Introduction
The COVID-19 pandemic has rapidly and significantly disrupted the health care system, creating considerable uncertainty about current and future utilization and costs. In this blog, we discuss how these changes have already impacted the risk adjustment program for Medicare managed care plans, as well as potential implications for the next couple years. We focus on two types of changes due to the pandemic: (1) changes in the utilization of health care and (2) changes in how health care is delivered.
Changes in Utilization
Treatment and Testing of COVID-19. The most direct impact the pandemic will have on health care utilization is through testing and treatment of COVID-19. Most of the costs associated with COVID-19 treatment can be expected to occur in the hospital. Based on over 30 states that are reporting daily hospitalizations due to COVID-19, it has been estimated that there have already been well over 200,000 hospitalizations across the country. The cost of these hospitalizations will vary by severity.
Several projections of the two-year health care cost—2020 through 2021—due to COVID-19 have been conducted ranging from approximately $50 billion to more than $550 billion. The wide range of these estimates reflects the uncertainty around the duration and effectiveness of physical distancing policies, possible seasonality of the virus, and the progression (including recurrences) of the virus, as well as the development, timing, and prices of treatments and vaccines.
Delayed and Forgone Health Care. Hospital and health care systems have had to dedicate resources to the testing and treatment of COVID-19. This has limited resources available for other health care, particularly in areas, such as New York City, that have had to deal with surges in COVID-19 cases. Coupled with stay-at-home orders and the practice of physical distancing by people in general, there have been reports of substantial decreases in elective procedures at hospitals, as well as outpatient care, that would have otherwise been used.
According to the most recent report on health care spending data from the Bureau of Economic Analysis, health care spending experienced unprecedented decreases during March and April 2020. Other health care monitoring data show a similar dip. For example, data representing more than 50,000 providers working in small and large practices across all 50 states show that the number of visits to ambulatory practices declined nearly 60% by early April. Since that time a rebound has occurred; but as of mid-May, the number of visits is still roughly one-third lower than what was seen before the pandemic. Many of the providers represented by the data are primary care providers. Remarkably though, the reduction in utilization does not appear to be limited to primary care and elective procedures. Declines in emergent care, including heart attacks, have also been experienced throughout the country. A national sample of hospital data shows substantial decreases in utilization during the pandemic for all types of patients, including those with cancer, heart conditions and other chronic conditions.
It is unclear whether claims and utilization for the second half of 2020 or in 2021 will revert to prior patterns, remain markedly lower, or experience a “catch-up” surge. Forgone care could offset the additional costs of treating people with COVID-19. Under the assumption that potential second and subsequent waves of COVID-19 are not more virulent than the first wave, health care costs have been predicted to be lower than they would have been in the absence of the pandemic in 2020.
The degree to which future utilization will be impacted will largely depend on the length and magnitude of this first wave of COVID-19, as well as the second and subsequent waves that may occur until immunity is developed. In addition, the size of the economic downturn will play a large factor due to increases in the number of uninsured and reductions in disposable income.
Impact on Medicare managed care risk adjustment. The impact from the treatment and testing of COVID-19, as well as the delayed or foregone care, will vary depending on the geographic distribution of infections across states. Some plans with substantial enrollment in areas with higher incidence may be more likely to face higher costs from treatment and testing. It is also possible that those plans will experience an increase in diagnoses within their membership used for risk adjustment that are related to COVID-19, such as pneumonia, respiratory dysfunction, or depression.
However, given the reports of substantial decreases in utilization throughout the country, it is likely that most plans will experience lower overall utilization. This may particularly be the case for plans with a concentration of members in areas of the country that face prolonged stay-at-home orders. The reduced interactions between plan members and providers will not only make it harder for plans to manage the chronic conditions of their members, but also to obtain appropriate medical documentation of non-COVID-19 related conditions. Thus, the reduced utilization could result in lower risk-adjusted payments for plan members.
Even if plans do manage to document chronic conditions for risk adjustment, it is likely that the way those conditions are managed and treated during the pandemic will vary substantially from pre-pandemic years. This could have significant implications for the size of payment increases or decreases made under risk adjustment in future years (see prior blog for a description of how risk adjustment impacts payments to plans). For example, if many Medicare beneficiaries with chronic conditions defer or forego preventive or other non-emergent care during the pandemic, the result could be lower overall resource use and utilization being associated with those chronic conditions. Consequently, there would be lower payment adjustments in future years when data from the pandemic era is used to calculate expected resource use for those conditions. In contrast, it may also be possible that deferred preventive care will lead to patients eventually seeking care with more severe symptoms, resulting in more resource use and costs. In this scenario, payment adjustments would increase in future years for those conditions.
Importantly, increases and decreases in payments under risk adjustment are largely calibrated on the experience of the traditional Medicare fee-for-service (FFS) population. These Medicare enrollees may be even more likely to miss or forego care as their health is less likely to be actively managed by a care coordinator, relative to Medicare enrollees in a managed care plan.
CMS has acknowledged the potential for substantial impacts to Medicare managed care payments due to the COVID-19 pandemic, and is considering whether modifications to the risk adjustment methodology may be required in order to ensure the stability of payments. Suggestions have been made on how to adjust the risk adjustment methodology, such as using 2019 data to supplement 2020 data when determining risk adjustment payment to more accurately reflect the health status of new and existing beneficiaries under non-pandemic conditions. In addition, CMS could develop an adjustment factor for all Medicare managed care plan payments to recognize potential decreases in utilization in the FFS population when generating benchmarks.
At this point, there is still much uncertainty; perhaps too much for CMS to make definitive changes to the risk adjustment methodology. In particular, it is not clear when or how utilization patterns will rebound. If lower utilization persists, plans may be getting overpaid now, which could balance out underpayments in future years. However, this type of volatility in payment rates relative to costs (i.e., benefits paid out by plans) is not ideal. CMS will likely need to consider how to level out the changes over time.
Changing Role of Providers
Creating flexibility in the health care system. In order to help meet the health needs of Americans during the pandemic, the federal government enacted an unprecedented array of regulatory waivers and new policies to allow more flexibility in the health care system. These provisions included allowing hospitals and health systems to deliver services at alternative locations, such as ambulatory surgery centers, inpatient rehabilitation hospitals, and hotels. In some parts pf the country, hospitals have set up screening sites in their parking lots. New York converted a convention center into a hospital. Moreover, certain free-standing emergency departments were temporally certified as hospitals.
Several actions were also taken to expand workforce capacity. For example, provisions at both the State and federal level enabled many physicians and physician extenders to be called into action in non-traditional ways—e.g. retired physicians were recertified to work. Provisions also made it possible for clinicians who are licensed in one state to be able to provide care in a different state. Importantly, the provisions also make it possible for patients to receive insurance coverage for COVID-19 related care that is delivered by alternative providers or in alternative locations.
Administrative burdens were also reduced in order to help frontline providers focus on patients. These actions included extending quality reporting deadlines, as well as temporarily suspending medical necessity documentation and provider documentation requirements for prior authorization. Physicians could have more flexibility in where they refer patients for treatment related to COVID-19. Normally, physicians are restricted from making referrals for certain services payable by Medicare to an entity the physician (or an immediate family member of the physician) has a financial relationship. That restriction has been loosened during the pandemic crisis.
The Use of Telemedicine. In addition, there were several key policies put in place to help spread the use of virtual medicine, known as telemedicine or telehealth. During the pandemic, Medicare began compensating for most telemedicine visits. Prior to this announcement, Medicare was only allowed to pay clinicians for telemedicine services in certain circumstances; e.g., patients in rural areas that travel to a local medical facility to get telemedicine services from a doctor in a remote location. Medicare would generally not reimburse telemedicine services provided in homes of Medicare beneficiaries. The waivers allow the broader Medicare population to receive telemedicine from their homes in order to decrease risk of exposure to COVID-19. Moreover, a broad set of clinicians, aside from physicians, would be eligible to bill Medicare for telemedicine, such as physical and occupational therapists and speech language pathologists.
The federal government also passed an economic stimulus bill—the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which made $200 million available through the Federal Communications Commission (FCC) to medical groups to help them install telemedicine technology and fund broadband installations. The CARES Act also set up a $29 billion grant program to support telehealth services for each fiscal year through 2025.
Before the coronavirus pandemic, Americans were slow to pick up on the virtual trend. However, there have been reports that the number of telemedicine visits rose rapidly through the first weeks of the pandemic. For example, Epic Health Research Network found a 300-fold increase in telemedicine use from mid-March to mid-April in comparison to the same time period last year. About half of the adult patient appointments in the Epic database (spanning 22 health systems across 17 states and covering 7 million patients) were managed with telemedicine instead of in-office during this time. However, the increase in telemedicine services was not enough to offset steep drops in in-person visits.
Impact on Medicare managed care risk adjustment. As with the changes in utilization, the changes in who is providing the care and where that care is taking place will also likely have substantial impacts on Medicare managed care risk adjustment. For example, CMS will need to decide if temporarily certified facilities will be considered an eligible provider type for the risk adjustment data validation process (RADV) for 2021 (which is based on 2020 dates of service).
CMS will need to decide if the list of acceptable provider specialties for RADV should be expanded. Temporarily certified providers introduce a completely new provider into the Medicare Part C system (which is the system that administers the Medicare managed care program). It is not entirely clear how these new providers will interact with plans and their beneficiaries. Their behavior could be very different than traditional service providers and may require tweaks for models to accommodate these differences. For example, retired physicians or physician with out-of-state licensing may not be accustomed to the medical documentation standards of the health system they practiced at during the pandemic.
CMS has also begun allowing medical record documentation from telemedicine visits to factor into risk adjustment for Medicare Advantage plans. Managed care plans may need to develop new processes for collecting and reviewing medical documentation from telemedicine visits. CMS has typically not allowed medical documentation for services that did not include a face-to-face encounter. Given that, it is likely that guidance will eventually be needed from CMS to determine what kind of documentation is acceptable in telemedicine situations.
Concerns have also been raised about fraud related to the lack of face-to-face and in-person encounters, as well as the use of a broader health care workforce and alternative work locations. This will likely only heighten the need for monitoring by both managed care plans and CMS of the appropriateness of billing and encounter records.
During the pandemic, telemedicine providers have also been allowed to waive patient deductibles and copayments during the coronavirus emergency. This furthers the concerns of fraud as waiving deductibles would normally be construed as a potential “kickback” to patients since they may discourage complaints about charges or lead to overuse of medical services. Medicare enrollees, due to their generally elderly status, may be more vulnerable than the general population through schemes that could act through telemedicine guises. Large Medicare fraud cases that have recently occurred have been associated with telemarketing, including for bogus genetic testing, prescribing unnecessary pain creams, and delivering unwanted medical equipment. These fraudulent activities can become massive because phone rooms operating anywhere in the world can target thousands of patients. Moreover, it can be difficult to differentiate improper bills from those submitted by a legitimate telemedicine operation.
Managed care plans will also have to deal with the fact that they may have less control of where their patients are receiving care, given the waivers in relation to referrals as well as the requirements for insurance coverage in alternative settings and for alternative providers. This may also make it more difficult for managed care plans to track down requisite medical documentation for RADV purposes.
Conclusion – Much Uncertainty Remains
The above is not a comprehensive list of impacts. For example, another notable policy that directly impacted Medicare managed care risk adjustment was the temporary suspension of all RADV activities to allow providers and plans to focus on the pandemic (as of the time of this writing, the audits are expected to resume starting in September 2020). CMS also announced a nationwide special enrollment period for people to enroll in MA plans who may have missed their opportunity to do so due to the pandemic. The impact from these provisions on risk adjustment is not clear at this time.
It is not possible to describe all of the potential impacts from COVID-19 in one blog. Moreover, the impacts are still evolving. The longer we remain without a vaccine and require physical distancing, the longer many of the effects to the health care system will endure. Additional Federal and State provisions will also become warranted. To date, some parts of the country have been much more severely hit by the pandemic. Thus, it is likely that the impact to Medicare Advantage plans will substantially vary depending on the distribution of their enrollment over the COVID-19 hot spots.