The Biden administration's final rule on Medicare Advantage risk adjustment leaves plenty of concerns unresolved, Centene executives said.
On the company's earnings call Tuesday morning, CEO Sarah London praised the Centers for Medicare & Medicaid Services for opting not to retroactively apply the risk adjustment updates to claims before 2018. That was the major concession to insurers in the controversial regulation, which was finalized on Jan. 30.
"CMS' decision in this regard avoid significant cost and abrasion for our provider partners," London said.
The rule applies new methodology to Risk Adjustment Data Validation (RADV) audits, which determine how much Medicare Advantage plans are paid. While insurers did dodge a bullet on backdated audits, they secured little else that they asked for, namely that CMS preserve the "fee-for-service adjuster," which accounts for errors in data gathered in traditional Medicare.
Humana CEO Bruce Broussard said on the company's earnings call earlier this month that the insurer, which has the bulk of its insurance business in MA, is "considering all of our options" in a response to the rule. He lamented the adjuster's removal, and said the rule did not include enough detail on the methodology to fully understand the impact of the audits.
London echoed his comments, saying the fee-for-service adjuster's elimination and the lack of clarity around the methodology "leaves a number of open questions as to the viability of the final approach."
"We are working in collaboration with our industry partners to determine the best path forward," London said.
Centene posted a $213 million loss in the fourth quarter of 2022, according to the insurer's earnings report issued Tuesday morning.
In the prior-year quarter, Centene reported $599 million in profit. While profits were down, revenues in the fourth quarter did increase, growing to $35.6 billion from $32.6 billion in the same period in 2021.
The company fell short of Wall Street analysts' predictions on both profit and revenue, according to Zacks Investment Research.
For full-year 2022, Centene reported $1.2 billion in profit, down from the $1.3 billion it brought in during 2021. Full-year revenue jumped, however, reaching $144.5 billion. The company posted $126 billion in revenue for 2021.
"Our disciplined focus in 2022 allowed us to successfully execute on foundational work that will support our long-term growth strategy. We also delivered strong financial results, exceeding our most recent full-year guidance," said London in the release. "This positive momentum positions us well for 2023 and beyond as we maximize the opportunities ahead for our core business."
Of note in the quarter, Centene made strides towards its overall value creation plan, which has been key strategic focus at the company as it aims to streamline its operations. Centene closed several divestitures, including Magellan Rx in December and its Spanish and European businesses in November.
In January, kicking off the first quarter of 2023, Centene also completed divestitures of Magellan Specialty Health, its prison healthcare business Centurion and HealthSmart, a third-party plan administrator.
Centene also unveiled several leadership changes in the fourth quarter it says position the company for "its next stage of growth."
Total membership at Centene as of Dec. 31 was 27.1 million, up from 25.8 million at the end of 2021. Open enrollment on the Affordable Care Act's exchanges, a key market for the insurer, ended in January.
Centene expects between $131.5 billion and $133.5 billion in revenue for 2023, according to the report, and earnings per share of between $6.25 and $6.40.