Beth Kutscher | February 24, 2015
DaVita HealthCare Partners anticipates a $100 million reduction in its 2016 operating income if the CMS finalizes proposed changes to Medicare Advantage rates.
DaVita detailed in a filing with the Securities and Exchange Commission that the proposed rates would amount to a cut of 4%, much steeper than the CMS is calculating.
The CMS last Friday proposed a 0.95% cut to Medicare Advantage rates, which the agency expects will be offset by an expected increase in risk scores for Medicare beneficiaries. The net effect, therefore, is likely to be a 1.05% rate increase for Medicare Advantage plans.
But in its filing, DaVita argued that the risk model calculation actually penalizes providers that have invested in wellness programs and care for higher acuity beneficiaries.
The company’s HealthCare Partners division uses a care coordination approach to manage patients’ chronic conditions, typically through capitated payment contracts. Its patients tend to be older and sicker than average, CEO Kent Thiry said on DaVita’s most recent earnings call this month.
“CMS should incentivize providers and plans to care for the most at-risk beneficiaries,” DaVita said in its filing Tuesday. “The 2014 model does not do this as it tends to over-predict costs for very low-cost beneficiaries and under-predict costs for very high-cost beneficiaries.”
Adjustments need to be made to the risk model calculation to encourage more innovation in population health management, DaVita added.
The company this month had declined to make predictions during an earnings call about 2016 Medicare Advantage rates.
“Right now our concern is that the administration may not realize how close they are to actually reducing the incentive for people to invest in Medicare Advantage, which has been the source of tremendous innovation, cost reduction and clinical improvements,” Thiry said on the call.
For full-year 2014, HealthCare Partners reported $215 million in operating income on $3.5 billion in revenue.
Source: Modern Healthcare