Improving HEDIS Scores Can Help Increase Revenue for Payers


HEDIS rates are a staple of healthcare plans, measuring the quality of member care and a plan’s degree of regulatory compliance. Plans with high HEDIS scores are also rewarded financially, with millions of dollars at stake. However, the process of submitting HEDIS information and managing it annually can be difficult.

By: Maurice Hill, consulting manager, data analysis at Change Healthcare

More than 90% of U.S. health plans participate in HEDIS, with scores publicly reported through the National Committee for Quality Assurance (NCQA). HEDIS scores inform value-based provider agreements, ensure regulatory compliance, and forge the analytics framework for keeping members healthy. These results are also an important contributor to an organization’s profitability, potentially representing millions of dollars in revenue gained or lost.

On the other hand, achieving excellent HEDIS scores requires constant investment in resources, data acquisition, data curation, and strict adherence to quantifiable, documented, quality programs and practices throughout the organization.

Every health plan understands the importance of keeping members healthy. Most understand that this requires great programs for keeping members healthy and a certain amount of analytics to inform their interventions.

The pressing question on the minds of health-plan executives is how to measure the value of an investment in a HEDIS program against the many priorities competing for the same resources — all while providing the very best member care and keeping the lights on.

Achieving positive ROI HEDIS excellence

While the HEDIS process can be difficult, it’s also rewarding, both for the health and welfare of members and for the bottom line. Here are two specific revenue streams to consider when valuing your HEDIS program:

STAR rating impacts performance bonuses

What a difference a STAR makes. A STAR rating, that is.

Medicare Advantage plans that receive at least four out of five stars are eligible to receive performance bonuses from the Centers for Medicare & Medicaid Services (CMS). The STAR ratings are based on several factors. However, a key factor in the CMS STAR rating is the plan’s HEDIS score.

The bonus amounts can vary dramatically. For example, in 2022, the average bonus per member ranged from $174 to $521, based on the actual STARS ratings. Those with four or more stars are eligible for these bonuses, with ranges dependent on where they fall in the actual rankings against other plans. A five-star plan receives the best bonuses.

If a plan has 250,000 members, even an additional $174 in bonus payments per member would bring in an additional $43,500,000. When star ratings decrease, performance bonuses also decrease. When they fall below a four-star rating, bonuses can be forfeited altogether. And, as we’ve seen in some high-visibility cases in the news recently, stock prices can tumble too.

Most states allow Medicare members to select a plan at enrollment. Members who do not select a specific plan are automatically assigned to a plan based on an algorithm. The algorithm varies from state to state, but most include some criteria that assigns members to plans with higher HEDIS scores. This auto-assignment accounts for as much as 75% of member assignments in many states.

Plans want to be on the high side of this auto-assignment algorithm. Let’s take a short analytics journey for this explanation.

First, the average Medicaid enrollee is on a plan for 10 months. That means that a plan typically loses 17% of its membership over the course of a year. Normally, this membership loss is balanced by new member assignments to the plan. Now comes the fun part.

Medicaid pays plans an average of $285 per member, per month just for having the member assigned to their plan, before reimbursements for services are rendered. Depending on the population mix, this number could be significantly higher.

Now, imagine a midsized plan (250,000 members) losing 17% of their membership over the course of a year. That’s 42,500 members. It’s important to continually balance that loss with new members. Being on the short side of the auto-assignment algorithm might mean they only regain 75% of that loss, resulting in a net loss of 10,625 members in a year. That represents almost $36M per year in lost revenue just for missing out on quality measures that drive auto-assignment. Plans that underperform severely risk losing all assignment, which could result in an annual loss of $214M.

Conversely, members lost by underperforming plans are actually gained by plans who score at the top end of the auto-assignment curve.

For example, California uses a carrot-and-stick approach. New Cal-AIM requirements reward high-performing plans. However, Cal-AIM now requires plans to score at or above the 50% percentile in select measures or forfeit their contracts altogether. This model is likely to be repeated in Medicaid operations across the country.

Getting help for the HEDIS process

Change Healthcare Consulting has more than 20 years of experience working with every size and type of healthcare plan, from new, small, plans to industry-leading commercial, Medicaid, and Medicare plans. We help customers build custom solutions tailored to their needs, including a framework to accelerate the delivery of analytics solutions.

Change Healthcare Consulting best-in-KLAS team members have served as HEDIS team leads to develop programs, improve payer HEDIS performance, and more. 

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