Thomas L. Kelly, HealthSmart 

Threats and Opportunities for Managed Care Organizations 

THREATS & OPPORTUNITIES FOR MCOS  Threats > Managing state expectations for quality > Surviving bad rates > ACO-frenzy > Avoiding page 1 (or 6) > Life in the land of the giants 1 

THREATS & OPPORTUNITIES FOR MCOS  Opportunities > delivering on integration of physical and behavioral health > charting the path to delegation (& learning how and when to let go) > reinforcing the difference > exposing the ACO solution (the emperor with no clothes) > providing a transition route from the for-profit world 2 

MANAGING STATE EXPECTATIONS FOR QUALITY  For many states, more is always better  Most quality measures rely on provider performance. MCOs ability to influence is limited. Quality competition can be mostly about measurement.  Redundancy adds to cost and confusion  Can’t afford to leave delegation issue un-addressed 3 

SURVIVING BAD RATES  There are no bad groups (populations), just bad rates  Rate-making in areas with benefit variability and pent up demand almost sure to be biased low  Transitions from capitated (e.g. behavioral health carve-out) are scary  Big MCOs will continue to buy a place at the table, and remain confident of favorable selection Lead the effort for better risk adjustment Don’t be the good, broke guy 4 

ACO-FRENZY  States are interested in ACO-development. Many see it as a way to leverage away from big MCOs  General conclusion: states very worried about duals, and suspect that big MCO value prop is played out  Effective integration with traditional providers and insight/assistance in resolving rural health issues potential differentiators  Potential administrative nightmare if states decide to mix the MCO and ACO models (e.g. PPS in NYS) 5 

AVOIDING PAGE 1 (OR PAGE 6:)  Concerns about quality and comprehensiveness of duals programming at top of state’s issues list  Carve-out providers finding their way back in – fueled by knowledge of populations and providers  Plausible deniability at state level makes page 1 penalties brutal 6 

LIFE IN THE LAND OF THE GIANTS  Will the national MCOs dominate the market – they could, but I don’t think so  Capital is their big asset. Scale (low administrative costs) is a possibility but not a reality  Willingness to tolerate low margins (1% - 3%) very limited now that growth spurt is ending – you can expect multi-line carriers (Anthem, United, Aetna) to exit markets  Corporate culture/core strategy to cheapen up the product (but not lower the price) almost inescapable 7 

INTEGRATION OF PHYSICAL AND BEHAVIORAL HEALTH  The holy grail, rarely achieved, single most significant issue in all populations other than kids 8 

CHARTING THE PATH TO DELEGATION  High-performing primary care addressing the full needs of the member is the end game  MCOs can and should play a critical role in making this happen – and not allowing it to happen too soon  Quality reporting mostly belongs at the provider level, and we can’t be satisfied until providers report their own quality scores, and there is a single validation  Design of a mixed model (oversight & delegation) difficult but essential  Scope of primary care delegation a critical consideration 9 

EXPOSING THE ACO  Another nice idea from CMS  An opportunity for the 800-pound gorilla to strike a happy, non-threatening pose  More administrative junk….and the physicians are still not in charge We love clinical integration, but it’s rare. 10 

REINFORCING THE DIFFERENCE  Local, accountable, reliable, accessible – advantages to be strengthened at every opportunity  A political and regulatory voice independent of the big MCOs a must (and not whiney!)  Joining with local (responsible) providers, but not forgetting managed care skills & disciplines and not cow-towing to size a tough but essential strategy 11 

TRANSITION FROM THE FOR-PROFIT WORLD  With Medicaid leadership, build a view of the future  Help make that view practical – timelines and benchmarks  Be open to fundamental change  Find opportunities to prototype and test It’s an executive-level activity, and at least some of your leadership team will hate you for it. 12 

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