SS&C Blog

Two-step strategy for capital generation and plan modernization

Breaking free of the chicken-egg conundrum

Thursday, August 23, 2018 | By Adele Allison

Two-step strategy for capital generation and plan modernization

In May 2018, America’s Health Insurance Plans (AHIP) published an infographic showing just 2.3% net profitability for commercial health plans.1 As I travel around the country speaking to plan executives, I can confirm just how real these narrow margins are, particularly for small-to-medium insurance companies. With little capital to invest in modernization, these plans can become stymied. No margin means no new, progressive infrastructures necessary to meet growing state and federal value-based payment (VBP) mandates, making the drive for revenue and ability to remain competitive seemingly impossible. It’s literally a chicken-egg situation, and no matter which one came first, it’s important to break the cycle.

Specifically, here’s what we have heard. VBP is complicated but essential to remaining competitive and/or complying with regulatory requirements. Infrastructure modernization is vital to achieve transformation and sustainable results. Finding the dollars and internal resources to build a new, solid foundation is a difficult step when margins are limited. Squeezing additional savings from administrative cost reduction provides diminished returns; real plan costs are in medical loss.

The growing push to VBP is undeniable. Recently, the Centers for Medicare & Medicaid Services (CMS) announced they plan to expand the Medicare Advantage Qualifying Payment Arrangement Incentive (MAQI) under the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA), creating strong alignment between traditional and Medicare Advantage provider reimbursement strategy to accelerate VBP. On the Medicaid side, 39 states now use managed care organizations (MCOs) for member coverage, with 29 states reporting 75% or more of their beneficiaries are enrolled in these plans.2 States are leveraging these MCOs to increase VBP by requiring social need screening, care coordination, and alternative payment models for provider reimbursement.3

For health plans, the shift from fee-for-service to alternative payment requires a technical (and cultural) change from transaction-based payment to analytic-based payment. Plans must be able to measure provider performance, member satisfaction, and outcomes; and price claims according to acute or condition-based episodes and/or population-based payment models that incorporate measurable health value.

How do you get there? DST Health Solutions has developed a two-step solution to create revenue and modernize for VBP.

Step 1: Plans must optimize medical cost reduction

Yes, advanced analytics are essential to the long-term path forward, but first a plan must access untapped revenue potential in the claims data it already has. By analyzing “small data” to identify probable targets for medical loss improvement, you can measure and identify incremental areas for proactive management. This can result in cumulative revenue that makes modernization investment possible.

But what plan has the time and resources to chase down small opportunities for what would seem to be diminutive return when more pressing matters are priority? This is where DST Health Solutions can help. DST Health Solutions offers Specialty Services Management to direct the entire program. Our experts can target and act on seemingly small areas (such as Durable Medical Equipment (DME), imaging, or medical pharmacy) for medical loss reduction, potentially adding up to millions in overall savings.

Step 2: Use medical loss reduction revenue to actualize modernization

Dollars and resources gained from specialty service improvements can be redirected to a rapidly emerging economic future that requires analytic-driven value-based payment over transactional-based payment. DST Health Solutions offers system-agnostic, flexible VBP services and infrastructure including:

  • Consulting to identify alternative payment arrangements (APM) that make sense for your market, your providers, and your beneficiaries.
  • Educational services to assist in cultural transformation.
  • Pricing technology for APM arrangements, including episode payment models (as a service).
  • STARS performance and analytic tools that include the ability to deliver feedback to your providers.

Contact us to learn more. Our two-step strategy is designed to help you optimize your resources and increase margins, which can help fund investments in modernization.

1 AHIP, “Where Does Your Health Care Dollar Go?” May 22, 2018

2, 3 Kaiser Family Foundation, “50-State Medicaid Budget Survey for State Fiscal Years 2017 and 2018,” Oct. 19, 2017