Corporate Research Group’s Weblog

Not clear.  Citi analyst Carl McDonald says, “United’s results are a positive indicator for the rest of the industry,” with the implications of lower cost ratios obvious.  But UBS analyst Justin Lake notes, ”We would caution that UNH business momentum is beyond that of its peers and others may not have the same” benefit from prior period development.  Complete coverage appears in the latest issue of Health Plan Market Trends.

By Alan Gilbert
Vice President, Business Development
AxSys Health

Managed Clinical Networks (MCN) are an important component in the support of better patient access and treatment through a coordinated care approach.  The MCN concept was created in Scotland in 1999 by the Scottish Department of Health.

Their definition of MCNs is defined as “linked groups of health professionals and organizations from primary, secondary and tertiary care, working in a coordinated manner, unconstrained by existing professional and Health Board boundaries, to ensure equitable provision of high quality clinically effective services throughout Scotland.”

Like a fine wine, this definition has aged well and seems to translate into the current goals of ACOs.

Some features of a MCN include:

• The application integrates primary, secondary and tertiary care services
• A care plan is established which will serve all network stakeholders
• The care plan has the capability to incorporate evidence-based medical practices
• All participating members of the multi-disciplinary care team will have equality of access to the care plan (access rights can be granted, partly or whole)
• Multi-disciplinary team meetings are facilitated through the telemedicine and teleconferencing. Experts at remote sites are able to discuss the patient review patient notes simultaneously
• Automated generation of referral letters, summary documents and discharge letters
• Educational and patient advice leaflets can be accessed and distributed

A specific client example is a Gynecological MCN for the West of Scotland that was established in 2000 to ensure the highest standard of care for all patients with gynecological cancers across the region. This was to be achieved by enhancing the referral system for specialist opinion and treatment, encouraging a multidisciplinary approach and educating all clinicians involved in the care of these patients by open discussion and debate. Participants would include medical & clinical oncologists, gynecologists, radiologists and pathologists. A weekly videoconference was instituted to enable clinicians from across the region to participate in discussions on their patients. The patient data was redacted so that the care-giver did not know if the patient was in their hospital or one of the other 9 hospitals in the region.

Benefits Realized by implementation of the Gynecological MCN included:

• Reduced travel and delays – The MCN was able to discuss individual cases without extensive travel and patients are able to be referred and seen without delay
• Equitable access to care – Patients are guaranteed that they will receive specialist review regardless of geography and that all clinicians involved in their care participate in establishing and reviewing their care plans
• Improved care delivery – The speed of delivery of the treatment plan has improved as all relevant information such as laboratory reports and pathology is recorded and collated through one central system
• Improved education – Clinicians have benefited from the sharing of knowledge through the cross specialty discussions and the meetings also provide an excellent training ground for junior doctors and other clinical staff who attend
• Improved data quality – through a central repository with better audit trail and introduction of standardization and accountability

I believe that as ACOs continue to form collaborative patient care in a community, that models like Managed Clinical Networks should be studied.

From a Citi research note on not-for-profit Blue Cross Blue Shield plans:

We didn’t think minimum medical loss ratios would be much of a concern for the non-profit Blues, but after the big improvement in financial performance in 2010, that is no longer universally the case. Health Care Service Corp., for example, enrolled almost 307,000 individual members in Illinois in 2010, generating just over $800 million in premiums, and a loss ratio of just 72.1%. In Oklahoma, the 2010 individual loss ratio on the company’s 73,500 individual lives was just 73.5%. And in Texas, where HCSC enrolls 415,000 individual lives, the loss ratio was just 64.4% last year. Everything else being equal, and assuming the Blue were able to increase the reported medical loss ratio by 400 basis points through SG&A and tax adjustments, we estimate the rebate on the individual product from just these three states alone would have amounted to $146 million last year.

So clearly this is one Blue plan that will likely have to adjust its premium rates going forward, particularly in the Texas market, since the bulk of the rebate relates to that market. By our calculations, in order to have achieved an 80% loss ratio on the individual product in Texas, the Blue would have needed to price its individual product almost 12% lower than it did in 2010.

Here are my back-of-the-envelope calculations.  Note: a total of nine states have asked for MLR waivers.  Maine’s was approved.

The market reacted quickly and negatively to news from CMS that Medicare Advantage rates will rise a just 0.4% on average in 2012 — driving down shares in health plans with a lot of Medicare membership like Humana, United and HealthSpring.  Humana, for example, was down 0.8% yesterday — the day after the CMS announcement — and another 1% in midday trading today.

Initial CMS expectations announced in February called for a 1.6% increase in 2012; however, CMS says medical expenditure aren’t rising as fast as expected.  CMS doesn’t think the lower payment will have an impact on plan enrollment: “When payment rates for MA plans were frozen from 2010 to 2011, Medicare Advantage enrollment increased by 6% while at the same time beneficiaries’ premiums decreased by 6%.”

Wall Street analysts remain upbeat about the prospects of Medicare plans despite the lower-than-expected 2012 rate increase.  Christine Arnold of Cowen notes that the announcement will enable companies to maintain margins in 2012, with membership flat to up.  “The news is most favorable for Humana,” she says.  Justin Lake of UBS notes, “While stocks may see some pressure…we would be buyers on any weakness as we expect plans will have no difficulty managing benefits/margins for 2012.”