Centene, a key player in healthcare, voices concerns over proposed Medicare Advantage rates for 2025, citing inadequacy. CEO Sarah London highlights the challenges posed by rate reductions amid significant regulatory changes. Despite the financial resilience shown in Q4 2023, with profits surpassing expectations, Centene stresses the insufficiency of proposed rates in meeting industry needs. The company anticipates providing further insights post-finalization of rates.
Centene, a prominent player in the healthcare industry, has voiced significant concerns regarding the proposed Medicare Advantage rates for 2025, deeming them insufficient to meet the needs of the sector. The Centers for Medicare & Medicaid Services (CMS) recently released its annual Advance Notice proposal, indicating a decrease of approximately 0.16% in benchmark payments for Medicare Advantage (MA) plans. While CMS stated that payments to MA plans should witness a 3.7% increase under the proposal, Centene and other industry insiders anticipate challenging times ahead.
Sarah London, the CEO of Centene, highlighted that the proposed reduction in rates coincides with substantial changes to risk adjustment and star rating calculations mandated by federal authorities. London emphasized, “Bearing in mind the continued expectation for the multi-year phase-in of the risk adjustment model change that was finalized in 2023, we view the preliminary rates as insufficient concerning general medical cost trend expectations.”
Echoing these sentiments, Drew Asher, Centene’s Chief Financial Officer, mentioned that the company is in the process of evaluating the proposed rates’ impact, particularly focusing on concerns regarding the adequacy of the fee-for-service trend.
In a similar vein, Humana, another major player in the healthcare sector, expressed apprehension about the proposed rates, indicating a higher-than-expected decrease. Given the dynamic nature of the healthcare landscape, adjustments to the final rates are anticipated before the April 1 deadline.
Centene has announced its intention to provide further insights into its bid plans during its Q1 2024 call, following the finalization of the rates. Despite these challenges, Centene demonstrated resilience in its financial performance for the fourth quarter of 2023. The company reported a profit of $45 million for the period, marking a notable improvement compared to the previous year.
The earnings report released by Centene revealed total revenue of $39.5 billion for the quarter, surpassing the expectations of Wall Street analysts. This upward trend in profitability is a stark contrast to the fourth quarter of 2022 when the company reported a loss of $213 million.
Moreover, Centene’s performance for the full year of 2023 showcased substantial growth, with profits reaching $2.7 billion and revenues totaling $154 billion. This represents a significant increase compared to the previous year’s figures of $1.2 billion in profits and $143.2 billion in revenues.
Sarah London, the CEO of Centene, expressed optimism about the company’s prospects, stating, “Looking ahead, we are excited by the opportunities we see within our core businesses as we execute against our strategic plan, fortify our foundational assets, and drive cost savings.”
Despite experiencing a loss of approximately 1.5 million Medicaid members during the redetermination process, Centene’s overall membership increased to about 27.5 million people by the end of 2023, up from 27.1 million in 2022. Additionally, enrollment in its commercial marketplace and group products witnessed significant growth, rising from 2.5 million to 4.3 million.
Driven by the stronger-than-expected marketplace enrollment, Centene announced an upward revision of its premium and service revenue guidance for the year, now expecting between $134.5 billion and $137.5 billion. Furthermore, the company projects earnings per share of at least $6.50 for 2024, indicating a positive outlook despite the challenges posed by the proposed Medicare Advantage rates.
Centene’s critique of the proposed Medicare Advantage rates underscores the challenges facing the healthcare sector. Despite the company’s robust financial performance in Q4 2023, the looming rate reductions pose significant concerns for future operations. Centene remains committed to providing quality healthcare services but emphasizes the necessity of fair and sustainable reimbursement rates to ensure continued access and affordability for beneficiaries.