Managed care organizations: Lean into technology to drive better outcomes 

Updated on February 22, 2024

Managed care organizations continue to see pressure on rising costs due to sustained inflation, an increase in medical benefit utilization from members, and broader coverage of plan benefits, such as telehealth and behavioral health.

One specific area that has seen top-line pressure has been Medicare Advantage product lines. For 2024, Centers for Medicare & Medicaid Services decreased premium rates by 112 basis points before any risk score factoring is involved and the advance notice for 2025 rates were decreased by 16 basis points.  

Screenshot 2024 02 22 at 10.40.16 AM

Medicare Advantage has grown in popularity as 30.8 million people, or more than half of Medicare-eligible members, were enrolled into Medicare Advantage plans in 2023, according to the Kaiser Family Foundation. Utilization of benefits from the growing base of members has increased as well, putting a burden on medical loss ratios for some managed care organizations. 

Technology and data may provide answers

With downward adjustments to premiums and a growing base of membership that carries a higher acuity factor than those who are not eligible for Medicare or Medicaid, organizations may look to technology to help reduce the cost of care and create healthier member outcomes. One technology example includes how some organizations are using remote digital technologies and data analytics to manage high-risk discharges to ensure care is followed up appropriately to help reduce readmissions, which can drive up the total cost of care. 

In light of premium headwinds, however, managed care organizations still see the Medicare Advantage market as an opportunity and those organizations who use a data-driven approach and have experience in providing coverage to higher acuity type members such as Medicaid or Medicare supplement can scale to expand in this type of market. Health care represents approximately 30% of the world’s data, according to RBC Capital Markets. Meanwhile, 97% of that data remains dormant, according to Microsoft.  

Using data driven approaches can unlock key demographic and geographical insights to help identify high-risk populations and help managed chronic conditions by shepherding preventative interventions to avoid costly hospitalizations. Overall, these types of data-driven approaches help managed care organizations understand and guide medical decision behaviors for their members. 

In addition, managed care organizations who diversify their products into areas that have similar drivers of utilization behaviors can find synergies from the people, process and technologies used to serve members. For instance, similar contractual programs may be embedded in Medicare and Medicaid products such as medical loss ratio requirements, risk adjustment programs and pharmacy rebates. 

Having a depth of knowledge of these types of contractual requirements by utilizing treasure troves of data can have compounding effects, allowing an organization to diversify into multiple products and gain membership at scale. 

The takeaway

With top line pressures like declining changes to reimbursement for Medicare Advantage plans, a growing base of those eligible for Medicare products, broader coverage of services and an increase in utilization, organizations should consider leveraging their data effectively to execute data-driven digital strategies, to generate a sustainable margin and create better member outcomes. 

schmidt danny 1
Danny Schmidt
Health Care Senior Analyst, Senior Manager at RSM US LLP

Danny Schmidt is a senior manager in the assurance practice and a health care senior analyst for RSM US LLP. As a member of the Industry Eminence program, Danny works alongside the firm’s chief economist and his fellow senior analysts to understand, forecast and communicate economic, business and technology trends affecting middle market businesses.

haas michael
Michael Haas
Health Care Senior Analyst at RSM US LLP

Michael Haas is a technology management consulting manager in RSM US LLP’s health care industry practice. In 2022, he was selected for the firm’s Industry Eminence Program as a senior analyst covering the health care industry, working alongside the firm’s chief economist and other program participants to analyze the trends and themes affecting the nonprofit and education industry and shaping middle market businesses. Michael is based out of RSM’s New York City office.