Health systems are no longer just managing reimbursement challenges — they’re entrenched in a two-front battle for financial sustainability.
Hospital leaders point to mounting pressure from both government and commercial payers. Proposed Medicaid cuts threaten access to care, particularly for safety-net hospitals, while commercial payers are employing more aggressive tactics, including higher denial rates, downcoding and delayed payments.
Payers argue that they also face rising cost pressures, evolving regulatory demands and the challenge of ensuring value-based care — factors that continue to shape reimbursement policies and contracting strategies.
In response, health systems are being forced to adapt quickly. Executives are taking on broader strategic roles to drive transformation and protect long-term viability. For many, the way forward hinges on operational resilience, revenue cycle innovation and targeted advocacy.
Against this backdrop, two CEOs and three CFOs from major health systems recently shared with Becker’s how they’re navigating this complex environment.
Editor’s note: Responses have been lightly edited for clarity and length.
Question: Medicaid reimbursement cuts are a looming concern, but many CFOs say commercial payer rates are equally problematic. How would you characterize the reimbursement pressure your system is under today?
Robert Garrett, CEO, Hackensack Meridian Health (Edison, N.J.): There are many headwinds coming at us from many different directions, from the government payers as well as the commercial payers. On the governmental side, we’re still modeling what is being proposed now in Washington, but there’s evidence that it could mean 300,000 or so fewer people on Medicaid in New Jersey — a reduction that’s significant for organizations like Hackensack Meridian Health.
On the commercial side, we have seen a lot of pressure. Medical inflation has certainly played a role there for healthcare costs. Our costs continue to go up. Medical inflation is way more than the national overall inflation rate — and pharmaceuticals, supplies, labor costs all play a role in that. And we’re seeing with higher utilization rates coming out of COVID, that the commercial payers are getting hit with additional utilization. So they’re trying to pare back on commercial rates, but we’re faced with medical inflation and higher labor costs.
We’re continuing to face those challenges as they are ratcheting down the rates because of the higher utilization that’s happened at hospitals across the country since COVID.
So on the governmental side, there’s some huge threats and headwinds. But certainly on the commercial side, health systems are seeing significantly reduced increases in rates.
Unfortunately, it’s a perfect storm. We saw that earlier this year. We had long protracted negotiations with our biggest insurer in the state, Horizon Blue Cross Blue Shield of New Jersey. We were able to come to terms without our health system being out of network. At the end of the day, it was a fair deal for both sides. But we’ve seen much more pressure than we have in the past.
Erik Wexler, president and CEO of Providence (Renton, Wash.): When we look at 2024 — when that year ended — and we compare denials and accounts receivable and downcoding to 2023, the first thing I would say is, from the Providence perspective, not much changed. The patient population, pretty much the same. The intensity of the care that we’re providing, pretty consistent with prior year. The utilization, pretty consistent.
No new information system. We’re processing things, and we’re doing coding like we did in 2023, in 2024. But if we look at the difference in the slow pay and down coding and denials from the commercial payers, it increased by half a billion dollars.
And there was an article recently … where a very accomplished private equity firm was speaking about “the arms race” between the payers and the providers, and that the payers are winning the arms race in paying less after care was provided.
I submit to you, that comment alone, exemplifies why we have a problem with the payer system in this country — because after care is provided, the provider should be paid. And there should not be an effort to try to pay less.
Do we do that when we go and buy groceries, or gasoline, or when we go to a restaurant? Of course not. And the assumption that the providers are purposely trying to take advantage of the system borders on offensive. It’s not that there aren’t mistakes that happen from time to time, but I believe there is a very wholesome, high-integrity intent by the providers — physicians and hospitals and others — to do a very, very good job so that they do get paid on time.
This article denoted what should not be an arms race, but should be: how do we come together, create alignment for the better of our society?
Clay Ashdown, CFO, Intermountain Health (Salt Lake City): Both potential Medicaid cuts and commercial payments challenges are profoundly troubling yet fundamentally different. Potential Medicaid cuts reduce access to proactive care, which will inevitably create more costly chronic healthcare conditions in years to come. They also result in a synthetic tax to hospitals as uninsured patients will still come to hospitals for care, but the hospitals will have no revenue to help offset those treatment costs.
Commercial payment challenges are multi-faceted. It is unrealistic to expect commercial payers and employers to continue to bear a greater and greater financial burden for a shrinking share of the population. However, adhering to contractual obligations is paramount for all parties. Time and effort spent disputing or unnecessarily revisiting claims is wasteful and results in added costs — even when appropriate payments are ultimately made. For example, recently published data from Kodiak Solutions demonstrated an increase in primary denials from 2.4% to 11.8%. Enhancing processes, achieving objective contract adherence, and ultimately improving the timeliness and completeness of appropriate payments are among Intermountain’s highest priorities.
Q: What strategies have been most effective in reducing denials, accelerating payments or protecting financial performance on the commercial side?
Robert Garrett: For us, it’s getting back to basics in terms of utilization management and revenue cycle to really ensure that our network gets paid accurately the first time, so that we can minimize the number of appeals that we have to make. We’re doing pretty well there. Through enhanced documentation, through using trended data by payer to understand those areas of time, we’re able to do a better job up front.
At HMH, we are seeing only about 8% of our claims initially denied, which is half the national average. That doesn’t sound like a lot. But in a $10 billion organization, that’s still worth $800 million.
By getting back down to the basics to ensure we have strong documentation. Progress is being made by trending those causes for denials based on payer, because each payer may be emphasizing a different issue or a different area of medical care. These strategies have helped us in reducing denials and accelerating payments.
Erik Wexler: Our revenue cycle provider, which is R1 RCM, is beginning to use digital technology to make sure that we create a perfect claim that can’t be debated or denied by the commercial payer. That’s a very important initiative and, hopefully, in the long run, will reduce administrative overhead. We spent $250 million a year at Providence in claim adjudication, and I have to believe the commercial payers are paying that and more.
Often, a patient has completed their care, and we haven’t been paid for 250 days or more for the care that was received. That means we’re financing that on our end while the payers are arbitraging that on their end.
Clay Ashdown: While there are numerous opportunities to streamline processes on the front end of the revenue cycle to optimize the likelihood of payment on the back end, there are other key strategies that can help increase the likelihood of payment. While each situation and payer are unique, the following efforts have demonstrated utility:
- Timely use of comparative data. The creation of payer scorecards showcasing performance helps inform dialogue about why performance may be waning and what can be done on either side to improve.
- Effective contracting language to increase the likelihood and timeliness of payment. Being diligent and persistent about getting fair and reasonable contract language is essential in achieving appropriate revenue yield.
- When appropriate, pursuing legal/arbitration processes as stipulated in contracts may be necessary. While certainly not the preferred option, showcasing a willingness to pursue formal options can improve the effort and urgency between parties to solve differences earlier in the process.
Daniel Morissette, senior executive vice president, CFO, CommonSpirit (Chicago): We’ve been doing our best to advocate for fair reimbursement, not just in terms of base rate increases but also addressing the growing number of claim denials. The volume of denials, downgrades, underpayments and administrative burden through additional and unnecessary reviews that we’re seeing now is significantly higher than at any other point in my career. It’s a tough environment, and while we’ve worked hard to improve quality and patient satisfaction scores — factors that help us indirectly — but the fundamental issue remains: the gap between revenue growth and expense increases is unsustainable. Given that we operate in 24 different states, some markets are even more challenging due to higher inflation rates. In certain states, inflation has been so severe that it’s difficult to see a viable path forward without increases in per-patient reimbursement rates.
We’ve also worked to standardize contract language to mitigate these challenges and make it administratively efficient for payers through consistent terms and provisions. While base rates matter, the sheer volume of payer-specific denials and downgrading our services makes contract language a key factor in securing fair payments. If we can clarify terms upfront — what will be covered, what won’t, paying clean claims in a timely manner — it could significantly improve outcomes.
Additionally, where possible, we’ve tried to have system-level negotiations while gaining efficiencies for payers and their operations staff. In markets where we have a strong presence, aggregating multiple facilities and physicians in contract discussions can help demonstrate our essentiality within the healthcare landscape. However, success with this strategy has been mixed. At the end of the day, it’s an uphill battle. We’re doing everything we can to make our case to payers, emphasizing the value we bring, but it’s a difficult environment with no immediate resolution in sight.
Garrick Stoldt, vice president of finance, CFO, Saint Peter’s Healthcare System (New Brunswick, N.J.): The two biggest impacts. First, we were blind to how many days a patient is in the hospital when determining if we think they were clinically appropriate to be an inpatient or not. We had a lot of two-day stays, which payers were automatically denying, saying it wasn’t inpatient because it was just a two-day stay — even though there’s no rule that says it can’t be. We basically gave up and said, ‘Okay, if it’s a two-day stay or less, we’re going to bill it as observation instead of inpatient.’ That significantly dropped denials.
The second was expanding our team of physician advisors who actually spend their time attacking the payers for denials while patients are still in-house. We now do 100% peer-to-peer reviews and we have a team addressing every encounter so we don’t miss anything. Because it’s somewhat specialized, we still bring in our experts. For instance, if we have a neonate in our NICU and we’re getting today’s stay denied, we use our neonatologists to fight the denial. It’s like a heavyweight against a lightweight.
Most payers use primary care doctors as their medical directors making clinical determinations on inpatient status. But when you have a neonatologist — with their breadth of detail — they can run circles around an internal medicine doctor. We almost always get those overturned because of the clinical expertise brought to the table. We do the same thing in our pediatric intensive care unit, and with high-risk moms using our maternal-fetal medicine doctors, in addition to our core denial management team. Using specialists in these cases usually gets the denial overturned well over 90% of the time — because it’s a specialist against a primary care doctor. Nothing against primary care doctors — they’re very good — but they don’t have the subspecialty expertise.
