As Medicare Advantage continues to grow in the skilled nursing space, beneficiaries utilizing traditional Fee-For-Service Medicare have declined, and in turn reimbursement has dropped at an alarming rate.
For every two beneficiaries that opted for MA, one FFS individual left the program in 2023, the first year the number of FFS beneficiaries declined in every state, with Delaware topping the list.
That’s according to leaders at Zimmet Healthcare Services Group, who discussed managed care trends during a webinar on Tuesday, including how a shifting in plans has affected the bottom line.
Nursing homes have lost a staggering $274.9 million for every percentage point MA plans grow, Zimmet Healthcare president Marc Zimmet said. Medicare spend per beneficiary is only $448 on MA plans, while FFS Medicare on average pays out $841 per beneficiary.
For perspective, MA enrollment increased from 35% in 2017 to 50% in 2023 – between 2006 and 2022, MA enrollment skyrocketed by 337% as FFS Medicare declined 2.9% during the same period.
“That is money out of our pockets,” said Zimmet. He was joined by Vincent Fedele, partner at Zimmet Healthcare and COO of z.PAX, the Post Acute eXchange, and David Asher, senior vice president and co-founder of Longevity Health Plan. The company even created a link to a “debt clock” which calculates Medicare FFS reimbursement lost to MA this year, slowly ticking up.
Penetration per state varies, but as of Feb. 1, the percentage of Medicare beneficiaries electing MA crossed the “threshold to plurality,” Zimmet leaders said. In other words, more than half of those eligible have abandoned the traditional FFS Medicare program.
Insurance plans have grown to dominate major markets, and unlike hospitals and physician practices, skilled nursing operators don’t have as much leverage or protection to negotiate. Plans can’t meet CMS network requirements without hospitals and physician practices, Zimmet said.
“We are in a situation where Medicare Advantage continues to grow unabated … we’re at an inflection point here,” said Zimmet. “For all the talk about Medicaid and funding, a big problem is Medicare Advantage making it more difficult for skilled nursing facilities to absorb Medicaid rate cuts.”
The market is fragmented, he said. Facilities can only do as well as their market will allow, and the setting is thought of as a “downstream” cost center where accountable care organizations and insurers seek to limit expensive utilization.
“For years, Medicaid has relied on Medicare, and to a lesser extent private pay, to make up the difference. Medicaid could pay less below costs because Medicare had paid so generously. It’s called cost shifting,” said Zimmet. “Now, the problem we have here with this equation is that we have fewer and fewer Medicare patients, because now we have Medicare Advantage patients.”
Other “SNFonomics,” presenters said, include irrational pricing. Medicare, Medicaid and MA rates vary significantly for providers in the same market. And, outdated, inconsistent and (in the case of MA) unavailable data makes comparing SNFs difficult, especially when negotiating MA reimbursement rates.
Proprietary data analysis helps operators see how they compare to their peers, including Zimmet’s Z-RAF, or risk adjustment factor method. Z-RAF looks at risk adjustment to predict resource utilization and take into account different care settings, with scores calculated using demographics and acuity, and patient conditions like sepsis or hip fractures.
What’s more, skilled nursing doesn’t adhere to traditional economic principles – SNFs can’t impact pricing or demand, and facilities are paid per patient per inpatient day. Care isn’t a product. It can’t be scaled, standardized, automated or outsourced, Zimmet said.
Companies featured in this article:
