The CMS may have raised benchmark payment rates for Medicare Advantage plans, but at least one large provider group believes the new risk calculation scores will actually hurt, rather than help, its bottom line.
Publicly traded DaVita HealthCare Partners warned investors Wednesday that the 2016 Medicare Advantage payments will amount to a 2% rate cut, or a loss of about $50 million in 2016 operating income.
The company, which operates a large multispecialty medical group in addition to its core dialysis business, reiterated its concern that the CMS' new risk adjustment model unfairly penalizes providers that focus on wellness programs and chronic disease prevention.
Earlier this week, the CMS issued final Medicare Advantage payment rates that were above what many in the industry previously feared. The 1.25% rate increase is considered a win for health plans, which had aggressively lobbied against the 0.95% rate cut that was initially proposed in February.
Moreover, CMS officials said they actually expect payments to increase an average of 3.25% because of higher risk-score coding.
The CMS' new risk adjustment model eliminates some of the general disease categories and replaces them with a greater number of more specific categories, said Mandy Pellegrin, a legislative and regulatory analyst at Obsidian Research Group.
The most controversial change, however, involved eliminating categories for unspecified renal failure, early stage chronic kidney disease and nephritis, she said. Under the new model, which was proposed for 2014 and phased in incrementally, only acute renal failure and stage 5 kidney disease are recognized.
That change could penalize providers such as DaVita by eliminating the incentive to intervene when patients first start showing signs of kidney disease, Pellegrin said.
The CMS for its part said the change makes the payment system fairer. In a fact sheet, it said the 2014 model excludes diagnoses that have been “coded very frequently by the MA plans that have been most aggressive in coding.”
For instance, the agency cited 2012 data to show that the code for renal failure was used for 9.9% of fee-for-service Medicare beneficiaries, 14.6% of Medicare Advantage beneficiaries and 38.8% of beneficiaries enrolled in plans that were described as the “most aggressive in coding.”
DaVita, however, argued that that new model “negatively affects the Company and other providers like us who have differentially invested in wellness and prevention programs for patients with chronic conditions.”
Yet even DaVita saw some relief from February's proposed rates. At the time, the Denver-based company had said the 0.95% rate cut would have jeopardized $100 million in operating income—about twice as much as the current estimate.
