Our Latest Stories

Here Comes the Squeeze

Adam Kustin
Published on: 06-23-2023

Earlier this year I met one of our Medicaid health plan customers for lunch. Like most of these check-ins, we covered a lot of territory both personally and professionally. I’m always grateful for the opportunity to hear firsthand how we’re doing and what’s on the horizon for our customers.

In addition to my post-meeting to-do list, something he said stuck with me, “Adam, it’s 2023. We have to start looking in the couch cushions again.”

Unfortunately, and pardon the pun, he was right on the money.

As redeterminations ramp up, typically healthier members – those who initially qualified for Medicaid during the Public Health Emergency – are being pushed out of Medicaid plans. This is a triple-whammy: Medicaid plans will receive lower overall reimbursements from the state while attempting to address proportionally higher utilization from remaining members. In addition, the plans can’t easily reduce headcount, as they must maintain high enough staffing levels to manage the changes in membership.

Medicare is facing a similar challenge with post-pandemic increases in non-acute care. Last week, UnitedHealth announced its MLR “to be higher than previously expected in the second quarter of 2023, due to a surge in outpatient care utilization among seniors.” In turn, United’s stock fell 7% the next day. The announcement sent CVS Health (Aetna) stock down nearly 8% as well.

If you are not on the health plan side of the equation, higher utilization, ironically, is being celebrated and rewarded. Select Medical, a national post-acute care organization with a focus on physical and occupational therapy, recently announced earnings that beat analyst estimates by more than 50%. The earnings gain was driven in part by a 14.1% increase in outpatient (PT/OT) visits. And of course, those visits are paid for by Medicaid and Medicare plans.

Lastly, as if reduced reimbursements and increased utilization were not enough, health plans – and virtually every other organization for that matter – are suffering from increased administrative costs. This week Sherlock Company published an analysis of Blue Cross Blue Shield expenses across 17 health plans. They found that administrative costs fell 0.4% in 2021, yet rose 7.2% in 2022. One can only assume similar growth – due to wage inflation – for 2023.

Over the prior few years, many health plans have benefited from an economic buffer through the addition of healthier Medicaid members. Likewise, they’ve benefited from a utilization buffer as many people delayed non-emergency care. It’s 2023; those buffers are gone.

I never thought I’d say, “look for me in the couch cushions,” but that’s where you can find us. As it turns out, you can also find us within arm’s length of those eye-level branches on the fruit tree of your choice.

As you’re seeking out opportunities to improve your MLR as well as generate more value, here are five ideas to consider:

  1. Leverage vendors who are clinical risk-bearing entities, like Health Network One. One hundred percent of our capitation can be applied to medical costs, in turn shielding your MLR.
  2. Go after risk adjustments. In Florida, we’ve helped health plans shift membership to a higher-acuity group with a materially higher reimbursement from the state.
  3. Improve your STARs rating. More STARs mean more money. When contracted for Routine Vision, we guarantee 5 STARs for the Diabetic Retinopathy Exam HEDIS measure.
  4. Reduce medical costs, plain and simple. We are experts in outpatient therapy and have never encountered a plan where we could not find cost savings while simultaneously preserving member access and provider satisfaction.
  5. Evaluate – and adjust – the connection between reimbursement methodology and facility costs. We have found that alternative payment models can dramatically reduce surgeries in podiatry and ophthalmology.

As we enter the second half of 2023, most organizations are already preparing for 2024. No doubt the search in the couch cushions will continue, so consider getting a head start now by engaging your trusted partners on all five ideas.