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Signaling what may be an emerging national trend, two influential medical groups with San Diego-based Scripps Health are cancelling their Medicare Advantage contracts for 2024 because of low reimbursement and prior authorization hassles, leaving 30,000 enrolled seniors to look for new doctors, or different coverage.

"Negotiations with the payers for MA with our medical foundation groups and Scripps Health were unsuccessful and we have been forced to withdraw from those plans due to annual losses that exceeded $75 million," Scripps CEO Chris Van Gorder told 番茄社区app in an early morning email.

He said the losses are due to "low reimbursement, denials, and administrative costs to manage high utilization and out of network care."

Van Gorder emphasized that about 30,000 enrollees will have to make a change in their coverage or pick another doctor. About 1,000 physicians and advanced practitioners such as physician assistants are members of the two groups.

"We certainly regret any inconvenience to them," he said, but "that kind and size of loss is unsustainable by Scripps. We will remain in MA with our IPAs [independent physician associations] as those contracts are structured differently and of course, traditional Medicare."

The two medical groups affected are Scripps Coastal and Scripps Clinic Medical Group. Five other Scripps medical groups will continue to take MA plans, he said. Affected beneficiaries should receive a notice directly from the plans.

Enrollees "can continue to see Scripps through traditional Medicare at all our hospitals and affiliated medical groups or can switch to an independent medical group (IPA) that still maintains a MA contract at Scripps Mercy, Scripps La Jolla, and Scripps Encinitas hospitals," he added.

Patients can also switch to Kaiser Medicare Advantage during re-enrollment starting Oct. 15, or to another hospital system whose physicians still take MA plans.

However, switching to traditional Medicare without a supplemental plan -- also called a Medigap plan -- means patients incur 20% of all physician, lab, imaging, and emergency room costs, along with a $1,600 deductible per hospitalization episode this year. In California and in 44 other states, supplemental plans can reject applicants with common health conditions such as cancer, high blood pressure, a prior hospitalization, or joint replacement. In addition, these plans are expensive, with increasing monthly premiums as one gets older.

But Van Gorder said he had no choice. "We are a patient care organization and not a patient denial organization and, in many ways, the model of managed care has always been about denying or delaying care – at least economically. That is why denials, [prior] authorizations and administrative processes have become a very big issue for physicians and hospitals – not to mention that the reimbursement is insufficient in most government programs as we all know."

"Now with intermediaries taking their profit and offering insurance to beneficiaries for free in many cases [the extra benefits like trips to the doctor], the end of the economic food chain is once again the hospitals and physicians."

Van Gorder said patients should ask themselves, "'Am I receiving the care I need if my hospital and physician are not even covering their costs? How long is that sustainable?'"

Where these patients will go is an open question.

More than half of all Medicare beneficiaries are now enrolled in MA plans nationally. In San Diego County, the fifth largest in the country, that percentage is of those eligible.

Nate Kaufman, a San Diego-based health system consultant, wasn't surprised at Scripps' news.

"I advise all hospitals to terminate their Medicare Advantage plans with anybody unless they're getting over 115% of Medicare," Kaufman told 番茄社区app.

The problem is complicated, but in a nutshell the issue is a lack of funds to go around to pay hospitals and doctors the cost of care.

"Medicare's contracts with Medicare Advantage plans pay less than what Medicare pays for traditional Medicare enrollees on the expectation that the plans will save money," Kaufman said. "Then, the MA plan takes a piece off the top. The remaining funds go into two buckets. One for MA plan pharmacy benefits and the other for hospital and physicians. And that requires a major reduction in utilization to maintain profitability."

Kaufman said all of this is made worse by the issue of prior authorization, which is now under .

"It creates hassles for everybody and cost," he said. "The foundation upon which Medicare Advantage was built, which was that there's excess money somewhere, has disappeared after the insurance company takes their cut off the top and captures the pharmacy rebates."

Additionally, providers are seeing delays in getting paid, which carries its own cost. And because enrollees pay very low or no premiums, there are less funds for most of the providers, he said.

The issue is likely to keep many independent insurance agents busy. Christopher Westfall of Senior Savings Network, who is licensed to write Medicare contracts in 47 states, also sees providers ending their MA relationships as a national trend.

He said it can be extremely frustrating for his agents when seniors either don't check their plan or choose the wrong plan thinking their provider is in network, only to find out after Jan. 1 that their doctors are in different plans, or have dropped out.

Many health systems have announced that they're terminating their MA contracts, or are strongly considering it.

The Mayo Clinic in Jacksonville, Florida, and Scottsdale, Arizona, told beneficiaries last October that it would no longer take most MA plans. If those patients sought care, it would be considered out-of-network, leaving them with a higher share of the costs.

Samaritan Health Services in Corvallis, Oregon, its MA contracts with UnitedHealthcare, one of the largest Medicare Advantage contractors in the country.

Regional Medical Center in Cameron, Missouri contracts with Cigna's MA plans in 2023, and planned to drop Aetna and Humana MA contracts in 2024. Cameron's Regional CEO Joe Abrutz blamed the plans' practice of "delaying any action on reimbursement."

Stillwater Medical Center, a 117-bed hospital in Oklahoma, last year with all of its in-network MA plans, blaming rising operating costs and a 22% prior authorization denial rate, compared with a 1% denial rate for traditional Medicare.

Brookings Health System, a 49-bed hospital in South Dakota, with any MA plan starting in January to preserve its financial sustainability.

St. Charles Health System in Oregon its seniors not to enroll in MA this year as it re-evaluates its participation in Medicare Advantage contracts.

And Baptist Health Medical Group in Louisville, Kentucky by its deadline with Humana's Medicare Advantage plan and alerted their patients to seek other options.

Officials for the Medicare Advantage industry had not returned requests for comment as of press time.

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