An Honest Perspective from Aaron DeBoer, MBA, Executive Vice President, Honest Health, and Mary Zuckerman, FACHE, Vice President and General Manager of Michigan Market, Honest Health
Part 2 of a 3-part series exploring how health systems can navigate the risks and rewards of Medicare Advantage to drive financial and clinical success.
In part one of this three-part series, DeBoer and Zuckerman outlined why health systems can and should view full-risk Medicare Advantage as a potential strategic advantage. Here in part two, they focus on what it takes to succeed — highlighting five core capabilities essential for strong performance and long-term sustainability.
Succeeding in full-risk arrangements requires more than intent — it demands significant and specialized capabilities that many health systems do not inherently possess.
While it’s possible to build these capabilities internally, most health systems have historically struggled to operate effectively in risk-based models like Medicare Advantage. These challenges are often rooted in gaps across critical skill sets, infrastructure, and strategic alignment. To succeed, health systems must prioritize developing — or partnering for — the capabilities needed to manage complexity, mitigate risk, and achieve measurable results.
Consider coding as one example. While most systems excel at coding in a fee-for-service model — where services provided are then coded for reimbursement — full-risk models require a fundamentally different approach. Hierarchical condition category (HCC) coding demands the consistent, comprehensive, and accurate capture of patients’ conditions, which calls for a shift in workflows, provider education, and a different mindset altogether.
Without deep subject matter expertise in HCC and other risk-aligned processes, health systems may miss crucial opportunities or face costly missteps. That’s why adopting a comprehensive organizational strategy — supported by proven partners — is essential to navigating the complexities of full-risk Medicare Advantage.
In this article, we explore the five most essential capabilities organizations must either build or access through trusted partnerships in order to thrive in Medicare Advantage.
Capability #1. Actuary and contracting expertise
Effective contracting with health plans begins with robust member-level data and trends. Without an informed and accurate baseline, health systems risk exposure to external factors beyond their control. Small contractual details can have disproportionate impacts, potentially jeopardizing performance and making the need for specialized experience a non-negotiable capability.
Without the ability to evaluate contract terms and set accurate projections, health systems may take on more risk than they can manage — with costly consequences.
Health systems with limited experience in risk-based arrangements aren’t likely to have in-house actuary expertise. While outsourcing is a viable solution, health systems taking on significant risk should strongly consider developing this capability in-house to allow deeper integration and alignment with organizational goals.
However, building this core capability independently can be challenging due to budget constraints and limited access to actuary professionals. Partnering with an organization with this expertise and ability can be valuable and effective.
Whether you build or outsource, ensuring your health system has access to a risk management team is critical for sustainable success in Medicare Advantage.
Capability #2. Clinical programs and care models for high-risk patients
Health systems operating in fee-for-service models often lack the clinical programs and care models necessary to manage population health or reduce unnecessary spending.
Success in full-risk arrangements requires a fundamental shift in focus to achieve these goals and hinges on the ability to control unnecessary and often harmful utilization. Full-risk arrangements incentivize health systems to implement clinical programs that improve outcomes while reducing costs.
Effective clinical programs are specifically designed to address common drivers of inefficiency, such as unnecessary emergency room visits, negative-margin medical admissions, and avoidable readmissions. They also often consider alternative care sites, including in the patient’s home, to promote patient-centered – and cost-effective – care.
Honest Health offers proven programs that support smoother care transitions and promote better outcomes — including transitional care and home-based follow-up models — helping partners avoid readmissions and strengthen their patient engagement, as an integrated extension of their practice.
By adopting collaborative and coordinated clinical programs such as these, health systems can enhance effective and efficient patient care and achieve financial sustainability in full-risk Medicare Advantage arrangements.
Capability #3. Diagnosis capturing and documentation abilities
Enrolling patients in the right clinical programs — whether to support chronic conditions or acute health needs — is integral to successful population health management.
Achieving this requires a comprehensive understanding of each patient’s health. In Medicare Advantage, accurate and thorough diagnoses are essential for setting risk funding totals at the patient level, ensuring resources appropriately match the needs of the patient population.
Accurate coding expertise and clinical documentation integrity are pivotal in this process. For example, a patient whose diabetes diagnosis is not captured may not gain access to the necessary care programs, potentially compromising outcomes and increasing costs.
The importance of effective disease identification and documentation extends beyond clinical program enrollment. These factors also ensure revenue aligns with the risk your organization assumes, safeguarding your financial sustainability and enabling better resource allocation across patient populations.
This capability is amplified when supported by the right technology — enabling health systems to identify documentation gaps, improve coding accuracy, and act on real-time insights. We explore these tools and strategies further in the final article of this series.
Capability #4. Physician alignment and change management
Physician alignment and change management are among the most challenging yet critical capabilities required for success in Medicare Advantage. Organizations most often fail in value-based care arrangements because they don’t effectively align physician incentives or secure their buy-in or trust.
A common pitfall for health systems is underestimating the scale of physician change management required. Even with all the other capabilities and best tools and programs in place, full-risk models will falter if physicians don’t adopt, trust, and focus on the arrangement’s goals.
Driving behavioral change begins at the organization’s leadership level. While financial incentives are significant, fostering a shared understanding of the “why” behind the work is critical for an organization’s success. Physicians must see how this model can improve clinical outcomes, patient care, and experiences, and leaders play a crucial role in championing this shift.
Capability #5. Risk protection mechanisms
Taking on financial risk is inherently challenging, especially in the early years of a full-risk contract when losses are more likely.
Health systems need both financial reserves and organizational fortitude to navigate this transition effectively. Unexpected challenges can and will arise — many often outside your control — so it’s critical to establish a robust system that mitigates financial downside risk and enables long-term stability and confidence in contracts.
Organizations that successfully weather this phase often rely on trusted guidance, including tested financial models, contract design expertise, and risk mitigation strategies to avoid early missteps and build a more stable foundation for long-term success.
Avoid critical missteps in your transition to full risk
Steering clear of common pitfalls can be the difference between early setbacks and long-term success in full-risk arrangements. Two of the most critical missteps to avoid include:
- Relying on inexperience. Expertise matters. Full-risk Medicare Advantage is complex, and success depends on understanding its financial, operational, and clinical dimensions. Avoid placing crucial work in the hands of individuals without demonstrated experience. Instead, engage leaders and partners who have successfully navigated similar models and can bring clarity to complexity.
- Making risk management a part-time job. Entering a full-risk arrangement requires full-time focus and dedication. Health system leaders should ensure they have clearly defined roles — or teams — solely responsible for leading the transition, overseeing risk operations, and sustaining performance.
Partner to empower a strong performance from the start
Medicare Advantage continues to grow — and for many health systems, it represents a strategic opportunity worth pursuing. But strong performance in full-risk arrangements doesn’t happen by chance. Success requires preparation, investment, and the ability to execute across multiple dimensions of care and operations.
When done right, full-risk Medicare Advantage can unlock sustainable growth, improve patient outcomes, and strengthen long-term financial stability.
Health systems don’t need to navigate this shift alone. The right enablement partner can bring the experience, infrastructure, and insight needed to avoid early missteps and accelerate progress.
By focusing on the five core capabilities outlined here — and tapping into proven expertise, protections, and resources when needed — health systems can build the foundation for success and realize the full potential of Medicare Advantage.
Don’t miss the final installment of our series, “The Path Forward: Winning in a Medicare Advantage Future.” In the concluding article, DeBoer and Zuckerman will explore success factors and strategic approaches health systems can take to optimize performance and ensure a positive path forward with full-risk Medicare Advantage.