Universal American said last week that it would sell its traditional insurance business to focus its energy on a business line that's losing money: accountable care organizations.
Universal American, a publicly traded insurance company, bet big on Medicare's Shared Saving Program for ACOs, forming dozens of joint ventures with physicians to enter the Affordable Care Act program when in launched in 2012.
The company lost $89,000 on those ventures during the first six months of this year, which was a big improvement over the $23 million loss during the same period the previous year.
But Universal American CEO Richard Barasch continues to see ACOs as an attractive market as the company adjusts its strategy and Medicare accountable care regulations change. That must be welcome news to federal officials, who have also bet big on ACOs as a vehicle to overhaul Medicare spending through 2018.
Basically, Barasch said, the company is getting better at working with doctors.
“We're just getting smarter,” Barasch said. “We're more flexible.” The company has grown more efficient and less rigid with doctors who enter joint ventures with Universal American to form ACOs. It also has pulled out of several of the contracts that weren't working.
Medicare also agreed to change critical rules that Universal American and other ACO operators said made financial success a challenge for some and almost impossible for others. Barasch praised those changes, which take effect in January.
Doctors are they key to achieving the quality and savings targets that earn ACOs bonuses under the Medicare program, and Universal American is being more selective when identifying doctors to enter its ACOs. "Not every provider group is going to be capable of the kind of change and have the sort of leadership you need to make this sort of change.”
The company said last week it would shed its Medicare supplemental, life and long-term care insurance business in a $42 million deal in order to focus on ACOs and Medicare Advantage.
The company has a much stronger financial position in Medicare Advantage, clearing about $48 million in income on $1.4 billion in revenue from those plans in 2014.
But Barasch said the ACO model holds promise because it gives the company much more leverage to influence the way physicians practice.
“Until you have enough wallet-share of a practice, or mindshare of a practice, it's really hard to get physicians to change their behavior,” he said. Most practices contract with multiple Advantage plans, each covering a small percentage of the medical group's practice.
But many patients remain in Medicare fee-for-service and might be assigned to the practice's ACO, making the physicians accountable for quality and cost of their care. “You automatically get bulk in a practice,” Barasch said.