Getting Dibs on (MA) Bids - Part 3
Tactical sales advice for those who want to help Medicare Advantage (MA) organizations outperform their competition
Context
Welcome back to Part 3 of TheTreatmentPlan’s 3-part “interview” series designed to help digital health leaders at startups and larger companies better understand current and prospective MA plan customers and their likely needs. If you have not already, I recommend you start with Part 1, which provides some context on the MA bid process which is so central to company strategy and performance. Part 2 breaks down the core financial formula that MA organizations use as a framework to make strategic choices. In this 3rd and final element of the interview, we will get into the “so-what” as it relates to how best to use this information so as to be a better partner.
As reminder, I use quotation marks above around “interview” because the conversation is with an imaginary MA executive, Susan Moop. Just as in the past two segments, the discussion is fictional, but the content is informed by executives with real profit and loss and benefit design management experience, and the content of the interviews was edited by them.
Time to hear from Susan how you can close more deals!
Part 3 Highlights
If you are selling a product or service to a MA organization for the first time, you need to understand whether your solution gets priced into its plans’ bids.
If what you sell is bound by the MA bid cycle, that is generally a great opportunity. It means that you can help the insurer grow and perform in a financially sound way. Not much is more important.
However, if you are bound by the MA bid cycle, you need to line up your sales process with the way that health plans evaluate ideas for submission in their bids. This has long lead times.
To be included in the MA bid cycle, your solution must deliver results that are actuarially validated by the MA organization’s actuaries. You must have data that support your claims, and these data need to be well defended.
It isn’t just the actuaries. The number of different entities involved in the decision process are significant and it is important to understand who makes the decision, who influences the decision, and what their motivations may be and why. If you are betting your sales strategy on one executive sponsor and not covering the bases, you risk falling short of your objectives.
If you are approaching MA organizations too late in the bid cycle, that doesn’t mean you can’t find opportunities to sell your solution in the intermediate term. The key is to anticipate which of those organizations may need support if their results fall short of the financial plan embedded in their bid submissions.
It is much easier to help address opportunistic issues if you are already partnered with an MA plan than if you are not yet currently serving them.
Introduction
We are excited to share Part 3 of our interview with Susan Moop. As a reminder, we interviewed Susan, one of the pre-eminent experts on MA in the country, for an insider perspective on the MA bid strategy and planning process. This process is among the most consequential in US health care, funding the care for over 28 million Americans and accounting for $427B1 in federal expenditures. As a federal program administered by Centers for Medicare & Medicaid Services (CMS) with a highly regulated annual cycle, the bid process is highly structured, the inputs are well studied, and the blind auction submission offers some drama that caters to eager game-theorists. Understanding the process, why it is important, and anticipating challenges and opportunities MA plans and their risk-bearing provider partners face can offer rich insights for digital health entrepreneurs to harness in their sales efforts with MA clients.
Interview - Part 3
TheTreatmentPlan: Welcome back one last time Susan. Let’s take the conversation in a more tactical direction. Folks are thirsting for practical advice to best approach MA plans with the technology, services, and analytics they believe can make an impact.
Susan Moop: Absolutely and makes sense. Now that your audience understands the business model and operational timelines associated with that business model, it will be easier to provide guidance on how to approach prospective MA partners.
TheTreatmentPlan: That point around the timeline of the business model is a key insight, actually, so lets start there. As we learned earlier, the time it takes to to evaluate and ultimately submit bids seem very long. For many aspiring MA plan vendors for whom time is precious, lengthy sales cycles are scary. Is it actually a good thing if the solution I provide is subject to the MA bid planning process?
Susan Moop: Very good thing! If your solution is something that is important enough to be a covered Medicare benefit or manage total cost of care, it signals that you are crucial to an MA plan’s economic model and differentiation strategy. Yes, the timelines require that you plan ahead. And yes, the intense scrutiny around the numbers means only the most well supported ideas make it. However, if you are able to get through this process, your solution is driving both growth and bottom line economics for your customer, and contributing to success here is a great way to build a long term relationship. Also, if you can navigate through one bid cycle, you are well positioned for future cycles (recurring revenue) and other MA customers.
TheTreatmentPlan: This is an embarrassing question but how does one know if the solution they offer is included in the bid or not?
Susan Moop: It is a great question and an important one. Basically, if your offering is a covered benefit or a solution that decreases unnecessary total costs of care, you will be subject to the bid planning, evaluation, and submission process.
TheTreatmentPlan: What are some examples?
Susan Moop: Sure. Utilization management programs, disease or care management programs, and new supplemental benefits (ATI Advisory put out a good primer on Supplemental Benefit trends) would all be subject to the bid planning process. Also included would be analytic solutions that might support novel value-based contracting agreements, or technology solutions that allow network physicians to improve referral management or other programming that reduces total cost of care.
TheTreatmentPlan: And what are some examples of those solutions that are not relevant to the bid planning process?
Susan Moop: Programs designed to improve Star Ratings, provider contracts, and technology that improves administrative operations are some of the solutions that would not be subject to bid planning. Sales and marketing programs also are exempt. Some might technically argue that solutions in these areas all factor into the bid process. True, the MA plan effectively prices in the efficacy of these programs in their bid submission. But investments in improvements can be made anytime and therefore changes are primarily subject to the plans annual planning/budget cycles.
TheTreatmentPlan: We are in May right now. So for 2024 plan go-live, bid submissions are finalized at the end for this month. Something tells me that if I think I have a great idea to help an MA plan that is subject to 2024 bid, I am too late.
Susan Moop: That is an understatement.
TheTreatmentPlan: How late? Should I have been engaging with the plan as early as January of this year?
Susan Moop: Honestly, more like summer/fall of 2022. As I said before, sometimes it helps to remember the dates using common holidays. New ideas will get energy in the summer/fall (Labor Day), they will be socialized in late fall (Thanksgiving), ROI numbers will be submitted to cross functional teams in the new year (Valentines Day), final projections will be submitted in the Spring (Easter), and the horse trading will finish by Memorial Day before final submissions are sent to CMS in June. Obviously the timelines may be somewhat shorter for companies with smaller footprints and less complex plan mixes.
TheTreatmentPlan: Got it. I probably need to focus on 2025?
Susan Moop: Yes, but remember, this is one of the most impactful bid seasons the MA industry has seen, I would not advise interrupting your prospective clients attention from 2024, unless it is with a team that thinks further out. As a general rule, certainly don’t try to get their attention in the March through May timeframe in any year.
TheTreatmentPlan: Very helpful. This summer I will start to socialize my ideas for 2025. But with whom should I start? As you know MA organizations are large and it would seem to me that there are quite a few people involved in the decision on whether to invest in a new program or not. Is that a fair statement? If so, who are the people involved?
Susan Moop: Correct. The governance associated with assessing, evaluating, designing, and implementing a program that is priced into bid is one of the most rigorous processes in a MA organization. End-to-end, stakeholders from almost every function can be involved, and decisions often go very high in the organization. Every dollar needs to be defended and debated between teams with often divergent points of view, which is one of the ways the strongest MA plans engineer good decision making.
TheTreatmentPlan: My sense is that there is likely a team (or several teams) tasked with coming up with new ideas. They are probably who I need to engage with primarily? What are some of the other functions that get involved?
Susan Moop: You are correct. There is either a team or set of teams in different parts of the organization who look for unnecessary total cost of care improvement ideas that improve quality. Usually a health plan will have medical trend impact targets that are set out for a few years. That target, of course, always goes up each year. This encourages teams to think more innovatively, both for internally developed programs as well as externally. From these teams you want to understand 1) the targets they are trying to hit 2) the thematic ways they have been thinking about hitting those targets and 3) the process they use to bring a target idea through a test-and-learn process to bid approval. #3 is the most important and the hardest, and it varies significantly across organizations.
TheTreatmentPlan: Why is #3 so hard?
Susan Moop: While each organization’s business process is likely well defined, the politics of the process are often unwritten. What do I mean by that? You can have teams that are actually competing for the same area of impact. You can have different individuals who feel personal pressure to deliver in different areas. You can have new leadership with a different point of view. You can have new people in different roles in the process who are unaware of how to navigate the process. And different areas of the business can wax and wane in importance based on competitive threats, business performance, and investor influence.
TheTreatmentPlan: This sounds like it is hard to navigate even for the people who work inside of the MA organization. How can I figure it out from the outside?
Susan Moop: It is hard. But the best way to navigate these issues is to employ time-tested consultative selling skills. Build trust, be extremely curious, and act like a partner.
TheTreatmentPlan: What teams at a MA insurer are involved in green lighting a new idea?
Susan Moop: The work is very cross functional. While many teams are involved, generally you will have a program sponsor, a market/P&L sponsor, and an actuarial sponsor. From there other teams will assess how the program might interplay with provider partners, with member experience, quality improvement and sales. The program sponsor is usually the best entry point as they are generally accountable for year over year improvement in unnecessary medical cost impact or clinical innovation. While this person/department works on an annual cycle generally MA organizations will have a portfolio management process and/or empower teams to identify new ideas and test them for future expansion/scale.
While the program development team will be accountable for ideating and putting new ideas into action, the large numbers of cross functional teams involved makes the process particularly complicated. Each individual involved in program design and evaluation have distinct reporting lines, which in part is designed to bring good governance. It is a tricky relationship. The P&L sponsor wants the maximum savings possible so as to price the most aggressively. The program sponsor wants to achieve projected savings that can expand year over year, and the actuarial sponsor is incentivized to make sure the other two don’t make mistakes. These folks are all seeking input from their colleagues in different disciplines. In many organizations, the actuarial sponsor can trump the others, which is counter-intuitive for most entrepreneurs who are generally used to situations where the business drives the decision making. Again, this is designed explicitly so that MA plans do not expose themselves to unintended insurance risk, which is the kiss of death in insurance. Reminds me of a great tweet I saw recently from PE investor Dr. Bijan Salehizadeh, MD. This quote was about provider organizations taking risk, but the principle most directly applies to insurance.
TheTreatmentPlan: So does that mean I need to get in front of the actuarial team?
Susan Moop: Your program sponsor would probably kill you if you tried to do this independently. But yes, your program sponsor needs to get you, your value prop, the numbers, and the clinical drivers that support your numbers to the actuarial team. It is good to understand exactly how that happens, as it is not always easy to get actuarial resources assigned, even for great ideas.
TheTreatmentPlan: Next you are going to tell me the actuarial process is extremely rigorous.
Susan Moop: Yes. Your cost savings calculation needs to be the exact same one used and supported by the actuarial team, and needs to be actuarially valid. Often entrepreneurs are frustrated with this process, but it is what it is.
And in general, it is hard to support your numbers without some sort of prior evidence. This could come from another customer or a prior smaller pilot or scope of work that you were able to do from a budget outside of the bid process.
And just to pile on, it is not just the actuaries. In final submissions, everyone around the table asks extremely tough questions of the program sponsors to support the projections. Good ideas can get killed from all sides, after multiple iterations of review. It is a very robust process, and some decisions can go all the way to the top of an MA organization.
TheTreatmentPlan: So if it is a new program that does not have evidence, it is going to be hard to get support. A few minutes ago I was resigned to the fact that I need to focus on 2025. But it sounds like 2025 is in play really only if two things are true: 1) the medical economics impact of the clinical model has been proven, and 2) I have been sufficiently disciplined in working through the bid strategy process with the right teams. If I have a relatively new idea that has not yet had large scale data evaluation, are you saying that I am really looking at 2026 plan year go-live?
Susan Moop: It really depends, but the short story is that this is hard. As mentioned before, some companies solve for this with some sort of formal portfolio management process or 3-year planning process as we discussed earlier. So there may be budgets for smaller-scale projects that provide an opportunity for your intervention or tool to generate an outcome that would provide the opportunity to prove that your solution meets the thresholds required to scale. Smart organizations, however, create an environment and incentives necessary to drive new ideas into the business, and smart leaders push for scalable solutions to be deployed fast.
TheTreatmentPlan: Ok, so the tactical advice here is to try to see if there are opportunities to put my solution into action in a focused way. Then, use that opportunity to prove my solution’s ability to scale and meet other outcomes thresholds in the following bid cycle? Given the time to do this kind of test and learn, that probably takes time?
Susan Moop: It does, particularly for those programs that take time to recruit/engage members or providers, time for the intervention to (credibly) deliver the intended result and time to demonstrate that the implementation plan is bulletproof and risk-free for the client.
TheTreatmentPlan: Are there other ways to be more nimble?
Susan Moop: It is important to remember that your customer has a lot of risk in deploying solutions that 1) don’t work or 2) can’t scale so it is important to be respectful of the challenge they have and why the process does take time. However, there are other opportunities for smart entrepreneurs. Specifically, there sometimes are situations, off-cycle from the annual bid planning and 3-year portfolio innovation cycles where you may be able to find a burning platform necessary to green-light a brand new program without any prior cost savings evidence.
TheTreatmentPlan: Can you expand?
Susan Moop: Remember that the bid is the price that is expected to cover member medical expenses and an assumption for a margin (which MedPAC estimates at 4.6% in 2023 bids but varies between non-profits and for-profits2), and therefore drives projected margin. As happens, actual performance will sometimes vary from projections. To that end, vendor partners can uncover off-cycle sales opportunities when it becomes reasonably clear that actual costs are exceeding projected costs. In that situation, the plan is in imminent risk of missing its earnings forecasts, which is how these companies are valued and how executive bonuses are paid.
For example, let’s assume pre-claims prior authorization data suggests that utilization trends in oncology treatment are accelerating higher than modeled. This means that the insurer needs to find savings from somewhere else if it wants to achieve expected earnings performance. Mitigating this risk can result from 1) dialing up other oncology quality programs that have the ability to do so, or 2) deploying new quality programs in oncology or 3) looking for programs in other clinical areas that can offset the shortfall in oncology. This is a big opportunity if you can spot it in advance, and you have the trust of key executives with a mandate to make change quickly.
TheTreatmentPlan: How would an outsider to the plan be able to anticipate these challenges and take advantage of the opportunity?
Susan Moop: There are a few ways. You may have access to data that gives you insight into the kinds of challenges the plan is having. You also might have access to the people in the MA organization who are monitoring these issues. In general those of your readers who are best positioned to take advantage of these these kinds of situations 1) are already vendors of the MA plan, 2) have offerings that do not require significant integrations in order to generate near term savings or 3) were in consideration for future bid cycles. But whether you are current partner of the MA plan or not, you need to be acutely aware of the key drivers of MA plan economics. This means that both via public and proprietary sources of information, you could anticipate MLR challenges associated with greater than anticipated growth, utilization trends in specific clinical categories, or market dynamics in specific markets.
TheTreatmentPlan: Got it. So even more important to be hyper aware of the market forces impacting the MA plan, constantly in communication with key stakeholders and effectively using those consultative selling skills.
Susan Moop: Yes, my favorite consultative selling trainer would call a sales executive who was good at this a “Superstar”.
TheTreatmentPlan: Well in some ways I am more depressed about the timing of all of this and on the other hand I am less depressed knowing that there is an actionable playbook I can employ.
Figure out how my idea can help the business
Understand the bid process and how decisions get made
Make sure I have robust actuarial evidence that supports the impact my intervention can deliver, and it can do so at scale
Help my sponsor navigate the company and process so she/he can sell it
Align my evaluation to the actuarial culture/methods of the client
Communicate, communicate communicate
Hope for the best
Is that about right?
Susan Moop: You are an MA pro!
TheTreatmentPlan: Thank you Susan. I appreciate all the time you took to educate us about Medicare Advantage bid and how that relates to those looking to sell into MA organizations. As is the case in almost everything health care, this is a topic that is much more complicated than meets the eye. I have to admit I was itching to dive more deeply into the weeds on a few of the topics you touched on, but I am glad we kept the conversation at this altitude. Maybe we can convince you to come back again in the future?
Susan Moop: Thank you Duncan. It has been a pleasure, and I would be happy to see how I can be helpful.
A Final Word
This concludes our 3-part Interview of Susan Moop. We know we probably did not cover everything that you might like to see, and sadly, Susan never revealed herself. To that end, if there are topics that we did not address that you think we should, please reach out. If there are aspects about the process that you think we got wrong, also please reach out. Last, if there are friends or colleagues that you think would benefit from reading this interview or the content in this newsletter, please feel free to forward this along.
One last note - this may be my last post on MA for a while, unless there is a specific topic that subscribers want to explore that makes sense for me to write about. I likely will pivot to articles on areas I am particularly passionate about right now. Stay tuned on those.
https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-enrollment-update-and-key-trends/
an assumption for a margin (which MedPAC estimates at 4.6% in 2023 bids but varies between non-profits and for-profits)