Medicaid redetermination will result in a material decline in revenue this year for health plans across the country. Now more than ever, payers need a comprehensive strategy to ensure all earned income per encounter is properly collected and reported to minimize revenue loss, which gets back to the essence of managed care.
Given that background, it is no surprise the healthcare industry is paying close attention to the impact that redetermination will have on payer operations. In one payer’s conference call with investors to discuss second quarter 2023 financial results, redetermination was mentioned 16 times, and was the focus of several questions from Wall Street analysts. And earlier this year, one of the country’s largest health plans forecast that its 2024 Medicaid revenue will decline by almost 10% from its 2023 projected Medicaid revenue.
The reason is simple. Redetermination will result in about 15 million Americans, or 17.4% of Medicaid and Children’s Health Insurance Program enrollees, losing coverage, according to estimates from the U.S. Department of Health and Human Services. That disenrollment, says KFF, will result in about 83% of health plans generating lower Medicaid revenue.
Lower Medicaid revenue from redetermination is being compounded by a few other factors. States have become increasingly sophisticated and more stringent in reviewing encounters and are requiring health plans to meet higher reporting standards and requirements. Also, because of redetermination, payers face the likelihood that they will be left with higher acuity members, which could result in higher medical loss ratios that may negatively impact operating margins.
Focusing on encounters to safeguard revenue
Payers historically have focused less on encounters because of other operational priorities, such as accurately paying claims, improving technology, launching innovative products and services, and addressing regulatory changes. A renewed focus on encounters can help ensure that health plans are paid appropriately for the services they cover.
Using the “people, process and technology” framework to improve encounters
Because of the interconnected nature of how redetermination affects operations, payers must take a comprehensive, 360-degree approach to ensure alignment that focuses on people, process and technology (PPT).
The PPT framework is widely known and used by organizations of all shapes and sizes. The approach, however, often gets overlooked or temporarily cast aside when a company’s normal operations are disrupted, such as when payers are subject to sanctions or facing revenue deficits.
Organizations tend to react to the problem by trying to “fix” it quickly, rather than charting a course first. Leaders often fall into the trap of thinking they can throw the latest technology at the problem and expect it to magically go away.
PPT can help organizations, including health plans, solve complex business problems and enhance operational efficiency by maximizing the interactions between the people, processes and technology that drive an organization forward. Here is how payers can leverage the power of PPT:
- People: To capture all earned revenue and protect operating margins, payers need various functions to be involved in the encounter process and accountable to support improvement initiatives. Payers must ensure that team leaders and members across multiple departments fully understand state regulations, reporting requirements and their role in the encounters process. Loss of key talent could expose departments to knowledge gaps that lead to reporting errors, revenue loss and financial penalties. Leveraging a RACI (responsible, accountable, consulted and informed) framework can help payers better communicate roles and dependencies across functions.
- Process: Encounters/claims pass through multiple departments, and it becomes easy to make mistakes and, just as importantly, lose valuable data. It is vital that payers update processes and governance systems to facilitate correct reporting and resolve issues. Attention should be paid to communications systems to ensure that information is flowing effectively and efficiently to leaders and team members processing encounters data.
- Technology: Payer technology must be agile to quickly adapt to changes made by states that more closely scrutinize healthcare services and payments. Technology changes must seamlessly capture, across multiple departments, the changing regulatory reporting requirements. Analytical tools should be created to identify data gaps or roadblocks to improving claims processing.
The restart of redeterminations resets managed Medicaid back to pre-pandemic operations. As such margins will tighten and revenue capture will become more critical to a plan’s financial success.
Health plans must act now and act strategically. Improving encounter processing and reporting can safeguard and maximize revenue and operating margins providing the financial resources for payers to continue providing members with quality, life-enhancing healthcare.
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