CVS to lose up to $1B in net income due to MA star ratings
There are no assurances CVS will improve its star ratings as CMS makes it harder to achieve four or more stars. CVS says.
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CVS Health projects it will incur up to a $1 billion reduction in net income in 2024 based on the result of the Medicare Advantage Star Ratings.
Net income will be affected by $800 million to $1 billion, according to Seeking Alpha.
The percentage of the company's Medicare Advantage members in plans with four or more stars is expected to drop to 21% as compared to 87% based on the 2022 star ratings, CVS said in a filing with the SEC.
The main driver of this decrease was a one-star decrease in the company's Aetna National PPO, which dropped from 4.5 to 3.5 stars, while many of the company's other plans remain rated at four or more stars, CVS said.
"As a result, the Company's Medicare Advantage plans' operating results in 2023 and going forward will be significantly affected by their star ratings," CVS said in the SEC filing. "The company's star ratings and past performance scores are adversely affected by any compliance issues that may have arisen each year in its Medicare operations."
WHY THIS MATTERS
A portion of a MA plan's reimbursement is linked to their star rating. Plans with a rating of four or five stars are eligible for bonus payments.
As of Dec. 31, 2021, 87% of the company's MA members were in plans with a 2022 star rating of four or higher. The 21% figure is based on 2023 star ratings.
The following year's star ratings are announced in October of the prior year. Fewer plans earned five-star ratings in the latest ranking.
CVS' largest contract score declined to 3.5 from 4.5, the company said. The decrease in the star rating for the Aetna National PPO will mean that it will no longer be eligible for CMS' quality bonus payments related to 2024.
THE LARGER TREND
Star ratings are based on the quality of preventative services, chronic illness management, compliance and overall customer satisfaction.
Only Medicare Advantage plans with an overall star rating of four or more stars out of five are eligible for a quality bonus in their basic premium rates.
The 2023 star ratings determine bonus payments in 2024.
The Centers for Medicare and Medicaid Services continues to revise its star ratings system to make it harder to achieve four or more stars, CVS said.
"There can be no assurances that the company will be successful in maintaining or improving its star ratings in future years," CVS said. "Accordingly, the company's Medicare Advantage plans may not continue to be or become eligible for full level quality bonuses, which could adversely affect the benefits such plans can offer, reduce membership and/or reduce profit margins."
Twitter: @SusanJMorse
Email the writer: SMorse@himss.org
