Medicare Advantage now covers more than 51% of eligible beneficiaries, but for a growing number of health systems, participating in the program has become a lose-lose proposition: stay in and absorb mounting losses, or exit and hand competitors an enrollment lane in the fastest-growing segment of Medicare, a tension Health Alliance Plan by Henry Ford Health President Margaret Anderson describes as leaving the industry in a Medicare Advantage quagmire hospitals can’t easily escape.
The Scale of This Medicare Advantage Quagmire Hospitals Are Navigating
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 30 systems have gone out of network with one or more MA plans, including Mayo Clinic, UNC Health, and Avera Health. About 1 in 10 MA enrollees, or 2.9 million people, will be forced to disenroll from their plan this year as insurers exit markets, according to a JAMA study published Feb. 18.
The Exits Stretching Across the Country
Scripps Health exited nearly all of its commercial MA contracts in January 2024, affecting about 32,000 beneficiaries across five health plans. Mayo Clinic ended most of its Humana and UnitedHealthcare MA contracts this January. Providence took 15 California hospitals out of network with UnitedHealthcare MA, and Lehigh Valley Health Network followed the same route Jan. 26.
Why Health Systems Are Citing Denials as the Core Issue Within This Medicare Advantage Quagmire
The reasons are consistent across every exit: denial rates, prior authorization burdens, delayed payments, and reimbursement levels that no longer cover the cost of care. At Providence, MA plans are 70% more likely than traditional Medicare to deny claims for incomplete medical records and twice as likely to deny on medical necessity grounds, President and CEO Erik Wexler told Becker’s, with requests for additional documentation running 7.5 times higher and a 73% increase in payment denials and underpayments.
Ascension’s Similar Findings
“Congress created Medicare Advantage to deliver better benefits, broader coverage and lower costs for seniors,” Ascension President and CEO Eduardo Conrado told Becker’s. “Too often, that is not what patients experience.” Conrado cited the same 70% higher denial rate for incomplete medical records and twice the rate of medical-necessity denials that Wexler described at Providence.
The Sunk-Cost Trap Within This Medicare Advantage Quagmire Hospitals Face
For many systems, the harder question is not whether MA is broken but whether they can afford to leave. Scripps CFO Brett Tande describes the dilemma as a classic sunk-cost problem, since systems have spent years building infrastructure, care management teams, and contracting capabilities around Medicare Advantage. Scripps was losing about $75 million a year on the contracts it exited, according to President and CEO Chris Van Gorder, but more than two years later the system has not reported a quarterly loss and inpatient volumes have largely held steady.
Why Few Systems Share Scripps’s Leverage
“For the average hospital, that’s a much scarier proposition,” Tande said. “But I still think you’re going to see more systems exit, because continuing to absorb losses isn’t sustainable.” Barry Arbuckle, PhD, president and CEO of MemorialCare Health System, warned that seniors leaving MA to buy Medigap coverage after their initial enrollment window often face medical underwriting, higher premiums, or outright denial, an affordability gap that hits hard given that 93% of adults 65 and older live with at least one chronic condition.
Why Henry Ford Health Is Doubling Down Amid This Medicare Advantage Quagmire
Not every system is retreating. Medicare Advantage enrollment at Health Alliance Plan by Henry Ford Health surged 45.8% year over year to 132,566 members as of June 30, up from 90,935 a year earlier, with the plan retaining 92% of existing membership while adding roughly 40,000 new members.
The Integration Strategy Behind This Growth
Anderson attributes the growth to network scale, affordability, and tight payer-provider integration, with about 96% of providers in network across Michigan’s Lower Peninsula. Henry Ford Health’s administrative loss ratio sits below 11%, and prior authorizations are negotiated in partnership with the provider network with the aim of eliminating them where possible. Anderson said the system is targeting just a 1% margin on the business, not outsized profit, framing the plan as a long-term community commitment rather than an opportunistic revenue stream.
What SCAN’s CEO Says Distinguishes Success Within This Medicare Advantage Quagmire
The Henry Ford approach echoes the case SCAN Group CEO Sachin Jain, MD, made to Becker’s in 2024: MA works when systems commit to full-risk arrangements and invest in managing population health, rather than treating MA as a lower-paying version of traditional Medicare. Jain said success requires excellent performance in both star ratings and appropriate coding simultaneously.
Why This Framing Matters for the Broader Industry
Jain’s emphasis on full-risk arrangements paired with population health management, rather than partial participation, suggests the health systems currently struggling with MA may be caught between two poles, either committing fully to the integrated model Henry Ford and SCAN describe, or exiting entirely, with a shrinking middle ground for partial or reluctant participation.
What This Medicare Advantage Quagmire Hospitals Face Means Going Forward
With roughly 90 systems already having exited and Anderson expressing pessimism about near-term improvement, the divergence between exit-focused systems like Scripps and Providence and integration-focused systems like Henry Ford Health suggests no single strategy has emerged as universally viable across the industry. Given that MA now covers more than 35 million seniors, whether Henry Ford’s full-integration model spreads more broadly or remains an exception accessible mainly to large, well-resourced systems may determine how much longer this wave of exits continues.
What to Watch Going Forward
As more health systems weigh whether to stay in or exit Medicare Advantage, industry observers will likely watch whether additional systems adopt Henry Ford’s integrated, full-risk approach, or whether the broader trend of exits documented across roughly 90 systems over three years continues accelerating. Given Anderson’s explicit call for increased program funding even as trends move in the opposite direction, this Medicare Advantage quagmire hospitals are navigating may increasingly become a policy question for Congress and CMS, not just an operational one each health system must resolve independently.
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