Medicare Advantage Plans Shift Their Financial Risk To Doctors


STUART, Fla. – Dr. Christopher Rao jumped from his chair. He'd just learned an elderly patient at high-risk of falling was resisting his advice to visit an inpatient rehabilitation facility following a hip fracture.

He strode in to the exam room where Priscilla Finamore was crying about needing to leave her home and husband, Freddy.

“Look, I'd have the same way basically was you and also did not wish to visit a nursing home, to a strange place,” Rao told her in September, holding her hand. “But the truth is, should you slip at home a little, it could end up in a bad, bad way.”

After a couple of minutes of coaxing, Finamore, 89, relented and agreed to go into rehab.

Keeping patients healthy and out of the hospital is a goal for just about any physician. For Rao, a family doctor in this retiree-rich city 100 miles north of Miami, it's also a sensible financial strategy.

Rao works for WellMed, a physician-management company whose doctors treat more than 350,000 Medicare patients at primary care clinics in Florida and Texas. Rather than being reimbursed for every patient visit, WellMed gets a fixed payment per month from private Medicare Advantage plans to cover almost all of their members' health needs, including drugs and physician, hospital, mental health and rehabilitation services.

If they can stay under budget, the doctor companies profit. Otherwise, they generate losses.

Dr. Christopher Rao, a family doctor at WellMed in Stuart, Fla., comforts Priscilla Finamore about seeking inpatient rehabilitation care.(Phil Galewitz/KHN)

This model – referred to as “full-risk” or “global risk” – is increasingly utilized by Medicare plans such as Humana and UnitedHealthcare to shift their financial exposure from costly patients to WellMed and other physician-management companies. It provides the doctors' groups more income upfront and control over patient care.

As an effect, they go to extraordinary lengths to have their members healthy and avoid expensive hospital stays.

WellMed, together with similar fast-growing companies for example Miami-based ChenMed, Boston-based Iora Health and Chicago-based Oak Street Health, say they offer patients significantly more time with their doctors, same-day or next-day appointments and health coaches. These doctors generally focus on salary.

ChenMed doctors encourage their Medicare patients to visit their clinic each month – for no charge and with free door-to-door transportation – to stay along with maintenance and manage chronic conditions. If people are not feeling well after-hours, ChenMed even will send a paramedic for their home.

“We could be a lot more creative in the way we meet patient needs,” said Iora CEO Rushika Fernandopulle. “By taking risk, we never have to ask – 'Do we obtain taken care of this or not?'”

A Way To 'Provide Less Care'

Some patient advocates, pointing to similar experiments that failed in the 1990s, fear “global risk” may lead doctors to scrimp on care – particularly for expensive services such as CT tests and surgical treatments.

“At no more your day, this is a method to keep costs down and supply less care,” said Judith Stein, executive director from the Center for Medicare Advocacy.

Dr. Brant Mittler, a Texas cardiologist and trial attorney who has followed the problem, said Medicare Advantage members should be suspicious.

“Patients don't know that decisions made on their behalf are often financially based. There may be pressure on doctors to cut corners to save cash which might not be within the needs of the patient's health,” he explained.

The insurers and physician groups disagree. I was told that limiting necessary care would only exacerbate an individual's health issues and price the doctors' group more income.

Noting that Medicare members stay with Humana an average of eight years, Roy Beveridge, the insurer's chief medical officer, said the program would be unwise to skimp on care because that will eventually leave the organization with sicker patients and longer hospitalizations.

“It makes even less sense for physicians at financial risk to skimp on care because people are typically with their physicians considerably longer than they are with a health plan,” he explained.

A study that examined care at ChenMed, published last month in the American Journal of Managed Care, found health costs were 28 percent lower among patients who had a lot more than double the amount number of typical visits using their primary physician. The research was conducted by researchers at ChenMed and the University of Miami.

To offer more personal care, ChenMed doctors typically see no more than a dozen patients per day – about half as many as is usual for a physician who gets paid for each individual service.

Medicare beneficiaries, who are able to choose a private health plan throughout the open-enrollment period that runs from Oct. 15 to Dec. 7, have no idea if their health plan has ceded control of their care to these large doctors' groups.

After selecting a Medicare Advantage plan, they generally sign up for a medical group that is a part of their health plan's network, actually because doctors are near to their current address or since the doctors offer extra benefits for example free transportation to appointments.

Eloy Gonzalez, 71, of Miami, asserted before switching to ChenMed a couple of years ago his doctors always appeared to be in a hurry when he saw them. He's pleased with his ChenMed physicians.

On a current visit, he spent nearly 20 minutes with Dr. Juana Sofia Recabarren-Velarde referring to keeping his blood pressure and lung condition in check. She also showed him exercises to manage back and shoulder pain.

“If she thinks she needs to see me once a month to monitor my blood pressure level and see contrary else is happening, it's Comfortable with me,” said Gonzalez, who pays nothing for the visits to the doctor or generic drugs under his Humana Medicare Advantage plan with ChenMed.

A Growth Spurt

Nearly one-third of the 57 million Medicare beneficiaries are covered by private Medicare Advantage plans – an alternative to government-run Medicare – and federal officials have estimated that the proportion will rise to 41 percent over the next decade. The government pays efforts to supply medical services for their members.

The “global risk” system has been used in South Florida and Southern California because the late 1990s and up to 50 % of Medicare Advantage members in those regions get care in the model. The use has spread further in the past 2 yrs as large physician companies have become more prevalent, and about 10 % of Medicare Advantage plan members nationwide have been in them now, health consultants say.

In addition, new information technology allows such groups to higher track their patients. With mixed results, Medicare Advantage insurers for years offered doctors bonuses to meet certain quality care standards, such as getting members vaccinated from the flu or controlling diabetes along with other chronic diseases.

Under the “global risk” arrangements, the plans provide the physician companies the bulk of their Medicare funding once they undertake the mantle of being financially accountable for all patient care.

For the doctors' groups, the arrangement means they receive money a large amount of money upfront for patient care and do not have to worry about billing or having to get insurers to always preapprove treatments.

Because the “global risk” arrangements are made to reduce plans' costs, they potentially allow the companies to reduce premiums and attract more customers, said Mark Fendrick, director of the University of Michigan's Center for Value-Based Insurance Design.

“I check this out trend continuing to develop as clinicians will be responsible for the first time for that care they offer,” he said.

Historical Lessons

But Ana Gupte, a securities analyst with Leerink Partners in Ny, noted providers may also lose money if not successful.

That's what went down within the late 1990s when some physician-management companies such as FPA Medical Management and PhyMatrix took on financial risk from insurers simply to later go under, interrupting care to a large number of patients.

Health insurers say they now trust only doctors' groups which have shown they are able to handle the financial risk. They also retain varying levels of control. Insurers set benefits, handle member complaints and review which doctors are allowed in its network.

Martin Graf, a partner with consulting firm Oliver Wyman, said that old financial arrangements failed because provider groups didn't manage the potential risks facing their patients.

“Now they are fully aware physician groups must be vigilant about their patients – whether they have been in the office or not,” he said. “Everyone is aware of the failure of history.”