Medicare Advantage now covers about 55% of eligible beneficiaries nationwide — more than 35 million people — but health systems are confronting a question that until recently felt almost taboo: What happens when participation in the country’s fastest-growing Medicare program no longer makes financial sense?
Over the past three years, Becker’s has reported on roughly 90 hospitals and health systems that have terminated some or all of their commercial Medicare Advantage contracts. In 2026 alone, at least 15 systems have gone out of network with one or more Medicare Advantage plans, and the trend is showing no signs of slowing down.
This year, 1 in 10 Medicare Advantage enrollees — about 2.9 million people — will be forced to disenroll from their plan following a spike in plans exiting the market, according to a Feb. 18 study published in JAMA.
Behind many of those decisions lies what Scripps Health CFO Brett Tande describes as a classic “sunk-cost” dilemma: after years of building infrastructure, staffing and strategy around Medicare Advantage, can systems realistically walk away — even when contracts are losing money?
For a growing number of health systems, the answer is becoming clearer.
Becker’s connected with executives from Providence, Scripps Health, Ascension, MemorialCare and Mayo Clinic to understand how they are reassessing their participation in Medicare Advantage and what that shift could mean for providers, payers and patients.
When the math no longer works
San Diego-based Scripps Health made headlines Jan. 1, 2024, when it exited nearly all of its commercial Medicare Advantage contracts, affecting roughly 32,000 beneficiaries across five health plans.
“It was a tough decision to make,” Scripps President and CEO Chris Van Gorder told Becker’s. “But we were losing about $75 million a year on those contracts, and the payers weren’t willing to negotiate the changes we needed — not just higher reimbursement, but addressing prior authorization issues and paying us what they were contractually obligated to pay.”
More than two years later, executives say the decision paid off.
Since exiting Medicare Advantage, Scripps has not reported a quarterly loss, according to Mr. Tande. Ratings agencies that downgraded Scripps in late 2023 have since signaled potential upgrades. While there was some ambulatory volume softness, inpatient volumes largely held steady. Many patients ultimately switched back to traditional Medicare with a supplemental plan to maintain access.
“A lot of things have changed since then,” Mr. Tande said. “But that’s an important data point.”
Scripps’ experience challenges a core assumption underpinning many systems’ Medicare Advantage strategies: that exiting contracts will trigger catastrophic volume loss. For systems with strong market positions, that risk may be less severe than feared.
But not every organization has Scripps’ leverage.
“For the average hospital, that’s a much scarier proposition,” Mr. Tande said. “But I still think you’re going to see more systems exit, because continuing to absorb losses isn’t sustainable. At some point, the decision has to change.”
The structural flaw providers underestimated
Beyond individual contract disputes, some leaders argue that Medicare Advantage has a structural flaw that providers have long underestimated.
“Insurance is actually a low-margin business,” Mr. Tande said, citing public filings from national payers. “Medicare Advantage insurance is, at best, a 2% to 3% margin business — and that’s when you run it with prior auth and other practices many of us find caustic.”
The more profitable segments for diversified insurers often lie in adjacent businesses — pharmacy benefit management, physician services or analytics subsidiaries — rather than in the Medicare Advantage insurance product itself.
Health systems, by contrast, lack the national scale and diversified revenue streams to subsidize thin Medicare Advantage margins, according to Mr. Tande.
“One of the reasons health systems got into MA was to gain market share,” he said. “But you can’t make money on traditional Medicare, and you certainly can’t make money on Medicare Advantage, which ultimately pays less. Yet systems have built very expensive infrastructure around MA and are afraid that if they exit, volume will go elsewhere.”
That dynamic — heavy upfront investment combined with fear of losing patients — creates what he calls a “sunk-cost fallacy.”
“Organizations have positioned themselves so they feel they have to keep hospitals full — and they’re doing it with MA payers that are terrible,” he said. “They’re stuck between two bad decisions.”
Providence CEO calls for a Medicare Advantage ‘reset’
Renton, Wash.-based Providence has not exited Medicare Advantage wholesale, but it has taken a firmer stance in negotiations. Last month, Providence Clinical Network — which includes 15 hospitals in California — went out of network with UnitedHealthcare MA.
Erik Wexler, president and CEO of Providence, called for a broader “reset” of the program in a January interview with Becker’s.
“If we are not seeing fair performance in how we are paid for the care we provide — and if denials and delays are not within a reasonable sphere of performance — then we are not going to continue working with that commercial payer,” Mr. Wexler said. “It’s time for us to reset the way the program works.”
Providence’s internal data highlights the pressure.
Compared to traditional Medicare, Medicare Advantage plans are 70% more likely to deny claims due to incomplete medical records and twice as likely to deny based on medical necessity, according to Mr. Wexler. Requests for additional documentation are 7.5 times higher, and the system has seen a 73% increase in payment denials and underpayments.
“Even before H.R. 1 came to life, the deterioration in commercial payer performance on Medicare Advantage was substantial,” he said.
Providence leaders argue that this level of friction diverts resources from patient care and imposes hundreds of millions of dollars in administrative burden. Mr. Wexler has called for stronger federal oversight, including support for the Medicare Advantage Prompt Pay Act, which would require MA plans to pay most clean claims within defined timeframes.
Mayo Clinic’s selective strategy
Rochester, Minn.-based Mayo Clinic has also adopted a more selective approach. In January, it ended contracts with most Humana and UnitedHealthcare Medicare Advantage plans.
“There’s been a significant amount of peer and network disruption in the Medicare Advantage space, and Mayo Clinic is taking a fairly aggressive approach,” CFO Dennis Dahlen said Nov. 5 during a fireside chat at Becker’s CEO+CFO Roundtable.
Mayo’s strategy is not an outright rejection of Medicare Advantage, but a recalibration.
“We’re being very selective about which Medicare Advantage plans we contract with,” Mr. Dahlen said. “But for those that we’re not in network with, patients likely won’t be able to get an appointment unless it’s clinically significant or we can make an exception.”
For every network decision, Mayo has built in clinical safety nets to preserve continuity for patients undergoing active treatment. But Mr. Dahlen warned that the current trajectory — marked by annual network disruptions and contract terminations — is unsustainable.
“Seniorhood is when we need healthcare the most,” he said. “That should be the last point in life where you’re at risk of losing network access.”
Ascension taking a closer look at Medicare Advantage
St. Louis-based Ascension, a 90-hospital system, is also scrutinizing Medicare Advantage more closely.
Eduardo Conrado, president and CEO, believes the program has drifted far from its original purpose.
“Congress created Medicare Advantage to deliver better benefits, broader coverage and lower costs for seniors,” Mr. Conrado told Becker’s. “Too often, that is not what patients experience.”
Like Providence, Ascension’s data show Medicare Advantage plans are 70% more likely than traditional Medicare to deny claims due to incomplete medical records and twice as likely to deny based on medical necessity. Most denials are eventually overturned, but only after time-consuming appeals.
“That process creates unnecessary stress for patients and delays in care,” Mr. Conrado said. “It also pulls doctors and nurses away from patient care and into administrative back and forth with insurers.”
Ascension has gone out of network in certain markets before returning to the table under revised terms. For example, Ascension Wisconsin recently went out of network with UnitedHealthcare before reaching a new deal in October
As contracts come up for renewal, Mr. Conrado said the health system is prepared to hold firm on expectations around timely payment, reduced administrative burden and patient access.
“We will focus on payers willing to work with us to support sustainable care for Ascension’s patients enrolled in Medicare Advantage plans,” he said.
What Medicare Advantage breakups mean for patient care
As more systems exit or narrow participation in the program, the implications for patients are becoming more visible.
For relatively healthy seniors, Medicare Advantage can offer lower premiums and additional benefits. But when patients develop complex or high-acuity conditions, narrow networks and prior authorization requirements can become barriers.
When Scripps exited Medicare Advantage, some patients expressed frustration. Others switched coverage to maintain access.
However, moving back to traditional Medicare is not always simple.
Barry Arbuckle, PhD, president and CEO of Fountain Valley, Calif.-based MemorialCare Health System, told Becker’s seniors who attempt to buy Medigap coverage after leaving Medicare Advantage may face medical underwriting, higher premiums or denial altogether — particularly if they have multiple chronic conditions.
For providers, the risk is that escalating contract disputes create instability at the very moment seniors need predictable access to care.
“If the end of the food chain isn’t compensated appropriately, providers will either close or exit those contracts — and the cycle will start all over again,” Mr. Van Gorder said.
That cycle could leave patients caught between network disruptions and rising out-of-pocket costs.
A tipping point?
Medicare Advantage is unlikely to disappear. Enrollment continues to grow — though at a slower rate — and bipartisan political support remains strong.
But the economics for providers are under strain.
Hospitals are facing what Providence leaders have dubbed a “polycrisis“: rising labor costs, inflation in supplies and equipment, looming Medicaid cuts and reimbursement pressures from traditional Medicare and commercial payers.
In that context, absorbing consistent Medicare Advantage losses becomes harder to justify, no matter how much infrastructure has already been built.
“The misguided belief among health systems is that you can make money providing Medicare Advantage as insurance,” Mr. Tande said, adding that neither the data nor Scripps’ experience supports that conclusion.
For many systems, the question is no longer whether Medicare Advantage is philosophically aligned with value-based care. It is whether the financial model — as currently structured — works.
If it does not, more providers may confront the same “sunk-cost” dilemma Scripps faced in 2024: stay in a system that erodes margins, or take the short-term pain of exit in pursuit of long-term stability.
As Mr. Dahlen put it, the current trajectory is unsustainable.
“While I don’t know exactly how this will play out, the current path — where there’s massive annual disruption around network participation, plan exits and coverage drivers — is one that can continue,” he said.
Whether through federal reform, payer recalibration or providers stepping back, something will have to give.
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