LeadingAge Magazine · March-April 2019 • Volume 09 • Number 02

The Care and Feeding of Networks

March 14, 2019 | by David Tobenkin

Provider networks are invaluable for aging services providers, as regulatory and market pressures are increasing the impetus to join them. Here are insights from some network managers.

The managed care train has left the station and is gaining speed, leading many providers to band together and rely upon managed care networks (MCNs) to address the quality, cost, and administrative challenges presented by a new, more complex health care environment.

While providers have joined MCNs to jointly negotiate service contracts with payers for a long time, regulatory and market pressures are increasing the impetus to join. Payers, led by the U.S. government itself, are requiring that providers demonstrate efficiency, effectiveness, and caps on charges in order to be paid.

A more complex and exacting health care environment leads to the need for more sophisticated health care negotiators and coordinators, says Steve Wermuth, a partner at Columbus-based Strategic Health Care, Inc., which serves as network manager for 4 MCNs representing 254 organizations in Ohio, Indiana, Illinois, and Iowa.

“Payer expectations are increasing rapidly,” Wermuth says. “It is a real challenge for our members to get away from fee-for-service to managed care, given they may have been doing the former for 30 years. We are changing the delivery model and the way they are paid. That is a difficult adjustment for them and for us.”

The collective power of MCNs can help address those challenges, says Bill Knutson, chief executive officer of CareChoice Cooperative, a Minnesota-based MCN with 21 nonprofit organizations that operate 43 nursing homes and 65 independent housing and assisted living facilities.

“A network has the opportunity to have consistent dialogue, and the ability to satisfy particular payer desires, such as a certain geography or class of patients they want to deal with,” says Knutson. “CMS [the Centers for Medicare and Medicaid Services], which sets payment standards for Medicare Advantage, has expectations for performance that have increased significantly. They are ultimately driving a payment reform model that is value-based. Medicare standards are trickling down to others.”

A Host of Benefits

MCNs like CareChoice act as an interface between their caregiver members and managed care organizations like accountable care organizations, Medicare Advantage plans, and other care purchasing groups.

MCNs provide a wide variety of benefits. “In Ohio, we surveyed our members after 3 years and the common answers regarding what they got out of being in the network were, first, ‘You got me into contracts I could never get into before on my own,’ two, ‘You got me better rates,’ and, finally, that the network took a huge administrative burden off their plate, because [it] takes care of tasks such as contracting, contract management, staff training, organizing and leading committee and board meetings, credentialing, answering payer questions and chasing payments down,” Wermuth says.

Benefits also include the sharing of best practices and efforts to increase clarity and efficiency in operations, says Nichole Pelerine, executive director of CareChoice. CareChoice offers a data enterprise tool to which members submit data for benchmarking and performance.

“Our members share clinical and financial data with confidentiality,” Pelerine says. “When you operate efficiently, you will be easier to do business with and you will probably get the right payment for the right services. Billing each payer for managed care is a unique process, and payers pay differently. We keep abreast of everything in the marketplace, and our job is to […] keep them ahead of what is happening.”

Wermuth says MCNs also work with members to improve care results and quality of life while controlling costs, by ensuring the right care is delivered at the right location at the right time.

For the networks his organization manages, such care is measured through a dashboard that tracks different metrics of interest to payers over a 13-month period, including some measures required by states for purposes of Medicare and Medicaid compliance, Wermuth says. Key measures common to many states are 30-day rates of readmission, given that going to the emergency room, receiving care, and going back to the nursing home may cost $2,500 to $3,500, while readmission to a hospital is often a $25,000 expense, he adds.

When Joining Makes Sense

Wermuth says that for such networks to represent a good value for members, states generally need a 30 percent penetration of Medicare Advantage, dual eligible plans, Medicaid managed care plans and special needs plans such as I-SNPs. Additional new networks may be added. Wermuth says he is discussing creation of additional networks, including Washington state and Texas.

For many providers where networks exist or may make sense, figuring out what services they can provide and how these match up to payment networks and relevant performance expectations is an important first step in deciding to join, say Pelerine and Knutson.

Some networks have quality requirements, notes Dana McHugh, principal, Health Management Associates, who represents the Florida Association of Homes for the Aging Health & Services Corporation (FAHA H&S Corp.), a MCN subsidiary of LeadingAge Florida that includes 42 percent of the LeadingAge Florida members. Most of the FAHA H&S Corporation’s members are nursing homes and assisted living communities within Life Plan Community campuses. Membership requires a CMS 3-star or better rating of its members, McHugh says: “Health plans are now tracking star ratings. The quality performance of a provider network is important as it impacts [its] star rating. Health plan star ratings drive enrollment and revenue.”

Requirements for Wermuth’s 4 networks include participation on quality and contracting committees, submitting data on a monthly basis, being current on a quarterly basis with data submission into the quality program of the network, and being a member in good standing with the LeadingAge state partner.

Wermuth says all 4 of his networks are open to new members and that none screen members for acceptance based on quality. On the other hand, Pelerine says joining a network is not mandatory, and her organization has no drive to add members.

Dollars and Sense

While not cheap, the costs of participation in such networks can be easily recouped, Wermuth says. “One contract got its members an average increase of $25/day per patient/resident; another member responded, ‘You got me in a contract that increased my revenue over $100,000 in the first year, which more than paid for my $10,000 annual dues to the network,’” Wermuth says.

Wermuth says costs for the 4 networks Strategic Health Care manages average roughly $6,500 per year per member. Network members determine their own dues structures. In Ohio, for example, the dues structure is a flat fee per nursing facility, a fee per bed, a fee per assisted living bed, a flat fee for a certified home health agency (Medicare), and a flat fee for an adult day program. Other networks structure their cost components differently.

The Changing Landscape

A host of federal and state regulatory changes are increasing the scope and impact of managed care. One is that special needs plans have been made permanent, causing many managed care plans to offer these types of services, Knutson says. CMS reforms requiring value-based purchasing and quality standards also push Medicare and Medicaid providers to implement managed care.

CMS is also increasingly gathering and disseminating quality scores for networks as well as communities, to enable consumers to make informed decisions.

Changes by CMS are also changing compensation. The conversion from a Resource Utilization Group-based reimbursement to the Patient Driven Payment Model (PDPM) in October 2019 will make fee-for-service look more like managed care, Wermuth notes.

Some states were already moving in this direction. McHugh notes that LeadingAge Florida expanded FAHA H&S Corp. in 2013, after Florida required the Medicaid long-term care population to be shifted from fee-for-service to managed care. “LeadingAge Florida realized how significant this change would be for its members,” McHugh says. “The network assists members’ ability to adapt to the managed care environment while maintaining viability and profitability.”

Another important issue in some regions is the advent of for-profit competitors. “Minnesota always restricted managed care organizations to nonprofits, but that was recently changed by law,” Knutson says. “There is now a for-profit venture between the biggest health care network, Allina, and Aetna. They never used to provide services here and now they are in the marketplace, too. This sets up the potential of premium wars to set up enrollments and conflicts over reimbursement and enrolling people faster. It will definitely create disruption in our market.”

A steady evolution toward greater competition and assumption of value-based contracting with some level of risk by providers is the likely long-term trend, McHugh says. “It may take a while, but you are seeing value-based with shared savings in parts of the country,” McHugh says.

McHugh says LeadingAge members may be able to function better in that paradigm than some of them think. “[Life Plan Communities] are uniquely situated to take advantage of value-based contracting with some level of risk,” McHugh says. “The infrastructure and the ability to provide numerous types of services in their continuum, such as primary care, home health, urgent care and social services, gives [them] the opportunity to help the health plans improve quality, moderate costs and grow the business.”

David Tobenkin is a freelance journalist in the greater Washington, DC area.