Unpacking the Issues Created by Medicare Advantage Plans for Hospitals
As the healthcare landscape continues to evolve, Medicare Advantage plans have emerged as a popular choice for many seniors seeking comprehensive coverage. However, the increasing prevalence of denial issues has cast a shadow over the seemingly beneficial nature of these plans, leaving hospitals to grapple with financial strains and patients with unforeseen obstacles. In this blog, we delve into the denial problems created by Medicare Advantage plans, the role of AI, plan profit pressures, and the implications for hospital finances.
The Complex Web of Denial
Medicare Advantage plans offer lower monthly premiums and attract enrollment but ultimately, they do not deliver comprehensive coverage. One of the primary challenges hospitals face with Medicare Advantage plans lies in the fact that rates paid by the government on Medicare Advantage plans can fall below what insurers refer to as cost trends. To counterbalance this downward pressure on profits there can be an incentive to be more aggressive in managing costs that can negatively impact member benefits (Morgenson of NBC News: “Deny, deny, deny…” October 2023). The result is a higher likelihood of denials, as hospitals navigate a maze of differing regulations, making it difficult to predict reimbursement outcomes accurately.
Artificial intelligence has also been found to be a factor exacerbating the situation negatively impacting patient care and hospital finances. The House of Representatives had 30 members sign a letter urging the CMS to evaluate how Medicare Advantage plans use AI for decision-making related to authorizing care for patients. This has gained attention especially as it applies to prior authorization requests (AMA, 2023: House Letter on AI…).
Financial Strains on Hospitals
Denials from Medicare Advantage plans have a direct impact on the financial health of hospitals and have increased by 56% from January 2022 to July 2023. Hospitals experience larger revenue reductions due to the lost reimbursements from these denials. Denied claims mean delayed or reduced reimbursement, forcing hospitals to absorb the financial burden of providing care. “In November 2022, an AHA survey found that half of hospitals and health systems reported having more than $100 million in unpaid claims that were more than 6 months old. As of June 2023, health systems had a median of 124 days cash on hand, down from 173 days in January 2022” (Emerson, 2023: Becker’s Hospital CFO Report)
This can result in a strained cash flow, hindering the hospital's ability to invest in essential resources, infrastructure, and staff, ultimately compromising the quality of patient care.
Administrative Burden
The administrative burden imposed by Medicare Advantage plans contributes significantly to denial issues. Hospitals must dedicate substantial resources to navigate the complex and ever-changing landscape of plan requirements. The administrative workload associated with appealing denials is time-consuming and costly, diverting attention and resources away from patient care and other critical operational aspects.
Lack of Transparency
Transparency is a crucial factor in any healthcare system, and the lack thereof exacerbates denial issues with Medicare Advantage plans. Patients often find themselves caught in a web of confusion, unaware of the specific reasons behind claim denials. This lack of transparency not only undermines trust in the healthcare system but also makes it challenging for hospitals to educate and guide patients effectively.
Adverse Impact on Patient Care
Denials from Medicare Advantage plans can lead to delayed or denied treatments for patients. As hospitals grapple with financial constraints, the ability to provide timely and quality care may be compromised. Patients may face disruptions in their healthcare journey, potentially impacting their health outcomes. This creates a concerning scenario where financial considerations take precedence over patient well-being.
Calls for Reform
The challenges posed by denial issues have prompted calls for reform in the Medicare Advantage system. Advocates argue for standardized guidelines, increased transparency, and a simplified appeals process to alleviate the administrative burden on hospitals. Policymakers are urged to address these issues to ensure that the Medicare Advantage system truly serves the best interests of both patients and healthcare providers.
Conclusion
While Medicare Advantage plans offer a less expensive alternative for seniors seeking healthcare coverage, the denial issues they create for hospitals cannot be ignored. The financial strains, administrative burdens, lack of transparency, and adverse impacts on patient care all contribute to a complex issue of reduced patient trust in the healthcare system and greater financial strains on rural healthcare providers. As we move forward, it is essential to address these issues collaboratively, fostering a healthcare system that prioritizes patient well-being while ensuring the financial sustainability of healthcare providers.
Articles referenced:
AMA: House letter on AI use in Medicare Advantage denials
https://www.aha.org/news/headline/2023-11-06-house-letter-ai-use-medicare-advantage-denials
Emerson, Jakob: “American Hospital Association: Medicare Advantage denials jump 56%”
Morgenson, Gretchen: “Deny, deny, deny': By rejecting claims, Medicare Advantage plans threaten rural hospitals and patients, say CEOs, Medicare Advantage plans "are taking over Medicare and they are taking advantage of elderly patients," said the CEO of one Mississippi facility.”
https://www.nbcnews.com/health/rejecting-claims-medicare-advantage-rural-hospitals-rcna121012