Last month, St. Charles Health System threatened to cut ties with all Medicare Advantage plans next year, a move that would leave an estimated 26,000 local beneficiaries without access to a hospital less than 100 miles away.
“The reality of Medicare Advantage in central Oregon is that it just hasn’t lived up to the promise," St. Charles Health System CEO Dr. Steve Gordon wrote in a news release at the time. "A program intended to promote seamless and higher quality care has instead become a fragmented patchwork of administrative delays, denials and frustrations," he said. The Bend-based nonprofit company declined to make an executive available for an interview.
Health systems nationwide appear to share Gordon's consternation, especially those similarly located in rural areas. Rural healthcare providers tend to be disproportionately affected by factors such as reimbursement cuts or denied and delayed payments from Medicare Advantage plans because Medicare enrollees make up most of their patient populations. Cutting off Medicare Advantage plans, or at least declaring that to be a possibility, is a response to the growing market power these carriers have, especially over rural providers.
"There's a lot of confusion and concern in the community right now," said Jeremy Vandehei, Oregon market president at PacificSource, a nonprofit insurance company. About 15,000 PacificSource Medicare Advantage members are St. Charles patients, he said.
Medicare Advantage growth
Although Medicare enrollees make up a disproportionate share of patient volume at St. Charles, rural areas generally are less successful for Medicare Advantage plans compared to urban and suburban regions.
Narrow provider networks, for example, spur twice as many rural Medicare Advantage enrollees to switch to the fee-for-service program than urban beneficiaries, according to a study published in Health Affairs in 2021. Less local competition also translates into higher premiums, the consulting company Milliman reported in April.
“Rural providers are feeling the pain points amplify and get larger as Medicare Advantage enrollment gets bigger,” said Molly Smith, group vice president for public policy at the American Hospital Association.
As competition intensifies among Medicare Advantage insurers, rural counties offer them one of the few remaining opportunities to boost business. Rural Medicare Advantage enrollment is growing faster than overall enrollment: Since 2010, the share of rural beneficiaries who choose private plans over the traditional program has more than quadrupled, to 40% from 11%, according to KFF survey results published this month.
Regulatory changes have contributed to making rural markets more welcoming to Medicare Advantage. The Centers for Medicare and Medicaid Services relaxed network adequacy standards for Medicare Advantage plans operating in non-metropolitan areas in 2020. The agency also offered additional flexibility in network regulations to Medicare Advantage plans that contract with telehealth providers or operate in states with certificate of need laws. CMS has approved 92% of requests for exemptions from network rules, according to the most recent federal data.
St. Charles’ decision to exit Medicare Advantage networks was dramatic and not without precedent. Brookings Health System, a nonprofit municipal provider in South Dakota, took the same action last month. Brookings declined to comment
Ozarks Community Hospital considered shunning Medicare Advantage plans but could not afford it, said Scott Taylor, administrator of the Gravette, Arkansas-based critical access hospital. Medicare Advantage covers more inpatient stays at the for-profit facility than any other payer, he said.
Despite dissatisfaction with Medicare Advantage, Ozarks concluded it had no choice but to stay the course, Taylor said. “We don't ever know when, or how much, or why our payments are delayed,” he said. “But at this point, it’s so bad that we're just thankful we get any money, which is not a great place to be in when you’re trying to keep the doors open.”
Hospitals are asking for reimbursement increases to cover rising labor and supply costs and looming Medicare payment reductions. Insurers, too, are reckoning with challenges such as Medicare Advantage rate cuts, stricter federal audits and escalating utilization.
Among the 58 publicly known contract disputes between insurers and providers this year, 35—more than half—involved Medicare Advantage carriers, according to data compiled by FTI Consulting. Last year, 29 of 51 were related to the privatized Medicare program.
Most conflicts center on how health insurance companies do business more than on reimbursements, said FTI Consulting Managing Director Adam Broder.
“It's like, ‘What's the point of fighting about rates if we can't even get paid?’” Broder said. “They make money on the commercial contracts. The margins are just so much smaller from Medicaid or Medicare, and if they can't get paid on time or properly or in the full amount, then that's going to lead to a dispute.”
At Aspirus Health, some Medicare Advantage insurers deny as many as 35% of claims, said Matthew Heywood, CEO of the Wausau, Wisconsin-based nonprofit health system. In response, the 17-hospital chain is renegotiating contracts to include provisions regarding prior authorizations and claims processing times, he said.
Aspirus has reached out to state hospital groups to gauge interest in suing insurers over claims reviews and denials, Heywood said. Medicare Advantage insurers are not threatened by single-system lawsuits because the insurance market lacks competition, he said.
“How can we start working with some associations to figure out a joint mechanism for all our smaller members to have a voice that's a little stronger than having to go one-off in the court system?” Heywood said. “It's starting to percolate.”
Two weeks after St. Charles Health System announced it wouldn't accept Medicare Advantage next year, the provider restarted negotiations with insurers, Gordon said. Open enrollment begins Oct. 15, but the health system has not settled on what Medicare Advantage networks it will join, if any, he said.
Decisions like these can have effects throughout the healthcare system.
For instance, the absence of St. Charles from local Medicare Advantage networks would make insurers out of compliance with network adequacy rules, Vandehei said.
And providers such as New York-based Summit Health are worried about how splits between rural hospitals and Medicare Advantage insurers would affect shared-risk contracts, said Justin Sivill, chief operating officer for VillageMD’s Summit Health practice in Oregon, which serves Bend and other nearby areas. Summit Health, a Walgreens property, also has a hospitalist team in place at St Charles Health System.
“What we're more afraid of is if they end up using this as a negotiating platform and if they end up negotiating better rates,” Sivill said. “We'll just have to manage the population better.”
The situation at St. Charles demonstrates a need for more lenient network adequacy standards, said Gary Jacobs, executive director of Chicago-based VillageMD’s center for government relations and public policy.
Medicare Advantage insurers should not have to construct networks, and hospitals that accept fee-for-service Medicare should be required to accept Medicare Advantage when plans pay full Medicare rates, Jacobs said. “Allowing a hospital to say no to Medicare Advantage can be really problematic as we advance down the road towards value in healthcare,” he said.