‘Fighting for a Rate Floor’: Stagnant Medicare Advantage Rates Force Nursing Homes to Shift Payers

Operators have been opting for different payer sources other than Medicare Advantage plans given its persistent challenges.

Medicare Advantage’s lower reimbursement rates compared to traditional Medicare and higher administrative burdens tied to prior authorizations and payment denials, have caused operators to seek even Medicaid as an alternative payer, emboldening efforts by advocacy groups to push for a rate floor for Medicare Advantage plans.

For providers with decent Medicaid rates, it might make sense to add more Medicaid beneficiaries to combat low MA reimbursement, said Chris Chirumbolo, CEO of Ohio-based Carespring Health Care Management. Such a shift could also affect staff morale.


“This shift has been further driven by Medicare Advantage plans keeping rates stagnant for long periods of time and plans’ unwillingness to adjust the reimbursement despite the increased costs – especially over the last four years since the beginning of the pandemic,” said Chirumbolo.

In the past, Medicaid underfunded the care for a long-term care resident by $30 to $80 per resident day, depending on the state’s reimbursement, facility age and amenities, and other fixed costs. The idea to admit a Medicaid beneficiary over Medicare Advantage didn’t make much sense at the time, he said.

However, fast forward to the current environment, and more states have realized it’s bad policy to grossly underfund long-term care residents on Medicaid. Numerous states have begun allocating additional funds to Medicaid reimbursement, shrinking the funding gap between Medicare and Medicaid.


Operator pushback against MA plans and the ‘rate floor’

This has led to some operators shifting back to Medicaid as a payer.

One continuing care retirement community (CCRC) in Kentucky that had been pushing back against the Medicare Advantage payer for better rates, took a closer look at their reimbursement, and decided it was time for a change. The operator eventually decided to fill more beds with Medicaid recipients, said Nicole Fallon, vice president of integrated services and managed care at LeadingAge.

“One of the unexpected outcomes of them making this move away from contracting with Medicare Advantage, and filling beds that were open with Medicaid, is that their staff turnover rates have actually gone down,” said Fallon.

Staff are happier because they’re dealing with less of the constant cycle of prior authorizations and appeals, stress about residents getting discharged before they’re ready. Fallon called it a positive, unintended consequence of the shift.

Opting for other payers is all part of operators pushing back on Medicare Advantage plans, along with coming prepared to the negotiating table. Data proving costs, and in turn higher rates, are other ways nursing homes are resisting MA plans.

Having a plan ready to shift payer sources could help with any type of negative fallout from rate negotiations, but bigger organizations have an advantage in being able to shift to other payers.

“I think that’s easier when you’re a multi-site organization,” Fallon said of pushback. “It also gives you leverage, because you have more sites.”

Ultimately, information is power, she said. Know what it costs to care for Medicaid patients, then for Medicare and Medicare Advantage. Another LeadingAge member told Fallon he had asked for a 55% increase, was countered for 5%, then 10% by the plan, but he said it still wasn’t enough.

“He knew going into that contract that it was 40% of his revenue. He had gone in with a strategy of, ‘I know how I’m going to make up this revenue if I have to walk away from this,’” said Fallon.

A number of hospital systems have also been pushing back, opting not to take MA anymore, Fallon said.

“I think that’s starting to help us from a public policy perspective, to say we need to relook at this,” Fallon said. “For that reason, we’re really fighting for a rate floor, which is an uphill battle, but something that needs to be done.”

Less headaches, comparable rates

The administrative burden providers are faced with in working with certain MA plans can and will easily push providers to choose to care for the more stable and potentially less clinically complex long-term care resident, added Chirumbolo.

A typical resident on Medicaid, which Chirumbolo said comprises over 65% of the census in an average nursing home, is generally a long-term care resident. The daily Medicaid rate covers all care and non-skilled services for that resident, while other ancillary services are billed separately from the Medicaid rate.

For example, therapy services for a Medicaid beneficiary would run through Medicare Part B, and pharmacy through Medicare Part D.

“When a short-term skilled patient on a Medicare Advantage plan is admitted to a facility, this facility gets an all-inclusive daily rate to reimburse for the care and services, like the LTC resident on Medicaid, and the “other” ancillary services, therapy, pharmacy, etc,” said Chirumbolo.

Other ancillary costs can add up to $120 to $200 depending on the acuity level of the patient, he said, especially when paying for high-cost medications.

Ultimately, the decision to shift payer sources will need to be made on a facility by facility basis, and based on each facility’s assessment, he said.

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