How Medicare Advantage plans can manage performance as one system
By John Cole, Talha Bhatti, Harbinder Raina and Pritpal Virdee
Key takeaways
· Medicare Advantage (MA) plans should manage growth, reimbursement, medical cost and operations as one interconnected system.
· A dedicated performance office can identify issues before they affect future bids and margins.
· Leading indicators become actionable only when compared with bid assumptions, timelines and accountable owners.
MA plans need a dedicated, cross-functional performance management capability that manages growth, reimbursement, medical cost and operations as one system. By comparing leading indicators with bid assumptions, expected timelines and accountable owners, plans can act before performance gaps become embedded in future bids and margins.
Does your plan identify performance issues early enough to act?
Consider a composite MA plan. In February and March, prior authorizations for a newly popular outpatient procedure using a high-cost implanted device begin exceeding the utilization assumed in the bid. Clinical operations sees the increase in its weekly report, but the comparison with the prior year makes it look like ordinary growth. Actuarial and finance do not yet see the impact because the claims have not been paid. The plan then files the following year’s bid using the same underlying assumption. When the claims emerge over the summer, leaders learn that the plan will miss its medical loss ratio target by more than one percentage point. A signal visible in March therefore affects two years of margin.
No individual function failed. The problem was structural: one team saw the signal, other teams absorbed the financial impact, and no one assessed the change against the bid. MA levers are interconnected but operate on different timelines. That matters more as risk-model changes, harder Star thresholds and rising medical costs have made MA a margin market. Gross margin per enrollee fell 17% in 2024, and AM Best reported a $5.7 billion underwriting loss on the MA line that year.
MA plans need a dedicated, cross-functional performance management capability that manages growth, reimbursement, medical cost and operations as one system. It should compare leading indicators with the trajectory needed to meet plan targets, account for the time each lever requires to produce results, and prompt action before performance gaps become embedded in future bids.
Why MA performance must be managed as one system
Most plans report performance by function: growth tracks membership, quality tracks Stars, risk adjustment tracks risk scores, medical management tracks the medical loss ratio, operations tracks administrative cost, and finance consolidates the results. Some plans assign accountability for the Medicare profit and loss statement, but fewer assign responsibility for how these functions affect one another. The industry has not settled where that responsibility belongs.
These levers are connected, and they operate on different timelines. Payment integrity and unit-cost initiatives may affect the profit and loss statement within a year. Benefit design and bid changes may take one to two years, while Star performance may affect revenue roughly two to three years later. Although most plans reflect these effects in a three-year budget and forecast, in-year reviews and incentives emphasize the current year. Without a clear record of each lever’s timing and trajectory, short-term work can displace longer-term priorities.
The opening example shows how this can happen. Cutting service staffing creates a similar trade-off: it can reduce administrative cost now but increase hold times and complaints that later affect Star measures and retention. It may also limit the plan’s ability to implement vendors and processes with meaningful returns, since the same staff are often needed to stand up those vendors and processes.
A separate problem is the level at which results are viewed. Most plans already manage a profit and loss statement by county, but the margin within a county can vary widely by benefit package and by how long members have been enrolled. Newer members often carry acquisition cost and risk scores that do not yet reflect their conditions, so a county that looks healthy in total can hide a package that is losing money.
Because these issues sit between functions, separate scorecards cannot resolve them. Plans need a team and forum that can evaluate immediate and longer-term effects together.
What an MA performance office does
We recommend establishing a named performance office or assigning equivalent accountability to a dedicated role, rather than leaving it as an informal expectation spread across several existing jobs. This does not require a reorganization. A small cross-functional team representing Stars, risk adjustment, growth, clinical operations, operations and finance can connect decisions across functions without replacing existing ownership. This end-to-end approach connects decisions across functions, timelines and performance levers so plans can act on emerging risks before they become embedded in financial results. It has three responsibilities.
1. Create one integrated performance view. The office keeps a single, agreed set of numbers traceable from the enterprise profit and loss statement to the county, benefit package or member group. A standing review aligned with the bid calendar (Figure 3) compares short- and long-term levers on the same page.
2. Document decisions and measure results. For each material decision, the office records expected value, time to payoff, ownership and anticipated movement in the leading indicator. It then compares actual results with those expectations. Without this discipline, reviews often occur only when needed to justify a contract renewal, and institutional knowledge leaves with the people involved.
3. Establish consistent, decision-ready data. Claims, enrollment, clinical, risk, Star and vendor data should use shared definitions and be available at the member, provider, county and benefit-package levels. Analytics and AI investments should first improve visibility where money is made or lost, rather than buying tools that act on data that is incomplete or inconsistent.
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The office also holds every metric to one standard. A number that only reports the past should be linked to the leading signal that moves first, the time that signal takes to show up in the final result, an accountable owner and the action that owner can take, and the signal should be compared with the level needed to meet the target. Without these elements, the metric is being reported — not managed.
How the performance forum works
Return to the opening example. In a plan with this capability, clinical operations compares monthly authorization volume for high-cost categories with the utilization assumed in the bid. In April, the office flags that the procedure is running well above plan and brings the issue to the standing review. Actuarial adjusts its trend assumption before the June filing, medical policy reviews prior authorization criteria within Centers for Medicare & Medicaid Services (CMS) coverage rules, and finance updates the current-year forecast. The plan may still miss its target, but by less; leaders understand the cause earlier and avoid carrying the same assumption into the next bid.
How leading indicators reveal performance risks earlier
The capability manages four levers: two that grow membership and revenue, and two that protect margin. Quality and compliance cut across all four. Care and coordination-of-care activities should therefore be tracked monthly against both risk adjustment and Stars.
Medical loss ratio and final Star ratings describe what has already happened. A leading indicator provides earlier insight only when compared with the required trajectory. For example, confirming 61% of suspected conditions may appear acceptable. If the bid assumed 74% by that point, the plan is behind — but still has time to act.
The same method turns other early signals into forecasts. Comparing authorization volume with bid assumptions can estimate medical loss ratio about two weeks after month-end, rather than three to six months after the books close. Comparing current Healthcare Effectiveness Data and Information Set (HEDIS) and other measure results with the rates needed for the next cut point provides an early view of the coming Star rating. Existing plans are paid monthly on ratings earned in earlier years, so current measure performance changes the payment rate roughly two years later. The exhibit applies this structure to each lever.
Most of these indicators already exist in plan systems, so plans can test their scorecards without new technology. The first thing the test usually shows is that leading indicators are being reviewed rather than managed: they are trended against last year instead of being compared with the trajectory the bid assumed, and they are not tied to the lagging results they predict or to an owner who can act on them. The test also tends to surface gaps in the underlying data, and two are common. First, acquisition cost, retention and margin usually sit in separate systems; linking them for members enrolled in the same period reveals lifetime value by broker, channel and county. Second, CMS payment depends on member statuses such as Medicaid eligibility, institutional residence, hospice and end-stage renal disease. Unless plans reconcile CMS payment records with enrollment records each month, discrepancies can create unnoticed underpayments.
Why the bid calendar should drive performance reviews
The bid calendar — not the financial quarter — should set the operating rhythm. A plan is always delivering one bid while preparing the next, and reviews tied only to financial reporting often identify issues after the opportunity to act has narrowed. Star timing illustrates the length of the cycle: the 2026 Star Ratings, published in October 2025, measured 2024 performance and affect 2027 quality bonus payments.
Finance, actuarial, product, Stars, network and growth should jointly own the bid and document their agreements. When county or market margin is shared across functions, one person should still be accountable so shared ownership does not become no ownership.
Questions MA leadership teams should ask
Leadership teams can test whether this capability exists by asking four questions:
Which leading indicators do we compare with bid assumptions, and which do we only trend against the prior year?
When a decision improves this year’s margin, who assesses its effect on retention and Star ratings two years from now?
Do we document what major decisions are expected to deliver and later compare results with those expectations?
Do we know, by county, the membership level at which fixed costs are no longer covered?
If leaders cannot answer these questions clearly, the plan is likely identifying performance issues too late to change the outcome.
Part 2 will explain how plans can prioritize and sequence performance levers while balancing near-term margin with longer-term returns.
This article reflects the authors’ personal views and does not necessarily represent any official position of ZS.
