What happened when Scripps quit Medicare Advantage

Last year, Scripps Health declared it would pull two medical practices from Medicare Advantage networks, risking losing patients in exchange for ridding itself of insurers tying it up in red tape and paying less than it considered adequate.

So far, so good, according to Scripps Health President and CEO Chris Van Gorder. “We don't regret making the decision, that's for sure,” he said.

Although Medicare Advantage plans still have plenty of hospitals and doctors in their networks, San Diego-based nonprofit Scripps Health may be at the forefront as complaints about Medicare insurers intensify.

Providers gripe that Medicare Advantage plans offer insufficient reimbursements and burden them with rampant prior authorization requirements, claims denials and other restrictions they say interfere with care delivery. Contract disputes have grown more contentious.

Cutting ties with Medicare Advantage is not a decision to be made lightly, however.

Related: Provider, payer contract disputes are heating up

Medicare covered 67 million people as of February, slightly over half of whom were in Medicare Advantage — and that share is increasing, according to the most recent estimates from the Centers for Medicare and Medicaid Services. These patients consume a lot of healthcare services and excluding them comes at a cost.

Providers considering such a drastic move must weigh whether they are better off staying in-network, with all that entails, or cutting ties with Medicare Advantage plans and making patients pay higher out-of-pocket costs or scramble to find care elsewhere.

“We don't want to walk away from taking care of our patients, but I think we're at that point where we have no choice but to do that,” Van Gorder said. Scripps Health lost $75 million treating Medicare Advantage enrollees last year, he said.

As of Jan. 1, Scripps Clinic and Scripps Coastal Medical Center no longer accept Medicare Advantage. That decision left about 10% of their patients, or around 32,000 people, in limbo, Van Gorder said. About three-fifths of them have stuck around so far, he said. Some switched to fee-for-service Medicare and some transitioned to other Scripps Health locations that continue to take Medicare Advantage, he said.

“While we are sympathetic to the challenges providers face, it is worth considering why more than 33 million Americans choose Medicare Advantage for their healthcare,” Mary Beth Donahue, president and CEO of Better Medicare Alliance, which represents insurers, said in a statement. Health insurance trade group AHIP did not respond to a request for comment.

‘Tip of the iceberg’

Despite the growing popularity of Medicare Advantage coverage, Van Gorder and others see a trend emerging.

“Scripps, I think, is the tip of the iceberg,” said Britt Berrett, managing director of the Brigham Young University Healthcare Industry Collaborative. Berrett previously held senior positions at Nashville, Tennessee-based HCA Healthcare, Arlington-based Texas Health Resources and San Diego-based Sharp Healthcare.

At least 20 contract disputes went public in the first quarter, and 10 involved Medicare Advantage, according to a report FTI Consulting published in April. Half of all these negotiations did not end in agreements before patients were affected, the company found.

“There's no question that hospitals and health systems and physicians are going to have to demand better reimbursement or they're not going to be able to make it economically. It's as simple as that,” Van Gorder said. “The idea of negotiating a contract just to lose money is probably not a really good idea.”

Great Plains Health observed what Scripps Health and other providers were doing before making the call to leave Medicare Advantage networks next year, said CEO Ivan Mitchell. The nonprofit, North Platte, Nebraska-based health system announced its decision last month. About 2,000 patients will be affected, he said.

“The mission of our organization is to provide health and healing by putting patients first always. We realized that we didn’t feel like we could accomplish our mission with Medicare Advantage,” said Mitchell, who consulted with counterparts at Brookings Health System in Brookings, South Dakota, which dropped Medicare Advantage in January, and Stillwater Medical Center in Stillwater, Oklahoma, which stopped accepting these plans in 2023.

Great Plains Health's 116-bed hospital has a particularly hard time getting Medicare Advantage insurers to approve patient transfers for post-acute care, Mitchell said. At any given time, he estimated six to 12 patients are stuck in the hospital waiting to be moved to other settings. According to a hospital survey the group purchasing organization and consulting company Premier conducted last year, Medicare Advantage plans initially denied 20% of discharges to post-acute care in 2022.

Not only does this delay services the provider and patients deem necessary, Mitchell said, it strains staffing resources. “Because we have a shortage of nurses, what's happening is we are denying care for other people because we have people just sitting in our facility,” he said.

More Medicare Advantage breakups

Other providers are weighing the pros and cons of Medicare Advantage behind closed doors, health system consultants said.

“I’ve talked with integrated delivery systems who are watching Scripps very closely, and they're asking the same question that Scripps — ahead of the pack — asked and answered: Does it make economic sense?” Berrett said.

Scott Ellsworth, president of Ellsworth Consulting, is having similar conversations with clients, who are more interested in reducing their exposure to Medicare Advantage than exiting the program entirely, he said.

“I've got a dozen clients. Every single one of them is concerned about Medicare Advantage," said Ellsworth, a former executive at companies including Centene, UnitedHealth Group and Exellus BlueCross BlueShield. “Two of them specifically have me working with them to reduce the number of plans from eight to two or three for 2025, and that's going to happen.”

Medicare Advantage insurers should be wary, Ellsworth said. “They are going to have to look at the reimbursement rates, and they're going to have to make adjustments. If they don't, they're going to run the risk of losing significant chunks of the network,” he said.