Medicare Advantage now provides health coverage to around 55% of the nation’s seniors, but some hospitals and health systems are choosing to end contracts with some MA plans due to administrative hurdles. The most frequently cited challenges include high prior authorization denial rates and delayed payments from insurers.
Becker's connected with five health system CFOs at our 12th Annual CEO-CFO Roundtable on Nov. 11 to understand how hospital finance leaders are navigating Medicare Advantage today.
Question: Medicare Advantage plans are growing in popularity, but health systems often cite challenges stemming from prior authorizations and reimbursement rates. How are you navigating these challenges to ensure your organization can still provide high-quality care to seniors while managing financial pressures?
Jim Molloy, Executive Vice President, CFO, Treasurer, Ochsner Health
We're going to have to fix this ourselves. The Medicare Advantage segment of the population is growing, and it’s going to become a larger and larger part of the system. We will eventually need to figure something out, but it won’t be easy.
The reality is, no one really makes money off Medicare, and that’s something we have to address. I've been hearing about this issue for over 30 years. Back then, the goal was to make it work, but the difference now is that the math has changed. We no longer have a growing commercial population to offset the losses. The fastest-growing segment of our population is Medicare-eligible, and more people are moving into MA.
While I do think we need to push back on the insurers, I believe the more fundamental issue is that politicians aren’t addressing the core problem: the fact that Medicare isn’t profitable, and it covers a huge portion of the population. No one is tackling this problem head-on.
At my institution, we are already facing hundreds of millions of dollars in costs, whether from inefficiency or other factors. The inflation we will experience on the cost side is going to outpace whatever Medicare is going to pay, even if insurers cut another 10%. While we fight the insurers, as an industry, we need to figure out how we'll deal with the rest of the challenges Medicare presents.
Matthew Cox, CFO, Corewell Health
We operate a very large Medicare Advantage plan, and when managed well, it works effectively. One of our core values is collaboration, and that extends across the company. While working internally is easier than working externally, we apply similar tactics in both contexts. We prioritize sharing information openly. For instance, if we're having trouble getting claims paid or facing issues with certain edits, we address those challenges together to reduce unnecessary friction.
That said, sometimes friction is necessary. When I wear both a health plan hat and a hospital hat, I understand that some level of friction helps ensure we’re doing the right thing. It’s important to make sure that the proper processes are in place and that the right decisions are being made.
We also contract with Medicare Advantage plans from a variety of payers and use payer scorecards to track performance. When denial rates are high or there’s excessive administrative friction with no real value, we sit down with the insurers to discuss what needs to change. In my experience, as long as we are firm but collaborative in addressing issues, we've had success working with some of the largest insurance companies in the country.
Of course, our situation might be different from that of a single critical access hospital, given our prominence in Michigan. But the underlying principle is the same: if we’re overturning 98% of denials, every denial represents wasted administrative costs. To address that, we use payer scorecards to demonstrate the problem and communicate that if these inefficiencies continue, we’ll need to adjust reimbursement rates to cover the extra costs incurred. We make it clear that these unnecessary hurdles yield no value.
Overall, we believe Medicare Advantage is here to stay, but it must be properly managed. We can’t allow payers to take advantage of the system without accountability.
Stephen DelRossi, CFO, Interim CEO, Northern Inyo Healthcare District
One of our biggest strategies is refusing to sign contracts. I recently read a report showing that Medicare Advantage denials have increased substantially in recent years. This is completely unsustainable for a community where around 49% of patients rely on Medicare.
To address this, I’ve been going out into the community, especially this time of year, to speak with senior citizens about their Medicare options. We recently held a large meeting to help them navigate the confusion, particularly around COVID-related changes to Medicare. I was very clear with them: while they can choose Medicare Advantage, we do not accept it unless they’re in a specific group that we work with.
Many of them were surprised to learn this, and it helped them understand why we have to be selective about which plans we accept. At the end of the day, we are committed to providing the services the community needs, but we also have to be realistic about the financial impact. The current proposals from payers, which would result in significant financial losses, are simply not sustainable. We cannot continue to absorb these losses.
David Krajewski, Executive Vice President and CFO, LifeBridge Health
About two years ago, we acquired a local health plan. In Maryland, the penetration of Medicare Advantage is much lower than the national average, around 20% compared to the 50% range elsewhere. As the penetration increases, we plan to participate in that growth. A key factor in this will be getting clinicians involved. It's essential that they understand the pre-authorization process and what needs to be done to avoid denials. Engaging clinical leadership and ensuring they’re on board with the contracts is crucial to navigating these challenges effectively.
Another important aspect is self-reflection. Healthcare is simply too expensive. When you look at the broader cultural and societal impact, it’s clear that we need to find ways to make healthcare more affordable. To that end, we scorecard our Medicare and Medicare Advantage plans, and we won’t hesitate to cancel contracts with those exhibiting poor behavior.
But self-reflection also applies internally. We need to ensure we are providing services in a cost-effective manner. For example, if we're doing a total knee replacement across the entire episode of care, we need to assess whether we’re more expensive than other hospitals in the state. Having this kind of data gives us significant leverage in negotiations with payers. If we find that we're too expensive, we need to figure out why and address it. Ultimately, it’s about holding ourselves accountable and ensuring we are doing our part to keep costs down while maintaining quality care.
Jim Heilsberg, CFO, Tri-State Memorial Hospital and Medical Campus
Our system currently has a small number of Medicare Advantage contracts. We have recently negotiated a new contract at better rates than traditional. We continue to evaluate other relationships with managed care companies and are considering options for canceling or improvement. It appears that the relationship between providers and managed care companies has changed and degraded in the past few years. Insurers seem to be focused on ways to not pay or deny claims instead of finding ways to pay clean claims. As a result of changes in landscape, we have had to increase our already active denial programs in an attempt to stay ahead or with insurer strategies. We are implementing an AI tool that is intended to catch charges/codes prior to billing that is based on prior experience to prevent claims from going out to be denied. This tool also uses prior experience to prioritize denials that have best chance for appeal. It is a challenge at best.