Healthcare Financial Management

If you thought #MedicareAdvantage was rough in 2023, the next 2 years could be brutal. Moody's Investors Service reported that MA margins declined from 4.9% in 2019 to 3.4% in 2022, while earnings per member declined 28% as utilization increased after the pandemic. Profitability is shrinking fast, especially for smaller local/regional MA plans. When the 2023 numbers come in, margins could be 2.5% or even lower. I expect in 2024-2025 we’ll see greater emphasis on narrow networks and cuts to #supplementalbenefits addressing #socialdeterminantsofhealth (#SDOH). Major administrative expenses like large IT investments, #priorauthorization functions and #caremanagement teams will be trimmed wherever they can without further hurting profitability. Watch for a new surge in mergers and acquisitions among smaller MA plans. Strap on your crash helmets friends. The Gold Rush days of MA are over.

As a spine surgeon, I am compelled to shed light on a pressing issue that profoundly impacts both healthcare providers and patients: the persistent delays by major insurance carriers—such as UnitedHealthcare, Cigna, and Aetna, etc—in compensating physicians for services rendered. Recent events have highlighted the pervasive problems within the health insurance industry. For instance, the tragic incident involving the fatal shooting of UnitedHealthcare CEO Brian Thompson brought to light widespread dissatisfaction with insurance practices. The assailant’s actions were reportedly fueled by frustrations over claim denials and delays . This event has intensified discussions about the “delay, deny, defend” tactics often attributed to insurance companies, where they postpone payments, reject valid claims, and rigorously defend their decisions to protect profits. Despite obtaining prior authorizations and promptly submitting operative reports immediately after surgeries, I am still awaiting payment for procedures performed six to nine months ago. 🤬 This untenable situation not only jeopardizes the financial stability of medical practices but also threatens the quality of patient care. This problem is not isolated. A recent survey by the American Hospital Association revealed that 50% of hospitals have not been paid for claims totaling $100 million or more for over six months, with some outstanding claims dating back to 2016. Such delays are often attributed to insurers’ tactics to minimize payouts and maximize profits. In Texas, the Prompt Payment Act was established to protect healthcare providers from habitual late payments by insurance companies, imposing statutory penalties for such delays. However, the effectiveness of this legislation is questionable, as many providers, including myself, continue to face significant payment delays. It’s imperative to address these systemic issues. While patients are held accountable for timely premium payments, insurance companies must also be held responsible for prompt and fair compensation to healthcare providers. Delays spanning several months, as I’ve experienced, are unacceptable and highlight the need for reform in the healthcare reimbursement process!!

Every now and then a topic comes up that I happen to know a little bit about - like Medicaid Managed Care. Shares of Elevance (40% Medicaid) and Molina (mostly Medicaid) took a tumble today after Elevance announced higher medical costs mostly due to Medicaid. Medicaid plans - Elevance, United, Centene, and Molina - caught a break during the pandemic with elevated enrollment since beneficiaries did not need to show that they still qualified financially. However, about a year ago, redeterminations began, resulting in many losing eligibility. Health plans downplayed the losses, leading to rosy estimates of retention. Unfortunately, the loss of eligibility turned out to be worse than expected. Many healthy, low-cost members dropped off while sicker members remained, leading to lower premium revenues as medical costs stayed the same or increased, causing higher "loss ratios." Health plan premiums are currently set by the states, with premium increases lagging behind medical cost trends. It may take a couple of years for state actuaries to correctly set new rates, as actual medical costs are rising at double-digit rates. Health plans report that their target margins are 2-4% in Medicaid, but state actuaries usually set rates with an expectation of 2% margins. Margins much in excess of 2% are not sustainable, and as states face tough times financially, the actuaries target the lower end of the range. Things are getting tougher for health plans operating in the government sector. Fewer health plans achieved 4 STARS in Medicare, and NCQA ratings declined for Medicaid plans. Since these rankings affect quality bonuses, revenues will decline. The challenges ahead highlight the complexity and uncertainty in the Medicaid Managed Care landscape.

48.86% of United Healthcare Premiums went to Optum... A few days ago, I came across an insightful post by Chris Deacon about the concept of eliminations in healthcare. Her explanation struck a chord with me: "At its core, eliminations reflect transactions between UnitedHealth’s insurance arm (United Healthcare Group) and its health services arm (Optum - which includes physician groups, OptumRx, Change Healthcare, etc). Technically speaking, eliminations are accounting adjustments made to remove internal transactions from consolidated financial statements to avoid double-counting revenue and expenses. In a highly vertically integrated healthcare organization like UnitedHealth Group, this technicality becomes a powerful tool to obscure how internal transactions inflate profits, consolidate market power, and ultimately drive up costs for patients and employers." Inspired by her post, I dug deeper into the 10-K SEC filings for FY 2023 from several major healthcare companies. Federal law mandates that health insurance companies spend 80%-85% of premiums on healthcare costs. However, based on conversations with insurance regulators, once funds are shown on paper as a cost of care and are no longer held by the insurer, they fall outside the jurisdiction of insurance oversight. Here’s the key finding: UnitedHealthcare’s insurance division reported over $279 billion in premiums for 2023. Of this, a staggering 48% was funneled to its own subsidiaries under Optum, including their PBM (Pharmacy Benefit Manager) and physician groups. This effectively shifts money from one pocket to another within the same organization, sidestepping regulatory scrutiny. The same pattern is evident at Aetna/CVS, another vertically integrated giant. Both of these organizations have a significant presence across Group, Medicare, Medicaid, and Individual markets, which means their practices directly shape the cost and quality of care for millions of Americans. It raises an important question: How do we ensure that regulatory frameworks evolve to address these complexities and protect patients and employers from the rising costs associated with this vertical integration? Let’s discuss. What are your thoughts?

The article delves into allegations against Cigna, asserting that it orchestrated a widespread scheme to embezzle funds from healthcare providers, patients, and self-insured health plans. Cigna is accused of engaging in systematic fraud under the RICO which targets coordinated criminal activities. The lawsuit asserts that Cigna and its partners acted as a criminal enterprise by executing fraudulent schemes to enrich themselves at the expense of others. Cigna allegedly worked with repricing companies, such as Zelis, to negotiate reduced rates with out-of-network providers. However, the providers were often unaware or did not consent to these arrangements. The scheme involved Cigna retaining the difference between what health plans paid and what providers were actually reimbursed, rather than passing the savings to employers. Claims sent to patients and providers were misrepresented, showing certain amounts as “not covered” or “discounts” when, in reality, Cigna had already pocketed the difference. Providers were coerced into accepting underpayments, or they risked receiving no payment at all. Cigna allegedly used funds from self-insured health plans (employers) for purposes that were not transparent or authorized, violating fiduciary duties. Employers and self-funded plans were deceived into believing that Cigna’s processes resulted in fair pricing, while the funds were being diverted. The lawsuit accuses Cigna of using incorrect claim coding and billing practices, violating the HIPAA. These practices obscured the actual payment flow and created confusion for providers and patients. Healthcare providers were pressured into accepting significantly reduced reimbursements, jeopardizing their financial stability and ability to provide care. Cigna’s tactics created barriers for providers to collect rightful payments for services rendered. Patients faced increased financial responsibility as Cigna misrepresented liabilities and forced providers to seek unpaid balances directly from them. These actions resulted in surprise bills and potential credit damage for many patients. Self-insured employers, who depend on accurate and efficient claims administration, suffered financial losses due to Cigna’s alleged practices. The lawsuit highlights a breach of trust between Cigna and these employer groups. The lawsuit is part of a broader “healthcare litigation tsunami,” reflecting growing concerns about unethical practices in claims processing and reimbursement. It exposes systemic issues in the healthcare payment model and raises questions about transparency, accountability, and regulatory oversight. The case emphasizes the need for legal reforms to protect healthcare stakeholders from similar predatory practices. https://lnkd.in/gqN6gF2U

New research from the Cambridge Institute for Sustainability Leadership (CISL)), with risk analysis from global insurance group Howden Group Holdings, demonstrates the transformative economic efficiency of risk-sharing systems to provide vulnerable countries with financial security from climate related disasters. The smallest and most vulnerable countries risk losing over 100% of their GDP from extreme climate shocks next year, according to the findings, which underlines the scale and severity of the risks faced by the Global South. Small Island Developing States (SIDS) and other vulnerable countries bear these overwhelming threats almost alone. This can be solved. The report, which models Loss and Damage (L&D) implementation, reveals these risks are insurable and proposes a solution using the power of (re)insurance and capital markets to dramatically scale up the impact of L&D funding. The modelling shows that the intolerable financial risks faced by this group of countries could be reduced to just 10% of GDP. The research outlines an action plan for L&D implementation across 100 less developed, climate vulnerable countries. It proposes leveraging donor funding to unlock vast sums from (re)insurance and capital markets to provide guaranteed financial protection to exposed communities now, and through to at least 2050.  https://lnkd.in/e-tX4AsP

I am happy to co-author this article with Beatrice WEDER DI MAURO, President of the CEPR - Centre for Economic Policy Research, reflecting on the urgent need to engage in collective thinking and action to adapt our response to the challenge of insurability in the face of escalating climate risks. This article, which captures key convictions from our joint workshop hosted at Collège de France by the AXA Research Fund and CEPR - Centre for Economic Policy Research, couldn't have been more timely.   Devastating floods in Valencia, the wildfires in Los Angeles, the typhoons in Mayotte and La Réunion... These recent climate catastrophes show a clear reality: climate risks are intensifying and the protection gap for local communities and economies are becoming evident. Global economic losses from extreme weather events reached $320 billion in 2024, while in Europe, only 25% of economic losses were insured - leaving individuals, businesses, and communities vulnerable.    To address this, we need to enhance risk-sharing mechanisms and promote partnerships between public institutions and private companies.   Ensuring insurance accessibility and effectiveness is crucial. This can be done through: ➡️ Hybrid models, combining market mechanisms with public-private partnerships, to help ensure broad coverage and affordability. France’s CatNat regime and Switzerland’s hybrid model offer valuable insights. These models can be adapted to regions facing extreme exposure, such as sea level risks. ➡️ Greater investment in prevention and risk-sharing mechanisms. Initiatives like local municipal risk assessments can help small municipalities assess and mitigate local climate risks. ➡️ Impact underwriting, where insurers incentivize policyholders to adopt risk-reducing measures in exchange for lower premiums. ➡️ Public education on climate risks and stronger coordination between insurers, governments, and consumers to ensure preventive measures are taken seriously.   As we move forward, it's clear that policymakers, insurers, and society must work together to strike a sustainable balance between affordability and fiscal viability. This is not just about who pays the bill. It is about how we manage risk in an increasingly uncertain climate landscape. Let's continue to foster collaboration and innovation to close the protection gap and build a resilient future. 👇 https://lnkd.in/er6BkrtZ

Financial results are on a downward trend for Medicare Advantage organizations in CY2023. Only 40% of plans have positive margins. --- With 54% of Medicare-eligible beneficiaries choosing #MedicareAdvantage, the performance of these organizations is continuing to grow in importance for our #HealthcareCosts in the US. For a deep dive on overall performance of these organizations, Milliman released a research report (in the comments) looking at the financial results for CY 2023. CY2019-CY2023 are available in the PowerBI visuals as well for comparison. --- The big takeaway for me was that only 40% of plans had a positive margin (see attached image). While some plans had big margins, the majority of plans lost money, and a significant chunk lost more than 20%. This can be compared to 60% of plans with positive margins in early Covid, and 50% the last two years. --- Margins are expected to continue to see headwinds due to revenue reductions still ahead of us, particularly related to #StarRatings and #PartD changes under the #InflationReductionAct These potential reductions are resulting from: -Tukey outlier removal (how cut points for each star measure are calculated) -The new Health Equity Index that is replacing the current rewards system -Calculations/weighting of measures -Increasing the hold harmless threshold from 4 stars to 5 stars (unfinalized at this time) -Part D benefit redesign While the report shows evidence that some plans are still succeeding in Medicare Advantage, a large number of the plans will likely continue to face margin pressures and will have to proactively build strategies to combat these challenges. The best positioned plans according to past results are the larger plans with higher membership. --- There are many other views and numbers in this research report that may be interesting in other ways, so check out the full report if this post was insightful. Philip Ellenberg Shyam Kolli Sean MacQuarrie Greg Sgrosso

A recent report by the The Wall Street Journal has revealed a shocking case of alleged fraud by United Healthcare (UHC), where the company reportedly added non-existent diagnoses to patients' records, potentially defrauding Medicare by more than $50 BILLION. Let's unpack this. #MedicareAdvantage (MA) is a program where #taxpayer money is given to private insurers like UHC to provide insurance coverage for beneficiaries. These MA programs receive more funds based on higher risk score adjustments for more diagnoses (or "sicker patients" and by diagnosis "add-ons"). However, the WSJ investigation uncovered that UHC falsely claimed thousands of patients had conditions like diabetic cataracts and HIV when they did not. While other insurers have engaged in similar "diagnostic fabrications," UnitedHealth Group stands out as a significant outlier. Why are we here? First, follow the money. In Medicare Advantage, taxpayer money from Centers for Medicare & Medicaid Services funds private health insurance corporations. The corporations then provide insurance coverage to Medicare beneficiaries (i.e. privatizing Medicare). Second, the financial incentives. They are fairly straightforward- increase revenues while reducing expenses = higher profits. How do we increase revenues? Lots of SINOs - "Sick In Name Only" patients. The "sicker" on paper, the more money UHC gets from the government. How do you decrease expenses in this scheme? A) Make it hard for patients to receive the care they need or create barriers for treatments for physicians (ex: prior authorization) and/or B) Leverage SINOs and well patients - If they aren't sick, they won't need treatment; expenses will decrease. Key Questions: Why are we, as taxpayers, policymakers, patients, and healthcare professionals, continuing to tolerate this? Is it because UHC is too big to fail? Are we financially rewarding a corrupt system with virtually no penalties for fraud? What do we do? As I said in a previous article in MedPage Today (https://shorturl.at/dzVb4), our private health insurance problem demands Congressional attention and oversight. We must implement better safeguards to protect our patients and taxpayers from unethical practices. It's time to hold corporations accountable and ensure that our healthcare system prioritizes patient well-being and the integrity of taxpayer funds. We also have to change the system and the financial incentives in the system. If growing profitability is the North Star of a corporation, the focus and actions will always be placed there. #Healthcare #MedicareAdvantage #Fraud #TaxpayerMoney #HealthcareIntegrity #UnitedHealthcare #PolicyChange #Accountability #WSJReport ABIG Health MedPage Today ESCP Business School UNC Kenan-Flagler Business School

For all the talk about payment models and reimbursement reform service, one fact gets overlooked -- healthcare demand is growing faster than supply. In fact, while demand is expected to explode, supply may be shrinking (doctors aging out of practice, retiring early, or burning out). The unfortunate truth is that the extensive time, money, and resources being focused on the downstream may not be enough, even if we achieve the most efficient, cost-effective, waste-free system. Healthcare spending will soon crest $5 trillion (if it hasn't already). At an expected 5.6% annual growth rate, healthcare spending outstrips GDP growth (4.3%). Based on those numbers, it would take $65 billion of yearly savings just to bring healthcare spending in line with GDP. Thus far, CMS/CMMI efforts to stem the tide haven't made much of a dent. The most successful programs have saved on the order of $2-3 billion. Impressive, but a mere 0.04-0.06% of the $5 trillion problem. Other programs have produced more modest savings -- tens to hundreds of millions. Savings don't take into account the cost of administering these programs, an issue that's less well understood and frequently omitted in calculations and discussions. The CBO recently estimated that, taken in whole, CMMI spent $5.4 billion more than it saved in its first decade. Less than ideal. What's the takeaway? First, we have to move more efforts upstream. Without stemming demand, no amount of supply-side efficiency is going to be sufficient. This means more focus on prevention, wellness, patient experience, and patient engagement. (Ounce of prevention > pound of cure). We also have to understand that health does not exist outside of broader societal factors. Expecting the healthcare system alone to fix these (or deal with their consequences) is a recipe for failure. Next, we have to figure out a better way to really integrate prevention, wellness, and holistic health (the core of primary care) with downstream treatment (highly effective specialty care). Current integration efforts create too much of a tug-of-war. They incentivize avoidance and rely on spurious metrics rather than ensuring the high value care and high yield clinical pathways. The more I delve into these topics (including my last couple of Surgeon's Record posts and upcoming webinar with Daniel J. Durand), the more I think our current approach needs significant tweaking. Right now, efforts are nascent. But the thought exercise is slowly leading to action. Prevention, wellness, and health optimization--when approached thoughtfully and as part of a larger strategy--can be more than buzzwords for the worried well. #medicine #healthcare #health #healthcareinnovation