Medicare Advantage plans are growing in popularity, but their payment tactics hurt smaller hospitals

Photo via Mesa View Regional Hospital

Medicare Advantage plans have become increasingly popular with seniors, but for small, rural hospitals, the plans are too risky, which can leave local plan participants unable to go to their town's hospital. "Medicare Advantage insurers are private companies that contract with the federal government to provide Medicare benefits to seniors in place of traditional Medicare," reports Sarah Jane Tribble of KFF News. "The plans have become dubious payers for many large and small hospitals, which report that the insurers are often slow to pay or don't pay."

Enrollment in private Medicare plans "has increased fourfold in rural areas since 2010. Meanwhile, more than 150 rural hospitals have closed since 2010, according to the Cecil G. Sheps Center for Health Services Research at the University of North Carolina. States such as Texas, Tennessee and Georgia have had the most closures."

The slow or no-payment tactics of Advantage plans disproportionately hurt "small, rural hospitals that Medicare has designated as 'critical access," Tribble explains. "Under the designation, government-administered Medicare pays extra to those hospitals to compensate for low patient volumes. Medicare Advantage plans, on the other hand, offer negotiated rates that hospital operators say often don't match those of traditional Medicare." 

Medical providers can face a no-win situation when rural residents enroll in Advantage plans. For example, Mesa View Regional Hospital, a rural hospital about 80 miles east of Las Vegas, has "a high percentage of patients enrolled in Medicare Advantage plans," Tribble reports. The hospital has "21 Medicare Advantage contracts with multiple insurance companies. . . . Mesa View's CEO, Kelly Adams, says he has trouble getting the plans to pay for care the hospital has provided. They are either 'slow pay or no pay, he said. . . . It would be a 'tough deal' to be forced to reject patients because they didn't have traditional Medicare."

"At Mesa View, patients must drive to Utah to find nursing homes and rehabilitation facilities covered by their Medicare Advantage plans," Tribble reports. Adams told her: "Our local nursing homes are not taking Medicare Advantage patients because they don't get paid. But if you're straight Medicare, they'd be happy to take that patient."

What is being done? "In June, a bipartisan group of Congress members, led by Sen. Sherrod Brown, D-Ohio, sent a letter urging federal agencies to do more to force Medicare Advantage insurers to pay health systems what they owe for patient care. . . . In an August response, CMS Administrator Chiquita Brooks-LaSure wrote 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 get advance permission for care to ensure it will be covered by an insurer," Tribble reports. Brooks-LaSure noted another proposed rule that, once finalized, "could mandate that insurers provide specific reasons for denying care within seven days."