How will Proposed Changes to CMS Telehealth Reimbursement Affect Adoption?

Key Takeaways

  • CMS-proposed rule changes extend Medicare Advantage and Part D plan coverage for telehealth services starting in 2020
  • Proposal includes enhancements to the Star Ratings methodology, which include updating the cut-point determination methodology as well as adjustments for Star Ratings in times of uncertainty, such as hurricanes.
  • Under the proposed changes, starting in 2019 in Medicare FFS, CMS will reimburse for virtual check-ins, evaluation of patient submitted photos, and prolonged preventive services regardless of patient location and care facility.

What the Rule Changes Mean

doctor cares for medicare patient via telehealthOn Friday, October 26, the Centers for Medicare and Medicaid Services (CMS) announced several rule changes that affect how telehealth services will be covered under Medicare Advantage (MA) and the Medicare prescription drug program (Part D). These changes are in direct response to the Bipartisan Budget Act of 2018, which eliminated historical restrictions on telehealth reimbursement, and are intended to “improve quality of care and provide more plan choices for MA and Part D enrollees.”

Also included in the proposed rule changes are adjustments to methodologies and processes that should improve access to care, as well as recover funds from payments improperly applied to insurance companies. We view this as a positive development, especially as it relates to current and projected physician shortages. Greater reimbursement should allow for providing some basic services through telehealth applications, it is going to equip providers with the ability to “do more with less.”

Our recent report, Telehealth Beyond the Hospital, provides a detailed analysis of the telehealth market as a whole, but we felt it prudent to prepare a supplemental post to give a brief examination of how these rule changes could potentially impact the provision of healthcare services.

Easing Reimbursement via Classification

Telehealth services have previously seen limited implementation by MA plans because they have been traditionally classified as services covered by “supplementary medical insurance.” These new rule changes shift the classification of telehealth services to the “basic benefits” category. We have witnessed lagging adoption rates of telehealth technologies over the last several years, and view the inclusion of these services into the basic benefits category as a necessary step to increase their rate of use.

CMS expects that the inclusion of telehealth services in the basic benefits category will spur more MA plans to offer these benefits beginning in 2020, and increase their support of these services in subsequent years. This isn’t happening in a vacuum, and is in line with the broader push to promote telehealth services as viable alternatives and supplements to traditional care options. The move towards parity between physical visits and telehealth services has shown to increase reliance on telehealth services before: Michigan has seen a “77.5% increase in Telemedicine encounters after supporting service parity in telemedicine.”

This isn’t happening in a vacuum and is in line with the broader push to promote telehealth services as viable alternatives and supplements to traditional care options.

Driving Near-Term Adoption: Patient Satisfaction and Ease of Access

Recent surveys have shown that patients are growing more and more amenable to remote care options, especially if it reduces their out-of-pocket costs. The opportunity cost of non-reimbursed care is one of the primary barriers to provider adoption of telehealth services, and by removing this barrier we will hopefully see further alignment between providers and patients on this issue.

We see this alignment as a part of the greater industry shift towards value-based care (VBC). As we noted in our Patient Relationship Management (PRM) Market Scan Report, engagement was one of the areas where adoption of these new technologies for VBC was exceeding expectations. Increased reimbursement for telehealth should continue this positive trend and hopefully allow for the realization of some PRM benefits.

We predict that the CMS rule changes will encourage diversified managed care organizations (MCOs) to expand their current commercial telehealth contracts to their MA business and also potentially drive the adoption of telehealth offerings among that trend.

Impact on Providers and Vendors

These new rule changes have a large potential upside for all players in the telehealth market, but it is important to note that telehealth adoption has been incremental over the last several years and there is no reason to predict a stark diversion from that trend.

We predict that the CMS rule changes will encourage diversified managed care organizations (MCOs) to expand their current commercial telehealth contracts to their MA business and also potentially drive the adoption of telehealth offerings among that trend.

Vendors looking to capitalize on this incremental market growth are going to have to navigate the differing needs of commercial and Medicare providers. For commercial providers, telehealth is seen primarily as a cost-savings and efficiency tool. For Medicare providers, they are looking most closely at telehealth as a way to promote post-acute care management and patient engagement. To effectively sell to Medicare providers, vendors are going to have to tailor their tools and pitches to hit on the appropriate pain points.

Conclusion

As the costs of chronic condition management skyrocket, looking for innovative telehealth solutions is of paramount importance.  Reclassification as basic services and simplification of the reimbursement process will certainly help vendors supplying these solutions overcome potential buyer uncertainty on the ROI of their products.

The most important takeaway from these rule changes from an HCO perspective is that the future of value-based care is arriving quickly. HCOs need to prepare for this future by refreshing their care delivery strategies, especially as it relates to primary care. The primary care environment is changing, and HCOs need to closely examine what they need to provide in terms of physical locations, providers, and services for their patient populations. They then need to craft strategies to meet these evolving requirements.

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Did You Know?

How to Succeed with a Provider-Sponsored Medicare Advantage Plan

By Matt Cox (Chief Marketing Officer, Lumeris) and Nigel Ohrenstein (Senior Vice President and head of Market, Lumeris)

doctor consults with Medicare Advantage patient

Health system and health plan leaders across the country are asking the same question: how will our organizations survive and thrive in a value-based world? As the shift to lower-cost settings accelerates and the population becomes older and sicker, organizations are seeking new ways to manage costs, generate income and control quality.

For many organizations, launching a Medicare Advantage (MA) plan paves the way for value-based care models that reward delivering better care at lower costs by combining clinical and financial expertise. As enrollment in MA continues to outpace traditional Medicare enrollment – with national MA penetration growing from 30 to 50 percent in the next 10 years – organizations must have a strategy that enables success in the future.

Benefits of a Medicare Advantage plan

MA is increasingly viewed as a potential growth area for organizations. While launching a plan certainly carries risk, it also offers significant upside for providers and payers to successfully manage the health care needs of members.

With an average annual premium of $10,000 per member according to a Lumeris study, MA enables provider-sponsored plans to manage the risk of a population. Access to comprehensive claims data can be used to identify high-risk patients and areas of high utilization, supporting an organization’s population health efforts and steering patients in-network. With aligned incentives, organizations can innovate and invest in care delivery with tools and workflows that support high-value, appropriate care.

Further, MA’s sophisticated risk adjustment methodology supports premium payments that reflect the expected cost of providing medical care to each member, including those with complex conditions. Proper risk adjustment requires providers to capture diagnoses accurately and completely to support reimbursement.

Finally, with Star ratings, well-managed MA plans that earn 4- to 5-Star ratings can attract more members and revenue through enhanced benefits. Highly-rated plans receive performance bonuses that bring in an extra five percent a year, which are used to provide additional benefits to members.

Consider creating a plan built around a collaborative model: one that aligns incentives, bolsters the provider-payer-member relationship and enables delivery of high-quality, cost-effective care.

Building blocks for a provider-sponsored plan

Establishing a provider-sponsored MA plan is a significant undertaking. Given the large investment of time and money, organizations considering launching a plan must ensure they have several foundational elements in place. Consider creating a plan built around a collaborative model: one that aligns incentives, bolsters the provider-payer-member relationship and enables delivery of high-quality, cost-effective care.

Organizational and market strategy

Before launching a plan, organizations must evaluate their tolerance for risk and ability to capitalize said health plan. A strong brand reputation in the market is obviously crucial, but additive resources and significant infrastructure are also required. Organizations should also consider market dynamics, population growth and reactions from key players – competing systems, provider groups and other payers – and how these factors impact their strategy as a differentiated plan offering in the market.

Operational experience

Considerable infrastructure is required for claims processing, actuarial analysis and utilization management, among other payer functions, which can be leveraged from working with a collaborative payer or operating partner. In MA, expertise in Star ratings, risk adjustment, sales and marketing, compliance and plan design add further complication to successful operations. To build the right foundation, provider-sponsored plans must focus on enabling the provider-payer-member relationship, often requiring innovative processes on everything from data transparency and aligned incentives, to coordinated care management programs and shared governance.

Engaged network

Core to a collaborative model is ensuring organizations are aligned. Managing a health plan requires organizations to focus on improving patient outcomes and monitoring the entire population, not just the patient in front of them. Fostering the right network and governance, aligning incentives to create mindshare, sharing best practices and information, and supporting new workflows and behaviors are all critical to success in value-based care delivery.

Partnering for success

Before launching a collaborative MA plan, organizations must assess capabilities to identify gaps in knowledge, expertise and operations. For most organizations, working with an operating partner is more effective than building internal MA competencies from the ground up. Finding a partner with skill and experience in launching a collaborative plan can enable organizations to gain a competitive advantage more quickly. It can improve the likelihood of success while limiting risk and enable providers to focus on their core strength of delivering high-quality, high-value outcomes.

One example of bringing these necessary capabilities together is the newly announced collaboration between Cerner, a global leader in healthcare technology, and Lumeris, an award-winning health plan and value-based care managed services operator. Under the relationship, the companies will provide a suite of offerings under the name Maestro Advantage™, designed to enable health systems and health plans to drive success in value-based arrangements through population health service organizations or provider-sponsored plans. The offerings combine Cerner technology and Lumeris operational services aiming to streamline redundant processes that burden members, payers and providers, including lengthy claims processing and reimbursement cycles, and obstacles to sharing data and records across any electronic health record in the network.

This post originally appeared on September 19, 2018, as the second in a series of sponsored guest blog posts on our Convergence conference blog. 

Humana-Walgreens Partnership: Primary Care Focused on Medicare Advantage

Key Takeaways:

  • Humana and Walgreens jointly announced a partnership for Human to operate senior-focused primary care clinics in Walgreens stores.
  • This comes as a response to a clear industry need for new “front doors to care” and other investments in retail health by competitors to both companies.
  • We predict these sorts of deals and services will expand in number and into other regions with these and other companies in response to unsustainable healthcare spending.

 

humana walgreens partners in primary careMedicare Advantage (MA) continues to show the most robust growth of any line of business for health insurers. Overall MA growth was 7.8% year over year in July 2018, reaching 21.4 million, while Part D enrollment grew to 25.5 million. To better serve these members, health insurers are considering several strategies – one of which is operating primary care clinics that exclusively focus on Medicare patients.

Overview

On June 19, Humana (NYSE: HUM) and Walgreens (NASDAQ: WBA) jointly announced a partnership under which Humana will initially operate two senior-focused primary care clinics inside Walgreens retail stores in the Kansas City, Missouri area. The clinics will open under Humana’s Partners in Primary Care banner; they will join four existing Kansas City area clinics, opened in 2017, which share the same name. The two co-located clinics are slated to open in the fall and occupy ~2,500 square feet (~25% of an average Walgreens store).

These clinics will have their own separate entrance, with an exit into the Walgreen’s pharmacy. While the companies are not sharing details on the nature or economics of the partnerships, Humana did note that it will operate the clinics and staff the doctors and accept a variety of Medicare coverage, including fee-for-service, MA, and Medicare Supplement plans. The clinics will serve seniors exclusively; Humana expects they could take 3-4 years to reach capacity. The companies noted that the collaboration could expand into other markets over time.

This partnership shows how both Humana and Walgreens are focusing more heavily on their longer-term clinical strategy and responding to other competitors “front door to care” strategies.

Outlook: Humana

For Humana, this pilot is a logical extension of the company’s longstanding commitment to an integrated care model that more closely aligns primary care, pharmacy, in-person health plan support, and other services for Humana’s MA and Part D members. It also follows recently acquired minority/joint venture stakes in home health and hospice providers Kindred and Curo.

Humana believes the convenience of the retail pharmacy model should help make primary care more accessible to seniors. In addition to the co-located Partners in Primary Care clinics, Humana representatives will work in select other Walgreens stores to provide general assistance on health-related services to Humana Medicare members and other customers. These in-store “health navigation” services will be available at no cost to members inside the Walgreens pharmacy store (as opposed to the co-located clinic).

The Partners in Primary Care model offers integrated services that “go beyond addressing acute and immediate health issues, and [focus] on developing long-term relationships with patients living with chronic conditions.” In addition to the four wholly owned, standalone clinics that opened in Kansas City in 2017, Humana operates two clinics under the Partners in Primary Care banner in Greenville, SC and another in Gastonia, NC.

All of these providers are risk-bearing for Humana, as will be the locations co-located with Walgreens; the latter may or may not bear risk with other payers, depending on the contracts struck with third parties. Importantly, the collaboration with Walgreens does not preclude Humana from striking any other potential arrangements with other retailers. Humana will also continue to work with Walmart on a partnership that encompasses a value-oriented, co-branded Medicare Part D plan as well as other in-store consultative efforts.

Outlook: Walgreens

Walgreens has recognized the need to make changes to its store format and is exploring various partnerships that will add new services. This announcement with Humana appears consistent with a strategy of incremental, capital-light partnerships with other healthcare services providers to convert its stores away from retail toward a more comprehensive healthcare offering.

Others within the healthcare continuum have received more attention for their efforts to provide a more convenient location to access healthcare services – namely CVS Health with its acquisition of Aetna. But Walgreens has been actively growing its suite of healthcare services that can be offered both inside and outside the retail pharmacy: Partners in Primary Care with Humana, MedExpress with UnitedHealthcare, LabCorp PSCs, Walgreens Hearing, Walgreens Optical, and its new Find Care Now telehealth service.

In addition, Walgreens is piloting a set of differentiated service offerings in the Gainesville, FL market. These include Walgreens Plus (a subscription-based, in-store savings program with an option for free same-day prescription delivery) as well as an in-store partnership with Sprint for phone purchase and activation.

It appears that any new store concept is very much a work in progress, and Walgreens expects to update investors on its store strategy in about a year. We expect Walgreens to test the “Partners in Primary Care” concept in these two test stores before making a decision to roll it out more broadly, as with its other pilots.

partners in primary careLooking Ahead

We see four key questions about the Humana-Walgreens partnership.

Will patients come?

Humana has stated that it could take 3 to 4 years for the two new clinics to reach capacity. Humana did not provide details on how it will advertise these new clinics to new or existing Humana MA beneficiaries, what types of MA beneficiaries are likely to enroll in these clinics, and how it might convince MA beneficiaries to switch from the long-term relationships they have with their PCPs. These clinics might be a good fit for certain Humana MA beneficiaries (e.g. patients within walking distance of a Walgreens or patients without a regular PCP) – but it would not be surprising to see these clinics struggle to reach capacity unless they hire an existing PCP or two who can bring a large patient panel of MA beneficiaries.

Will it actually bend the cost curve?

Assuming a patient panel of 500 to 700 MA patients per physician at these new clinics, they are likely to only serve 1,500 to 2,000 Medicare patients in addition to the four existing Partners in Care clinics in the Kansas City area. Humana currently supports more than 65,000 MA and Part D prescription drug members in the Kansas City area. Will those few thousand beneficiaries regularly seeking care at Walgreens be enough to decrease hospital admissions and ultimately the medical loss ratio?

How quickly will the model expand?

While Humana has acknowledged that retail could be a powerful distributor of provider capabilities for its MA members, its view that model as still unproven. Humana expects to experiment with smaller, more targeted retail initiatives vs. broader ones, at least in the near term. Walgreens as well appears to be in no rush to rapidly expand this concept either, with its pilot starting at two sites and expected to last at least 12 to 18 months.

Will they build or buy an EHR?

It has not been disclosed if Partners in Primary Care is using a commercially available EHR or choosing to build its own product. Some primary care clinics focused on the MA population, such as One Medical, use a commercially-available EHR (eClinicalWorks). Others such as ChenMed and Iora Health have chosen to build much, if not almost all, of their own IT offerings, including a proprietary EHR. The startups that have built proprietary solutions felt that commercially available EHRs were not well-suited for their patient populations for several reasons (such as insufficient HCC coding and documentation support); as long as they only served the Medicare population, they found they were better off building and maintaining their own EHR.

 

We expect this type of coordinated care services model for MA beneficiaries to expand to other geographies over time. While this partnership is immaterial to either Walgreens’ or Humana’s financials over the next few years, it shows how both companies are focusing more heavily on their longer-term clinical strategy and responding to other competitors “front door to care” strategy for MA – especially CVS-Aetna and UnitedHealthcare-WellMed.

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