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January 11, 2022

How payers can keep improving their Medicare Star Ratings

By understanding the key factors behind the jump in the most recent ratings, payers can make the right moves to meet the shifting benchmarks of success.

In the latest release of the Medicare Star Ratings — which measure health plans’ performance in areas like quality of care and customer service — participating organizations realized significant improvements over the previous year. Not only did the boost result in substantial bonus revenue (about $11 billion) for companies earning four or five out of five stars; it also elevated the threshold for what it means to be an industry leader.

Per our analysis, the number of plans with the highest rating increased 252% year over year, yielding $2 billion in additional revenue from the Centers for Medicare & Medicaid Services (CMS), which oversees the administration of Medicare services.

However, the work involved with sustaining these gains may be more difficult than what it took to achieve them. By understanding and responding to the three key drivers behind the ratings improvement, organizations can position themselves to continue earning top ratings. 

Aiming for — and reaching — the stars

Here’s what’s driving the jump in Star Ratings and what businesses can do to sustain the momentum: 

  • CMS measure changes. In its recently released Star Ratings guidance, CMS removed six measures from the rating calculations, marking the largest ratings change in the last five years. As a result, payers experienced significant ratings performance improvements, with a 39% year-over-year increase in bonus revenue contracts (payers with contracted agreements with CMS that achieved a rating of four or more stars) and a 15% year-over-year increase in the number of members within those health plans.

    To maintain these high-performing ratings, it will be critical for payers to understand future changes to how the ratings are calculated, as well as predict CMS measure thresholds. To help payers gain this perspective, we’ve applied mutual information theory technology to predict future statistical cut points (the individual thresholds by which Star Ratings are measured) based on three drivers:

o   Anticipated impact of healthcare trends

o   Expected changes at regional/plan levels

o   Identification of measure-level drivers of performance

By understanding these future cut-point thresholds, payers can define focus areas of opportunity and initiate proactive steps to achieve quality improvement. For example, If the quality measure is breast cancer screenings, the cut point for achieving four stars this year may be between 85% and 87%. If our solution helps identify that next year’s cut point will be 88%, payers would focus on how many more members they need to receive mammograms and achieve that threshold of compliance.

  • Quality measure battleground. The ratings for member perception and clinical outcomes now represent approximately 60% of the overall Star Rating score for Medicare Advantage Prescription Drug (MAPD) contracts. This points to the increased importance of measures associated with member surveys (i.e., the Health Outcomes Survey and the Consumer Assessment of Healthcare Providers & Systems surveys), medication adherence, disease control and readmissions.

    With the emphasis on member perception and clinical outcomes, the battleground for high-performing plans has shifted away from traditionally easier measures to those that require systemic, complex changes to improve.

    For example, plans will be required to revisit their approach to member touchpoints and embed continuous improvement across their quality infrastructure. With this trend in mind, we’ve mobilized an AI-assisted recommendation engine to streamline member outreach, backed by quantitative insights and anthropological studies.

  • Inorganic growth. Top payers continue to turn to mergers and acquisitions of top-performing plans to magnify their quality bonus payments attributed to Star Ratings performance. These acquisitions serve as immediate sources of additional quality bonus revenue.

    In an ideal scenario, payers that engage in M&A would evaluate and employ best practices across existing plans to yield further improvements. However, this is often not the case, with recently acquired plans often experiencing a decrease in future Star Rating performance as payers struggle to assimilate these newer plans into their larger organization.

    Despite the inherent challenges of mergers and acquisitions, expect to see M&A activity increase, as many smaller plans have proved in the latest Star Ratings that they are able to achieve four-plus stars.  

Meeting high-performance thresholds

Health plans, whether rated as high- or low-performing, should take the following into consideration as we move toward the next round of Star Ratings:

  • Quickly incorporate future measure changes into their quality improvement programs

  • Accurately predict changes to CMS measure thresholds and how they will impact performance

  • Make a deliberate pivot toward clinical outcomes and member perception

  • Thoughtfully grow plans while maintaining or improving Star Ratings

  • Create a virtuous cycle of investment in Star Ratings improvement

In our experience, payers stand to gain significant value from their investments in improving their Star Ratings. The most recently released ratings deliver a resounding message that payers must continue to evolve to meet shifting benchmarks of success.

Michael Acosta
Senior Advisory Consultant
Picture of Digitally Cognizant author Michael Acosta

Michael Acosta is a Sr Consultant in Cognizant’s Advisory Consulting, leading the quality improvement solution offering in the Government Programs Practice, and supporting strategy and management consulting engagements for health payers.

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