Despite industry-wide headwinds, large health systems are performing better — in both financial and quality metrics. Regional hospitals often struggle to compete, providing services on a smaller scale in a specific area, and with fewer resources at their disposal.

It’s not just that these smaller systems struggle to keep pace — they simply can’t get ahead. Regional systems often operate with thin margins, making it difficult to invest in necessary innovations. By contrast, larger health systems benefit from economies of scale and higher profitability. For example, Tenet Healthcare reported an operating margin of 12.2% in 2023, while many regional hospitals struggle to break even.

Strategic partnerships can help bridge this gap by providing access to resources and expertise that regional hospitals cannot afford independently. Hospitals with strategic partnerships often see improved financial performance and stability. To create value and remain competitive, regional health systems should seek outside expertise in areas where they lack resources and capabilities.

In Spark’s experience, the agreed reimbursement rate with Medicare Advantage (MA) plans is nearly always tied to the current Original Medicare rate.

When CMS reduced the reimbursement rate for 340B-acquired drugs between 2018 and 2022, MA plans did the same. Similarly, when CMS restored the original payment rate of ASP + 6% in September 2022, MA plans again followed CMS’s lead. MA plans have not, however, followed CMS’s lead in devising a remedy for the underpayment of claims for 340B-acquired drugs which were paid between 2018 and 2022.

Providers are overwhelmingly being ignored or dismissed by contracted and non-contracted MA plans in their efforts to obtain a remedy for these underpayments. Like their peers, our partner 340B hospitals care for many uninsured or low-income patients and the 340B program allows these hospitals to expand such services to their communities. Pursuing recovery against MA plans for these underpayments can be complex and costly; therefore, providers should ensure they have reviewed their MA plan contracts carefully and evaluated their reimbursement data.

Rising claim denials and payment delays are straining the already-fraught relationship between providers and payers.

Providers spent nearly $20 billion in 2022 pursuing delayed payments and denials, more than half of which were eventually overturned. Some health systems have seen denials double in the last year alone, with more than half of that activity coming from MA plans. Spark data shows MA plans issuing five times more first-pass denials than from traditional Medicare.

Across the industry, payers control the rules for how denials are determined, and they’re using advanced AI technology to enforce those guidelines by any means necessary. Providers must take a proactive approach against payer tactics that are hindering cost-effective care delivery.

Here are three efforts we’ve found effective in pushing back against increasing payment delays and denials:

Dear Mr. Thompson,

I am writing to you on behalf of Spark, a dedicated revenue cycle partner committed to the financial health of hospital systems across the nation. By way of background, our organization manages $35 billion in net patient revenue for over 250 hospitals across the United States.

We have recently been made aware of your new nationwide Hospital Inclusive Charges Policy, set to take effect in December 2024. Upon review, we anticipate that this policy, which is effectively a line item denial policy, may disallow reimbursement for an indeterminate and potentially broad range of separately billed items and services. As such, it raises more questions than answers and significant concerns for our healthcare partners and the patients they serve.

UnitedHealthcare has reported record profits in recent years, yet this new policy appears to be a strategic move to further reduce reimbursement at the expense of patient care. A line-item denial approach would not only undermine the financial stability of hospitals, but it would also contradict federal guidelines that support separate billing for many of the items and services you may soon deem “routine” and ineligible for reimbursement.

We urge you to reconsider this policy for the following reasons:

1. Impact on patient care: By denying hospital charges for separately billed items and services that UnitedHealthcare deems routine, this policy risks compromising the quality of care provided to patients. Hospitals rely on fair reimbursement to maintain high standards of care and to invest in necessary resources and personnel.
   
   
2. Financial strain on hospitals: Line item denials place additional financial strain on hospitals, particularly those with contracts paid on a percentage-of-charge basis or with stop-loss provisions. This could lead to reduced services, staff layoffs and other measures that negatively impact patient care and the larger community.
   
   
3. Contradiction of federal guidelines: Your policy appears to contradict federal authorities that support separate billing for many of the items and services you now presumably plan to deny as routine services. This policy does not appear supported by the regulatory framework, and it may undermine the contractual agreements in place.

At Spark, we believe that the best outcomes for payers and providers come from working together to find commonsense solutions. We are committed to holding all parties accountable and working in good faith to solve some of the toughest challenges in healthcare. We are ready to collaborate with UnitedHealthcare to develop appropriate practices that remove administrative waste and ensure fair reimbursement policies.

We call on UnitedHealthcare to engage in meaningful dialogue with healthcare providers and stakeholders to develop fair and equitable reimbursement practices. Together, we can find solutions that support both the financial health of hospitals and the delivery of high-quality, medically necessary patient care.

Thank you for your attention to this critical matter. We look forward to your response and to working together to address these challenges.

Sincerely,

Shannon White
Chief Operating Officer
Spark Health Partners

A large portion of this growth can be attributed to the enhanced subsidies introduced during the COVID pandemic by ARPA in 2021 and renewed under the IRA in 2022. These subsidies made health insurance more affordable for all enrollees, but particularly for low- and middle-income individuals who were previously priced out of coverage. In fact, 91% of beneficiaries now receive some form of subsidy, while 74% of beneficiaries are below 250% of the Federal Poverty Level.

This expansion of accessible coverage has had a substantial impact, particularly at a regional level. States with the highest growth in ACA enrollment, such as Texas, Mississippi and Georgia, initially had high uninsured rates and have not expanded Medicaid. This has direct, positive repercussions for healthcare providers and their bottom lines, since many individuals enrolled in ACA plans were uninsured prior to the Affordable Care Act, often because of Medicaid restrictions within their state.

With the introduction of enhanced subsidies, these individuals were able to gain access to insurance plans — and not just any insurance plans, but those with the highest hospital reimbursements. The transition from uninsured to ACA plan enrollment, rather than Medicaid coverage to coverage by an ACA plans, represents the maximum revenue impact on hospitals that can be achieved via payer mix change.

Effective revenue cycle management ensures that healthcare providers are paid for their services in a timely and accurate manner, critical for maintaining financial stability and supporting care initiatives. However, hospitals and health systems already have a primary mission in place that does not address revenue cycle needs. That mission: providing the best care for patients.

As payers increase their expenditures around artificial intelligence technology meant to assist in denying claims, health systems struggle to keep up with these focused investments, given limited funds and staff available in-house to put toward the latest revenue cycle advancements.

For many, outsourcing revenue cycle management emerges as the best answer — but how a system goes about implementing this process can drastically shift the outcome. There are critical differences between simply signing with third-party RCM vendors versus crafting a robust relationship with an end-to-end RCM partner.

The best revenue cycle management companies are those that understand how to balance proactive management of all aspects of staff and systems with long-term strategic planning to ensure providers continue to be supported at every stage of the revenue cycle.