Medicare Advantage is exacerbating providers' financial and operational problems, making the current path almost untenable, say hospital CEOs.
In this week's HealthLeaders' The WInning Edge series, hospital CEOs Rachelle Schultz from Winona Health and Holly McCormack from Cottage Hospital share what strategies providers can use to hold their own against the challenges posed by Medicare Advantage plans.
Tune in to hear the panelists discuss the issues caused MA, as well as how leaders can approach contract negotiations with payers and advocate for reform.
Two hospital leaders share how providers can improve their standing in negotiations with Medicare Advantage payers.
Medicare Advantage payers may have most of the power in the dynamic with providers, but there are strategies the latter can utilize to create leverage.
In HealthLeaders' The Winning Edge for Battling Medicare Advantage, Cottage Hospital president and CEO Holly McCormack and Winona Health president and CEO Rachelle Schultz highlighted ways providers can improve the conditions of their Medicare Advantage contracts.
Providers' frustration with the private program is palpable, but there are actions they can take to alleviate its consequences.
There's truth is that there's no silver bullet for winning the fight against Medicare Advantage (MA) as a provider.
However, even though hospitals and health systems are at the whims of payers in this struggle, they're also not without recourse to soften MA's negative effects.
It takes, in one part, working on the margins, and in another part, attacking the problem head-on in talks with payers, but there's enough reason for providers to not feel helpless with MA.
In HealthLeaders' The Winning Edge for Battling Medicare Advantage this week, Winona Health president and CEO Rachelle Schultz and Cottage Hospital president and CEO Holly McCormack dove into strategies, both direct and indirect, to help even the playing field versus MA plans.
Here are three ways provider leaders can mitigate the impact of the private program on their organizations:
Reduce administrative burden
One of the biggest issues with MA is the amount of administrative strain it places on providers.
Prior authorizations, delays, and denials are weighing down a workforce that is already stretched to its limits in a post-COVID environment. Hiring more workers to throw at the problem is easier said than done when labor costs are rising and many organizations are opting to trim down.
So, how can CEOs respond?
Leveraging technology, specifically automation, allows providers to fight fire with fire against payers' own fleet of AI, according to Schultz.
Still, the fight is far from a fair one because when it comes to knowing the criteria and algorithm payers use to accept or deny prior authorizations, "there is no visibility to that," Schultz said. "There's no transparency."
Providers are essentially going in blind with their automation, but it's necessary nonetheless to minimize the load on staff.
Getting completely away from the human component right now is impossible though. That's why Cottage Hospital has formed a prior authorization team rather than having that work done by each department, "in the hopes that there can be some recognition of commonality as you prior authorize one procedure versus another," McCormack said.
Work with—or against—payers
The most direct way for providers to truly make up ground in the battle against MA will always be to bring payers to the negotiating table.
Whether it's working to improve reimbursement rates or decrease prior authorizations, hospital and health system CEOs must get insurers to play ball—willingly or unwillingly.
For Schultz, Winona Health found success in opening a dialogue with its main MA plan in the area by letting them know they were open to innovating and realigning on things like new payment models and care delivery to create a more mutually beneficial relationship.
Having that conversation also allows providers to get more insight about payers' decision-making, thought process, and assumptions, creating a fuller picture of what you're negotiating with.
To gain more leverage, hospitals and health systems, especially of the independent rural variety, should also consider forming a clinically integrated network, Schultz said. Doing so will give organizations the scope and scale for payers to be interested in the number of lives that are covered by their MA plans.
There's also the extreme action of threatening and following through with the termination of MA contracts that some providers can utilize to put the heat back on payers.
If you're a big enough system and can survive the loss of patients, it may be an effective method to rid yourself of the headaches that MA can bring. However, Schultz views it as more of a "short-term strategy," while McCormack noted that in small communities, it won't have the impact that a provider would want.
Advocate for reform and educate
At the end of the day, much of the power in how MA is structured is in the hands of policymakers, which is why providers need to be vocal about changes they want to see made.
Advocating for cost-based reimbursement and streamlined prior authorization processes is of the utmost importance, McCormack highlighted.
Schultz also wants to see greater transparency and accountability by payers around access, quality, and outcomes.
"It's making sure that our policymakers are aware of these things that are wrapped up into this and they don't know unless you tell them," McCormack said. "It's making sure that you're involved with reaching out, however that is, with your representatives, whether it's by e-mail or whether it's a phone call or whether it's hosting a legislative breakfast within your organization, because these folks don't know unless we tell them."
At the same time, providers must educate their patients to help them understand what plan is right for them.
"We have just heard so much feedback from patients who felt like they got blindsided by what was covered, what was not covered," Schultz said.
It's not about steering patients to one plan versus another, but about combatting some of the deceptive MA marketing that is out there and giving them all the information possible for them to make the best choice.
Ultimately, providers have to do what they can with what they have until the landscape shifts.
"There's so much dissonance that's happening, but Medicare Advantage is here to stay," Schultz said. "For us, we just have to sort of bide our time and continue to find openings to get in there and you provide care to the people who are under those plans in our community."
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."
