Why Are Medicare Advantage Players Dropping Out, But Not #PhysicalTherapy?

How Payors Coerce #physicaltherapy providers into taking Medicare Advantage

It is time again for my favorite group to expose-Medicare Advantage. For a few past ones, check out here, here, and here.

Earlier, this month, Humana announced its decision to exit 13 Medicare Advantage (MA) markets next year, impacting around 560,000 members, or 10% of its individual MA membership base. Humana expects to absorb about half of these members into other plans, but for many, this means fewer options in their local markets. Chief Financial Officer Susan Diamond made it clear during the Wells Fargo Healthcare Conference that the move is driven by profitability concerns — if the numbers don’t add up, they’re out. Meanwhile, CMS is consistently increasing Medicare Advantage plan payments, with a 3.32% boost finalized for 2024 and similar hikes expected in 2025.

The question is, why is it acceptable for a payer like Humana to drop out despite these increases, and why are hospitals following suit due to pricing pressures and excessive prior authorization requirements? Yet, physical therapy providers — who have seen well-documented decreases in reimbursement — are not dropping Medicare Advantage. Why do physical therapy providers continue to shoulder the burden when others making strategic and economic decisions? As a reminder, Medicare Advantage plans for physical therapy are typically indexed to the CMS fee schedule and paid a significant percentage below. They often have additional administrative burdens driving up costs for providers- a double whammy.

Let’s unpack the numbers. Over the past five years, the Centers for Medicare & Medicaid Services (CMS) has consistently increased payments to Medicare Advantage carriers, driven by factors such as rising healthcare costs, updates to risk adjustment models, and various policy changes:

• 2019: A 3.4% payment increase, higher than the initially proposed 1.84%, reflecting adjustments for coding intensity and expected improvements in healthcare delivery.
• 2020: A 2.53% increase, considering changes in risk scores and other factors.
• 2021: A more modest 1.66% increase, influenced by adjustments in the risk model and broader cost data.
• 2022: Payments rose by 4.08%, driven by higher anticipated medical cost growth and updated payment methodologies.
• 2023: A significant jump to an 8.5% increase, reflecting expected cost increases and additional benefits associated with Medicare Advantage plans.

These consistent payment increases underscore CMS’s intent to keep Medicare Advantage plans adequately funded and competitive. And yet, despite these rising payments, payers like Humana are exiting markets, and hospitals are also pulling back from MA plans, citing the challenges and costs of compliance and administration. Meanwhile, physical therapy providers have seen reimbursement cuts and increasing financial pressures and are not dropping these plans. Why does CMS have an intent to keep payers “funded and competitive” but not providers? Sounds like similar reasons to their refusal to exert buying power on big pharma!

Let’s be clear: Humana’s decision to exit unprofitable markets is framed as a strategic win, a necessary step to protect their bottom line. “Nearly all of those members have other options,” Diamond said. For Humana, the math doesn’t lie, and if a plan isn’t contributing positively, it’s gone. This isn’t just a Humana story; many hospitals are also dropping MA due to slow payments, prior authorization headaches, and administrative burdens.

Hospitals are uniting in their contempt for MA and the administrative hassles of dealing with MA plans, including delayed payments. In 2023, Becker’s Hospital Review reported that hospitals and health systems in at least 11 states announced that they would drop some or all of their MA plans in 2024. A Healthcare Financial Management Association survey found that 16% of health systems were planning to stop accepting MA plans in the next two years, and 45% were considering it.

Physical therapists, however, are caught in a different kind of math problem. By 2025, physical therapists will face a combined cut of approximately 13.93% due to both the cumulative conversion factor cuts and inflation (Medicare Advantage payers received over a 20% increase in the same period!). These cuts are layered on top of years of stagnant or declining reimbursements and are exacerbated by inflation rates that have been as high as 7% in 2021, trickling down to about 3% year-to-date in 2024.

So why don’t we see physical therapy providers dropping Medicare Advantage plans en masse? Is it our commitment to patient care, refusal to admit that we are seeing these patients below our cost, aversion to risk, our reliance on these contracts for patient volume, or simply a lack of viable alternatives? Ironically, it is likely none of those reasons! For many of the larger MA plans, it is because they have forced us to participate! Many MA payers will not let physical therapists enroll in their commercial products (non MA plans) typically indexed around Medicare, unless they agree to a contract on their MA patients (below medicsre rates). This is particularly challenging to providers in markets where a commercial payor has a dominant market share.

The disparity in responses between payers, hospitals, and physical therapy providers points to a deeper issue in the system. It raises a tough question for the industry: At what point does the math no longer justify the mission? When will #physicaltherapy say no or coalesce around the absurd practices of forcing to be on MA panels just because they have large patient beneficiaries in the commercial market.

Physical therapy providers continue to provide services under increasingly untenable financial conditions, absorbing the blows of declining reimbursement while hospitals and payers protect their profit margins. It’s a testament to the resilience and commitment of our field, but it’s also a signal that we must start advocating more forcefully for our place at the table. The broader financial context is undeniable, and the status quo is not sustainable. If others can walk away when the numbers don’t work, why can’t we? It’s time to rethink our approach and push for changes that respect the value we bring to patient care and the healthcare system at large.

larry

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