Use Enterprise Risk Management in Your Dealings with the Feds: A Lesson From LifeMasters

The Disease Management Care Blog has been thinking some more about the LifeMasters bankruptcy debacle.

There will be some additional fall out but in the meantime the the DMCB thinks there are some important lessons for the future:

The Government Can Be a Fickle Business Partner: One classic example is the Medicare Advantage (and let's not forget Medicare+Choice) program. Like it or not, that Federal program has been a roller coaster of commitments made and unmade. While you may not feel sorry for the contracting insurers, there's still something unfair about midstream and unilateral funding cuts ultimately based on shifting politics and budget shortfalls. It's a heluva way for a government to treat its citizens, especially when it comes to insurance.

And now we have LifeMasters. As the DMCB understands it, the disease management organizations (DMOs) that participated in the Medicare Health Support (MHS) Demo are dealing with the specter of having to remit their fees minus the savings back to CMS. The DMCB hasn't been privvy to the contracting terms, but it suspects there is room for interpretation and negotiating. The fact that one of the DMOs had to resort to bankruptcy suggests that the flexible, mutually beneficial, inquiry-driven partnerships that have characterized the MHS pilot has been replaced by lawyering. How much of the government’s hardball interpretation of the pilot's terms is a function of the CMS’ legitimate fiduciary responsibility versus a change in President, the lack of a strong full time CMS administrator and budget shortfall? Are the other DMOs involved in the MHS pilot going to have to litigate their way out of this?

Beware Rosy Actuarial Projections: The DMCB remembers those heady days back in the 1990s when those of us in traditional disease management thought we could conquer the world. While there were some preliminary studies that suggested increased quality and lower costs, our enthusiasm made us generalize preliminary findings involving an underdeveloped uni-dimensional care approach to any population in any setting. The fact that we were so naïve is OK, but let's face it. The calcuations underlying CMS' and LifeMaster’s assumptions on the fees and savings were about as accurate as all the other predictions about Medicare costs. It won’t be the last time.

There is a relatively new and admittedly imperfect business tool called 'enterprise risk management.' The DMCB suggests sponsors of the Patient Centered Medical Home (PCMH) and Accountable Care Organizations (ACOs) and Co-Ops that are so anxious to do business with the Feds aggresively use their ERM to pause and think really long and really hard about all the worse case scenarios that could happen when getting into the projected savings business with CMS. Think hard about changes in the administration, funding levels, the tax code, insurance support, costs vs. upside risk, data availability, shifting regulators and the threat of litigation. It's not only good corporate governance, but when it comes to the goverment, it may be all that stands between you and bankruptcy.