Episode Overview
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Daniel Marino:
Welcome to value-based care insights. I am your host, Daniel Marino. In today's episode. We're going to dive into Medicare advantage, and in particular, the implications to hospitals, providers, health systems of leaving the Medicare Advantage space. Of course, there's been quite a bit of press over the last year and a half on all the challenges that hospitals, health system providers have had with Medicare advantage.
Many very notable health systems. Chris Scripps, health being one of them and left met the Medicare advantage world last year. And it's interesting, because, you know, obviously, there's a big push for Medicare patients to move into Medicare advantage. The CMS. Is definitely creating incentives and has made it very clear by 2030 they really want to get out of the patient management claims adjudication. All of that good stuff get out of that space and really push it over to Medicare advantage. And yet we see Medicare advantage enrollment continuing to rise, 34 million people have enrolled in Medicare advantage plans into 2024. And yet, as we see the rise, there was an interesting report that came out at the beginning of the year from HFMA, that said 16% of the health systems were planning on stopping Medicare advantage, or stop accepting more plans, and in some cases leaving or dropping Medicare advantage. So it really creates a number of questions that we as an industry we're really, we're working towards. And I'd like to spend some time talking about them today. So those questions are, what's the impact to hospitals and health systems as they decide to not accept Medicare advantage within their payer space. What do the patients do? If you're switching from straight Medicare to Medicare advantage you're not familiar with what the alternatives are. So as a patient, it puts these patients at a at a pretty big disadvantage. And then what can hospitals do in the future? I know there's some legislation coming out, and we'll talk a little bit about that. But in the short term, what do you do to take care of patients in your community, especially if you're a rural health provider and have strong relationships with patients within your community.
Well, I am pleased today to have a colleague of mine been on the show many times, Cliff Frank. Cliff is a national expert in payer contracting has worked with for many health systems, hospitals, providers around the country, and has done quite a bit of work in the payer community as well. Love to have him on the program. Cliff. Welcome.
Cliff Frank:
Thanks, Dan. Glad to be here.
Daniel Marino:
So, Cliff, you know. In my opening remarks I kind of made a opened with a few questions related to the challenges hospitals are having as they consider leaving the Medicare advantage space. What are you seeing as that impact factor to hospitals as they're considering leaving Medicare advantage?
Cliff Frank:
Well, it depends who, where, and how many. So the who meaning which hospitals, in what geographic areas, and the how many is, how many plans are they thinking about walking away from? If they walk away from all of them. they could be putting their patience in a bit of a spot. Because if they want to go back to Medicare they can, but then they may not qualify for any Medicare sub, because the Medicare sups can medically underwrite and if you're sick, you know they don't have to take you so it's probably smarter and better to get rid of some of the abusive plans if you're going to trim them at all and stay with the plans that are more reasonable, and even make some have some conversations with the reasonable ones to get some, maybe some extra concessions, as you as you kind of narrow your field. On the other hand, if you're a rural facility and you're kind of it for the county you, you know you can shut down a Medicare plan in a heartbeat by discontinuing your participation, and then they can't sell in the county at all.
Daniel Marino:
Right.
Cliff Frank:
Well, there's a lot of leverage there. If you're a more urban market where there's, let's say, 3 or 4 systems in play. you know it's really more about protecting yourself from an abusive plan as opposed to trying to kind of control the market cause you're not able to control it.
Daniel Marino:
Well, it's no secret that probably the biggest area of frustration for hospitals for health systems is the administrative burden that come along with these Medicare advantage plans all the challenges around prior authorizations. Restricting care the costs to just get these services approved really does put some major burdens on these on these hospitals and health systems and yet at the same time, Medicare advantage, especially if you're maybe even in a rural or certainly in a metropolitan area, could be a significant portion of your revenue. Right? So as you think about that, hospital margins are slim to begin with, and in in some cases they're in the red. If you're all of a sudden cutting out the Medicare vend, you're impacting your top line revenue. Obviously it has a cost implication there. But how do you how do you manage through that?
Cliff Frank:
So that I mean, that's that is the crux of the problem. And I have seen health plans. You know that that you contract as a pay as a provider, you contract with them 100% of Medicare for Medicare, 102, whatever you get. But then your actual yield is in the 80 s. Because of all these denials, and that doesn't speak to the friction costs that you're carrying on top of it. And then there's 1 other piece that's really important here, Dan, and that is, these patients come in, then they get treated, then they're ready to go to sniff. And there are no sniffs beds with that plan. So now you're stuck with that patient for a lot at, you know a thousand dollars a day, or whatever your costs are and you're not getting paid for it. Yeah. So that's a whole other problem where the providers down where the payers downstream network is skinny. And so all of these things. you know you look at you look as hospital CFO is going to look at it and say, well, you know, yeah, there's a cash flow hit. But frankly it's a lot less cash flow hit than is obvious, you know. So yeah, you're getting 82 cents on the on the on the Medicare dollar. But you're really getting about 70 or less by the time you add up the compliance costs the denials and the other friction costs. My sense is that you don't kick them all out at once, and you don't do it in February.
Daniel Marino:
Yes.
Cliff Frank:
You’ve got to do it close to the annual open enrollment period, which is October 15 through early December. So if you can cancel, you know, like September one, that's important. And be in communication with your local insurance brokers who deal with these Medicare patients and send communications out to your members. These are this plans we still participate in.
Daniel Marino:
Yeah, giving them an giving them an option. I think the communication absolutely is key because you have to get. And it's tough, cause you're putting the patients in the middle. Patients don't understand the difference between Medicare and Medicare advantage. The only thing they understand is the Medicare advantage plans are cheaper, right? They offer a lower premium. So to be able to communicate with the patients is absolutely key. But I want to go back to something that you had mentioned working with some of the plans on some of these administrative burdens. It, you know, I think, for the larger national plans the humanas and United Health cares. I think that's a tough call, right?
Cliff Frank:
They have one way of doing things, and that's their way, and that’s it.
Daniel Marino:
Exactly. Is there more success that you can get with the regional plans? I mean, is that an alternative?
Cliff Frank:
I think it is. And even some other large nationals that are fairly screwed up. But they are. they are. They have some local delegation of, or regional delegation to where the State executive has some power. But to make some administrative adjustments. So, for example, if you say to a plan, we're gonna shrink our network. I mean our participation from 17 Medicare advantage plans to 5. But one criteria is that we get gold carded. So, we don't have any more of this prior off. And if you want to do that, we'll consider you kind of in the inner circle. If you don't well, you're at risk to getting kicked out. You know something like that where there's some administrative non price concessions. Because, frankly, price is the least, you know, kind of the least important deal here. It's really Hassle.
Daniel Marino:
Right?
Cliff Frank:
Another piece I wanna mention, though, is the connection to your medical staff. Because if your medical staff, for example, is deep in a humana deal, that's a risk deal. And now you're going to blow it up. and they're going to be forced over to the Academic Medical Center, which is higher cost, higher confusion, you know more friction all the rest of it. You know your medical staff may not be real happy with you as a hospital. So it's important to kind of figure out what some of these interconnected relationships are, and how pulling a lever over here may make something unexpected blow up 2 blocks over.
Daniel Marino:
Yeah, the impact points, I think, are really, really key cause, it's not just a matter of thinking okay, we're not gonna accept it anymore. But it's really what you begin to. You know how you manage, how you manage through it. If you're just tuning in. I'm Daniel Marino, you're listening to Value-Based Care Insights. I'm here today talking with Cliff, Frank, and we are talking about the implications to hospitals, health system to providers from leaving the Medicare advantage space. Let's talk a little bit further Cliff about those impact factors. Because you're right. There's a lot of interconnectivity there. You know, as a hospital's thinking about maybe cancelling one of their plans, but yet, you know, the providers in the community may have their professional contracts right? You know again that puts the patient in the middle. What can the providers do?
Cliff Frank:
Well, it's worse than that. Dan, because when the hospital does something. who are the patients going to call? They're going to call their doctor.
Daniel Marino:
They're gonna call the doctor.
Cliff Frank:
So now your medical staff is getting bombarded with hundreds of phone calls from anxious seniors who think that they're going to lose their doctor, because their hospital is, you know, a which may also be true. So if you're going to do this as a hospital. set up a call center for people to call so that they don't jam up the doctors phone lines. If you jam up your doctor's phone lines, your revenue is going to take a hit because the patients can't get in to make an appointment.
Daniel Marino:
Well, absolutely, and it continues to put that burden on the on the physicians. And it's just.
Cliff Frank:
Wrong. Place. Yeah.
Daniel Marino:
Never, never going to work. You know, there is a bill that's going to come out that everybody's kind of keeping an eye on for 2025. It's called the Improving Seniors. Timely access to Care act, and the goal with that is to help to streamline some of these administrative burdens. To create some type of electronic pro prior authorization to standardize what services do require pre authorizations versus those that don't. What do you feel the impact of this is going to be. Do you think it's going to have some, some positive implications, or is it still going to take a while for us to kind of work through all the pre off wrinkles that are out there.
Cliff Frank:
Well, how long did it take to implement price transparency.
Daniel Marino:
Exactly. And we're still going through that right.
Cliff Frank:
Exactly so. 5 years after that legislation passes. It may be longer now with this new chevron doctrine, with the old chevron doctrine thrown out. So CMS's degree of free degrees of freedom in terms of administrative implementation is going to be more limited, and there'll be more lawsuits that come out of this over nits. So I. And this is what this bill is addressing is certainly important. But it is not, these aren't the only irritants. And so yeah. Might take an 82 yield up to an 87% yield. Okay? But still, you know, it's not regular Medicare. So, I think what we're talking about as a strategy for hospitals and other providers is still very, very relevant. Whether that bill exists or not.
Daniel Marino:
I agree with you. I think it's a 1st step. I think it's going to take a long time for us to see the real, the impacts of that bill. and I really feel like, in order to work through these challenges with Medicare advantage. The hospitals, the health systems. You have to have a plan. We had an opportunity some time ago to create the payer strategy for an organization and within their payer strategy. Obviously, they were really focusing on what to do with Medicare advantage. And you know again there were some up and coming regional plans. That were starting to really take shape in the community for this particular hospital. A. Obviously the big market share was with the national plans. But it seemed like as we were having conversations with these regional plans that maybe steering patients or being able to create a stronger relationship with these Medicare advantage plan is really the way to go seems like these regional, these regional plans have stronger connections with the patients. There's a little bit there's more flexibility in terms of managing these administrative burdens, and I think you know, as you're starting to partner with the plans they understand, I think, a little better than some of the national plans what the hospitals and health systems are going through, especially in a rural setting.
Cliff Frank:
Well, I think that's right. I think there are some limitations to that strategy that are significant. The 1st is that a lot of these regional plans can't handle a major uptick in membership because they don't have the risk based capital to slug away. And in Medicare at 12 to 15,000 bucks annually per member, you know, and risk-based capital is about 7 percent of that number. You pick up 30,000 lives, and suddenly you got to find, you know, a whole bunch of money fast.
Daniel Marino:
Oh, yeah, yeah, yeah, absolutely.
Cliff Frank: They don't have it. The second thing is, is the version 24 to a version 28 risk scoring conversion Is really a big challenge to these, to these smaller plans. I mean, just keeping up with their risk scores is tough. And now you know, because there's there are fewer things that risk adjust finding them and making sure you don't. Backslide on risk adjustment is really has to be a focus, which means, again, their administrative resources for finding and supporting new patients may be limited. And then the 3rd thing is that You know the and this may end up being a plus. But by being a local or regional plan. you know, you kind of know better how the system works in in a particular community.
Daniel Marino:
Right.
Cliff Frank:
And so you can make kind of more rational decisions that we providers might view as kind and reasonable.
Daniel Marino:
Yeah. Well, and I can.
Cliff Frank:
Cost more in in the short term. So I'm not sure kind of how all these things fit together. But if a regional plan is kind of not deep, financially.
Daniel Marino:
Yeah.
Cliff Frank:
Moving, moving strongly in their direction, could kill them.
Daniel Marino:
Well, it's a great point. So I think doing due diligence around that regional plan I think, is an important factor, right? Because, like you said there could be, although they want to grow, there could be a big shift.
Cliff Frank:
Well, they could end up being a great risk partner.
Daniel Marino:
Yeah.
Cliff Frank:
For some sort of shared risk or full risk deal. If you have a CIN that's set up to kind of do that.
Daniel Marino:
Well, if you have the infrastructure, yeah, around the around, care management.
Cliff Frank:
I mean, why do that with humana when you know they're going to screw you.
Daniel Marino:
Yeah.
Cliff Frank:
So let's do it with somebody who's a reliable, who's at least local, so that if you have a problem, you can sit down and talk about it.
Daniel Marino:
Yeah, yeah, absolutely. So with hospitals, though, you know, if they decide and a few of our clients, you know, they've been a lot of press around. Say, say, they're the regional hospitals regional. I'm sorry the rural hospitals leaving Medicare advantage. What alternatives do they have? Can they create some connectivity? You mentioned goal carding with, maybe creating some goal cards or some special arrangements directly with Medicare patients. In your experience, or what are you seeing around the country in terms of what other alternatives the hospitals have? How can they continue to provide services to Medicare patients when they do leave Medicare advantage?
Cliff Frank:
Well, if they don't have, if they're just going back to regular Medicare. then, having some sort of easily accessible financial option for financing their deductible and coinsurance becomes really important.
Daniel Marino:
Yes.
Cliff Frank:
Because they're going to have. Those obligations. And they're probably not going to have a Medicare supp.
Daniel Marino:
Yeah.
Cliff Frank:
That's going to step in So chip both financial support and charity care obligations will necessarily be higher.
Daniel Marino:
Well in that financial support, even though it would cost the organization money, it might be less cost than the administrative burden they're assuming in the Medicare advantage world.
Cliff Frank:
Well, now, this is going to sound harsh, but I do, and I don't mean it to. But if the administrative burden, if removing the administrative burden doesn't result in staffing reductions on the administrative side all you've done is move the administrative dollars around.
Daniel Marino:
Yeah. Cost, shifting.
Cliff Frank:
Yes, but you haven't. You haven't harvested the gains that could come from reducing your administrative friction.
Daniel Marino:
Yeah.
Cliff Frank:
So. And it's really hard, you know, to kind of go through that process of saying, Well, who don't we? What don't we need to be doing anymore. And who's doing that? And now we need to help them exit the organization, because we don't need to be paying for that.
Daniel Marino:
Yeah, absolutely, absolutely. But I think being able to provide those alternatives to the patient in one way or another, to kind of get over the hump. I don't feel like you know, not accepting Medicare advantage. I don't. I don't know if that's a necessarily a long term strategy. Good strategy for the organization, I think given where Medicare is moving and I mean, I think Medicare advantage is going to be part of our world for quite some time. Until we can figure out these administrative challenges. We have to come up with some short term alternatives. Right?
Cliff Frank:
I think that's where the carrots and sticks come in. So if you're rural hospital, sole community provider in that county, you got you got some big sticks. Now, you may only have 5,000 Medicares in your market, but it's pretty disruptive to a plan to kind of have to carve out a county when they've been there.
Daniel Marino:
Sure.
Cliff Frank:
So the best thing would be to kind of. you know. Take a couple of them and say, Look, we're going to do this our way, or you're out. And our way is goal carding. Our way is a maximum number of denials. It means you're going to pay us for patients who are stuck here because your network is inadequate and it means you're going to pay our doctors fee schedule. That is at least 100 percent of Medicare. And not this 80% of Medicare stuff.
Daniel Marino:
Right. So I guess when a hospital is thinking about what to do around Medicare advantage, it comes down to probably 3 things right? So if they're thinking about leaving, what's that implication to your physician partners, or your medical staff? Are there alternatives that you can provide, or at least align with some of the regional plans? And then setting up some alternatives with the patient. Right? So you don't. So you sort of as much as possible lessen the burden on the patient. Anything else you might add?
Cliff Frank:
Yeah, there's 1 other thing that I would add, and that is advocacy with your State Hospital Association.
Daniel Marino:
Good point yes.
Cliff Frank:
If you're having these problems with the particular plan, so is everybody else.
Daniel Marino:
Yeah.
Cliff Frank:
And you can't kind of organize a boycott that's not going. That's not legal. But you can turn to your hospital association, and they can organize. Some sit downs with particular plans or advocacy with the Federal Government. Around some of these issues.
Daniel Marino:
Yeah, so.
Cliff Frank:
So that you get some love and attention from some of these plans, who really otherwise won't pay attention.
Daniel Marino:
Yeah, that's a great point. Great point. And hey, that's their job. Right? They should be able to advocate for the hospitals. Well, Cliff, thanks for your time. This is a great discussion, and not going to be the last time we're going to have it, that is, for sure. We're going to continue to see a lot of this activity and different decisions that are made for Medicare advantage. So thanks again for coming on. You know, I'm sure we're going to be having you back again sometime. Love to have you on the program. My friend.
Cliff Frank:
It's always good man.
Daniel Marino:
Yep, and to you our guests and listeners. Thank you for tuning in. We really appreciate it until the next insight. I am Daniel Marino, bringing you 30 min of value to your day. Take care.