CMS proposed provider bonus rule could speed adoption of value-based contracts
The proposal would require bonuses included as claims in insurers' medical loss ratios be explicitly tied to improvement standards.
A proposed rule from the Centers for Medicare and Medicaid Services could change provider compensation and accelerate the adoption of value-based contracts, Modern Healthcare reported.
Provider bonuses included as incurred claims in insurers’ medical loss ratios must be explicitly tied to quality or clinical improvement standards under the December proposal. CMS also recommended that only spending directly related to quality improvement count toward insurers’ quality improvement claims in their ratio.
The medical loss ratio policy means health plans must spend 80% of individual and small group premiums and 85% of larger group plans on patient care. If insurers fail to reach those minimums, they must refund the different to consumers. Health plans have been offering providers bonuses instead of returning excess profits to patients, CMS wrote in the proposed rule.
“This artificial inflation of MLR often eliminates most, or in some cases even all, of the rebate owed to enrollees, regardless of how low enrollees’ claims costs are relative to premiums those enrollees pay,” CMS wrote.
Although consumer advocates such as the National Health Law Program say the policy changes are appropriate and necessary, insurers and providers have reservations. AHIP and the American Hospital Association both urged CMS to clarify that bonuses related to formal value-based arrangements can qualify. The American Medical Association also worries the policy change could add to physician burdens to earn incentive money.
CMS estimates the proposed change would increase rebates or reduce premiums for consumers by about $12 million a year. The agency said it can’t say how often this maneuver has been used or how much consumers have lost out on rebates as a result, because examinations of MLR data haven’t been finalized yet.
Along with ensuring that provider bonuses are based on patient outcomes, CMS also wants to stop insurers from using expenses not directly related to quality improvement to inflate their MLRs. Some insurers count expenses such as overhead, marketing, lobbying, office space, executives’ salaries, company retreats and artwork as incurred claims, CMS wrote in the proposed rule. This proposal is unpopular with AHIP, which said in comments on the proposed rule that indirect expenses are necessary to help plans carry out quality initiatives.
If the rule is finalized, it could underscore the importance of collaboration between payers and providers, and accelerate adoption of value-based care among health systems, because they will have to share more information to insurers to satisfy their MLR requirements, said Jonathan Buck, a principal at Polsinelli who focuses on health law.