Medicare Survival Guide: Value Chain Analysis

Many moons ago (1985 to be exact) Michael Porter’s bestselling book, Competitive Advantage: Creating and Sustaining Superior Performance, introduced the concept of value chain analysis - the chain of activities within an organization that each adds value to the final product or service. Fast-forward to 2009. Never has the value chain been more important to a Medicare plan than today.

 

Regulatory pressure, competitive positioning, shifting consumer priorities, and sustainable profitable growth make a successful Medicare Advantage plan a dicey venture these days. In a recent posting, “Strategic Stimulus: Setting-Up For Opportunity,” I encouraged companies to take an introspective look at their strategic vision and tactical approach to the markets they serve. 

 

This time, I’m advocating a similar “self assessment” for Medicare plans plotting a course for the future. Six areas of focus deserve attention —

Following is a mini-self review for a Medicare plan’s
value chain:

 

1. Regulatory Compliance – Tracking, managing and reporting on the never-ending stream of CMS rules and regulations has never been easy for Medicare contractors. Costs associated with a Corrective Action Plan or marketing suspension are extensive in terms of financial penalties, brand deterioration, and staff distraction. Most recently, CMS has raised the bar with a set of reporting requirements for Parts C and D that incorporates hundreds of new, complex data points.

- Does your plan have a real-time mechanism able to provide managers a “dashboard” view of critical compliance reporting across key operations or, does your compliance officer have to go “hunting and gathering” each month like a blind squirrel hunting for nuts?

- Is your plan able to withstand the scrutiny of a CMS audit (or even a mock CMS audit) in areas such as routine documentation, policies & procedures, appeals & grievances, and fraud/waste/abuse?

 

2. Revenue Management – Medicare Advantage payment rates are dead center in the Obama administration’s target for cost reduction—within the next five years MA and FFS will be on a level playing field. With the pressure of shrinking payment rates survival depends on aggressive revenue management and flawless enrollment operations.

- Does your plan have expert tools in-place to make sure you’re maximizing reimbursement through Hierarchical Condition Category (HCC) and Part C/D reconciliations on a timely and up-to-date basis?

- What metrics are used to manage and measure your Plan’s enrollment operations to make them an integrated member management function (vs. fragmented collection of data entry staff)?

3. Medical Management – With 80% of seniors having at least one chronic health condition, the knock on Medicare Advantage has been an inability to demonstrate value of care management and improved beneficiary health outcomes. And now, with reduced reimbursement rates, there is renewed demand on plans to improve medical loss ratios to maintain profitability.

- Is your plan linking its complex and chronic care management efforts to its HCC management?

- Are care management tactics such as personal health assessments, medical home, and evidence-based practice guidelines part of your 2010 medical management plan?

 

4. Customer Service – Competitive rivalry means your customers are another MA plan’s prospects. Customer retention now takes a mindset that combines proactive customer service with continuous “after-sale sale” tactics.

- Is there a formal member retention program to protect your customers from competitor “switcher” campaigns, build long-term, and track retention costs…as carefully as you track acquisition costs?

- Are operations and marketing working together to communicate with customers in a way that blends benefit education with ongoing selling of your plan’s value (i.e., an after-sale sale)?

5. Marketing Mix – Data, Data, Data…it’s at the core of every successful MA plan’s marketing mix. Customer and prospect data mining, modeling and profiling deliver tremendous competitive advantages to MA plans, from diversifying product portfolios to customer segmented messaging to new media strategies.

- Does your plan have ready access to accurate intelligence on your competitors’ MA, MA-PD and PDP plans, including detailed plan-by-plan benefit and enrollment information in your service areas?

- Have you segmented your existing customers and prospects using demographic indicators combined with psychographic profiles such as lifestyle priorities, buying habits, and advertising preferences (including Internet usage)?

 

6. Distribution Capacity – Inappropriate marketing and sales practices are by far the biggest problem for MA plans. And, CMS is taking a hard-line approach – secret shoppers, onerous penalties for non-compliance, shutting down sales, and issuance of a glut of new rules. At the same time, organic membership growth gets tougher and tougher. The ability for a plan to deploy multiple distribution channels is separating winners from losers.

- Are your field sales agents (in-house and outside brokers) fully trained, credentialed, certified, and monitored to make absolutely certain you’re limiting exposure to CMS marketing and sales rule violations?

- Have you moved away from a single source distribution strategy to maximize a multi-outlet sales approach: complementary field agent channels, telesales and Web?

 

This self review is a quick start to figuring out if your plan is where it needs to be in today’s tumultuous Medicare marketplace. If answers are hard to come by or, if there’s little internal agreement, it’s an important sign—don’t wait. Your plan needs a deeper dive into those areas that are coming up short. Organize a dedicated effort to attack problem areas, utilize outside experts well-versed in the “ins & outs” of Medicare Advantage, and take corrective action. Most importantly, do it sooner rather than later.