Increases in Medicare Advantage enrollment are not, on average, associated with significant profit margin changes for hospitals operating in their respective counties, according to an analysis conducted by Medicare Payment Advisory Commission staff.
The analysis, which examined all-payer revenue, costs and profit margins pulled from hospitals’ 2013-23 Medicare cost reports, pushes back on hospital groups’ claims that the rising number of MA enrollees brings tighter margins and threatens financial viability.
MedPAC found that MA enrollment increases were tied to lower revenues and costs alike. Specifically, a 10-percentage-point increase in a county’s MA penetration was associated with a 1.3% reduction in all-payer revenues and a 1.2% reduction in all-payer costs. The resulting 0.1% dip in profit margins was not statistically significant.
The analysis found hospitals that are financially integrated with a MA plan did not have a significant change in revenues or costs with higher enrollment, which the commission suggested could stem from limited incentives for plans to reduce these hospitals’ volumes or payment rates.
Critical access hospitals also had no significant changes in revenues, costs or profit margins due to MA enrollment changes, potentially due to their cost-based reimbursements that would rise with lower volumes.
The commission noted that a shift in enrollment rates could have a downstream effect on the add-on payments many hospitals receive to offset their uncompensated care, due to the payment formula’s sensitivity to changes in total MA discharges and fee-for-service discharges. How exactly those changes are impacting uncompensated care payments would require further analysis, staff and commissioners said.