Across the healthcare landscape, Medicare Advantage (MA) plans seem to be the cause of substantial tension between providers and payers. A growing number of hospitals and health systems are re-evaluating their affiliations with MA plans, with some even severing ties completely. Such decisions carry profound implications, including the potential to affect thousands of beneficiaries and alter the trajectory of healthcare delivery nationwide.
The Underlying Issues
The decision of several health systems to reconsider their relationships with MA plans could be a sign of broader industry discontent. Originally designed to foster seamless and high-quality care, the MA program is now perceived as a source of administrative delays, claims denials, and staff frustrations, as detailed below.
- Administrative Burdens: Healthcare providers are experiencing significant administrative delays when dealing with MA plans. This includes slow response times for pre-authorization requests, cumbersome paperwork, and complex billing procedures requiring additional staff time and resources.
- Claims Denials: There is a high rate of claims denials from MA plans. Services that should be covered are often rejected, leading to lengthy appeals processes that can be both time-consuming and costly.
- Quality-of-Care Concerns: Some providers feel the restrictions and requirements imposed by MA plans compromise the quality of care they offer patients, as they are limited by the types of treatments and medications covered, which may not always align with their clinical judgment.
These issues are becoming particularly pronounced due to the high rate of membership growth over the last decade. Since 2007, the proportion of eligible beneficiaries choosing private plans over the traditional Medicare program has leaped from 19% to 51%.
Negotiation Challenges
The experiences of several health systems across the US, including those in Arkansas, Oregon, South Dakota, and California, are representative of the broader industry's focus on financial sustainability and the resulting strain on health plan negotiations. Hospitals are being hindered by delayed payments, high rates of pre-authorization denials, and continued reimbursement rate reductions while simultaneously dealing with escalating operational and labor costs due to inflation. This combination of reimbursement issues and rising costs is causing disputes between insurers and providers, further complicating an already difficult situation.
The ripple effects of terminating an MA contract can be felt across a health system. It can impact compliance with network adequacy rules and potentially jeopardize shared-risk contracts. Moreover, termination can leave an already vulnerable population exposed to disruptions in care. As such, the willingness of some health systems to discontinue their MA contracts speaks to the impact these plans are having on organizations’ bottom lines.
The Path Forward
The MA population's growth is a reality that cannot be ignored as the aging baby boomer population becomes eligible for these products, which means the time for finding a sustainable fix is now. Some potential solutions—that would benefit both payers and providers—are detailed below.
- More Aligned and Transparent Partnerships: Health systems are seeking better MA partners and looking to pare down participation to a few select plans. The parties need to come to the table to discuss payment, access, and administrative issues and develop a joint operating structure to improve both financial and operational performance.
- Cost-Based Reimbursement Models: Organizations should implement a reimbursement system that reflects the actual costs providers incur for delivering care. While this will require a transparent assessment of medical and operational expenses, doing so will ensure the MA line of business is not detrimentally impacting a provider’s financial sustainability.
- Streamlined Administrative Processes: Administrative tasks, such as billing, prior authorizations, and claims processing, should be simplified and standardized to the extent possible. Payment terms should be clear and reasonable for both sides, ideally mirroring the terms for commercial members.
- Shared-Risk Models: Many health systems have found success by implementing shared-risk models, under which payers and providers share in the financial risks and rewards of care delivery that provides high-quality services at a lower cost. The parties should work to align incentives, with a particular focus on efficiency, quality, and patient outcomes.
- Telehealth Infrastructure Improvements: Providers and payers should partner on collaborative investments in telehealth infrastructure, especially in rural areas. Enhancing access to care and reducing transportation barriers will lead to early interventions and better patient outcomes.
The future of healthcare relies on the alignment of providers, payers, and government entities. Collaborative efforts and a unified vision are essential to ensure the delivery of seamless and high-quality care for all beneficiaries.
Edited by: Matt Maslin
Published November 15, 2023
