‘Race to the Bottom’: Medicare Advantage Woes Keep Crunching Skilled Nursing Providers

With Medicare Advantage penetration on the rise, one industry leader recently described his concerns around MA rates for skilled nursing providers as a “race to the bottom.”

That comment came from Paul Branin, VP of Business Development at Health Dimensions Group (HDG), during the recent Capital & Strategy conference in Washington, D.C., which was organized by Skilled Nursing News and other WTWH Media publications.

The discussion also featured Sam Bechtold, chief investment officer at Eduro Healthcare, and Michael Beal, CEO of Care Initiatives, in a discussion about Medicare Advantage, reimbursement rates, and referral structures.


The following excerpt of the panel discussion has been edited for length and clarity.

SNN: Let’s talk about Medicare Advantage a little bit. I think there are a lot of pressures and concerns around Medicare Advantage rates and administrative burdens for skilled nursing providers. Paul, I think when we last talked, you used the phrase “race to the bottom.” Can you elaborate on that? What do you mean?

Paul Branin: So at LeadingAge last year, which was here in D.C., during the leadership conference, NIC Maps put up a graphic that was pretty staggering. It showed that since 2012, the Medicare Advantage rate has dropped from just below $650 per day to $507 currently.


So, we’ve seen a significant reduction in that Medicare Advantage reimbursement rate. At the same time, the traditional fee-for-service Medicare has increased by about $50. So we’re under a lot of pressure on both sides. We’re experiencing double compression, with the cost of expenses and payroll increasing. I don’t think everyone has lost $140 per day in expenses over the past 12 years. So that’s where the compression is, and that’s significant and concerning.

As the numbers keep pointing towards 100% enrollment in Advantage, it could be problematic down the road.

SNN: Sam, I assume you’re seeing the same trends?

Sam Bechtold: It’s twofold, really. It’s reimbursement, but it’s also if you’re not in-network and you’ve got a dominant player in the space.

Take Salt Lake City, for example. There’s Intermountain Healthcare, a massive 800-pound gorilla. We’ve got one building in Utah, and we’re not in-network with them. So what do you do in a place like that? We still get referrals from other hospitals. They’re not the only player in town, but it’s tough when you’re getting hit on the reimbursement side and also if you’re not in-network in certain areas that have a stranglehold on discharge. What do you do? It’s a two-fold issue for us.

Michael Beal: I’m just concerned currently with Humana and others coming out and saying their medical costs are going up substantially in those Medicare Advantage plans. And then the proposed rate increases, which we did not take favorably, just put more pressure on them to reduce costs. And that will trickle down to all of us in either reimbursement reductions or length of stay reductions.

SNN: Does having an I-SNP provide any advantage to you in terms of being able to negotiate with the larger insurers, given that you have that data or experience?

Michael Beal: No. As a skilled provider, we’re the last on the gravy train. We get the scraps that are left over. And we’re not market makers; we’re subject to whatever they want to give us.

SNN: Are you able to encourage your nursing home residents to join your ISNP versus being on another plan?

Michael Beal: We have a high penetration of people who have signed up, which helps us. But really the Medicare Advantage side these guys are talking about is really the short-stay patients coming in from the front end. The ISNP is really for long-stay patients. So, it’s kind of two different animals that we’re talking about.