Condition dynamics: Patrick Hervy, CEO of XLHealth, grows DM company into Medicare special needs plan

Recent years prove that the federal government as a healthcare payer is shifting its role from passive check writer to active shopper. And its shopping list is a mile long. Private sector organizations are pitching the government on select items from the list, such as the recently embraced special needs plans (SNPs), designed for the costliest populations of seniors. Prompted by the Medicare Modernization Act, there are three SNP models: dual-eligible, institutional care and chronic condition.

According to Chairman and CEO Patrick Hervy, the plan began as a pilot in eight counties and has now grown to six states-three of the 26 national SNP regions-where 1.3 million Medicare beneficiaries are eligible to join Care Improvement Plus. The plan currently claims 76,000 enrollees.

The Centers for Medicare and Medicaid Services (CMS) accepts C-SNP contracts on a case-by-case basis, allowing these narrowly defined plans room to create innovative models to reduce cost and increase care for disease-specific populations. Approvals take into account target population, quality of clinical programs and expertise of the organization.

Plans must meet all Medicare Advantage criteria, but have some flexibility in enrollment and population targets. They're also paid the standard Medicare Advantage rates-including risk adjustment.

"Special needs plans started officially a few years ago, but became of meaning in 2007 because risk-adjustment mechanisms took place," Hervy says. "Now with the new mechanisms combined with attention by CMS to try to provide better solutions for these patients as mandated by Congress, we felt this was a nice confluence of factors that would make us able to scale up what we had started to do over many years."

The high-cost, chronic-condition seniors would have been impossible to manage successfully without risk adjustment. Plans now have an incentive to take on such underwriting risk, and Hervy says the dynamics of XLHealth and its disease management experience made the organization a logical fit for expanding into the chronic-care Medicare market.