The pain points stemming from the continued expansion of Medicare Advantage (MA) have lingered for so long without a course correction that some nursing home organizations have altered their contracting practices with managed care groups.
The headline per-diem rate is no longer the primary factor in deciding whether to accept or renew an MA contract for some providers. Instead, providers are evaluating the entire financial picture and factoring in administrative costs, according to Elizabeth McLaren, SVP of Revenue Cycle Reimbursement and HCBS at Covenant Living Communities and Services.
“We’re really looking at the full economic and operational performance,” she said.
Important considerations for Covenant include retrospective denials, the number of times staff must touch a claim before it is paid, payment timelines, prior and continued-stay authorization requirements, portal functionality, and even the amount of staff time spent communicating with the payer, McLaren told SNN.
A seemingly attractive reimbursement rate can become far less attractive when administrative costs and delayed payments are accounted for, she said.
And so, Covenant conducts a plan-level margin analyses, examining actual revenue and costs by payer and community. This analysis helps identify contracts that are genuinely profitable, those that create excessive administrative burdens, and those that may need renegotiation or termination. In some cases, Covenant has chosen to walk away from contracts or reconsider its desired payer mix when managed-care reimbursement approaches Medicaid levels but requires substantially more administrative work, McLaren noted.
“At Covenant, we only have one national contract, and the rest of our contracts are specific to our individual communities,” she said. “We do have some state-specific contracts, and we’re part of a few different networks within certain states as well, so we’re able to leverage that a little bit different.”
Covenant has transformed its practices after having experienced a substantial shift from traditional fee-for-service Medicare toward Medicare Advantage, she said. The organization’s short-stay mix was approximately 58% traditional Medicare in fiscal 2021 but has since fallen to about 42%. Covenant manages roughly 120 MA and managed-care contracts across its communities, making the volume and complexity of payer requirements a important consideration in staffing and revenue-cycle planning.
“The level-rate models is what we’re trying to get away from as much as we can, but I’ll tell you, a lot of the payers aren’t quite ready for that level of conversation yet,” she said.
Danielle Dang, VP of Clinical Reimbursement at EF Senior Care, agrees that providers need to move beyond simply evaluating reimbursement rates and instead understand the full operational and financial impact of each payer relationship.
Negotiate for acuity, risk and administrative burden
Both Dang and McLaren urge more sophisticated contract negotiations, saying that providers should seek acuity-sensitive reimbursement because residents classified at the same payment level can require very different amounts of care and resources.
Organizations should also push for transparent contract terms, annual rate updates where possible, appropriate carve-outs and realistic incentive structures.
When a payer offers a lower base rate with the potential for incentives, providers should examine how often those incentives have actually been paid to other providers.
Dang emphasized leveraging industry partnerships and collective advocacy to push for better contract standards. Providers should also ensure documentation is complete, consistent and reproducible because MA plans may conduct both pre-payment and post-payment audits, she said.
“We’re leveraging our partnerships and recommending our clients do the same,” Dang said. “Organizations are advocating for contract revisions across the board for all of us, and we feel that that voice will hopefully allow all of the presenters in the network to see improved contract guidelines.”
Costing out residents before accepting them
An additional important strategy organizations are putting in place involves calculating the expected cost of an MA resident before admission. Providers should examine pharmacy expenses, equipment and rental costs, therapy needs and other services that may be included in the negotiated rate, McLaren said, adding that providers sometimes fail to recognize that they can negotiate carve-outs for unusually expensive services or medications.
Covenant for its part evaluates high-cost medications and may request a carve-out even when one is not included in the standard contract, she said.
Both Dang and McLaren recommended using pharmacy portals and other available tools to estimate medication costs before accepting a resident. Providers should then compare actual costs and reimbursement after the resident leaves to determine whether the relationship was profitable over time.
Use data to drive strategy
Building payer dashboards that make contract performance visible can also be a valuable strategy, giving providers a clear view of net revenue per patient. Dashboards can yield insights into the frequency and value of requested versus approved carve-outs as well as staff time or administrative effort required to get claims paid.
Covenant has centralized its prior-authorization process, allowing its team to develop payer- and location-specific knowledge about authorization challenges. That centralized data can then inform negotiations and operational decisions.
Organizations should use contract-level margins, authorization performance, denials, costs, length of stay, and payment speed to determine which contracts to pursue, renegotiate, limit or exit, McLaren said.
For Covenant, this analysis feeds annual planning and helps determine priorities for new contracts and renegotiations. For individual facilities with limited capacity, the same information can help determine which residents to accept when demand exceeds available beds.
Companies featured in this article:
