Managed Care Contracting Strategies Will Be Significantly Impacted by the Supreme Court Decision on the Affordable Care Act

The SCOTUS decision on June 28, 2012, upholds the ACA.  Many observers were expecting the court to rule to strike one or more of the provisions in the law.  The only impact was to limit the expansion of the Medicaid program.  This decision means that the innovative programs from Medicare, such as shared savings ACOs and bundled payments, will continue to be implemented and that each state will be required to operate a health exchange.  Barring other attempts to derail the law through defunding or legal challenges, the ACA will be a driving force behind changes to the delivery of healthcare for the next several years.

Providers waiting for the decision to implement managed care strategies will be wise to begin doing so, even with the political threat of additional attempts to derail the ACA.  The key insurance regulations (e.g., community rating, individual mandate, guaranteed issue, adult children coverage) and the retention of health exchanges will have two implications:  a lower percentage of uninsured and the proliferation of health exchange-based products from commercial health plans.  Further, commercial plans will continue to introduce an array of reimbursement models that will use value- and population-based arrangements to moderate costs and utilization while optimizing outcomes.

Managed care departments need to have a sense of the potential impact on revenue and the financial risk associated with each agreement.  The timing of the implementation of these agreements will be unique to each organization weighting its operational readiness, network alignment, utilization monitoring, and financial tolerance.  Organizations that are still developing integrated care networks and the capability to deliver on value-based contracts should conduct gap assessments to understand the areas of concern in preparation for new reimbursement models.

Providers should be proactive in discussing health exchange products and new reimbursement models with commercial payors to avoid unsatisfactory reimbursement.

  • Evaluate the financial impact of shifts in payor mix from the introduction of health exchanges.
  • View health exchange products as another part of the payor portfolio that does not automatically warrant subpar rates.
  • Negotiate clauses that allow termination of the health exchange product without impacting the rest of the book of business from that payor if performance does not meet expectations.

Ultimately, this may not be the end of the potential turmoil, pending the election in November, but it significantly increases the likelihood that all provisions in the law will be implemented on time.  Stay tuned.

Takeaways

Implications

  • The ACA will continue to be implemented on the outlined schedule.
  • The number of uninsured patients will drop as they move into health exchange products.
  • Health plans will continue to introduce health exchange products.
  • The disproportionate share adjustment calculation will be changed.
  • Innovation in reimbursement models from Medicare and commercial payors will continue into the near future.

Recommendations

  • Proactively seek to understand advanced reimbursement models that commercial plans may be offering.
  • Contract health exchange products as separate products.
    • Consider separate term and termination clauses.
    • Maximize expected reimbursement for these products; these patients will not be any less costly to take care of and will likely be more costly.
  • Evaluate your organization’s ability to deliver on value-based agreements.
  • Continue to focus on getting cost out of the system and moving toward improved value.
  • Seek to collaborate with like-minded payor partners on innovative reimbursement models that are appropriate for your organization.
  • Determine the financial impact and the organization’s financial risk tolerance for the potential reimbursement models.

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