CommonSpirit 'having real issues' with Medicare Advantage, CFO says

Chicago-based CommonSpirit is having significant challenges getting paid appropriately for care provided through some of its Medicare Advantage programs, CFO Dan Morissette said during the health system's Feb. 29 investor call. 

"We're having real issues with some of our Medicare Advantage programs, where we have contracts in place to pay us one rate and they're paying us a rate much less than that," Mr. Morissette said. 

The news comes as a growing number of hospitals and health systems across the U.S. are pushing back and dropping MA contracts with certain commercial payers.

Excessive prior authorization denial rates and slow payments from insurers are some of the biggest challenges that health systems across the country are seeing with MA. Some MA carriers have also faced federal billing fraud allegations and are being probed by lawmakers for high denial rates. 

Insurers are also pushing back against CMS' proposed MA rates for 2025. Payers argue that the proposed rule released Jan. 31 would cut payments by 0.16% in 2025, but CMS said it would lead to a 3.7% increase after adjusting payments to account for the insured population's health.

Speaking about the insurance landscape overall, Mr, Morissette said he has "rarely, if ever, seen the kind of payer behavior that we've seen recently."

"Denials that are absolutely not in accordance with the contracts that we have, delayed payments where we need to go to arbitration and/or litigation to try to get paid for work that we're clearly entitled to," he said. "The behavior overall has been egregious."

CommonSpirit said that certain markets are seeing a higher concentration of these challenges, but most markets are experiencing at least some problems.

"We have payers that owe us a substantial amount of these inappropriate denials," Mr. Morissette said. "We have some markets in which the payers themselves have a near-monopoly on the commercial insurance market and therefore we do not receive enough reimbursement to offset the costs of Medicaid, self-pay and even some of the Medicare outpatient things."

Interestingly, CommonSpirit said it tends to fare better in markets where it is more relevant. 

"I don't want to cite markets because there is minor payer behavior in all the markets, but typically where we have a bigger market share or really solid clinically integrated network we tend to do a little bit better," he said. "It's a major concern and a major focus."

The 162-hospital system typically loses the most money from non-payers from an operating perspective, Mr. Morisette said. Medicaid is generally a significant loss to the system while Medicare, which pays quickly, is okay on an inpatient basis but on an outpatient basis does not usually pay enough to cover CommonSpirit's costs in that care setting.

In terms of commercial payments, CommonSpirit's CFO said the trend is higher now but not nearly high enough. 

"We expect more of a share of inflation to be borne by [commercial payers]," he said. "Some of our states have had so much inflation. For example the State of Washington has had 30-40% of inflation plus or minus the last three or four years. There's no way you can make up for that in volume, so there are states where we are going to need higher increases just to partially offset the costs of inflation together with the staff shortages, etc."

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