In dealing with Medicare Advantage pain points, skilled nursing providers are shifting their focus from resisting managed care to building stronger ties with health plans. This includes pruning unprofitable contracts, improving discharge planning, and some “soul searching” and concessions by each party as margins diminish for both health plans and providers.

And while reimbursement pressures, prior authorization requirements and administrative burdens remain significant challenges, improving outcomes through earlier communication, better data sharing and more strategic contracting has proven to be more financially fruitful for providers, according to experts on a panel at the recent PAYER conference in Chicago co-hosted by Skilled Nursing News and Home Health Care News.

Ryan Haller, CEO and founding principal of Tennessee-based h/care, which manages a range of post-acute care operations, including skilled nursing, said providers are becoming much more disciplined about evaluating payer relationships, and it all starts with crunching numbers to limit health plans to financially lucrative arrangements.  

As an example, Haller pointed to his organization’s acquisition of a long-established Ohio-based home health agency with more than 100 payer contracts. After conducting a detailed margin analysis, his team found that roughly 80% of those payer relationships were losing money. Although reducing the number of contracts dramatically also reduced patient census, the organization ultimately transformed a negative operating margin into a positive one by focusing on financially sustainable relationships.

Providers should also carefully evaluate not only which payers they contract with but also which geographic markets they serve, Haller added, recognizing that Medicare Advantage penetration varies substantially by ZIP code.

That said, particularly for nonprofit organizations committed to serving all patients, he said making decisions to reduce service areas or terminate payer contracts can be a difficult but necessary step because without maintaining positive operating margins, care is bound to be compromised. 

How discharge planning can ease payer-provider friction

From the perspective of a health insurance company that offers Medicare Advantage, one of the biggest barriers to successful partnerships is discharge planning.

Discharge planning often begins too late, according to Coreen Dicus-Johnson, president and CEO of Network Health.

“One of the frustrations is that we don’t do enough planning early in the process,” she said. “We haven’t done [the discharge] early enough to be able to prepare the family, to prepare the patient, and to prepare either the skilled nursing or the payer, and that’s one of the things I don’t think we do well.”

Hospitals are under pressure to reduce length of stay, but families, skilled nursing providers and health plans are frequently brought into the process only at the last minute, she said.

Earlier coordination would allow plans to prepare authorizations, providers to plan admissions, and families to better understand available benefits and realistic discharge options. And setting expectations at the beginning of a hospital stay rather than at discharge could reduce delays, denials and frustration for all parties.

“One of the things that Network Health does better … is to go earlier in the process, and because of our relationships, we have the ability to call [a specific staff member] who’s in care management at our respective hospitals,” she said. “[W]e work closely with [hospitals], and so we’re in a better position because we can play the ground game better.” 

Moreover, there’s a general lack of understanding about what is actually covered at the start, she added. 

Many disputes stem from misunderstandings about what Medicare Advantage covers, Dicus-Johnson said. Families often expect plans to pay for long-term custodial care when beneficiaries no longer qualify for skilled services, even though custodial care is not a covered Medicare benefit. Health plans should do more to educate members about benefit limitations before they enroll, she advised, and explore supplemental products that could help bridge gaps when patients need custodial care but are not yet eligible for covered skilled nursing services.

While prior authorization remains one of providers’ biggest complaints, Dicus-Johnson said it was important to be mindful of the fact that health plans also face regulatory responsibilities and fiduciary obligations to ensure healthcare dollars are spent appropriately.

However, she acknowledged there is considerable room for improvement on the managed care end.

At Wisconsin-based Network Health, she said the organization has historically made authorization decisions within hours rather than days and is investing in technology, including Epic Systems’ Payer Platform, to streamline the review process and allow nurses to approve requests more quickly when documentation meets clinical criteria. 

Perhaps more importantly for providers frustrated by denials, Dicus-Johnson said her organization’s internal data show that nearly all overturned prior authorization denials resulted not from disagreements over medical necessity but from incomplete documentation submitted with the initial request. That finding suggests providers may be able to reduce denials significantly by improving the completeness and quality of information submitted upfront.

For their part, health plans now provide detailed authorization criteria that were not available years ago, giving providers clearer guidance on exactly what documentation is needed for approval.

Locally focused models of managed care

Beyond contract negotiations, Dicus-Johnson said the model followed by Network Health’s local presence and provider-owned structure has created opportunities for direct communication that national insurers often cannot replicate.  

Executives know hospital care managers personally, can resolve issues with phone calls instead of lengthy bureaucratic processes, and regularly share quality and performance data with providers. Rather than viewing negotiations as adversarial, she described them as efforts to ensure both the health plan and providers remain financially viable while reinvesting resources into their communities.

Performance-based reimbursement also plays a role in strengthening those relationships. Dicus-Johnson said Network Health shares Medicare Advantage dollars with providers that meet quality goals and has distributed millions of dollars in incentive payments to reward strong performance. She argued that plans benefit when providers succeed because health insurers ultimately rely on provider networks to deliver quality care to members.

Allison Rizer, chief growth and innovation officer at ATI Advisory, urged providers to recognize that Medicare Advantage is entering a new financial reality post the COVID-19 era, when plans experienced relatively favorable payment conditions.

Now, increased federal scrutiny, payment changes and demands for greater transparency mean tightened margins for MA plans.

In the end, as financial pressure increase, health plans and providers need to see a new way of engaging.

“We find ourselves at this inflection point where I think both on the health plan side and the provider side, both parties really need to do some soul searching and self-reflection on what are the concessions they are willing to make,” Rizer said. “There’s just fewer dollars, we’re seeing plans exit markets, which is putting pressure on the plans that remain [and] there are fewer plans, [providers] may have less negotiating power.”

Organizations should closely examine their operating margins, administrative expenses and contracting strategies because the environment is unlikely to become more favorable in the near future. As plans exit certain markets and competition decreases, providers may also lose negotiating leverage, making strong payer relationships even more important.

Recent MedPAC findings show Medicare Advantage beneficiaries who ultimately require post-acute care often experience longer hospital stays than traditional Medicare patients, she said. Those delays can result in sicker, more medically complex patients arriving at skilled nursing facilities, increasing both clinical demands and financial risk.

Locally integrated health plans that maintain close working relationships with providers may be better positioned than national insurers to reduce those bottlenecks because their incentives are more closely aligned with local hospitals and care networks, Rizer said.