From Dr. Tom's Desk

In a value-based world, hospitals are a center of cost, not profit.
 
Treat them as such.
 
One of the clients I’m working with now does so---and is enjoying phenomenal success.
 
From California to New York, hospitals are closing their ERs and opening up stand alone “acute medical centers.”
 
The health systems behind these hospitals have gotten the message.
 
Their inpatient services are just another “vendor,” another cost-center as they try to deliver healthcare under a fixed budget.
 
My partners and I recognized this problem early on. It took us years to overcome the Certificate of Need process in our state to license our own hospital---but license it we did.  We did so because there was no other way to control how much an acute hospital day cost us.
 
Today, health systems are going further. A number of my health system clients are caring for their patients in “acute care centers” that are licensed by the state, but not approved by Medicare.  They don’t bill for their services, they only act as inpatient facilities to get Medicare Advantage patients through an acute illness.
 
These systems have gone “all-in” on their Medicare Advantage contracts and have little financial interest in trying to profit from inpatient services.
 
They realize every nickel they don’t spend on care goes straight to their bottom line.
 
And of all their care costs, inpatient care is the “Big Kahuna.”
 
These “acute care centers” are still a grey area to most state regulators. They don’t need an ER to feed them patients, and they don’t bill Medicare. They are an excellent example of innovation moving ahead of regulations.
 
Sure, they divert resources away from traditional hospitals that depend on Medicare Advantage revenue to keep their doors open---but you can still support indigent care financially, as much as you desire, once your annual settlement check comes in.
 
Value-based care requires a change in your thinking
 
You, not Medicare, are not on the hook for every expense.
 
It’s up to you to plumb the depth of your ingenuity to deliver your care as cost-effectively as possible---with innovations that work completely outside the system if necessary.
 
Medicare Advantage will reward you for doing so.

You Should Know

 
Visibility.
 
Being able to see far enough in the future that you can accurately assess the return on your investments.
 
It was one of the reasons I jumped on the opportunity to sell my health system 6 years ago.  It was either sell or compete with an organization that very much wanted the value we possessed---and had far greater resources at their command.
 
Their offer was fair and sitting in 2011 there was very little visibility in the Medicare Advantage program going forward.  Without a certain knowledge of the resources we would have going forward to compete with them, I took their offer and recommended to my partners that they do the same.
 
I’m glad I did.
 
By 2015 Medicare Advantage was paying $150 pmpm less than it was in 2012, not including inflation. We would have been competing with greatly diminished resources.
 
That was then.
 
If I were in the same situation now, I wouldn’t take the deal. There is tremendous visibility in the Medicare Advantage program---and what one sees now is clear sailing.  As you’ve read in these pages many insiders are jumping on the boards of Medicare Advantage plans and the government is actively pushing the chronically ill onto the program. 
 
The “mega-trend” is Medicare Advantage all the way.
 
And now we get word that one of the biggest fish of all, Google, is making the first of many large capital investments in a Medicare Advantage plan, this time with New York insurance innovator Oscar.  Their expertise in healthcare may be questionable, their commitment to privacy problematic, but Google’s political influence is unquestioned.
 
Medicare Advantage is here to stay and destined to be the predominant payment system for Medicare.  Sure, there’ll be some pushback and traditional Medicare is not likely to be completely eliminated. But any investments you make in the processes that support your Medicare Advantage system are likely to pay off for at least a decade.
 
I doubt ACOs can say the same thing.
 

Tip From Tom

 
You don’t need a crazy high average RAF score of 1.5 or 1.6 to do well under Medicare Advantage, you only need, at most, a 1.2.  A working knowledge of risk codes and a systematic approach is all you need to achieve that. Check out my “Success Codes” blog series. link to  https://www.tomdavisconsulting.com/category/success-codes/ 
 
Can telemedicine fill the gap when Samantha loses her doctor?  She learns more than she bargains for trying to keep her family safe. Share her journey.

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