How Acadia Healthcare and UHS are preparing for Medicaid redetermination

The nation’s largest behavioral health provider is gearing up to allow states to resume Medicaid redetermination.

The true impact is unknown, but analysts have warned behavioral health providers Acadia Health Care (Nasdaq: ACHC) and Universal Health Services (NYSE: UHS) that millions of Americans could lose their health care. I asked what companies would expect and do in the face of this. coverage.

“From a hospital operations perspective, we will do everything possible to ensure that patients who have lost Medicaid coverage are eligible for commercial replacement or other coverage available in certain markets. We are ready to do whatever we can to help,” UHS CFO Steve Filton said on the company’s first quarter earnings call.

Medicaid makes up the bulk of both companies’ revenues.

Last year, Medicaid accounted for 39% of UHS behavioral health revenues. According to the 2022 financial report, Medicaid is the behavioral health sector’s largest source of revenue. Medicaid accounts for 27% of UHS’ total revenue.

Medicaid will account for 51% of revenue in 2022, according to Acadia Healthcare’s latest annual financial report.

The federal government has allowed states to offer continued enrollment in Medicaid in exchange for additional funding to ensure access to care during the pandemic. This led to a surge in Medicaid enrollments statewide.

According to the latest federal data available, Medicaid enrollment has increased 32% since February 2020, reaching nearly 93 million as of January. Medicaid is the largest payer of all behavioral health services in the United States.

Continued registration was previously associated with a public health emergency declaration enacted by the Trump administration. Since then, every state has taken the first steps to begin redetermination, according to a Kaiser Family Foundation (KFF) poll.

The KFF found that nearly all states (43) expect the process to take 12 to 14 months from inception to complete all redeterminations.

In August 2021, the federal government estimated that 15.5 million people would lose Medicaid coverage. Other estimates put the number even higher. The Urban Institute estimates that 18 million people will lose coverage, and the KFF has a similar estimate.

UHS expects the redetermination process to have a “slightly negative” impact on the company’s financials in the second half of 2023. The company’s financial guidance this year explains the loss of coverage and a minor change in payer mix.

“No one really has a very clear and precise view of how redetermination will affect behavior or urgent business,” Filton said.

Filton said the impact depends on many variables. Such as how quickly the state completes redeterminations, the percentage of former Medicaid Her members who obtain commercial or ACA replacement plans, and how quickly patients establish coverage.

During the companies’ first-quarter earnings calls, analysts asked whether the redefinition of Medicaid could move more members to private health plans. Commercial plans usually have higher reimbursement rates. However, this will not have a significant impact on Acadia Healthcare.

David Duckworth, CFO of Acadia Healthcare, said on the company’s latest earnings call that he didn’t see a big difference in pricing between enterprise and Medicaid plans compared to other segments of healthcare.

“We may see some gains in some markets, but I don’t think the change in payer mix will bring significant gains,” said Duckworth. “What we put into our initial guidance for the second half of the year … we believe is still holding up.”

Acadia Healthcare CEO Chris Hunter said there are several benefits Acadia will rely on to mitigate the impact of the Medicaid redefinition.

He expects children with Medicaid to have less premium cancellations than adults. Acadia Healthcare’s residential treatment center business, which primarily treats children, accounts for his 11% of the company’s total revenue.

For its specialty facilities business (22% of revenue), Hunter expects patients who have lost Medicaid coverage to receive help from state agencies other than Medicaid to help them gain addiction treatment coverage. increase. He also pointed to similar non-Medicaid-supported programs for opioid use disorder (OUD) treatment: More than 50% of his outpatient OUD clinics at Acadia Healthcare are in states with such programs. I have.

In addition to relying on state programs, the company began raising patient awareness about redefining Medicaid about a year ago. Created and distributed digital materials on securing coverage and launched a hotline to support patients who needed help navigating coverage options.

“We hope that the actions we are taking and some of these protections in place across our service lines will actually mitigate the volume risks we identified earlier,” Duckworth said.

Acadia Healthcare is also renegotiating several payer agreements with managed care organizations. Without divulging details, Hunter said it was confident it would be able to extract higher fees that could offset the loss of revenue from the redetermination.

“Throughout the first quarter, we remained very cautious about all of our interest rate strategies,” Hunter said. Many states are still in the early stages of activity.”

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