Living with Medicare Advantage can be draining for your organization, but it doesn't have to feel hopeless.
The unfortunate reality for providers is that Medicare Advantage (MA) is as popular as ever, meaning the hurdles that come with accepting the plan are here to stay.
Providers have little choice but to consider how they can alleviate the effects of low reimbursement, high denial rates, and increased administrative burden associated with MA to maintain the financial and operational health of their organization.
How MA can be crippling
Unlike traditional Medicare, MA plans are run by private payers, which have their own set of reimbursement rates and schedules, as well as claims processes.
Even when providers are reimbursed, payments can feel inadequate due to payers exerting power in contract negotiations to keep rates down. However, providers often face delayed payments or denials that place more strain on staff and administrative costs.
MA is particularly known for its prior authorization requirements for services, which force providers to submit additional documentation and wait before administering care.
The results can be devastating to organizations, like in the case of Bristol Hospital. Last year, CEO Kurt Barwis said the operator would eliminate 60 jobs, including 21 layoffs, to offset the costs stemming from MA delays and denials.
"The Medicare Advantage abuse is outrageous," Barwis told the Hartford Courant.
In many other cases, hospitals and health systems are going to the extent of dropping MA contracts to avoid the headache altogether.
Sanford Health, one of the Midwest's largest health systems, made the decision to do just that last August, when it announced it would end its participation with Humana's MA plan.
"We have attempted to work with Humana for several years, but unfortunately, we have continued to experience delays in patient care, barriers to scheduling and denials of coverage causing financial burden and undue stress to our patients," said Martha Leclerc, vice president of corporate contracting for Sanford Health.
The downside of the move is losing MA beneficiaries as patients, which is why not every provider will have the luxury of severing ties with MA payers.
Still, the strategy is one more and more leaders are considering. In last year's survey by the Healthcare Financial Management Association, 16% of health systems said they plan to stop accepting one or more MA plan in the next two years, while 45% reported considering the same without having made a final decision.
What's clear is that the toll MA is taking on providers everywhere can't be ignored.
Reclaim your ground
MA isn't going anywhere anytime soon, so leaders must rethink how they approach payer contract negotiations and improve efficiency within their own organization to withstand the negative impact from the private program.
The next webinar in our The Winning Edge series will dive into ways leaders can mitigate the financial and operational challenges stemming from Medicare Advantage, featuring insight from hospital CEOs.
Our distinguished panel includes:
Holly McCormack, president and CEO of Cottage Hospital, and HealthLeaders Exchange member
Rachelle Schultz, president and CEO of Winona Health, and HealthLeaders Exchange member
Jay Asser, event moderator and HealthLeaders CEO editor
This isn’t just another webinar—it’s your chance to learn from the best in the business and walk away with strategies you can implement immediately.
Join us as we address problems, share solutions, and help you in the battle against Medicare Advantage.
Register here to reserve your spot and see what other topics we have in store this month.
Our Summer 2025 CEO Exchange is being held on June 4-6 at the Park Hyatt Aviara in Carlsbad, CA.
Are you a CEO interested in attending our event and strategizing with other attendees? To inquire about attending the HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
"The biggest waste that exists in the system is administrative expense related to how payers and providers work together," says one heath system CEO.
In this episode of HL Shorts, UMass Memorial Health president and CEO Eric Dickson shares what changes he would like to see made to the healthcare system to help avoid hospital bankruptcies and closures.
Be mindful of the people that will use AI just as much as the technology itself, says UMass Memorial Health's Eric Dickson.
Hospital leaders have little choice but to explore the ways AI can lessen the burden on clinical and non-clinical staff, according to UMass Memorial Health president and CEO Eric Dickson.
However, there's more to implementing AI than just picking the right technology. Here are three steps Dickson outlined for CEOs to get the most out of AI at their organization.
The fourth quarter marked another period of financial struggle for the health system.
Community Health Systems continues to feel pressure on its bottom line as it works to reshape its portfolio to become profitable.
Increased costs from claim denials and outsourced medical specialists, along with lost revenue from ongoing divestitures, cut into the hospital operator's fourth quarter and year-end earnings, CHS reported.
The Franklin, Tennessee-based health system saw its losses jump to $516 million for 2024, compared to a $133 million loss in 2023, while the fourth quarter featured a $70 million loss, versus a $46 million gain over the same period in the previous year.
CHS has recently been divesting hospitals to open up funding, clear debt, and boost its finances. In 2024, it sold Tennova Healthcare-Cleveland to Hamilton health Care System for $160 million before offloading two North Carolina hospitals to Iredell Health System.
This year, CHS is expected to sell ShorePoint Health in Florida and Lake Norman Regional Medical Center in North Carolina, which CHS CFO Kevin Hammons anticipates bringing in $550 million in gross proceeds, he told investors on an earnings call.
"In addition to these previously announced transactions, we continue to advance discussions on additional divestitures that we expect to announce in the near future, also at very attractive multiples," CHS CEO Tim Hingtgen said on the call. "All told, these pending and expected transactions should generate more than $1 billion in total proceeds, which we expect to lead to meaningful deleveraging and increased shareholder value."
CHS has also been investing in outpatient care, such as purchasing 10 Arizona-based urgent care centers and opening two freestanding emergency rooms.
Speaking on the shift in strategy from acute care to outpatient care, Hingtgen said the core portfolio is smaller, but "generating roughly these similar amount of net revenue as three or four years ago. So we know that our investments are yielding the intended outcomes, caring for more patients and driving that type of growth."
However, CHS leadership highlighted challenges CHS is facing with costs stemming from claim denials and medical specialist fees.
In terms of denials, Hingtgen noted that the situation "has shown some stabilization since the third quarter."
Meanwhile, CHS experienced a "sharper increase" in medical specialist fees, which rose 12% in the fourth quarter on a same-store basis for a total of $170 million. For 2024, medical specialist fees hit $640 million, representing a 10.9% climb on a same-store basis from the previous year.
"To mitigate this trend, we have scaled our proven capabilities for managing in-sourced hospital-based services beyond hospitalist and emergency medicine into a growing number of anesthesia programs," Hingtgen said.
In its initial guidance for 2025, CHS is forecasting net revenue of $12.2 billion to $12.6 billion, and adjusted EBITDA of $1.45 billion to $1.6 billion.
New analysis identifies private equity investment trends in the industry and how a changing environment could spur an increased pace.
Following a steady, but modest, year of private equity dealmaking in healthcare, 2025 could see higher levels of activity as market conditions shift.
Analysts forecast an increase in transactions due to falling interest rates, a more favorable regulatory environment under the Trump administration, and dry powder available to invest, according to a report by the Private Equity Stakeholder Project (PESP).
In the face of high interest rates and ramped-up regulatory scrutiny in 2024, 1,049 unique deals were completed by private equity firms last year, which marked a 7.6% decline from the 1,135 deals tracked in 2023, the study found.
Of the deals made in 2024, 166 were buyouts, 262 were growth/expansion investments, and 621 were add-on acquisitions to 383 unique platform companies.
The subsectors that experienced the highest activity were dental care with 161 deals, health IT with 140 deals, outpatient care with 139 deals, medtech with 105 deals, pharma services with 80 deals, home health, home care, and hospice with 73 deals, and behavioral health with 65 deals.
Private equity dealmaking peaked in 2021 and has since been trending downwards as high interest rates have made debt more expensive and harder to secure, causing firms to be more hesitant with assets, the report highlighted. As interest rates continue to decrease this year, analysts anticipate that private equity firms will get more aggressive with their investments.
Meanwhile, regulatory scrutiny picked up during the Biden administration as lawmakers put the spotlight on potential consequences of private equity ownership, including increased prices and lowered care quality.
A bipartisan report from the Senate Budget Committee released in January detailed how two private equity firms negatively impacted two hospital operators.
However, "it is unlikely that inquiries, investigations, and regulatory efforts undertaken by various federal agencies during the Biden administration to better address private equity in healthcare will carry into the Trump administration, which is moving to reduce the federal bureaucracy and workforce and pursue deregulatory priorities," PESP said.
The Federal Trade Commission's recent settlement with Welsh, Carson, Anderson and Stowe could foreshadow how the agency approaches private equity ownership going forward under new chair Andrew Ferguson.
Private equity firms can further avoid antitrust scrutiny by engaging in joint venture partnerships rather than traditional mergers and acquisitions, especially when the partnership combines nonprofit health systems with for-profit entities, the report noted. Joint ventures also allow private equity firms to access new markets through trusted organizations to achieve growth.
The drugstore chain is reportedly nearing a sale to the private equity firm that could lead to a breakup of its businesses.
After several months of on-again, off-again rumors, Walgreens' fate in a potential sale may finally be reaching a resolution.
The retail pharmacy giant and private equity firm Sycamore Partners are closing in on a $10 billion deal to take the company private, according to The Wall Street Journal, which cited people familiar with the matter.
The report stated that the two sides have been discussing Sycamore paying between $11.30 a share to $11.40 a share in cash to complete the transaction.
Discussions of a deal were first reported in December after Walgreens shares fell and its market value plummeted from $100 billion in 2015 to under $8 billion at the end of 2024.
If Sycamore takes over, it could result in the company's businesses being split up three ways, with U.S.-based Walgreens, U.K-based chemist and retailer Boots, and speciality pharmacy Sheild Health Solutions turned into independent units, according to The Financial Times.
Sycamore is expected to retain Walgreens' U.S. retail business in the event a deal is completed, WSJ said. Though the firm doesn't have experience with healthcare investments, it is well-versed in the retail space and could make the most of Walgreens' brick and mortar footprint.
However, Walgreens has been working to shut down unprofitable store locations to reduce costs, including closing 70 stores in the first quarter of the fiscal year and planning for another 450 closures this year.
For the first quarter, the company beat Wall Street expectations and saw its sales increase by 7.5% year over year, but still reported a net loss of $265 million, compared to $67 million in the same period for the previous year.
Days after posting its earnings, Walgreens suspended its quarterly dividend for the first time in 92 years to reduce debt and conserve cash.
It's the final project in the health system's initiative to build out its hospitals and campuses across multiple states.
Mayo Clinic announced it will begin its largest-ever expansion in the state of Arizona.
The $1.9 billion investment to transform its Phoenix campus will allow the Rochester, Minnesota-based health system to increase its clinical space while adding jobs in the area.
Mayo said the project, which is part of its system-wide "Bold. Forward. Unbound." strategy to build on its physical infrastructure, will kick off this year and is expected to be completed in 2031.
The expansion is set to cover 1.2 million square feet and includes the construction of a new procedural building, a five-floor vertical and horizontal expansion of the Mayo Clinic Specialty Building, integration of new technology, and enhancement of the arrival experience for patients and visitors, along with the formation of 11 operating rooms and two patient units supporting 48 beds.
Additionally, the plan features a two-story, indoor promenade that wraps around the front of the campus and the development of "care neighborhoods" to improve the patient experience by grouping clinical services.
Richard J. Gray, M.D., CEO of Mayo Clinic in Arizona, stated in a video detailing the plans that the project will lead to 59% more clinical space. Inclusive of that is an increase of 62% in MRIs, 31% in operating rooms, and 44% in number of CT scanners.
The expansion will also result in the creation of more than 3,500 jobs in the state, according to Gray.
"The dramatic growth in our metropolitan area, state and region has led to an escalating need for care of patients with complex medical conditions that is difficult to accommodate with our current technology and infrastructure," Gray said in the news release. "We continue to believe that Arizona is a great place to advance new cures, new collaborations and Mayo's distinctive model of care."
Mayo's "Bold. Forward. Unbound." initiative includes projects across multiple states. The system announced a $432 expansion of its hospital in Jacksonville, Florida in 2022 before unveiling a $5 billion redesign of its downtown Rochester campus in 2023.
Last year, Mayo completed construction on a hospital bed tower in Mankato, Minnesota, for $155 million and on a new hospital in La Crosse, Wisconsin, for $215 million.
Gianrico Farrugia, M.D., president and CEO of Mayo Clinic, said in a statement: "Through this work, we are physically and digitally transforming healthcare and blurring the lines between inpatient and outpatient care to support Category-of-One healthcare for our patients, a Category-of-One workplace for our staff and to serve as a blueprint for the world."
The health system "actively, critically, and deliberately" identified and executed on areas that needed improvement, interim CEO Deborah Addo said.
In this episode of HL Shorts, Penn State Health interim CEO, president, and chief operating officer Deborah Addo shares how the health system achieved a $217 million turnaround in fiscal year 2024.
Dr. Eric Dickson shares with HealthLeaders the importance of getting clinicians on board with AI for alleviating hospital capacity constraints.
As an aging population continues to grow and require more care over time, hospitals have no choice but to become more efficient to survive and serve their communities effectively.
To do that, healthcare must find answers for two mega trends that the industry can't ignore, according to UMass Memorial Health (UMMH) president and CEO Dr. Eric Dickson: the widening ratio of patients to healthcare workers and how technology like AI can aid in uncluttering hospitals.
"If I could fix one thing right now today for our healthcare system, it would be getting patients out of the hospital that don't need to be there," Dickson told HealthLeaders. "That would fix all the other problems that are really symptoms of the root cause."
At Worcester, Massachusetts-based UMMH, the academic medical center is running at about 110% capacity as long length-of-stay times are being compounded by the lack of labor, resulting in significant lost revenue, Dickson noted.
Hospital occupancy rates are expected to only go up in the coming years, placing further financial and operational stress on organizations, as well as increasing the risk of burnout for workers.
Unless something changes, the national average hospital occupancy rate could reach 85% as soon as 2032, constituting a bed shortage, a recent study published in JAMA Network Open revealed. The increasing occupancy rates are less about the rise in hospitalizations and more about the decline in number of staffed beds, highlighting the importance of a strong workforce.
For Dickson, the providers that learn how to utilize AI to create more efficiency among their staff will be the ones that solve their workforce challenges. The key to that, however, is getting the buy-in from physicians and other clinicians.
"AI is math and for years we've known solutions to problems mathematically but could never implement them because of the psychology of change," Dickson said.
Pictured: Dr. Eric Dickson, president and CEO, UMass Memorial Health.
Dickson's clinical background helps him communicate to his doctors how AI can benefit them, but he's doing more to deepen his understanding of the technology to make it as palatable as possible for his staff. That includes enrolling in the Stanford healthcare AI certificate program and setting up an AI governance structure at UMMH.
"I'm spending much more time thinking about the psychology of getting people to use AI and the data platform and how the data gets entered and making sure we have our data platform right, more so than which AI do we want to use and how do you roll it out. Because I think if you don't have those two building blocks correct, you're going to fail," Dickson said.
Aside from calibrating AI to address the needs of the staff using it, it's also on organizations to have the right data platform, Dickson emphasized. Unless you input good data, you're not going to come out with the AI result that you want. Where systems are likely to falter, the leader of UMMH pointed out, is in the inaccuracy of data that goes into their system.
Stepping into the relatively unknown landscape of AI isn't for the faint of heart, but it will be necessary for organizations that want to thrive in the future.
"There are going to be big winners and big losers in healthcare over the next decade, and it's primarily the losers that are going to be the ones that didn't get AI right and the winners are going to be the ones that did. The winners are going to have a tool that's going to make them 20% to 30% more efficient," Dickson said.
"We, at UMass Memorial, are doing everything we can to make sure we're on the winning side of that equation."
The job cuts will improve efficiency and allow frontline workers more access to leadership, according to the health system.
Coming on the heels of an announcement that it would conduct the largest layoffs in its history, Mass General Brigham (MGB) released its first quarter earnings, which showed a sluggish start to the fiscal year.
The Sommerville, Massachusetts-based health system experienced increased labor and supply costs, along with capacity constraints, but expects to save more than $200 million per year from the job cuts.
In its earnings filing, MGB said it is "accelerating action plans to reduce the rate of expense growth through a strategic reorganization of management and administrative positions."
Earlier this month, the hospital operator stated it would eliminate hundreds of non-clinical workers due to a projected $250 million budget gap over the next two years. MGB has reportedly been working to trim down administrative roles after studies revealed that it had an inefficient management structure.
When reporting its first quarter finances, MGB said that the reorganization strives to "reduce bureaucracy, enhance decision-making, improve communication and foster a more agile environment." Additionally, it will create more transparency and accountability by giving frontline staff more access to leadership.
For the quarter, the system recorded an operating loss of $53.8 million (-1% operating margin), which was a decline from the $32 million operating loss (-0.7% operating margin), excluding $114 million of prior year revenue, over the same period the previous year.
MGB brought in $282 million in net income, which more than halved the net income of $579 million in same quarter last year.
Both operating revenue and operating expenses increased around 11% year over year, with the former jumping to $5.44 billion and the latter to $5.49 billion.
Key to the increase in operating revenue was an 8% climb in patient care revenues, including a 2% rise in discharges and outpatient growth.
Meanwhile, costs swelled in large part due to wages going up by 9% and supplies and other expenses increasing 17%.
MGB also reiterated the "unrelenting capacity crisis" it continues to face, which it previously highlighted in its reporting of its fiscal year results. The capacity constraints are stemming from overcrowded emergency departments, causing the system's academic medical centers to treat more patients, reducing bed capacity, the MGB said.
More hospitals could be dealing with a bed shortage in the coming years, with the national hospital occupancy rate expected to reach 85% by 2032, according to a recent study published in JAMA Network Open.
