medicare Advantage, PPACA

SCOTUS Says PPACA Is In Good Health

While we knew predicting a Supreme Court (SCOTUS) ruling based on questions asked by justices during oral arguments was fraught with peril, we nonetheless gave into temptation and predicted that the high court would scuttle at least the individual mandate and perhaps closely linked provisions of the Patient Protection and Affordable Care Act (PPACA). As we all know now, SCOTUS shocked many last week when it ruled 5-4 that all aspects of health reform (minus one provision) pass constitutional muster. In an even bigger shock, Justice Anthony Kennedy sided with conservatives in voting to overturn PPACA, while Chief Justice Roberts provided the deciding vote with the four liberal members to uphold PPACA.

Read more

07.02.12 | ACOs, CMS, Healthcare Reform, Medicaid, Medicare, PPACA