As more older adults opt for Medicare Advantage plans, reimbursement fights between hospitals and insurers are increasingly centered around those contracts.
According to data shared with Becker's by FTI Consulting, there were 20 reimbursement disputes between hospitals and insurers that made headlines somewhere in the country during the second quarter, the same amount as the first quarter and slightly lower than the same period in 2023, when 24 contract disputes were reported in national or local media.
Notably, a record number of Q2 disputes (15 of 20) involved Medicare Advantage plans, and 30% of disputes failed to reach a timely agreement, meaning tens of thousands of patients were left without in-network coverage. FTI has tracked media reports regarding negotiations over reimbursement rates during each quarter since early 2022.
"Managed care works with a tighter network and the ability to do better care coordination," Citseko Staples Miller, managing director of public affairs, healthcare and life sciences at FTI, said. "With more seniors choosing MA plans, especially in rural or more nontraditional settings, that's part of what is making it difficult for these arrangements to work."
As of March, 50.4% of the Medicare-eligible population is enrolled in an MA plan, according to CMS. In rural areas specifically, MA enrollment has quadrupled from 2010 to 2023, growing from 10% of rural Medicare beneficiaries enrolled to 40%.
But as the program has boomed, financial challenges have risen. In 2024, the country's largest MA plans reported rising utilization and medical costs among older adults. Paired with reduced benchmark payments and increasing regulatory oversight from CMS, several MA insurers have said they will exit markets in 2025, and potentially reduce benefit offerings, setting the stage for increasing reimbursement fights with hospitals.
In 2023, Becker's reported on at least 15 hospitals and health systems nationwide that dropped some or all of their Medicare Advantage contracts, a trend that has shown no sign of slowing this year. Among the most commonly cited reasons are excessive prior authorization denial rates and slow payments from insurers.
One recent example of ongoing negotiations is between Trinity Health and UnitedHealthcare, which has left several of the Livonia, Mich.-based system's ministries and hospitals from coast to coast out of network with the country's largest insurer since July 1.
"We've had difficult negotiations with UnitedHealthcare over the years and with some other payers, but now it's coming to a head due to the impact of inflation, Medicare Advantage and the pressures on that program, and the fact that we can no longer sustain and accept it," Stuart Kilpinen, Trinity's senior vice president of payer strategy and product development, told Becker's.
"I don't think we knew what we had with fee-for-service Medicare," Robert Boos, vice president of revenue cycle at Lynchburg, Va.-based Centra Health, told Becker's during a virtual event in June. "If you know that system and have people that understand it, you're going to get your claims paid and have a low administrative burden. MA plans absolutely offer patients extra benefits, but they make it difficult to get claims paid out."
In January, the Healthcare Financial Management Association released a survey of 135 health system CFOs, which found that 16% of systems are planning to stop accepting one or more MA plans in the next two years. Another 45% said they are considering the same but have not made a final decision. The report also found that 62% of CFOs believe collecting from MA is "significantly more difficult" than it was two years ago.
"We're looking very carefully at who our partners should be," Ethel Hoffman, vice president of payer contracts and relationships at West Reading, Pa.-based Tower Health, said at the virtual event. "When we've compared traditional Medicare to MA codes, financially we do better under traditional Medicare in every case, though there are disparities from payer to payer."
Ms. Hoffman noted that Medicare Advantage plans can be attached to a contract that includes other insurance markets such as Medicaid or commercial, making it more difficult to drop a single MA contract without affecting the overall relationship with an insurer.
"We find that those payers are less likely to listen to our MA concerns because they know that it's challenging for us to get out of it," she said.
Despite the tensions with some hospitals, the MA program has bipartisan support in Congress and boasted a 95% quality satisfaction rating among enrolled members in 2023. There are about 4,000 MA plans being offered this year nationwide, and MA members spend an average of $2,434 less on out-of-pocket costs and premiums per year compared to traditional Medicare enrollees.
"Consumers still want Medicare Advantage," Ms. Staples Miller said. "But whether it continues to work for them and they can get the care they need is going to determine if we start to see fewer patients choosing MA in parts of the country where managed care is more complicated."