Health systems across the country are experiencing frustrations with Medicare Advantage plan denials, delays, administrative burdens, and increased length of stay.1 As experts estimate that these plans will add 16 million members by 2030, some providers are re-evaluating their participation in the plans entirely in the interest of preserving their workforce and promoting improvements in patient care. One of those providers is St. Charles Health System, a four-hospital network headquartered in Bend, Oregon.2
A recent incident at the St. Charles Bend emergency department (ED) paints a picture.
An elderly Medicare Advantage enrollee arrived at the ED with uncontrolled high blood pressure, abnormally high heart rate, and new acute delirium. After two days and nights, her blood pressure and heart rate had stabilized, but her mental capacity was still compromised—causing doctors to consider whether her situation warranted transition to a short-term nursing facility or memory care center. But by the fourth day she had improved significantly and was able to be discharged to her home and family.
While her care was administered within Centers for Medicare & Medicaid Services (CMS) guidelines, her inpatient admission was denied by her Medicare Advantage plan. The denial meant the senior faced out-of-pocket costs, and the hospital would have to spend time appealing to the payer.
St. Charles has discovered the benefits of a unique approach to addressing these challenges. Guidehouse Partner and Health Finance & Revenue Cycle Advisory Leader Tim Kinney sat down with St. Charles’s Steve Gordon, MD, president and CEO, and Matt Swafford, senior vice president and CFO, to hear firsthand how they successfully enhanced one payer relationship —Central Oregon’s largest Medicare Advantage plan covering about 15,000 seniors.3
With a primarily rural service area approximately the size of South Carolina, geography plays a big role in the care delivery and expense sides of St. Charles’s statement of operations. Like so many other rural parts of the country, gas and groceries cost more in Central Oregon—and so does healthcare.
“When you talk about the value equation, it’s very simple: quality divided by cost,” said Gordon. “But in conversations over value-based care, providers can struggle to optimize the numerator part of that equation, which is even more important for rural organizations like ours. It just costs more to provide healthcare services in a rural environment that is separated from the major transportation hubs. It’s not simply providing high quality care at a lower cost; it’s providing optimal care in our area so that patients don’t have to drive across a mountain range in the middle of the winter.”
At the start of 2023, St. Charles was in-network with seven different Medicare Advantage plans covering about 40% of the Medicare population in the region. Gordon noted that that fragmentation, combined with pandemic-era staffing shortages and other market pressures, had complicated the St. Charles purpose of providing high-quality, efficient care to Central Oregon residents.
"For a comparably modest population of seniors across a broad geographic area, part of that fragmentation is not simply the experience that a senior has within any one plan; it’s also the experience that our caregivers have covering more than half a dozen different plans—each of which creates its own sets of rules and experiences,” Gordon said. “So, when you view it through that lens of a single care system trying to make sense of it all at a time when the workforce is challenged, you see the complexity, challenges, and frustrations our caregivers face when caring for our patients.”
According to Swafford, the numbers illustrating the problem were stark. The system was seeing significant and persistent post-payment denial activity for Medicare Advantage plans, as well as a 2022 average length of stay that was notably higher than that for patients on traditional Medicare. One Medicare Advantage plan’s average length of stay was 25% higher than that of traditional Medicare, negatively impacting patient experience and patient risk.
“The lack of payer awareness about that impact on providers and caregivers was striking, and that’s partially why we were very fervent in our discussions with all Medicare Advantage payers in our market,” Swafford explained. “They were focused on member benefits—vision, dental, getting the $5 gift card for achieving 5,000 steps 40 days in a row—but that was pitted against funding the acute-care system, which still needs to have caregivers delivering safe, high quality care at the bedside and not spending time answering insurance queries.”
Kinney said that Guidehouse research confirms Medicare Advantage plans tend to have higher denial rates and administrative burdens across the nation. It’s a combustible situation that’s not sustainable as Medicare Advantage participation grows and health systems reach their breaking point, added Gordon.
“We’ve been hearing it from physicians and colleagues for years, and I lived it as a practicing physician,” Gordon said. “It’s the nature of the work, the emergence of prior authorizations and getting approvals. That came into existence for some very important reasons: to protect patients and to protect those who pay for care from overuse, misuse, and poor decision-making. I have no quarrel with any of those objectives.”
What was eye-opening, he said, was the presumption that providers must accept that added burden as a cost, whether direct or indirect, for the work they do.
“As we looked closer and it was brought to our attention by our frontline teams, we couldn’t find in our own experience the justification for the direct and indirect expenses that were falling upon our people,” said Gordon. “This prompted us to challenge some long-held presumptions of that deal.”
Additionally, increasing post-acute care discharge delays and related length-of-stay extensions put another spotlight on the problem. As St. Charles dug into these issues with local skilled nursing facilities, it became clear the skilled nursing facilities often chose to take traditional Medicare patients over Medicare Advantage patients because of their own difficulties receiving payment from the Medicare Advantage plans. This contributed to capacity challenges, since they were so backed up with patients being stuck in the hospital without being able to appropriately discharge them, which in turn resulted in access to care issues at the front door.
This summer, St. Charles announced it was considering cutting ties with some Medicare Advantage plans covering about 26,000 people across the region.4 While negotiation discussions are generally conducted in private, awareness of the health system’s considerations shone a brighter public light on the issues of concern. And as one payer faced the real possibility of losing St. Charles as an in-network hospital system for the 15,000 seniors on its plan, the company came to the negotiating table ready to listen.
“The problem with value-based care and payment model discussions is they can emphasize the contract and dollars before you get to the conversation you need to have first, which is orienting around quality and experience and patient safety,” said Swafford. “If you can get on the same page and organize around evidence-based care, then the conversation starts with the appropriate focus.”
St. Charles leaders worked on a strategy to effectively tie patient and clinician impact to their conversations with payers. They listened to their utilization management team and tracked avoidable write-offs—then determined what those avoidable write-offs meant when grounded in specific patient stories around how care was delayed or denied. They also focused on how switching from inpatient to outpatient care created a financially higher burden for patients, solely due to the payers’ determinations.
Swafford explained the crux of the argument that St. Charles leaders made in their talks with payers.
“With one Medicare Advantage plan, we saw the number of denials reach 20% of the total number of covered lives. And, we were overturning approximately 75% of that plan’s denials. How is that adding value to the healthcare system?” he asked. “It’s delaying payment, it’s taking time away from delivering care to patients, and it’s causing St. Charles’s clinicians to absorb the Medicare Advantage plan’s busywork. And you know why those denials were overturned? Because clinical leaders from the payer and from St. Charles had come to agreement clinically. So, we want the payer conversation to start with where we agree clinically and then get to the situations that are clinically challenging and other areas where there might be room for legitimate disagreement.”
St. Charles leaders worked to define broad lanes of agreement on clinical care with experts from the payer side. They specifically focused on length-of-stay issues and on the St. Charles Cancer Center’s stellar record of providing care aligned with National Cancer Care Network guidelines.
By doing so, the organizations were able to come to an agreement to reduce administrative burdens and hospital lengths of stay by:5
These elements of the agreement extend to the payer’s commercial insurance plans and to the insurer’s coverage of Oregon Health Plan members.
Successes like this offer providers nationwide more confidence to enter the market and make changes—especially while knowing CMS is more aggressively working to address the concerns of higher delays and denials seen with Medicare Advantage plans and Medicaid managed care organizations.
"We’re seeing large health systems using a similar playbook to analyze where the benefits are supposed to fall and go after them,” Kinney said.
To improve relationships and negotiate payer agreements that better serve patients, it’s essential to have the relevant quantitative information at your fingertips. To achieve success in value-based care, it’s especially important to gather, organize, and bring the right data to the negotiating table based on benchmarks. Showing Medicare Advantage payers how denials, delays, and certain pre-authorization requirements specifically extend length-of-stay numbers at hospitals—all while placing unnecessary administrative burdens on the people responsible for providing care—can go a long way toward finding common ground.
“To have a successful conversation around an improved Medicare Advantage model, you have to first figure out how to orient around the clinical purpose and agree to what those guidelines and standards are,” added Swafford. “Then you isolate where the disagreements are to those vital few that rightfully exist—not because a delay-and-deny model is just embedded in the system. It’s a combination of leadership style, having simple goals, and acting on the things you can control.”
Gordon said that over the longer term, the challenge is to easily quantify the human impact of payer behaviors, present payers with more reliable metrics and targets, and make adjustments based on actual patient and caregiver experiences in faster and more quantifiable ways.
“Right now, we know there is a tax on our daily work, but trying to put a dollar figure on it to bring to payer negotiations is impossible, so we need help with that,” he said.
He also cautioned against having an unrealistic outlook or timetable. “This is not a one-time event; it’s going to take several years of cycles,” Gordon said. “Payer contracting is largely an annualized process, so we’re just beginning. And for our payer colleagues who are motivated to make change, we must hold each other accountable, knowing meaningful change will take time.”
Recognizing the essential role of payer and provider alignment within Medicare Advantage is pivotal for achieving a mutually beneficial relationship. By resetting their Medicare Advantage strategies, health systems can not only safeguard their capacity to better serve seniors within their preferred plans, but also fortify their market position. Successful alignment strategies will foster improved care delivery and ensure the sustainability and growth of your healthcare enterprise.
1“Answering Your Questions on Medicare Advantage.” St. Charles Health, www.stcharleshealthcare.org/news/answering-your-questions-medicare-advantage.
2Emerson, Jakob. “Hospitals Are Dropping Medicare Advantage Left and Right." www.beckershospitalreview.com/finance/hospitals-are-dropping-medicare-advantage-left-and-right.html.
3“St. Charles Announces Agreement with PacificSource.” St. Charles Health, www.stcharleshealthcare.org/news/st-charles-announces-agreement-pacificsource.
4“St. Charles Announces Agreement with PacificSource.” St. Charles Health, www.stcharleshealthcare.org/news/st-charles-announces-agreement-pacificsource.
5“St. Charles to Accept Some Medicare Advantage Plans in 2024, but Not All.” St. Charles Health, www.stcharleshealthcare.org/news/st-charles-accept-some-medicare-advantage-plans-2024-not-all.
Complexity demands a trusted guide with the unique expertise and cross-sector versatility to deliver unwavering success. We work with organizations across regulated commercial and public sectors to catalyze transformation and pioneer new directions for the future.