Health Systems Reassess Medicare Advantage Participation Amid Financial Strains
Recent developments reveal that numerous health systems, including Scripps Health, Providence, MemorialCare, Ascension, and Mayo Clinic, are reexamining their involvement with Medicare Advantage plans due to financial challenges. As approximately 55% of eligible U.S. beneficiaries are enrolled in these plans, the low-margin nature of Medicare Advantage, coupled with significant investments in infrastructure and staffing, has led several providers to reconsider their participation. Over the past three years, about 90 hospitals and health systems have terminated some or all of their Medicare Advantage contracts, with at least 15 systems withdrawing in 2026 alone.
Scripps Health reported annual losses of $75 million from its commercial Medicare Advantage contracts before largely exiting them in 2024, impacting approximately 32,000 beneficiaries. This strategic exit has since stabilized their financial performance. Providence also recently stepped out of network with UnitedHealthcare Medicare Advantage due to issues with claim denials and administrative inefficiencies. Meanwhile, Mayo Clinic has terminated agreements with numerous Humana and UnitedHealthcare plans to adopt a more focused strategy. Ascension is closely monitoring Medicare Advantage, emphasizing expectations for timely payments and reduced administrative load.
Chris Van Gorder, President and CEO of Scripps Health, explained, "It was a tough decision to make, but we were losing about $75 million a year on those contracts, and the payers weren't willing to negotiate the changes we needed." His statement highlights the financial strain such contracts placed on the health system. Erik Wexler, President and CEO of Providence, expressed a similar sentiment, stating, "If we are not seeing fair performance in how we are paid for the care we provide...then we are not going to continue working with that commercial payer."
These industry challenges indicate potential ongoing negotiations and renegotiations of Medicare Advantage contracts. Without adjustments to the current financial structures, other providers may follow suit in reducing or terminating their participation. The continuing trend of withdrawals underscores the call for reforms, as ongoing network instability and increased patient costs become a growing concern.
Dennis Dahlen, CFO of Mayo Clinic, remarked on the unpredictability of outcomes, observing, "The current path — where there's massive annual disruption around network participation, plan exits and coverage drivers — is one that can't continue." This comment reflects broader industry sentiment, signaling the necessity for either federal intervention or a strategic realignment by payers to ensure program sustainability.