Humana Inc (NYSE:HUM) commented on updated Star quality ratings for the 2018 plan year published today by the Centers for Medicare and Medicaid Services (CMS), showing that the percentage of the company’s July 31, 2016 membership in 4-Star plans or higher declined to approximately 37 percent, or 1.17 million members, from approximately 78 percent, or 2.15 million members, in the prior year.  The company noted that the decline in membership in 4-Star rated plans does not take into account certain operational actions the company intends to take over the coming quarters to mitigate any potential negative impact of these published ratings on Star bonus revenues for 2018.

The company believes that the decline is primarily attributable to the impact of lower scores for certain Stars measures as a result of the company’s recently-closed comprehensive program audit by CMS.  The Civil Monetary Penalty imposed by CMS on December 29, 2015 resulted in an automatic downgrade to the Beneficiary Access and Plan Performance (BAPP) Star measure, and certain other issues associated with the timeliness of member service and appeal measurements noted in the audit resulted in downgrades to two additional Star measures.  In addition, higher threshold levels for certain individual Star measures as compared to the previous year reduced the company’s ratings on these measures.  Thresholds for Star measures are calculated across the sector, without regard to weighted average membership of each plan.  Together, these factors more than offset the company’s improved Star rating performance in certain quality measures such as Healthcare Effectiveness Data and Information Set (HEDIS).

Humana believes that its Star ratings for the 2018 bonus year do not accurately reflect the company’s actual performance under the applicable Star measures.  Consequently, the company intends to file for reconsideration of certain of those ratings under the appropriate administrative process.

Humana expects the impact of CMS’ comprehensive program audit on the company’s Star ratings to be limited to the 2018 bonus year.  On September 8, 2016, CMS notified Humana that, based upon the results of an independent validation audit demonstrating that the company had substantially remediated the issues identified in the audit, CMS had formally closed that audit.

Humana expects to evaluate its contract structures for further rationalization to mitigate any potential negative impact on Star bonus revenues for 2018.  Additionally, the company intends to take certain measures to address the challenges described above, including:

• Taking steps to improve the company’s performance for future CMS audits
• Further leveraging the company’s predictive analytics capabilities to identify and execute on Stars improvement opportunities
• Enhancing provider partnerships to improve education and focus on patient experience data
• Continuing investment in the company’s integrated care delivery model and its Stars operational processes and procedures, encompassing clinical engagement, provider engagement and consumer engagement.