Humana has seen stable inpatient trends in the second and third quarters of 2024, according to CEO Jim Rechtin.
In July, the company reported higher than expected inpatient costs. CFO Susan Diamond said these costs were likely tied to the two-midnight rule.
Humana reported its third-quarter earnings Oct. 30. On a call with investors, Mr. Rechtin said there was a "fair amount of noise" around regulatory changes in the first quarter, but trends have stabilized.
"I think everyone was adapting to the regulatory change. We put a lot of attention on it at that point in time, and we think we worked through all the changes, processes and approach, and have gotten to a relatively stable place," Mr. Rechtin said.
At the beginning of 2024, new CMS regulations took effect requiring Medicare Advantage plans to provide coverage for an inpatient admission, rather than observation, when the admitting physician expects the patient to require hospital care for at least two midnights.
Health systems have reported increased denial rates from payers related to the two-midnight rule. Executives at Franklin, Tenn.-based Community Health Systems said the system has seen increased "aggressive" denials from payers. The denials are largely focused on claims affected by the two-midnight rule, added CFO Kevin Hammons.
Ms. Diamond said the payer has seen more appeals and more appeals upheld than it historically has as over the two-midnight rule's implementation.
Ms. Diamond said the company is assuming the regulation will result in higher appeals and upheld appeals overall.
"I think why you may be hearing some different commentary from hospital systems is they may not have recognized that as quickly, and may have seen that higher appeal rate initially and assume that the absolute appeals would still be comparable year over year," Ms. Diamond said.
George Renaudin, president of Humana's insurance segment, said the company is "very confident" it is applying the two-midnight rule correctly. A CMS audit verified that the company is following the regulation, executives said.
"Our clinicians continue to speak with many of the provider clinicians to talk through the issues, to make sure we all have a similar way of approaching this, that everyone is clear and has an understanding of what the two-midnight rule is and is not," Mr. Renaudin said.
Humana reported a medical loss ratio of 89.9% in the third quarter of 2024, up from 87.6% in the same time period last year.
Though inpatient costs are stable, executives said, the company saw rising costs in oncology spending and specialty drugs.