An Olive Branch and an Alarm Bell: Implications of the Final Rule and Rate Notice on Star Rating Performance

The recent release of the CMS Final Rule and Rate Notice caught many in the healthcare industry by surprise.

And at first glance, the changes seem contradictory. On the one hand, it brought expectations of cost-cutting and efficiency, in line with the current administration’s focus on reducing government expenditures. But on the other, it also brought unanticipated policy shifts that finalized higher-than-expected rate increases for Medicare.

What does this mean for the future of healthcare delivery? Is the government doubling down on the privatization of healthcare, or is there something more nuanced at play here?

Let’s break it down.

What we Heard in the Final Rule and Rate Notice: Efficiency, Private Sector and Equity

The government’s focus on cutting costs remains clear – as evidenced by the firing of thousands of health-focused officials. Also clear is the eschewing of anything labeled “equity” – despite the fact that the Health Equity Index was designed to save money and preserve the Medicare fund.

But the Administration seems to have taken a different posture toward bureaucratic spending versus policy, as reflected in the favorable rate increase. They also maintained the design of the Health Equity Index, even though it was renamed to align to the Administration’s agenda.  

With many moving pieces, let’s summarize the key themes that emerged:

• Keeping Health Plans Whole: There is a healthy focus on the private sector as a part of the solution for Medicare Advantage growth and solvency.

• Meeting Population Health Needs: Though Health Equity Index (HEI) has been renamed to Excellence in Health Outcomes for All, the mechanics and what’s important remain in place.

• Measuring and Enabling Quality Care Across the Care Continuum: There’s a strong push for health plans to demonstrate quality care that spans all stages of a member’s healthcare journey – particularly for D-SNP members, who were clearly an emphasis in the Notice.

• Removing Administrative Measures May Be on the Horizon: For health plans, the era of relying on administrative measures to buffer their Ratings may be over. This could mean that the true quality of care delivered will be more evident, placing more pressure on health plans to enable and deliver effective outcomes.

The potential impact?

• Health plans cannot achieve financial success without a commitment to improving patient care experiences and outcomes through more personalized care and services.
• Health plans shouldn’t rest on their past high performance of administrative Star measures.
• The spirit of the Health Equity Index – and cost-savings it was designed to realize – is critical to the ongoing success of the Medicare Advantage industry and will likely be a major headwind for many MAOs in PY2027 who did not address member mix and care strategies for those with social risk factors.

The Thread: Personalization – and Prioritization – of Care across the Continuum

There is a consistent thread throughout: the prioritization of personalized care – particularly for different population groups and across the care continuum – is essential. Healthcare systems must ensure capabilities that support high-value decision making and targeted execution.

Deploying the Pareto Principle:

• Do you know which 20% of your provider groups can deliver the greatest impact for your clinical and patient experience Star measures? 
• Do you know the 20% of members who are impacting 80% of your Star performance? 
• Most importantly: do you know what those 20% of members need, how to reach and engage them in their care, and support their care journey?

The time to act is now—ensure your analytical tools, decision-making processes, and execution strategies are aligned to focus on the most impactful members, providers and interventions, driving better access, outcomes and patient experiences.

Conclusion:

The message within the Final Rule and Rate Notice is both an olive branch and an alarm bell. The higher Medicare rates provide some financial relief, but the real takeaway is the need for healthcare organizations to evolve from disjointed point solutions to analytical insights that empower you to know which members, which providers, and which actions will yield the greatest value overall. Having the capabilities to execute these coordinated efforts to drive business and health outcomes will be paramount. 

The Future Belongs to Plans that Act Decisively.
Start with Pareto’s Stars Capabilities Assessment to uncover where your strategy is strong and where it needs reinforcement. We’ll help you identify the members, providers, and actions that have the greatest impact, so you can focus on delivering what matters most: better experiences, stronger outcomes, and lasting results.

To learn how Pareto can support your Stars strategy, get in touch at contact@paretointel.com.