While 2023 will always be celebrated as the year that Covid-19 shifted from a pandemic to an endemic state, providers across the country still faced significant financial challenges in 2023. From ongoing issues with Medicaid redeterminations and reimbursements to issues related to the huge growth of Medicare Advantage to shifting commercially insured expectations regarding care delivery, many hospitals and health systems are still fighting across multiple fronts to keep their doors open. In this blog, we’ll explore each of these challenges and offer advice on how to address them in 2024.
Challenge #1: Insufficient Reimbursement & Related Challenges For the Medicaid (& Medicare) Population
Medicaid Unwinding has been covered consistently by the press since the Public Health Emergency ended and Medicaid eligibility redeterminations resumed this spring. As of January, KFF’s real-time Medicaid tracker showed that more than 14.4 million enrollees have lost their coverage and 71% for procedural reasons. While it’s clear that the downstream impact of so many vulnerable patients becoming uninsured is going to be monumental, there is not nearly enough discussion in the media about how the Unwinding impacts providers. Just months into the Unwinding, the AHA reports that hospitals are already seeing significant increases in uncompensated care.
This additional uncompensated care is especially problematic because hospitals and health systems have been struggling with Medicaid’s underpayments for years. The reimbursement rates – roughly 57 cents for each dollar of care given – are so stagnant that some providers have stopped accepting new Medicaid patients. As an example, according to a recent op-ed published by Brian Tabor, President of the Indiana Hospital Association, Medicaid base rates in Indiana have not been raised in more than 30 years. To make matters worse, the fees that hospitals pay the state to fund programs related to Medicaid keep increasing.
The situation with Medicare is similar with regard to reimbursement. Healthcare Finance quotes the AHA as saying that “…hospital expense increases between 2019 and 2022 are more than double the increases in Medicare reimbursement for inpatient care during that same time.” Examples of struggling systems abound, with UPMC reporting a net loss of $916 million last year, while Providence’s losses totalled $6.1 billion in 2022.
Our advice: It’s vital that hospitals address Medicaid Unwinding proactively as the Medicaid reimbursement yield is significantly more than the uncompensated care yield. Providers should be educating their patients and helping them retain coverage whenever possible. Just as marketing firms helped provider organizations create vaccination campaigns during the pandemic, they can now assist with the development of awareness campaigns about the Unwinding. Strategies for exchange products can also support those who are no longer eligible for Medicaid Longer term, providers can work with the AHA and other groups that continue to push CMS to increase Medicaid and Medicare reimbursements.
Challenge #2: Increased Delays & Denials for the Growing Medicare Advantage Population
The financial picture for traditional Medicare is almost as bleak as Medicaid, but the context is quite different when it comes to Medicaid Advantage (MA). While the immediate threat with Medicaid is the Unwinding, the immediate threat with Medicare is the explosive growth of enrollment in privately managed plans – that is, Medicare Advantage. For the first time ever, over 50% of those eligible for Medicare enrolled in MA plans in 2023. That enrollment growth sets the stage for a potential revenue opportunity so large that Humana has officially exited the commercial market to focus exclusively on MA.
However, potential revenue is quite different from realized revenue. MA members are older, which in many cases means they are sicker – or at the very least are managing more chronic conditions – than other patient populations. While some payors have been working to keep MA members healthy and the cost of their care lower through strategies like partnering with health tech innovators that offer on-the-ground care in senior communities, other payors are accused of engaging in more nefarious practices like overbilling the government. According to a New York Times investigation, 9 out of the top 10 insurers offering MA plans have been accused of fraud either by a whistleblower, the government or OIG. Sicker patients translate to more money for the insurers who manage their care, and these accusations center on overbilling and inflating diagnoses to get more money to manage patients and make MA profitable.
The other questionable practice is MA plan sponsors shorting providers – whether through slow prior authorization processes, claims denials, delays in payment, and benefit plans designs where copays are impossible to collect. The yields on Medicare are so far below traditional Medicare reimbursement (70-95%)some providers are no longer accepting MA patients.. In the last quarter of 2023, USA Today reported that a large, multi-state health system on the East Coast and two doctors groups within Scripps Health on the West Coast are terminating their contracts with MA plans over these issues. Becker’s has since reported on 13 separate instances across the country of hospitals/health systems terminating MA contracts, underscoring the prevalence of these unscrupulous practices.
Our advice: Given bipartisan support for MA, additional member benefits, and high quality satisfaction rates among members, MA growth will only continue if the member’s preferred health system is in-network. Hospitals need to analyze their own data and then be prepared for the unique aspects of negotiating contracts for this population. In most cases, that strategy has been more successful when a seasoned managed care agency is involved to develop a proactive payor strategy aligned with the health system’s overall strategy and marketing budget.
Challenge #3: Changing Desires of the Commercial Population
The healthcare community has been talking about the need to provide more consumer-friendly care for almost as long as we’ve been discussing the shift from fee-for-service to value. But 2023 was arguably the year that the technology and outpatient care options became a reality when compared to the patient experience. While the commercially insured have some of the best healthcare options of any insured group, they also seem to be the ones questioning the value of traditional care settings and expressing the most interest in healthcare’s “shiny new objects.”
This commercially insured population is embracing concierge care models, excited about bundling their healthcare and prescriptions into their Prime memberships and might be the first that flocks to Forward’s controversial new Carepods, which not only represent a new care setting, but also with a stated goal of removing doctors and nurses from the patient experience.
Fortunately, year-over-year Gallup poll data consistently shows that healthcare professionals remain among the most highly trusted professions. Of course, that doesn’t mean that providers can let their guard down. To compete with new market entrants and their innovations, hospitals and health systems will have to offer a few shiny objects of their own. And that’s the rub – while health tech companies can get VCs and private equity to bankroll their efforts, hospitals and health systems are largely reliant on reimbursement for their revenue. Rather than receiving increased reimbursement rates to account for spend on new technologies and improvements to the patient experience, reimbursements are actually decreasing in some cases.
Our advice: While there’s no “silver bullet” solution to this problem, it’s table stakes for hospitals and health systems to develop patient acquisition and retention strategies while improving the patient experience. The best way to ensure these efforts succeed is to partner with experienced marketers who know how to identify the hospital and health system assets that are available – such as leaning into data on strong clinical outcomes, creating broader awareness of affiliated ambulatory centers, or promoting groundbreaking research or procedures.
Achieving Financial Success In 2024
These challenges are complex, and much of the behavior driving them is troublesome at best. However, providers are not powerless. While the government works to regulate insurers and hold them accountable in the long term, hospitals and health systems can take action to improve their revenue strategy in the near term.