Medicare Advantage and Interoperability: Regulation Changes and Recommendations for Success

Adele Allison
Judith Nelson
Adele Allison
Director, Provider Innovation Strategies
Judith Nelson
Director, Medicare Advantage Strategy


The Centers for Medicare & Medicaid Services (CMS) recently released the 2017 Medicare Advantage and Part D Rate Announcement and Call Letter on April 4, 2016. The CMS announcement outlined several key provisions related to the Medicare Advantage Program including payment rates and adjustments, HCC risk adjustment model, an increase from 10% to 25% in the risk score weighting for diagnoses derived from the Encounter Data System (EDS), guidance on the future of provider directory requirements, and several other policy updates.

In February, CMS requested comment from the industry regarding the adoption of technology that supports interoperability between Medicare Advantage plans and their contracted providers as well as identifying barriers to successful adoption. CMS believes that commercial payers and the Medicaid program have taken steps to promote interoperability across provider settings with the ultimate objective of reforming the delivery system and supporting quality initiatives focused on improving patient outcomes.

Plans operating within this space need to have a full understanding of interoperability and the impact to payers, along with a well-crafted plan of action for collaborating with their provider partners.


Under the American Recovery and Reinvestment Act of 2009 (ARRA), the Health Information Technology for Economic and Clinical Health (HITECH) Act required hospitals, physicians, and non-physician providers to adopt and use interoperable, certified electronic health record technology (CEHRT), also known as Meaningful Use (MU). Launched in 2011, CMS and state Medicaid agencies provided incentives for providers complying with the EHR Incentive Programs requirements; Medicare penalties for non-adoption began in 2015. Since commencement, nearly 560,000 physicians and non-physicians and over 4,800 hospitals have registered for the program and/or received a portion of nearly $32 billion in incentives.

The Office of National Coordinator (ONC) has been working on interoperability standards and requirements for CEHRT vendors. The HITECH Act also provided $2 billion in discretionary funding to the Secretary of HHS, which flowed through investments made under the ONC. Included in these programs was a federal investment of $547,703,438 for interoperability made in March 2010 to every state and territory in the union; and, an additional $16 million was made in January 2011. Each state/territory was required to submit a plan for health information exchange (HIE) and guidance on standards toward advanced, query-based exchange using the HITSP C83 standard.

In September 2012, final rules for providers and vendors introduced two interoperability options to meet MU measures. In addition to compliance through a HIE certified on the national interoperability network ("The Sequoia Project"), the HL7 standard known as Direct messaging was made available for an incremental approach to interoperability. Direct messaging resulted in sustainability issues for the newly established public HIEs.

Direct messaging uses a Consolidated Clinical Document Architecture (C-CDA), an extensible markup language (XML) schema for reading clinical documents – a machine-readable template, so to speak. In this fashion, coded data types collected under MU can be represented as HL7 concepts and structured, object-oriented vocabularies are encrypted and pushed securely over the Internet similar to email. The Direct standard can be used for simple ambulatory and inpatient use cases such as referral management or discharge.

Recent regulations have added a third HL7 interoperability standard known as the Fast Healthcare Interoperability Resources (FHIR, pronounced "fire"). Referred to by HL7 as the next generation standard framework, FHIR leverages new versions of HL7, the C-CDA, and the Internet to assemble modular bundles or "resources" using application programming interfaces (APIs) to achieve rapid, low cost interoperability.

Payers and Interoperability

There are a number of payer benefits from real-time data interoperability, including:

  • Access to structured clinical data associated with MU
  • Use of clinical data to strengthen HEDIS performance
  • Use of data for risk-identified member cohorts, patient-centered member management, and care coordination
  • Exchange of data to support of value-based payment design to manage cost variation, provide performance feedback, and other payer-provider data-sharing
  • Objective alignment to strengthen provider-payer relationships

Nevertheless, it will be important for payers to understand the state of interoperability in the markets they serve. To accelerate the adoption and use of interoperable CEHRT, HITECH created the federal MU programs. Although the number of providers registered for the MU program is substantial, true interoperability is limited to providers who have achieved Stage 2 MU. As of January 2016, the Health IT Policy Committee reported only 59,605 eligible professionals (less than 11 percent of professionals registered) and 1,835 hospitals (less than 38 percent of registered) had attested to Stage 2 MU. This means the number of markets that have realized capabilities for sustained data-sharing is limited and widely variant.

Additionally, there is likely variation in the technology and standards being used to achieve interoperability of data within these markets. Today, there are three federally recognized standards for health information interoperability: HIE certified on The Sequoia Project, Direct, and FHIR. Payers should expect the use of any given standard to vary by use case, market availability, and provider achievement under MU. Potentially, a payer may need to secure technical capabilities under all three standards to accomplish data interoperability across a geographical network in which it does business.

In other words, without clearly defined use cases that include providers and payers, the stakeholders will not have a business model framework geared towards mutual alliance. The use case should clearly identify a shared problem and associated needs (for example, data capture, care coordination). It should also map the solution, identifying the appropriate technology and standard to achieve. By structuring appropriate use cases, stakeholders will be able to understand financial and operational impacts to implementing and maintaining these technology-enabled workflows.


  1. Conduct and share an environmental assessment that identifies by metropolitan service area and by use case:
    1. Physicians, other clinical professionals, hospitals, and other stakeholders using technically-enabled interoperability, and
    2. The federal standard(s) – Certified HIE, Direct, and/or FHIR – or non-federal standard(s) being used
  2. Create a taskforce or workgroup to develop and recommend payer-provider use cases. Some may include: clinical record summaries for payer case managers, sharing care plans, quality reporting, performance data transparency, secured messaging, ED or hospital admission notification, precertification, provider enrollment/credentialing, risk stratification, or population health management. Use case work has been done by a number of collaborations, which should be leveraged by any MA-provider workgroup.
Medicare Advantage regulations continue to evolve and each Call Letter adds to the complexities of the industry. If you are interested in learning more about how DST can help you navigate through this changing environment, contact us at 1.800.272.4799.

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