Centene’s CEO has voiced concerns over the Biden administration’s final rule on Medicare Advantage risk adjustment, highlighting unresolved issues during the company’s earnings call. The rule’s decision not to apply risk adjustment updates retroactively to claims before 2018 was praised, but insurers’ requests, such as preserving the “fee-for-service adjuster,” were unmet. Humana’s CEO shared similar sentiments. Centene reported a Q4 2022 loss of $213 million, contrasting with the previous year’s $599 million profit. Despite revenue growth, Centene fell short of Wall Street predictions. The company aims for growth in 2023, following strategic changes and divestitures.
Executives at Centene have expressed lingering concerns about the recent final rule issued by the Biden administration regarding Medicare Advantage risk adjustment. During the company’s earnings call on Tuesday morning, CEO Sarah London commended the Centers for Medicare & Medicaid Services (CMS) for their decision not to retroactively apply risk adjustment updates to claims preceding 2018. This move was seen as a significant concession to insurers within the contentious regulation, which was officially finalized on January 30.
London emphasized the positive impact of CMS’ choice, stating that it helps avert substantial costs and challenges for their provider partners. The new rule introduces a fresh methodology for Risk Adjustment Data Validation (RADV) audits, which determine the payment rates for Medicare Advantage plans. While insurers managed to avoid the setback of retrospective audits, they didn’t secure many of their other requests. This notably includes the preservation of the “fee-for-service adjuster,” an element designed to account for inaccuracies in data gathered from traditional Medicare.
The CEO of Humana, Bruce Broussard, echoed similar sentiments during his company’s earnings call earlier in the month. Given that Humana’s primary insurance operations are within Medicare Advantage, Broussard mentioned that the insurer is currently considering its options in response to the rule. He expressed disappointment over the elimination of the adjuster and highlighted the rule’s lack of comprehensive details on the methodology, making it challenging to fully comprehend the audit’s impact.
London reiterated these concerns, underscoring that the removal of the fee-for-service adjuster and the ambiguity surrounding the methodology have left numerous unanswered questions about the ultimate viability of the rule. She emphasized that Centene is collaborating with industry partners to determine the most suitable path forward.
Centene reported a fourth-quarter loss of $213 million in 2022, as indicated in its Tuesday morning earnings report. This marked a decline from the $599 million profit reported in the same quarter of the previous year. Despite the profit decrease, fourth-quarter revenues experienced growth, rising to $35.6 billion from $32.6 billion in the corresponding period of 2021.
However, Centene fell short of the predictions made by Wall Street analysts concerning both profits and revenue, according to Zacks Investment Research. For the entire year of 2022, Centene reported a profit of $1.2 billion, down from the $1.3 billion recorded in 2021. Nonetheless, full-year revenue demonstrated an increase, reaching $144.5 billion compared to the $126 billion in revenue reported in 2021.
London highlighted the company’s disciplined approach throughout 2022, which enabled the successful execution of foundational work supporting long-term growth strategies. She expressed optimism about the positive momentum driving Centene into 2023 and beyond, as the company seeks to capitalize on forthcoming opportunities within its core business.
During the quarter, Centene made notable progress in its value creation plan, a central strategic focus aimed at streamlining operations. The company completed several divestitures, including Magellan Rx in December and its Spanish and European operations in November.
The first quarter of 2023 saw Centene finalizing divestitures of Magellan Specialty Health, its prison healthcare division Centurion, and HealthSmart, a third-party plan administrator. Additionally, Centene enacted several leadership changes in the fourth quarter, positioning the company for its anticipated next phase of growth.
As of December 31, Centene’s total membership reached 27.1 million, up from 25.8 million at the end of 2021. Open enrollment on the Affordable Care Act’s exchanges, a pivotal market for the insurer, concluded in January.
Looking ahead, Centene anticipates revenue between $131.5 billion and $133.5 billion for 2023, along with earnings per share falling within the range of $6.25 to $6.40, as outlined in the company’s report.