Consider the following case: Alpine Health is a managed care organization that serves eight counties in California. It is a Medicare Advantage health plan with more than 10,000 Medicare beneficiaries. The plan has a rating of 3.5 stars on the five-star quality-rating scale used by the Centers for Medicare & Medicaid Services. Alpine Healths chief financial officer recently informed the board that the companys margin has been eroding. In addition, the plans quality measures have been declining, patient satisfaction has been decreasing, and membership has been dropping at a rate of 2.5 percent a year. Profit margin was 2 percent last year and is expected to be a loss of 1 percent this year. Some key metrics are as follows:

Revenue	$120 Million	$1000 per member per month
Expenses	$117 Million	$975 per member per month
Profit/loss	+$3 Million	$25 per member per month
Membership	10,000

The plans contract with Medicare stipulates that revenue increases by 2.5 percent with every half-star increase in quality. Thus, an increase from 3.5 to 4 stars would lead to a 2.5 percent increase in revenue per member. However, a change from 3.5 to 3 stars, conversely, would lead to a 2.5 percent decrease in revenue. Your manager of quality improvement points out that patient satisfaction is in the lowest decile of the organization's peers. Patient satisfaction has been a significant driver in star ratings. The revenue transformation team has identified that the plan is contracted with more than 40 hospitals in the eight counties. The rates for admissions range from 100 to 170 percent of Medicare's allowable rates. Some have proposed the idea of narrowing the network so that more membership can be directed to preferred hospitals. The primary care providers' capitation payment has been averaging $100 per member per month. Specialist care is costing $110 per member per month. Specialist usage is 20 percent higher than the market average. In a few counties, three high-cost specialties seem to be utilizing a lot more than the rest. Productivity reports indicate that administrative functions production is 10 percent below the norm. Claims examiners process 10 percent fewer claims per examiner. Utilization coordinators are processing 10 percent fewer referrals as well.

a. What strategies and tactics can Alpine Health use to increase revenue? Consider performance-based incentives, quality-related reimbursement, and membership growth.

b. What steps can be taken to reduce costs? Evaluate the effects of renegotiation of provider-based contracts, narrowing of the network, utilization management, population health efforts, disease management, and case management