| Statement of Jim Mattes, President and CEO, Grande Rhode Hospital, La Grande, Oregon Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means February 28, 2008
Chairman Stark and distinguished
members of the Committee, thank you for inviting me here today to share with
you Union County, Oregon’s experience with Medicare Advantage plans. I am
Jim Mattes, President and Chief Executive Officer of Grande Ronde Hospital in
La Grande, Oregon, where I have served for the past 24 years.
My testimony draws on my
community’s experience and my hospital’s experience with Medicare Advantage
plans in Union County, Oregon. It is my hope that by sharing our experiences
you will be able to see the adverse impact and long term consequences Medicare
Advantage plans will have on beneficiaries, Critical Access Hospitals, and the
health care system.
Union County, Oregon (2000 US Census)
Union County, Oregon has a population
of approximately 24,530 people, dispersed over 2,039 square miles. Per capita income in Union County is $16,907. About 13.8% of the
population is below the poverty line, including 9.5% of the population age 65
and over.
The County seat is La Grande, a
small community of 12,327 people. We reside in the Blue Mountains of Northeast
Oregon, a remote rural part of the State, with 4,000+ foot elevation mountain
passes in every direction. Travel during the winter months is
treacherous, with winter storms sometimes closing our
highways and making it impossible for people to leave the community.
Grande Ronde Hospital
Grande Ronde Hospital is a
community owned, not-for-profit, 25-bed Critical Access Hospital (CAH). The
closest tertiary facilities are located over mountain passes in Boise, Idaho (177 miles to the East) and Portland, Oregon (259 miles to the West). The
closest hospitals are St. Elizabeth (42 miles to the East), St. Anthony (50
miles to the West), and Wallowa Memorial (68 miles to the North). Patients requiring transfer to a larger medical facility must
travel two to four hours by ground ambulance.
In order to sustain access to
local medical services, our hospital has recruited and employed 12 primary care
providers (i.e. ten physicians and two nurse practitioners) who practice in three
provider-based clinics which are fully integrated with the hospital.
Accordingly, our hospital’s experience with Medicare Advantage plans is
amplified by the fact that our provider-based clinic revenue is integrated with
hospital revenue, and our hospital-owned clinics currently care for the
majority of Medicare patients in our community.
Medicare Demographics in Union County, Oregon (2000 US Census)
Union County’s age 65 and
older population of 3,949 makes up 16.1% of the County’s total population. Insurance
agents in La Grande claim to have enrolled approximately 1,500 of these seniors
into Medicare Advantage plans. This currently represents 38% of the County’s
Medicare population. Based on the rapid growth in Medicare Advantage
enrollment in Union County we project that within two years Medicare Advantage
enrollment could be 2,500 or 63% of our Medicare population. [See EXHIBIT 1: Medicare
Enrollee Estimates]
Medicare Advantage Plans are Hurting Union County Seniors
A large number of seniors who have
enrolled in Medicare Advantage plans in Union County do not realize they have
opted out of traditional Medicare – a frequent problem that we estimate occurs
with one out of every four Medicare Advantage enrollees. At Grande Ronde Hospital, we routinely counsel and assist confused and frustrated beneficiaries. It
is not uncommon to encounter patients who do not realize they have joined a Medicare
Advantage plan. They simply thought they were signing up for a Medicare
supplement, Medicare drug benefits or some other form of additional coverage. Beneficiaries
are often upset to learn that they no longer have traditional Medicare coverage
and that the “low cost” plan they opted for could potentially cost them more
out of pocket than traditional Medicare.
Illustration #1: Mr. Johnson (not
his real name) pays more out of pocket
Mr. Johnson signed up
for the Advantra Freedom Medicare Advantage plan, believing he had purchased a
Medicare supplement and that he still has traditional Medicare. On December 1st
he was admitted to our hospital for 8 days and was discharged on December 9th.
On December 15th Mr. Johnson was re-admitted to our hospital for 5
days and was discharged on December 20th.
Mr. Johnson’s out of
pocket expenses are analyzed below.
Cost under Medicare Advantage
Plan (Advantra Freedom 5)
·
$900.00 First Stay ($180/day 1-5 days)
·
$900.00 Second Stay ($180/day 1-5 days)
·
$55.00 Monthly Advantage plan premium
·
$96.40 Medicare Part B Monthly Premium (paid in addition to
Medicare Advantage Plan premium)
TOTAL OUT OF POCKET: $1,951.40
Cost under Traditional Medicare:
·
$1,024.00 Part A Deductible ($1,024.00 every 60 days)
·
$96.40 Part B monthly premium
·
$120.00 (20% Part B co-pay, since Part B charges total $600.00
for both stays).
TOTAL OUT OF
POCKET: $1,240.40
As the information
above illustrates, Mr. Johnson paid an additional $711.00 out of pocket with
his Medicare Advantage plan coverage than he would have under traditional
Medicare coverage.
There are eight Medicare Advantage insurance carriers and 21
different plans in Union County for which our hospital and clinics have treated
patients, and there are reportedly others being sold. [See
EXHIBIT 2: Medicare Advantage Plan Growth; and EXHIBIT 3: Medicare Advantage
Plan Options] Too many carriers, too many plans and too many benefit
variables make due diligence comparison difficult and confusing, especially for
the elderly – a setting that is vulnerable to abuse. The Consumer Advocacy
Unit of the Oregon Insurance Division issued a “Consumer Alert” advising
seniors to beware of abusive Medicare insurance sales practices, and included
the following statement in their brochure for seniors: “… some unscrupulous
insurance agents are preying on seniors by using tactics that are confusing and
misleading. Many of the abuses are occurring in the marketing and selling of
Medicare Advantage plans …” One such apparent abuse in Union County is the annual “churning” of Medicare Advantage plans sold to seniors. Our hospital
billing staff estimates that the majority (more than 50%) of Medicare Advantage
enrollees are sold a new plan each year by insurance agents reportedly going
door-to-door. The churning of plans adds to the confusion and frustration of
beneficiaries as they struggle with knowing which carrier is responsible for
which claim.
Anecdotal Story #2: Mr. Jones
(not his real name) is unhappy
Mr. Jones comes to the
hospital ER admitting for medical treatment and presents both his Medicare and
Medicare Advantage insurance cards. He insists that the Medicare Advantage
plan is his secondary insurance. In an effort to avoid a dispute over coverage,
the admitting clerk enters both plans into the system.
When the billing
department receives the patient’s insurance information they realize that the
patient cannot have both traditional Medicare and Medicare Advantage coverage,
so the patient account representative calls the patient.
Mr. Jones insists that
he has both plans – despite all efforts to convince him otherwise. Eventually
the patient account representative assures a very upset Mr. Jones that she will
determine which insurance was in effect at the time the services were rendered
and that she will call the patient back. Mr. Jones leaves the hospital very
fearful that he may have lost his traditional Medicare coverage and simply does
not understand what is going on.
The patient account
representative calls the insurance carrier. After spending 20 minutes on hold,
the call is answered by an individual who struggles with English. With some
difficulty, the patient account representative manages to confirm that the
patient had Medicare Advantage coverage at the time the services were
rendered. The patient account representative subsequently calls Medicare to
verify that they have a record of the patient’s Medicare Advantage plan
coverage. Medicare has no record of any other coverage, and reminds the
patient account representative that CMS requires that only beneficiaries may
update their records via phone, and the account representative is not permitted
to act on their behalf. Since the patient is not present to put on the phone,
the patient account representative is unable to verify coverage information.
The patient account
representative next contacts the patient and explains the situation to him, at
which point Mr. Jones becomes very upset that he has lost his Medicare coverage
and decides that he wants to terminate his Advantage plan membership.
After several
frustrating calls to the Advantage plan without results, Mr. Jones brings all
his paperwork to the hospital billing department and asks the patient account
representative for help with terminating his Advantage plan coverage. Several
phone calls and 45 minutes later the patient’s Advantage plan coverage was
successfully terminated and he is again covered by traditional Medicare.
The hospital billing
department may now submit the ER bill to the Medicare Advantage plan for
payment. Bills for any services rendered after the date on which the Medicare
Advantage plan is terminated will be billed to traditional Medicare.
As
previously noted, Union County is a poor county with 9.5% of its senior
population below the poverty line. Because of this demographic, Medicare
Advantage plans with reduced deductibles appeal to seniors in our market. Unlike
traditional Medicare, some Medicare Advantage plans impose daily hospital
copayments and daily copayments for home health visits. Sadly, some of our
sickest beneficiaries who require frequent care end up paying more out of pocket
cost than traditional Medicare.
Medicare Advantage plans also do
a poor job of handling enrollee problems with claim and coverage questions. Insurance
agents are not always available to beneficiaries to answer questions and
resolve problems after a sale is finalized, and most of the Medicare Advantage
plans operating in Union County have outsourced their customer service
departments to foreign countries. When beneficiaries have a problem with a
claim or want to discontinue their plan, they often have difficulty connecting
with customer service personnel and routinely experience communication
problems, including difficult language and accent barriers. Poor customer
service, as illustrated in story #2 above, often results in our hospital and
clinic employees being called upon to help seniors resolve claim and coverage
issues. In doing so, we are effectively subsidizing these Medicare Advantage
plans.
Medicare Advantage Plans are
Hurting Providers in Union County, Oregon
While the focus of my comments
relate to beneficiaries, I do want to mention several issues that our medical
community is now facing with the explosion of Medicare Advantage plans in our
area.
There are two types of Medicare
Advantage plans, Preferred Provider Organization (PPO) plans and Private Fee-for-Service
plans. Both types of plans appear to have unfair leverage against rural
providers. The capitated rates paid to Medicare Advantage carriers in some
areas of the country, particularly in the rural western United States, are well above costs. With the mission of maximizing profits, Medicare Advantage
insurance carriers have a strong financial incentive to focus their marketing
efforts on the most profitable regions of the country, resulting in a disproportionate
enrollment of rural Medicare beneficiaries. This may help explain the
extraordinary levels of enrollment in Union County, Oregon.
Medicare Advantage PPO plans pursue
contractual relationships with providers, hoping to make them members of a PPO network.
Grande Ronde Hospital has only one Medicare Advantage PPO contract, with
negotiated payment rates which are nearly identical to the rates paid by
Private Fee-for-Service plans in Union County. As with other commercial PPOs
with a significant market presence, Grande Ronde Hospital is concerned that as
enrollment grows, Medicare Advantage PPO carriers will use market leverage to
force discounts in payment rates. Discounted payment rates for services
provided to Medicare beneficiaries, hurt small and rural hospitals and undermine
the Critical Access Hospital safety net intended by Congress.
The other seven Medicare
Advantage insurance carriers operating in Union County all sell Private
Fee-for-Service plans. These carriers have forced Grande Ronde Hospital into becoming what is called a “deemed” provider. This means that without signing a
contract, our hospital has agreed to accept the plan’s terms and conditions for
a particular plan enrollee for a particular visit or admission, simply by
treating a patient covered by one of these plans. Provider choices with
Private Fee-for-Service plans are limited as follows: (1) provide the care these
patients need and by doing so become a deemed provider or (2) refuse to provide
treatment, but still comply with Emergency Medical Treatment and Active Labor
Act (EMTALA) law. If Grande Ronde Hospital were to refuse to provide treatment,
then these patients would be forced to leave town for their medical care. For
the sake of our patients, the financial welfare of our hospital, and the good
of our community we truly have no choice but to care for these patients. In
our isolated rural setting with travel in and out of the community periodically
shut down due to winter storms, a refusal to provide treatment could have serious
consequences.
Medicare Advantage Private
Fee-for-Service plans sold in Union County are permitted to operate without a
contracted network of providers. These plans are suppose to pay providers what
Medicare would have otherwise have paid if the patient were a traditional
Medicare patient. However, for CAH providers whose payments are “cost-based”
under traditional Medicare, Medicare Advantage insurers are paying us the Medicare
interim payment rate (i.e. the prior year cost-to-charge ratio plus 1%).
Medicare Advantage insurers do not provide an inflation adjustment or a
settlement process to reconcile actual costs against the interim rate, such as
is proposed by Representative Ron Kind in the Rural Health Services
Preservation Act. [HR 2159: “… Although this CAH reimbursement system was
enacted by Congress to preserve access to hospital services for our rural
seniors, many CAHs do not receive payments at these levels today for providing care
to beneficiaries enrolled in the Medicare Advantage program. HR 2159 would
ensure that CAHs are reimbursed at the same levels by private Medicare
Advantage plans as they receive under the traditional Medicare program for
inpatient, swing-bed, and outpatient hospital services.”] Traditional Medicare
retrospectively reimburses CAH providers based on “actual costs” following the
conclusion of each fiscal year, with the actual cost-to-charge ratio becoming
the new interim rate for the subsequent fiscal year. Medicare Advantage plans
do not provide an adjustment for inflation and there is no look-back (i.e. reconciliation
of actual costs against the interim rate) which can capture any increase in the
actual cost-to-charge ratio.
Grande Ronde Hospital’s cost-to-charge ratios have been increasing in each of the past several years,
including a 3.8% increase (i.e. 66.14% to 69.94%) from FY2007 to FY2008. This
means Medicare Advantage plans have underpaid us by an amount equal to 3.8% of
patient charges, because there is no inflation adjustment or retrospective cost
settlement process. [See EXHIBIT 4: Ratio of Cost to Charges] Many CAH
providers have cost-to-charge ratios that are increasing, which typically
occurs when net operating margins are declining. Grande Ronde Hospital’s 3.8% jump in its cost-to-charge ratio from FY2007 to FY2008 illustrates the
significant financial impact which underpayment by Medicare Advantage plans can
have on CAH providers. [See EXHIBIT 5: Medicare
Advantage Plan Revenue; and EXHIBIT 6: Medicare Advantage Plan
Underpayment Estimates] To this point in time, Grande Ronde Hospital has been able to absorb these underpayments, but in the future that may not be true
for us or other CAH providers who are impacted by such cuts. It is well publicized
that Medicare Advantage insurance carriers are making big profits because of
the disparity between capitation payments and actual costs. However, few
people know and understand that Medicare Advantage carriers are also making
profits on the backs of small and rural hospitals as they force payment rates
on providers which are below traditional Medicare payment rates. Even my
hospital was caught off guard. It was my preparation for this hearing, over
the past two weeks, that fully brought to light the magnitude of the shocking
rise in Medicare Advantage enrollment in Union County and the impact that
Medicare Advantage underpayment is having on my hospital.
Another problem with Medicare
Advantage plans is their very high payment error rates, which adversely impact provider
productivity and increase health care costs. In a recent routine compliance
audit we randomly sampled Medicare Advantage payments and found the insurance
carrier payment error rate was 38.46%. Our hospital staff must review every
claim for accuracy and often must literally spend weeks or even months of
manual follow-up via multiple letters and phone calls to receive accurate
payment for services rendered to beneficiaries.
Poorly developed Medicare
Advantage electronic or manual billing and claims processing systems also
adversely impact hospital productivity and increase health care costs. All eight
of the Medicare Advantage plans in Union County accept electronic billing, but
none of them pay electronically, which appears to be an intentional method of
improving Medicare Advantage carrier cash flow at the expense of providers. At
my facility, Medicare Advantage claims are paid on average within 45 days of submission
of a clean claim, compared to traditional Medicare where a clean claim is often
paid within 14 days of submission. This has caused a 6.65% increase (i.e. $292,417)
in Medicare accounts receivable, and it has compromised our cash flow.
Anecdotal Story #3: Hospital billing
problems with Mr. Smith (not his real name)
Mr. Smith is admitted
to the hospital on December 25, and is an inpatient until January 4th. When Mr.
Smith presented to the admitting department he provided his “Secure Horizons”
Medicare Advantage card.
After discharge the
hospital billing department submitted Mr. Smith’s bill to Secure Horizons. Forty-five
(45) days after claim submission, a denial is received via US mail. The denial states “beneficiary not covered on these dates of service”.
The patient account
representative phones the patient and notifies him of the denial and questions
his coverage dates. The patient explains that effective January 1 he has a new
Medicare Advantage plan with “Today’s Options”. The hospital biller must now
“split bill” this service, sending the bill for the first portion of the
patient’s stay to Secure Horizons, and the bill for dates of service after January
1 to the Today’s Options. Each of the bills are subsequently paid 45 days
after submission, a total of 90 days in accounts receivable from date of
discharge to final payment.
Had the Medicare Advantage
plan been subject to the same electronic payment rules as Medicare, the
original claim denial would have been received 14 days after claim submission,
and both claims would have been paid in full (provided there were no other
errors) roughly 28 days after the first claim submission. [Total days for
payment: Medicare Advantage vs. Traditional Medicare (90 days vs. 28 days).]
Inefficiencies and increased
workload caused by Medicare Advantage plans has required significant additional
man hours from billing and collection staff, accounting and administration. Our
costs have increased in response to all of the following: assisting the elderly
with their complaints, plans, benefits and claims; managing 21 plans in
addition to traditional Medicare, which sometimes require split billing;
resolving frequent payment errors; and managing their slow payment practices. You
may be surprised to learn that the additional payroll expense caused by
Medicare Advantage plans are allowable costs on the traditional Medicare cost
report for CAH hospitals, which means that Medicare is unwittingly subsidizing
Medicare Advantage plans through the back door. Unfortunately for us, Medicare
only reimburses each hospital based on the ratio of Medicare volume to total
volume and the majority of these added costs must be shifted to other carriers
or subtracted from the hospital’s bottom line.
SUMMARY
Senior citizens deserve better.
They are confused and frustrated by the many benefit packages offered by Medicare
Advantage plans; the elderly are often unable to resolve problems and make
informed decisions because of poor plan communications and plan support; and some
Medicare beneficiaries would be better off financially if they stayed with
traditional Medicare. Medicare Advantage plans are structured so that
enrollees are taking risk, but without an adequate understanding of the risk
they are taking. Congress needs to assure that seniors are well-informed,
decision making is made simple, and risks are mitigated.
Rural hospitals and physicians also
deserve better. The frightening growth of Medicare Advantage plans and their rapid
displacement of traditional Medicare are having an adverse impact on our local
health care system. Medicare Advantage plans appear
to have unfair leverage against small and rural communities where costs are
well below capitation rates, and they underpay CAH providers. The very high
payment error rates, the delay in payments to providers, and the
increased workload these plans impose on providers are collectively undermining
the integrity of the Medicare program and increasing
the cost of health care.
Congress passed legislation to
protect CAH providers and ensure access to care in rural communities. Somehow,
it would appear, the Medicare Advantage program has been allowed to circumvent
congressional intent.
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