The Coming Provider Divide

In a recent article by Andrew Saul (Regional Sales Director at Physicians Mutual), the article is titled:

The Coming Provider Divide: When the Best Hospitals Say No to Medicare Advantage

The article states:

Over the past few months, we’ve witnessed a growing and uncomfortable truth emerge in the Medicare landscape: Some of the nation’s most respected hospitals are walking away from some or all Medicare Advantage plans.

-Mayo Clinic 1

-Mass General Brigham 2

-Centra Health 3

-Kettering Health 3

- MD Anderson 4

Names that have defined clinical excellence for decades are now scaling back or fully exiting contracts with MA carriers. And while headlines tend to frame this as an “access issue,” the real story runs deeper into a structural one.

Why Hospitals Are Leaving

At its core, this is about how care is paid for, and how those payments are delayed, reduced or denied. Traditional Medicare operates under a transparent fee for service model. When a claim is submitted, it’s processed by a Medicare Administrative Contractor according to a national and transparent fee schedule. Payments are predictable, standardized and typically made within two weeks.

Medicare Advantage, on the other hand, replaces that transparency with a capitated structure, fixed per-member payments from CMS to private insurers. These insurers, known as Medicare Advantage Organizations, manage utilization, prior authorizations and provider reimbursements. It’s an efficient model on paper, but in practice, hospitals, particularly in rural areas report that MAOs often reimburse at lower rates and with greater delays than Traditional Medicare.

A 2023 KFF analysis found that 99% of Medicare Advantage enrollees were in plans requiring prior authorization for some services6, and that hospitals and physicians consistently rank MA payment disputes among their top administrative burdens.

The Economics Behind the Exodus

MAOs receive capitated payments from CMS based on county level benchmarks, adjusted for health and economic risk and star ratings. Those rates are designed to be competitive, but as utilization and inflation rise, plans are caught between shrinking margins and growing medical costs. To stay solvent, many plans respond by:

Tightening prior authorization requirements.

Lowering reimbursement rates.

Exiting unprofitable counties.

In 2025, UnitedHealthcare and Humana both announced significant market exits, trimming plans from dozens of counties nationwide. This move signals for the first time in a decade MAO compression, not expansion.

For hospitals, those same pressures show up as revenue uncertainty, treating the sickest patients but waiting months to be paid.

The Coming Divide

The long-term risk isn’t just for hospitals. It’s systemic.

As this divide widens, we may see a split between two classes of care:

- Traditional Medicare: transparent, predictable with nationwide access.

- Medicare Advantage: managed, localized and increasingly restricted networks.

In other words, a two tier system within Medicare itself. It’s not an indictment of the intent behind MA. The program was designed to foster innovation and efficiency, but rather a reflection of how financial models behave under strain.

Where We Go from Here

For agents, FMOs and carrier partners, the message is clear: transparency and sustainability will define the next decade of Medicare. Plans that simplify authorization, honor prompt payment and maintain fair reimbursement will earn long term loyalty from both members and providers.

Hospitals aren’t leaving because they want to, they’re leaving because they have to. When care delivery and care management begin to conflict, the best systems will always side with the patient.

And that’s the story behind the coming provider divide.

This content is for informational purposes and thoughts shared are my personal opinions.

Jon’s Take:

THESE MOVES ARE CREATING A BIGGER AND BIGGER DIVIDE BETWEEN MEDICARE SUPPLEMENTS, AND MEDICARE ADVANTAGE PLANS. YES, NETWORKS HAVE ALWAYS BEEN AN ISSUE WITH MAPD'S, BUT WITH MAJOR HOSPITALS BACKING OUT OF THEM, AGENTS SHOULD BE SERIOUSLY CONSIDERING OFFERING MEDICARE SUPPLEMENTS AS A POSSIBLE CHOICE. YES, NOT EVERYONE CAN GET ONE, BUT LIVING IN NEW ENGLAND WITH MASS GENERAL WITHIN 2 HOURS, IT'S A GREAT MEDICAL SAFETY NET TO HAVE AVAILABLE. THE ULTIMATE QUESTION IS "WHAT IS THAT SAFETY NET WORTH"?

I SUPPOSE ONE OTHER POSSIBILITY IS THAT OTHER HOSPITALS, LIKE MASS GENERAL AND TO A GREATER EXTENT KAISER, WILL JUST HAVE THEIR OWN MAPDS AND LOCK PEOPLE IN OR OUT OF NETWORK.

LET ME KNOW WHAT YOU THINK!