Long Beach-based senior-focused health care nonprofit SCAN Group, whose main business is operating a Medicare Advantage plan, has hired former Walt Disney Co. Chief Executive Bob Chapek as a senior adviser to improve member procurement and experience.

The hire, announced last month, comes on the heels of a major legal victory for SCAN that overturned a ratings drop from the federal agency that administers Medicare and set a new precedent for the industry. At stake for SCAN was roughly $250 million in quality bonus payments from the Medicare agency, most of which was due to be passed through to various health care providers.

For SCAN, which stands for Senior Care Action Network, these developments come amidst a continuing expansion, both geographically to other Western states and in the services it offers. These include an expansion of its homeless services program to cover all residents in L.A. County instead of just seniors and health care plan offerings tailored to senior women, Asian, and LGBTQ+ populations.

“Every one of these things we’ve built or acquired is in the spirt of serving more and more people,” said SCAN Group Chief Executive Sachin Jain. “There are a lot of people with a lot of problems that need a lot of help. Our goal is to solve the problems of older Americans.”

Jain noted this hearkens back to the original founding creed of SCAN back in 1977 when a group of senior citizens – known informally as the “12 angry seniors” – organized in the Long Beach area to form a nonprofit aimed at doing everything possible to keep seniors healthy and independent.

What started as a small nonprofit nearly 50 years ago has now grown into one of the largest health care organizations specifically targeting seniors, with roughly 300,000 members in California, Arizona, Nevada, New Mexico and Texas and even one small program that extends to Pennsylvania. Jain said revenue is expected to top $5 billion this year.

Chance crossing of paths led to Chapek hire

The decision to hire Chapek arose out of a fortuitous coincidence. Both Chapek and Jain were serving terms on the national board of Phoenix-based Make-A-Wish Foundation, where they got to know each other. Chapek had just left Disney and Jain had recently joined SCAN Group as chief executive.

Chapek said that sometime after both left the Make-A-Wish Foundation board, Jain contacted him in September and asked if he would be willing to serve as a paid adviser to SCAN, offering advice on how to attract and retain members.

“My career has been all about taking steps to attract and retain consumers to a brand,” Chapek said, referring to his three decades with Disney. “But except for my time as an undergrad, when I majored in microbiology, I had little experience with the health care sector. So, I saw this as quite a challenge.”

Chapek joined as a senior adviser last month; he said he will be working about 15 to 20 hours per month on improving the customer experience at SCAN.

Chapek said one of his main tasks will be simplifying SCAN’s messaging to seniors looking to choose a Medicare Advantage plan. There are nearly 4,000 Medicare Advantage plans nationwide. Major insurers such as Aetna, Cigna Healthcare and Kaiser Permanente offer the plans, alongside hundreds of smaller carriers focused on specific counties, regions or states.

“My task will be to aid in the posturing of SCAN in the larger marketplace and of the different plans within SCAN,” Chapek said; as for member retention, “I will look at the management of any impediments to allowing members to get the services they need.”

Jain said Chapek is being compensated for his advisory services, though neither party elaborated on the details.

Precedent-setting legal victory

SCAN Group’s legal drama began last year when the Centers for Medicare and Medicaid Services, the national agency that runs the Medicare and Medicaid programs, abruptly lowered SCAN Health Plan’s star rating by a notch.

To help seniors choose from amongst the nearly 4,000 Medicare Advantage plans and the roughly 60 Medicare prescription drug plans across the nation, the agency rates each plan on the quality of member services and the quality of care, among other factors. The ratings go from one star (poor) to 5 stars (excellent).

More is at stake than just a Yelp-style rating for consumers, however. The Centers for Medicare and Medicaid Services, or CMS, gives quality bonus payments of up to 5% of plan revenue to all plans receiving a star rating of 4 or higher. The bonus payments are a powerful incentive for Medicare Advantage plans to offer consistently high levels of service and care.

For six years straight, CMS had awarded SCAN Health Plan a 4.5-star rating. Jain said that last year, SCAN Health Plan expected that rating to be lowered to 4 because of typical lags in performance immediately following periods of rapid member growth. But CMS instead gave SCAN Health Plan a 3.5 rating, making SCAN ineligible for the quality bonus payments.

“That translated into a drop of $250 million in revenue for us, about $200 million of which was to be passed through to our provider network,” Jain said. It also meant fewer enrollees signing up, since many prospective enrollees will only consider plans with 4 stars or higher, he added.

A significant reason for the rating drop, Jain said, was due to a newly implemented randomized “secret phone call” process that CMS uses to determine how a Medicare Advantage plan handles member issues. “The caller happened to speak in French and encountered someone who didn’t handle the call as rapidly as the agency was looking for,” Jain said.

That misstep was enough to drag the overall star rating down a notch.

But Jain said the entire secret phone call methodology was new in the star rating evaluation and that Medicare Advantage plans were not notified about this change as is customary in the Federal Register, which publishes in full notices of all regulatory changes.

“We felt this was unfairly penalizing us, and, by extension, all of the Medicare Advantage plans,” Jain said.

After exhausting internal appeals within CMS, Jain said SCAN Health Plan decided to file a lawsuit last December in the U.S. District Court in the District of Columbia. A couple of months later, one of the major Medicare Advantage plan providers, Indianapolis, Indiana-based Elevance Health Inc. (formerly Anthem), filed a similar lawsuit.

This past April, a judge at the court ruled in favor of SCAN and Elevance that CMS had exceeded its authority in changing its star rating methodology without providing advance notice in the Federal Register.

The ruling resulted in SCAN getting the 4.0 star rating it expected, resulting in the restoration of the quality bonus payment. But it could not restore the potential enrollments that were lost due to the lower star rating that had been in effect for nearly a year.

Jain did take some satisfaction from the broader impact of the ruling.

“Over 60 plans had their star ratings recalculated, resulting in $1.4 billion in additional payments to health providers all over the country,” he said. “People received better benefits as a result of the court decision.”

This year, SCAN received a 4.5-star rating under the new rating methodology that included the secret phone call. But this time, CMS published the methodology change in the Federal Register with plenty of advance notice.

Growth trend continues

The rapid growth that led to the brief dip in performance that was the context for the ratings lawsuit resulted from a period of geographic expansion for SCAN Health Plan.

Until Jain joined in 2020, SCAN’s reach was mostly in the Southern California region with a handful of Northern California counties. But over the last four years, SCAN has added more counties in Northern California to become the state’s second-largest Medicare Advantage plan. And it sought approvals and launched plans in Arizona, Nevada, New Mexico and Texas.

Beyond its flagship Medicare Advantage plans, SCAN has also boosted other services, including senior home care, a chronic disease management program for seniors, and a new offering that provides adult day care and medical services.

SCAN has also expanded its homeless services program from just helping seniors in Los Angeles to helping any homeless people throughout Southern California.

“This is an epidemic-level crisis in plain sight,” Jain said. “It’s an example of something very abnormal in society that we’ve normalized. A lot of health plans and government agencies have realized this isn’t just a homeless problem but also a health care problem.”