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Senior couple discussing finances on a phone call

Medicare Advantage is no longer a side channel in American healthcare. In 2025 it covers 54% of eligible Medicare beneficiaries, roughly 34.1 million people out of about 62.8 million with both Parts A and B.At the same time, a quieter countertrend has emerged. A growing set of hospitals and health systems are reducing or terminating participation in selected MA plans. Becker’s has identified roughly 40 systems that have dropped some or all Medicare Advantage plans for 2024 or 2025, including rural hospitals, regional systems, and nationally recognized academic medical centers.This is not yet a majority phenomenon. It is large and diverse enough that boards, CFOs, and payer strategy leaders should treat it as a structural early signal, not background noise.At Orchid, our focus is on revenue integrity and on understanding the financial signals that often precede operational stress. As we prepare for pilot deployment, four structural dynamics in Medicare Advantage stand out.<h2>1. Market structure: concentration and local exposure</h2>National MA penetration is only a starting point. What matters strategically is how coverage and insurer power concentrate in specific markets.Key facts from KFF’s 2025 work on MA markets:<ul><li>The share of beneficiaries living in counties where the two largest MA firms account for at least 75% of enrollment was about 50% in 2010 and about 25% in 2024.</li><li>UnitedHealthcare or Humana is the largest MA insurer in more than half of counties.</li></ul>At the same time, MA enrollment as a share of the eligible Medicare population has risen from 19% in 2007 to 54% in 2025.The result is a patchwork:<ul><li>Some counties remain dominated by traditional Medicare.</li><li>Others have MA as the clear majority coverage for seniors, often with one or two national insurers in control of most enrollment.</li></ul>Structural implication: in markets where MA is the dominant coverage and one or two plans hold most enrollment, leaving an MA contract is not a routine payer negotiation. It is a strategic move that directly affects the primary coverage pathway for a large share of local seniors.Risk is local. Hospitals in high-MA, high-concentration markets carry an exposure profile that is meaningfully different from those in traditional-Medicare regions. High concentration does not imply inappropriate behavior by insurers, but it does affect contracting leverage and the strategic consequences of MA participation decisions.<h2>&nbsp; 2. Financial impact: what MedPAC sees and what hospitals feel</h2>MedPAC’s 2025 work on MA penetration and hospital finances is clear on one point:<ul><li>On average, increases in MA enrollment are not associated with a statistically significant change in hospital operating profit margins.</li><li>A 10% point increase in MA penetration is associated with an estimated 1.3% drop in revenue and a 1.2% drop in costs, leaving the average margin essentially unchanged.</li></ul>That is an important finding. It undercuts simplistic claims that “MA growth automatically destroys hospital margins.”However, it is also incomplete.Hospitals that are actually stepping back from MA contracts describe a very different experience. Rural and safety net leaders, and several large systems, point to the following as drivers of financial stress and operational instability:<ul><li>persistent prior authorization friction</li><li>denial and downgrade behavior</li><li>below-cost contracted rates</li><li>slow and contested reimbursement</li></ul>Both perspectives can be true.MedPAC is working with county-level and system-level aggregates. It is essentially telling the industry that there is no statistically significant average effect of MA penetration on margins, and that revenue and cost shifts roughly offset at the mean.That does not mean individual hospitals are safe. It means we do not yet have robust, facility-level evidence that links the following to the actual financial trajectories of specific hospitals:<ul><li>MA share</li><li>plan behavior</li><li>ownership and integration status</li><li>denial and downgrade patterns </li></ul>Key data problem: the current evidence base is coarse. National averages can look flat while a subset of hospitals takes disproportionate damage. That is exactly how structural problems hide in plain sight.<h2>&nbsp; 3. Coverage and access risk: the Medigap constraint </h2>The financial story is only half of the risk. When hospitals exit MA networks, coverage design and Medigap rules determine how much harm lands on seniors.The Great Plains Health case in Nebraska illustrates the stress test. In 2024 Great Plains Health announced that it would stop accepting all Medicare Advantage plans beginning in 2025. CMS and the Nebraska Department of Insurance responded by granting affected MA enrollees:<ul><li>a Special Enrollment Period to move into traditional Medicare, and</li><li>temporary guaranteed issue rights for a range of Medigap plans so they could obtain supplemental coverage without underwriting. </li></ul>That intervention was needed because, under federal and state rules:<ul><li>Medigap insurers must offer guaranteed issue during a one-time six-month open enrollment window when a beneficiary first enrolls in Part B, and for a limited set of qualifying events.</li><li>Outside of those protections, in most states Medigap insurers can underwrite, charge more, or deny coverage based on health status.</li><li>Only a small group of states, such as Connecticut, Massachusetts, Maine, and New York, require continuous or annual guaranteed-issue Medigap access for people age 65 and older in traditional Medicare.</li></ul>For a middle-income senior in a typical state, the idea of “just going back to original Medicare” after losing MA network access is often not realistic. Without Medigap, the out-of-pocket risk is substantial. With underwriting, Medigap may be denied or priced out of reach. Seniors may be able to switch to a different MA plan during enrollment windows, but that does not guarantee restored access if multiple local providers have limited their MA participation.The Nebraska response shows two important realities:<ol><li>Regulators can mitigate access shocks, but only with explicit, time-limited interventions such as SEPs and guaranteed issue rights.</li><li>The underlying structure of MA and Medigap creates the potential for genuine access disruptions if MA exits cluster in markets where seniors have few alternatives.</li></ol>The article is not claiming that every MA contract adjustment will trigger this scenario. It is saying that the combination of MA dominance, insurer concentration, and limited Medigap protections creates a structural fragility that policy debates often underplay.<h2>&nbsp; 4. Strategic implications for hospitals </h2>The central question for hospital executives is not whether Medicare Advantage is good or bad. It is whether your organization understands its actual MA exposure and has a clear playbook for both staying in and, if needed, stepping back.A useful way to organize the work is along four dimensions:A. Exposure assessmentExecutives should have precise answers to questions like:<ul><li>What share of our Medicare volume and revenue comes from MA versus traditional Medicare?</li><li>How concentrated is our MA book across plans and parent organizations?</li><li>Are there local counties where MA enrollment among seniors is well above the national average, and where one or two insurers dominate?</li></ul>MA exposure is not just a percentage. It is a combination of volume, payer concentration, and the strategic importance of the covered population.B. Contract sustainabilityThe article deliberately draws a line between MA volume and MA sustainability.Important questions for CFOs, VPs of Revenue Cycle, and payer-strategy leads:<ul><li>Are MA contracts evaluated through a sustainability lens, or treated as necessary volume regardless of friction?</li><li>Do we have clear internal reporting on:<ul><li>denial rates by reason code</li><li>downgrade patterns from inpatient to observation</li><li>average payment lag</li><li>appeal overturn rates</li><li>administrative effort per dollar collected</li></ul></li><li>At what point do MA economics and friction, for a given plan, cross from difficult into untenable?</li></ul>Industry evidence and conversations with hospital finance leaders point to the same pattern that Orchid is designing around. Denials, downgrades, and extended adjudication do not just reduce booked revenue. They increase revenue volatility and working capital strain in ways that are often invisible in high-level dashboards.C. Access and community impact For boards and community-focused leaders, the decision to exit or narrow MA participation cannot be framed as a payer dispute alone.Key access-related questions:<ul><li>If we reduced or terminated participation with a major MA plan, what is the realistic effect on access for seniors in our service area, especially those with limited financial buffers?</li><li>In our state, what practical options would affected seniors have for:<ul><li>switching MA plans</li><li>returning to traditional Medicare and obtaining Medigap without underwriting</li><li>relying on Medicaid as secondary coverage</li></ul></li><li>How likely is it that state regulators would intervene with SEPs or guaranteed issue protections, as Nebraska did, versus allowing the shock to reach patients directly?</li></ul>Hospitals that anchor care in high-MA markets should treat MA exit scenarios as community-wide events, not just margin questions.D. Financial stress testingFinally, MA needs to be inside the same kind of scenario analysis that hospitals already use for labor costs, capital planning, and service line strategy.A minimal MA stress test should consider:<ul><li>different MA penetration paths over the next 5 to 10 years</li><li>changes in denial and downgrade behavior</li><li>potential rate compression relative to traditional Medicare</li><li>the effect of these factors on cash flow timing, reserves, and key covenants </li></ul>Conceptually, four quadrants are useful:<ul><li>Low MA volume, sustainable contracts – continue monitoring and optimizing.</li><li>High MA volume, sustainable contracts – invest in MA specific care models and analytics, but remain alert to policy shifts.</li><li>Low MA volume, unsustainable contracts – renegotiate or exit, especially if strategic value is limited.</li><li>High MA volume, unsustainable contracts – treat this as a high-risk zone that requires board-level oversight and explicit contingency planning. </li></ul>The article’s argument is not that every hospital is in the fourth quadrant. It is that too many organizations do not know, with quantitative clarity, which quadrant they occupy.<h2>&nbsp; 5. The larger policy question</h2>Medicare Advantage and traditional Medicare together form the backbone of senior coverage in the United States. MA already carries the majority share, and some analysts project it could reach the high fifties or low sixties as a percentage of beneficiaries over the next decade if current dynamics continue.At the same time, a nontrivial mix of rural hospitals, community systems, and major academic providers are signaling that certain MA contracts are not financially sustainable under current terms.The core policy question is not whether MA should exist. It is this:How do we maintain stable access for seniors in markets where the coverage product many of them choose may not be economically sustainable for the providers who deliver the care? Answering that question will require:<ul><li>better facility-level data on the interaction between MA penetration, plan behavior, and hospital finances</li><li>more transparent and accountable denial and downgrade practices</li><li>thoughtful alignment between MA rules and Medigap or other supplemental coverage pathways, so that exits and disruptions do not leave seniors stranded in coverage and access gaps</li></ul>Orchid will continue to examine how structural changes in Medicare Advantage affect hospital solvency, care quality, and the operational systems that support both revenue integrity and clinical appropriateness.Our position is straightforward. MA is not going away, but neither are the constraints hospitals face. The health systems that will navigate this period most effectively are those that treat MA as a strategic exposure to be measured, modeled, and managed, rather than a static payer relationship to be tolerated.This analysis is not an endorsement of any payer or policy position. It is intended to highlight structural factors that hospital leaders should incorporate into strategic and financial planning.<h2>Sources:</h2><ul><li>Medicare Advantage Enrollment and Market Structure KFF. “<a data-mce-href="https://www.kff.org/medicare/medicare-advantage-enrollment-update-and-key-trends/" href="https://www.kff.org/medicare/medicare-advantage-enrollment-update-and-key-trends/" target="_blank" rel="noopener">Medicare Advantage in 2025: Enrollment Update and Key Trends</a>.” </li><li>KFF. “<a data-mce-href="https://www.kff.org/medicare/issue-brief/most-medicare-advantage-markets-are-dominated-by-one-or-two-insurers/" href="https://www.kff.org/medicare/issue-brief/most-medicare-advantage-markets-are-dominated-by-one-or-two-insurers/" target="_blank" rel="noopener">Most Medicare Advantage Markets Are Dominated by One or Two Insurers.</a>” </li><li>Hospital Systems Dropping MA Plans Becker’s Hospital Review. “<a data-mce-href="https://www.beckershospitalreview.com/finance/20-health-systems-dropping-medicare-advantage-plans-2025/" href="https://www.beckershospitalreview.com/finance/20-health-systems-dropping-medicare-advantage-plans-2025/" target="_blank" rel="noopener">20 health systems dropping Medicare Advantage plans in 2025.</a>” </li><li>KFF Health News. “<a data-mce-href="https://kffhealthnews.org/news/article/hospitals-abandon-medicare-advantage-plans-members-quit-too/" href="https://kffhealthnews.org/news/article/hospitals-abandon-medicare-advantage-plans-members-quit-too/" target="_blank" rel="noopener">Hospitals Are Abandoning Medicare Advantage Plans. Members Quit Too.</a>” </li><li>MedPAC Findings on MA Penetration and Hospital Margins MedPAC. “<a data-mce-href="https://www.medpac.gov/document/association-between-changes-in-medicare-advantage-enrollment-and-hospital-finances/" href="https://www.medpac.gov/document/association-between-changes-in-medicare-advantage-enrollment-and-hospital-finances/" target="_blank" rel="noopener">Association Between Changes in Medicare Advantage Enrollment and Hospital Finances</a>.” </li><li>Great Plains Health. “<a data-mce-href="https://www.gphealth.org/news/releases/great-plains-health-to-end-contract-with-medicare-advantage-plans/" href="https://www.gphealth.org/news/releases/great-plains-health-to-end-contract-with-medicare-advantage-plans/" target="_blank" rel="noopener">Great Plains Health to end contract with Medicare Advantage plans.”</a> </li><li>Great Plains Health. <a data-mce-href="https://www.gphealth.org/news/releases/medicare-advantage-plan-holders-at-great-plains-health-granted-special-enrollment-period-and-guaranteed-issue-to-switch-to-traditional-medicare/" href="https://www.gphealth.org/news/releases/medicare-advantage-plan-holders-at-great-plains-health-granted-special-enrollment-period-and-guaranteed-issue-to-switch-to-traditional-medicare/" target="_blank" rel="noopener">“Medicare Advantage plan holders at Great Plains Health granted SEP and guaranteed issue to switch to traditional Medicare.”</a> </li><li>Nebrask Dept of Insurance <a data-mce-href="https://doi.nebraska.gov/sites/default/files/doc/NR191124.pdf" href="https://doi.nebraska.gov/sites/default/files/doc/NR191124.pdf" target="_blank" rel="noopener">“Notice Regarding Medicare Advantage Special Enrollment Period and Guaranteed Issue Rights.”</a></li><li>KNOP News. <a data-mce-href="https://www.knopnews2.com/2025/10/08/great-plains-health-featured-nebraska-hospitals-issue-medicare-advantage-warning/" href="https://www.knopnews2.com/2025/10/08/great-plains-health-featured-nebraska-hospitals-issue-medicare-advantage-warning/" target="_blank" rel="noopener">“Great Plains Health featured as Nebraska hospitals issue Medicare Advantage warning.”</a></li><li>Nebraska Examiner.&nbsp;<a data-mce-href="https://nebraskaexaminer.com/2024/10/25/medicare-advantage-a-growing-risk-to-nebraskas-rural-health-care/" href="https://nebraskaexaminer.com/2024/10/25/medicare-advantage-a-growing-risk-to-nebraskas-rural-health-care/" target="_blank" rel="noopener">“Medicare Advantage a growing risk to Nebraska’s rural health care</a>.”</li><li>KFF. <a data-mce-href="https://www.kff.org/medicare/issue-brief/medigap-enrollment-and-consumer-protections-vary-across-states/" href="https://www.kff.org/medicare/issue-brief/medigap-enrollment-and-consumer-protections-vary-across-states/" target="_blank" rel="noopener">“Medigap Enrollment and Consumer Protections Vary Across States.”</a> </li></ul>

Medicare Advantage Under Pressure: Structural Signals Hospital Leaders Should Be Watching

Asian doctor holding court hammer for and crime law justice, forensic medicine.

You cannot build a sustainable safety net if you force it to finance its own supply chain.As the Founder of Orchid, working in hospital revenue integrity and cash-flow analytics, I’ve been watching the 340B rebate pilot closely.The AHA’s lawsuit to block HRSA’s 340B Rebate Pilot is a defense of the “why” behind safety-net care. Regulators argue the Jan. 1, 2026 pilot creates transparency for 10 high-cost drugs, but the mechanism fundamentally alters the cash cycle.It shifts 340B from upfront discounts to a manufacturer-paid rebate model, forcing hospitals to front the full WAC price and carry that cost through dispensing and reconciliation.Reality for leadership:<ul><li>Float: Immediate discounts become a weeks-long cash float, waiting on manufacturer rebates while procurement costs hit the books immediately. Even with defined timelines, predictable float is still float.</li><li>Friction: New workflows for dispense tracking and rebate chasing create administrative overhead that drains liquidity. Transparency should not be purchased by shifting liquidity risk to safety-net providers.</li><li>Precedent: While limited in scope today, this model validates a structure that solves manufacturer and regulator concerns by squeezing provider working capital. Today it is “just 10” high-cost drugs, but pilots that reduce manufacturer exposure rarely stay contained.</li></ul>340B was designed as an upfront purchasing benefit. Requiring hospitals to front WAC reverses that design intent.We’re now arguing about whether the 340B benefit should arrive as a discount or a rebate, while everyone quietly accepts a system whose complexity burns millions on administration, legal work, and reconciliation.At some point, we have to ask the more uncomfortable question: Why are we clinging to inflated list prices, discounts, and rebates at all, instead of moving toward honest net pricing and reducing waste across the system?

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Medicare Advantage Under Pressure: Structural Signals Hos...

340B changes and AHA's lawsuit