Humana to back curbs to Medicare Advantage billing practices, WSJ reports

Humana (HUM.N) will support curbs to Medicare Advantage billing practices, potentially limiting lucrative payments insurers gain from diagnoses recorded by nurse practitioners during home visits, according to the Wall Street Journal. This move comes after scrutiny from Senators Mike Crapo and Ron Wyden regarding potential misuse of home visits and amid a U.S. Department of Justice examination of UnitedHealth's (UNH.N) practices for recording diagnoses that trigger extra payments.

Analysis

Humana (HUM.N) has reportedly indicated to congressional staffers its willingness to support new limitations on Medicare Advantage billing practices, specifically targeting lucrative payments derived from diagnoses recorded by nurse practitioners during in-home enrollee visits, a practice potentially worth billions in extra payments to the industry. This development, disclosed in a Wall Street Journal report citing a policy overview shared by Humana, occurs within a context of heightened scrutiny; nearly half of the 65 million Medicare beneficiaries are enrolled in such private plans. The move follows inquiries from Senators Mike Crapo and Ron Wyden, leaders of the Senate Finance Committee, regarding the potential misuse of home visits, and coincides with a U.S. Department of Justice examination into similar billing practices at UnitedHealth (UNH.N) related to diagnoses that trigger extra payments. The broader implication is a potential tightening of regulations that could impact profitability across the Medicare Advantage sector, which has faced scrutiny for how insurers utilize billing rules to enhance payments.

Key Decisions for Investors

• Investors should closely monitor legislative developments regarding Medicare Advantage billing practices and the outcome of the DOJ's examination of UnitedHealth, as Humana's supportive stance on curbs could foreshadow industry-wide changes impacting revenue models and profitability for insurers like HUM and UNH.
• Evaluate the heightened regulatory risk within the Medicare Advantage sector; the potential curtailment of billing practices linked to home-visit diagnoses, described as generating billions in extra payments, could lead to margin compression for involved insurers.
• Consider Humana's proactive approach as a potentially defensive strategy to mitigate more stringent regulatory actions or enhance its long-term relationship with regulators, even if it means forgoing certain lucrative payment streams in the near term.