014 - Money Tree Series #2 - Medicare Advantage Plans - How THEY Make Money

October 19, 2021 Coach JPMD Season 1 Episode 14
014 - Money Tree Series #2 - Medicare Advantage Plans - How THEY Make Money
Show Notes Transcript

In this Money Tree Series Episode #2, Coach JPMD discusses 3 things healthcare providers should know about Medicare Advantage payments from the Center for Medicare and Medicaid Services (CMS).  Private companies contract with CMS to provide medical services for patients enrolled in Medicare. These companies are entrusted with hundreds of millions of taxpayer dollars and healthcare providers have the opportunity to care for patients and generate a good revenue stream in this practice niche. 

Coach JPMD uses information gathered from MedPAC and has created a free link to the resource document.  

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Show Notes

Intro  0:00  
Welcome to the Practice Impossible Podcast where your host Jude A., Pierre MD, also known as Coach JPMD discusses medical practice topics that will guide you through the maze that is the business of medicine, and teach you how to increase profits and help populations live long. Your mission, should you choose to accept is to listen and be transformed. Now, here's your host, Coach JPMD.

Coach JPMD  0:25  
So welcome to the Practice Impossible Podcast. And we're into the Money Tree Series number two and talking about HMOs. And so I have to say that life happened last week, and I wasn't able to release the second money tree series. So it's being released this week. So thanks for listening. And I hope to release money tree series episodes every Tuesday, and still release the podcast episodes every Thursday and thats every other Thursday. And today, we're talking about the HMO or the trunk of the tree, and how this all works in a Medicare Advantage organization. So two weeks ago, we talked about the Center for Medicare and Medicaid Services. That's the root of the tree, and how Medicare receives its monies to fund health care in this country for majority of the 65 and older patients, and how Medicare funds the 65 and older or the disabled or those that are in dialysis. And it was enlightening to me to understand that most of the Medicare funding is actually through a Medicare trust funds that are were set up by Congress and through taxes and through medical, or through payroll taxes. And through federal taxes. 

We have a fund that's able to fund health care in this country. But how does an HMO or Medicare Advantage company receive its payments? Well, it comes through the center for Medicare and Medicaid Services. So insurance companies receive those funding's through by either providing services as a local organization. So you may be in a county where you have a large penetration of a particular insurance company. And those insurance companies are only local to that state, or local to that county. And then there are regional insurance companies and regional. When I say regional, that may be a whole state or whole region of the United States, let's say the southeast region or the North Atlantic region, and those insurance companies receive funding in somewhat of a different way. But for the most part, the government pays those insurance companies to provide care instead of providing direct payments to health care providers. Most physicians receive money through Medicare by providing a service and receiving monies directly from Medicare in certain regions. And certain localities. 

Those insurance payments can be received through Medicare Advantage companies that receive monies from Medicare, and those insurance companies pay the providers based on contracted rates. So let's focus on Medicare Advantage. Because that's what we do, we try to teach you as much as we know about Medicare Advantage companies. And so CMS payments are 100%, based on a bid that the insurance companies provide to the government that tells the government or suggests to the government This is how much they think that it's going to cost to take care of their population of patients. And then there is also what we call a benchmark that the government uses based on previous data that they have on that population of people in either that county or that region. And then CMS calculates the risk scores for that patient population, and multiplies it by that base rate and benchmark. Now there are other characteristics that CMS uses to pay those HMOs that include diagnosis is like we just talked about with HCCs. And I go in depth into that in the llama course by age, by sex, my Medicaid status, and also by the disabled status as well. So imagine CMS funding as being a pie of payments to payers, that's based on a whole bunch of different factors. 

And those factors are based on a patient population and the sick of the population, the higher the payments to that HMO. Now a couple of other things that factor in are the quality scores, the better the quality of an HMO, by preventing care by having patients perform some of the preventive care measures that are required by CMS, those insurance companies may receive a higher payment pin in the document that I'll reference in a little bit. It also describes what we call a rebate to those health plans based on their star ratings. So what I'd like to do with this episode today is to give you three things that you should know as providers that could make or break your practice. And so the number one thing the first thing I want to talk about is that it is complicated. There are accountants that actually trained to figure out these numbers. And, you know, I thought about bringing one of those, those accountants on this podcast, but I think it'd be a great episode to help you fall asleep, because it is boring, those number crunching accountants that's all they do is crunch numbers and look at populations and statistics and think about your statistics classes and, and how boring they were, at least they were for me, I wouldn't do that to my audience. 

So I just want you to know that it is complicated. And I'm going to try to kind of make it simple and give you the basics about what HMOs do in terms of the money tree that we've been talking about. Now, I know it's complicated, but the more you know about it, the better choices you can make about your practice. So in the show notes, I'm going to put a link to a document that I use to help prepare for this episode. And it's a document created by med pack. And med pack is a Medicare payment advisory committee as an independent congressional agency that helps that was established in 1997, to advise Congress on issues affecting Medicare, and every year, they produce a document. And that document is called the Medicare Advantage payment system. And they basically revise it every year, I believe in October. And it tells Congress where Medicare Advantage plans stand. And that's a great document, it kind of goes into the weeds a little bit. That's kind of where I got some of this information about how Medicare Advantage companies get paid. So the second thing you should know about Medicare Advantage plans, and how they get paid is that it can be regional or local, and kind of discussed that a little bit at the beginning. 

So think of it as a mom and pop store. So you've got a mom and pop stores that are local, they provide services to a local population, they know the members or they know their clients very well. And they provide the things that they would need in that local area. I think they give better service because they have better relationships with their clients. And so it's what we do in Hernando County, in Florida. So in Florida, we have a couple of local HMOs that at one point, we actually helped to startup, we provided networks for them. And it was great, great to see the growth, great to see patients who actually were appreciative of some of the things that the HMOs, the local HMOs did for them, that the regional ones wouldn't do, then of course, there are drawbacks to being local, and that some of the higher end services were not able to be provided. But then we lived in a city that was about 45 minutes, or I live in a city that's about 45 minutes away from the from Tampa, and that allows patients who are in a local HMO that don't have the services of a regional HMO, to be able to go out of network and to have services that they would not have been able to have in a local HMO. But yet, if things arise, if patients have complicated diagnosis, or complicated cancers, they were able to go to one of our tertiary care centers without an issue. 

So the nice thing about going to or providing services for local mom pop or local HMO is that you can, it's easier to negotiate with them on payments and negotiate on things that you may be providing for that local population that a larger HMO may not have or be willing to pay for. So remember that HMOs bring in a lot of money, and so don't shortchange yourself. So even though you are you may not understand negotiating and understand all of these things that we are talking about here, we obviously want you to understand them. But understand that Medicare Advantage companies make a lot of money, and a local ones may be able to help grow your practice. And you can negotiate better with them as opposed to regional HMOs, where you have a large organization that is looking to expand networks in a region, they may not see you as a local provider being able to provide the services that they may want to go to a large organization, because then they don't have to deal with the individual physicians. So there are some some drawbacks to being part of a regional HMO versus a local one. But just know that there is a difference. 

I think one of the major differences is that specialists get paid fee for service and PCPs in local HMOs can and many times get paid a capitation rate. So capitation means that they receive monies every month, regardless of whether they see the patients or not. And they receive bonuses based on the care that they get for the patients and the quality scores and their risk factors or their risk scores. So regional HMOs may not be able to provide that capitation rate because they're just so large, and I believe there's some stipulations from the government that don't allow that as well. But we'll be getting more into that in further episodes as we go into the providers and the branches of that tree. And, you know, I mentioned the payment tree. And so I do want to give you the opportunity. If you didn't hear my first episode on the money tree series, there is a download that you can download that references the money tree and what I discussed in this series, and that can be found at tree. So go ahead and download that if you haven't done that already. And so that we can use that as a reference. So the third thing I wanted to talk about, I wanted to make sure that you understood as providers is that providing quality and high quality preventive care can help you increase your patient population as well as revenue. 

So you have to remember, the Medicare Advantage plans are in it to make money, there are private companies that are looking to make money. And they want to partner with providers, as well as patients, but they want to partner with providers that can provide quality care, because that in turn increases their star scores and potential revenue in the future. So providers who understand Medicare Advantage plans and provide high quality Medicare Advantage plans are going to send patients to you. And in order to provide that high quality care, you have to have a good network of providers. I remember going to bat for some for a provider that was in the area that wanted to join a local HMO. And I went ahead and talked to the insurance companies because I felt that that provider was able to do things that other providers in the area were not able to do. And that allowed me to have a provider that could provide better care for my patients. And that's just basically a win win scenario for not only the patients but also the HMO. So to summarize this episode, I know that this is very complicated. And I'm trying to simplify it as much as I can. 

And feel free to download that med pack Medicare Advantage program payment system summary that kind of gives you the details of the things that we talked about today. And the second thing I wanted to make sure that people understand is that Medicare Advantage companies, HMO companies make a ton of money. And we have to know that as providers, so we can't sell ourselves short. Because if a Medicare Advantage company makes, let's say $1,000 a month on every patient, yes, they have their costs, they have their marketing costs, they have their their cost to remain in business and obviously shareholders to please but it always struck me as you know, Medicare Advantage companies make $1,000 a month per patient. And let's say they have 100,000 patients or 500,000 patients, you can do the math as far as how much they make a month, then paying a fee for service provider $50 per visit is really nothing to them. So I would invite you to understand that you can negotiate rates, if you provide a good service, and patients like you and you are compliant in your documentation and you do the things that are that are important in any practice, you should be able to negotiate better rates in a Medicare Advantage situation. 

The other thing you have to know is you know, Medicare Advantage companies contract with providers directly using fee for service, or IPA or MSO models to provide care that can be capitation rates, like we talked about for local HMOs. And for regional HMOs those a little bit different in terms of payments but still do the same thing. They they receive monies from the HMO, sorry from CMS, and they distribute those funds to providers. And in the next couple of series we're going to talk about providers and how they receive monies. So thank you so much for listening to this money tree series, series number two, and talking about the HMOs. And my goal is to basically help you understand the whole system and kind of piecemealing this so that eventually if someone wants to listen to all the monetary series episodes and understand every aspect of the payment to providers, you'll be able to do that. Thank you so much for listening to the Practice Impossible podcast and we'll see you next week.

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