AHA report details MA plans’ impact on rural hospitals

Medicare Advantage (MA) plans are creating a disproportionate amount of administrative and financial challenges for rural hospitals, according to a new American Hospital Association (AHA) report.

Total MA enrollment has increased by 120% since 2014, and Congress estimates that MA plans will cover 64% of all Medicare beneficiaries by 2034, according to the report. The number of MA inpatient days in rural hospitals has grown by over 100% between 2018 and 2023, far outpacing the 56% growth seen across all hospitals, said the AHA.

In light of this rapid expansion, the AHA examined how MA plans’ frequent use of claim denials, prior authorization requirements, and other administrative tactics are affecting hospital payments. The report revealed that MA plans reimbursed rural hospitals at just 90.6% of traditional Medicare rates on a cost basis in 2023. The lower payment-to-cost ratio can be attributed to higher non-clinical costs associated with treating MA patients and lower reimbursement rates, said the AHA.

In addition, the AHA determined average MA rates in 2023 for common Medicare Severity Diagnosis-Related Groups for rural hospitals landed at 91-94.5% of the fee-for-service rates. Critical access hospitals (CAH), which are reimbursed by Medicare based on the cost of care, received only 95% of the traditional rates from MA plans on a cost basis, according to the report.

The report highlights additional financial strains placed on rural hospitals caused by the increasing administrative burdens driven by certain MA plans’ operational practices. The AHA cited a KFF report that found MA prior authorization requests increased by 43.9% between 2020 and 2023.

Although hospitals are seeing more authorizations, they continue to see authorization denials. The AHA noted an Office of Inspector General report revealing that MA plans inappropriately denied up to 85,000 prior authorization requests in 2019 and rejected nearly 20% of reimbursement claims that met Medicare coverage rules.

“For rural hospitals that often operate with limited staffing, technology, and other resources, these practices present substantial challenges to their workflows and budgets,” said the AHA.

Care delays are also causing financial burdens. The AHA found that MA patients in rural hospitals had an average length of stay (LOS) prior to discharge to a post-acute facility 9.6% longer compared to that of traditional Medicare beneficiaries in 2024. This represents a 46% growth in the difference in average LOS for MA plans relative to traditional Medicare between 2019 and 2024, according to the report.

The AHA provided the following recommendations:

• Streamline MA prior authorization processes
• Ensure CAHs receive cost-based reimbursement from MA plans
• Ensure prompt payment from insurers for medically necessary, covered healthcare services
• Require MA plan clinician reviewers who review coverage denials to make certain attestations
• Improve data collection, reporting, and transparency in the MA program
• Expand network adequacy requirements for certain post-acute sites of care

Revenue integrity professionals can review the AHA report to learn more about MA plans’ financial and administrative impact on rural hospitals, as well as potential oversight improvements and legislative reforms.

Editor’s note: Find additional NAHRI coverage on rural hospitals here.