Nursing home operators across the United States increasingly opt for alternative payer sources due to the persistent challenges of Medicare Advantage (MA) plans. This shift is driven by lower reimbursement rates and higher administrative burdens associated with MA plans. Even Medicaid is becoming a more attractive option for some operators, spurring advocacy efforts for a rate floor for Medicare Advantage plans.
Lower Reimbursement Rates and Administrative Burdens
While popular among some seniors, Medicare Advantage plans offer lower reimbursement rates than traditional Medicare. This creates significant financial strain for operators who rely on adequate funding to provide quality care. Additionally, the administrative burdens tied to prior authorizations and payment denials have made it difficult for facilities to manage patient care efficiently. These challenges are prompting operators to seek other payer sources.
Stagnant Rates and Increased Costs
Chris Chirumbolo, CEO of Ohio-based Carespring Health Care Management, highlighted the issue of stagnant MA plan rates. "This shift has been further driven by Medicare Advantage plans to keep rates stagnant for long periods of time and plans’ unwillingness to adjust the reimbursement despite the increased costs – especially over the last four years since the beginning of the pandemic," said Chirumbolo. The inability of MA plans to keep pace with rising operational costs is a significant factor pushing the largest nursing home operators toward alternative payers.
Improved Medicaid Reimbursement Rates
Historically, Medicaid underfunded long-term care, with a shortfall of $30 to $80 per resident day, depending on state reimbursement policies, facility age, and amenities. However, more states have realized the drawbacks of underfunding and have begun allocating additional funds to Medicaid reimbursement. This has significantly reduced the funding gap between Medicare and Medicaid, making Medicaid a more viable option for nursing homes.
Positive Outcomes of Shifting to Medicaid
Nicole Fallon, Vice President of Integrated Services and Managed Care at LeadingAge, shared an example of a Kentucky continuing care retirement community (CCRC) that shifted from MA to Medicaid. The move not only improved financial stability but also reduced staff turnover. "One of the unexpected outcomes of them moving away from contracting with Medicare Advantage and filling beds that were open with Medicaid is that their staff turnover rates have gone down," said Fallon. Staff are happier because they're dealing with fewer administrative hurdles and less stress about residents being discharged prematurely.
Advocacy for a Rate Floor
Nursing home operators are increasingly opposing MA plans by advocating for a rate floor. This effort aims to ensure fairer reimbursement rates and reduce the administrative burdens associated with MA plans. Advocacy groups are pushing for legislation to establish a minimum rate that MA plans must pay, which could help alleviate some financial pressures on nursing homes.
Strategic Negotiations
Operators are coming to the negotiating table better prepared and armed with data to support their need for higher rates. Fallon recounted a case where an operator asked for a 55% increase in MA rates but was only offered a 10% increase. Despite this, the operator had a strategy to shift payer sources if necessary, demonstrating the importance of knowing the costs of care for different payer sources. "He knew going into that contract that it was 40% of his revenue. He had gone in with a strategy of, 'I know how I'm going to make up this revenue if I have to walk away from this,'" said Fallon.
Leveraging Multiple Sites
Larger nursing home companies with multiple sites have a distinct advantage when negotiating with MA plans. "I think that's easier when you're a multi-site organization," said Fallon. "It also gives you leverage because you have more sites." These larger organizations can shift resources and patients more easily between facilities, giving them more negotiating power.
Less Stress for Staff
Shifting to Medicaid can also reduce the administrative burden on staff, leading to improved morale and reduced turnover. Staff are relieved from the constant cycle of prior authorizations and appeals, which often accompany MA plans. This can lead to a more stable and satisfied workforce, ultimately benefiting patient care.
Stable and Less Clinically Complex Residents
The administrative burden of dealing with MA plans can push providers to prefer the more stable and potentially less clinically complex long-term care residents covered by Medicaid. Chirumbolo noted that over 65% of the census in an average nursing home comprises Medicaid residents, who generally require less complex care compared to short-term skilled patients on MA plans.
Ancillary Services and Costs
For Medicaid residents, the daily rate covers all care and non-skilled services. In contrast, ancillary services like therapy and pharmacy are billed separately through Medicare Part B and Part D. The all-inclusive daily rate for MA patients must cover these additional costs, ranging from $120 to $200, depending on the patient's acuity level.
Facility-by-Facility Decisions
Ultimately, the decision to shift payer sources must be made on a facility-by-facility basis. Each facility must assess its unique financial situation, the demographics of its patient population, and the reimbursement rates available from different payers. This strategic assessment will help determine each nursing home's best course of action.
Conclusion
The decision to shift payer sources from Medicare Advantage to alternatives like Medicaid is complex and must be made on a facility-by-facility basis. However, the trend reflects a broader dissatisfaction with the challenges posed by MA plans. As operators continue to advocate for fairer reimbursement rates and reduced administrative burdens, the healthcare landscape for long-term care facilities is poised for significant changes.
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