New Mexico is increasing its reimbursement rates for providers that bill Medicaid in the state.
Overall, providers are set to get an additional $409 million in reimbursement. The increases will start taking shape on claims made on or after July 1, 2023.
Another rate hike is expected in the future for CY 2025.
“Thanks to this substantial funding boost, Medicaid providers across New Mexico will now receive reimbursements at rates as high as 120% of Medicare,” Lorelei Kellogg, the acting director for the New Mexico Medicaid program, said in a press release. “By elevating rates, New Mexico Medicaid continues to work toward the goal of ensuring that all New Mexicans enrolled in the program have access to vital health care services.”
These rate hikes bode well for home- and community-based services (HCBS) providers in the state. In terms of payer sources, Medicaid has been kinder of late than other sources – Medicare is implementing rate cuts on the home health side, and private pay’s rising bill rates are squeezing out some of the customer base.
In particular, this rate increase will be a boost to Addus Homecare Corporation (Nasdaq: ADUS). Addus is not only one of the largest HCBS providers in the country – New Mexico is also one of its biggest markets.
“Addus is a clear benefactor given revenue exposure and commentary provided during the Q3 earnings call,” Scott Fidel, the managing director at the investment banking company Stephens, wrote in a note. “[New Mexico] represents Addus’ second largest market in personal care, generating ~14% of the segment’s revenue mix. Note, Addus highlighted this rate update equating to +4% increase and being embedded into 3Q23 results. We expect Addus to retain a normal margin as the company uses the additional reimbursement to drive hiring efforts.”
Obviously, other HCBS providers in the state stand to benefit from the rate increase as well.
Still, the Medicaid proposed rule from the Centers for Medicare & Medicaid Services (CMS), which would mandate that 80% of HCBS reimbursement be put toward wages, remains at the top of many HCBS providers’ minds.