“Providers have meaningfully benefitted from increased commercial rates (using better data around costs and quality) and enhanced Medicaid supplemental payment programs that often pay closer to average commercial rates for Medicaid managed care patients and could continue to proliferate,” the report states. “Both of these have helped partially offset factors that we believe will continue to put steady pressure on revenue yield and underscore management teams’ focus on revenue cycle improvement and revenue diversification strategies.”
Factors likely to pressure providers next year include:
1) A growing Medicare patient mix.
2) Steady increase of denials.
3) Medicare Advantage administrative challenges.
4) Federal emphasis on Medicare Advantage.
5) Regulatory and legislative programs to control federal payer costs.
“The incoming administration could further encourage enrollment into MA plans from traditional Medicare,” states the report. “Those organizations that are succeeding under value-based care contracts and taking risk are likely to benefit longer term, particularly as more individuals move under Medicare.”
The trend of health systems terminating Medicare Advantage contracts has grown across the U.S. in the last year, a trend S&P expects to continue. Larger health systems with a strong financial position are most likely to exercise this strategy, according to the report. The federal government could also zero in on Medicare and Medicaid costs next year.
“We could see more services transition to site neutral payments, changes to the 340B program, and focus on other areas that could affect provider revenues,” the report notes. “Allowing the enhanced Affordable Care Act premium subsidies to expire after 2025 or initiating changes to Medicaid programs could reduce coverage and/or provider revenues.”
