Objectives: In Medicare Advantage (MA) with its CMS Hierarchical Condition Categories (CMS-HCC) payment model, CMS reimburses private plans (Medicare Advantage Organizations [MAOs]) with prospective, monthly, health-based or risk-adjusted, capitated payments. The effect of this payment methodology on healthcare delivery remains debatable. How value-based contracting generates cost efficiencies and improves clinical outcomes in MA is studied.
Study design: A difference in contracting arrangements between an MAO and 2 provider groups facilitated an intervention-control, preintervention-postintervention, difference-in-differences approach among statistically similar, elderly, community-dwelling MA enrollees within one metropolitan statistical area.
Methods: Starting in 2009, for intervention-group MA enrollees, the MAO and a provider group agreed to full-risk capitation combined with a revenue gainshare. The gainshare was based on increases in the Risk Adjustment Factor (RAF), which modified the CMS-HCC payments. For the control group, the MAO continued to reimburse another provider group through fee-for-service. RAF, utilization, and survival were followed until December 31, 2012.
Results: The intervention group's mean RAF increased significantly (P <.001), estimating $2,519,544 per 1000 members of additional revenue. The intervention increased office-based visits (P <.001). Emergency department visits (P <.001) and inpatient hospital admissions (P = .002) decreased. This change in utilization saved $2,071,293 per 1000 enrollees. By intensifying office-based care for these MA enrollees with multiple comorbidities, a 6% survival benefit with a 32.8% lower hazard of death (P <.001) was achieved.
Conclusions: Value-based contracting can drive utilization patterns and improve clinical outcomes among chronically ill, elderly MA members.