Tiny, rural hospitals feel the pinch as Medicare Advantage plans grow

When several representatives from private health insurance companies approached Bleak a few years ago about offering Medicare Advantage plan contracts so their enrollees could use his hospital, he turned them down.

“Come back to the table with a better offer,” the CEO said he told them. The representatives have yet to return.

Battle Mountain is located in north-central Nevada, approximately three hours from Reno and four hours from Salt Lake City. Bleak believes insurance companies simply haven’t enrolled enough seniors in the area to require his hospital to be in their network.

Medicare Advantage insurers are for-profit companies that enter into contracts with the federal government to provide Medicare benefits to seniors in lieu of traditional Medicare. The plans have become questionable payers for many large and small hospitals, which report that the insurers are frequently slow or do not pay.

Private plans now cover more than half of all Medicare beneficiaries. While enrollment in metropolitan areas is highest, it has increased fourfold in rural areas since 2010. Meanwhile, the Cecil G. Sheps Center for Health Services Research at the University of North Carolina reports that more than 150 rural hospitals have closed since 2010. Texas, Tennessee, and Georgia have seen the greatest number of closures.

The expansion of Medicare Advantage has had a disproportionate impact on the finances of small, rural hospitals designated by Medicare as “critical access.” Under the designation, the government-run Medicare program pays those hospitals more to compensate for low patient volumes. Medicare Advantage plans, on the other hand, provide negotiated rates that, according to hospital operators, frequently do not match traditional Medicare rates.

“It’s happening across the country,” said Carrie Cochran-McClain, chief policy officer of the National Rural Health Association, a group that includes small-town hospitals.

“Depending on the level of Medicare Advantage penetration in individual communities, some facilities are seeing a significant portion of their traditional Medicare patient or beneficiary move into Medicare Advantage,” she said.

Kelly Adams is the CEO of Mesa View Regional Hospital in Nevada, another rural hospital. He praised Bleak of Battle Mountain for keeping Medicare Advantage plans out of his hospital for “as long as he has.”

Mesa View, located about an hour east of Las Vegas, has a high percentage of patients enrolled in Medicare Advantage plans.

“Am I going to say I’m not going to take care of 40% of our patients at the hospital or the clinic?” Adams said it would be a “tough deal” to be forced to reject patients because they did not have traditional Medicare.

Mesa View has 21 Medicare Advantage contracts with a variety of insurance providers. Adams stated that he is having difficulty getting the plans to pay for the care provided by the hospital. It’s either “slow pay or no pay,” he says.

In total, the plans owe Mesa View more than $800,000 for previously provided care. According to the most recent annual cost report, Mesa View lost about $1.3 million while caring for patients.

According to the NRHA’s Cochran-McClain, the expansion of the plans also limits patients’ options because “the contracting that is happening under Medicare Advantage frequently has an influence on steering patients to specific types of providers.” If a hospital or provider does not have an agreement with a Medicare Advantage plan, a patient may be required to pay for out-of-network care. That would not be the case with traditional Medicare, which is widely accepted.

Patients at Mesa View must travel to Utah to find nursing homes and rehabilitation centers that are covered by their Medicare Advantage plans.

“Because they don’t get paid, our local nursing homes aren’t taking Medicare Advantage patients.” “However, if you’re on straight Medicare, they’d be delighted to take that patient,” Adams said.

A spokesperson for AHIP, formerly known as America’s Health Insurance Plans, David Allen, declined to respond to Bleak’s and Adams’ specific concerns. Instead, he claims that enrollees are flocking to the plans because they “are more efficient, cost-effective, and deliver better value than original Medicare.”

CMS press secretary Sara Lonardo stated that CMS has taken action to ensure “that private insurance companies are held accountable for providing quality coverage and care.”

According to Keith Mueller, director of the Rural Policy Research Institute at the University of Iowa College of Public Health, the reach of private Medicare Advantage plans varies greatly in rural areas. If current trends continue, enrollment in rural Medicare could reach 50% in about three years, with some regions already higher than 50%, such as the Upper Midwest, and others lower, such as Nevada and the Mountain States, but trending upward.

A bipartisan group of members of Congress, led by Sen. Sherrod Brown (D-Ohio), sent a letter in June urging federal agencies to do more to force Medicare Advantage insurers to pay health systems what they owe for patient care.

CMS Administrator Chiquita Brooks-LaSure wrote in an August response that a final rule issued in April made “impactful changes” to speed up care and address concerns about prior authorization — when a hospital and patient must obtain advance permission for care to ensure it will be covered by an insurer. Brooks-LaSure also mentioned another proposed rule that, if passed, would require insurers to provide specific reasons for denying care within seven days.

Hospital owners Adams and Bleak want more federal action, and they want it now.

Bleak at Battle Mountain said he is aware that Medicare Advantage plans will eventually arrive in his area and that he will be required to contract with them.

“The question is,” Bleak went on to say, “how can we match the reimbursement so that we can sustain and keep our hospitals in these rural areas viable and strong?”