Healthcare providers face costs, workforce and MA strain | Viewpoint

Today’s healthcare finance and operational providers are in somewhat of a tight spot. To start, providers are still grappling with the lingering effects of the COVID-19 pandemic. Financial stress remains a significant concern due, in part, to rising operational costs. Meanwhile, workforce shortages, supply chain disruptions and evolving compliance requirements present additional hurdles.

Simultaneously, healthcare providers must also accommodate the shift toward value-based care—care that focuses on patient outcomes versus the volume of services provided. This shift is propelled by the Centers for Medicare & Medicaid Services (CMS), which set a goal that “all Medicare fee-for-service (and the vast majority of Medicaid) beneficiaries will be in a care relationship with accountability for quality and total cost of care by 2030”. Many leaders believe that embracing value-based care could alleviate the financial and operational strains they currently face. However the transition brings immediate costs and complexities.

As if that wasn’t enough for healthcare finance leaders to navigate, the growing popularity of Medicare Advantage (MA) and Medicaid Managed Care Plans adds additional layers of complexity to the current healthcare landscape. According to a 2024 study by the Kaiser Family Foundation, over half (54%) of eligible Medicare beneficiaries are now enrolled in a Medicare Advantage plan, a significant rise from just 31% a decade ago.

This shift places significant pressure on cash flow dynamics across health systems and has introduced additional pre-authorization requirements, increased denial rates, more complex billing processes and a multitude of payers that health systems must now manage.

For healthcare providers, responding strategically to the demands of Medicare Advantage and Medicaid Managed Care requires significant, proactive investments in revenue cycle management and IT infrastructure. Leaders should prioritize tracking key metrics such as days in gross and net receivables, denial rates, authorization timelines and cash flow stability to assess how effectively their revenue cycle is adapting to managed care demands.

Those with the capacity to invest in advanced systems and specialized teams for denial management, payer relations and compliance will be better equipped to navigate the complexities of managed care effectively. Unfortunately, coming out of the pandemic, not all organizations are positioned to afford these upgrades, heightening the risk of revenue leakage and operational strain. For providers unable to make these investments independently, exploring partnerships, engaging third-party experts or sharing resources with another provider offers a viable alternative, enabling them to build capacity gradually and stay competitive in a value-based care landscape.

Ultimately, the goals of health equity and value-based care are more prominent than ever. However, many providers feel constrained by existing pressures, making it difficult to embrace new initiatives. Developing a strategic roadmap for enhancing IT systems, building dedicated teams or engaging specialized firms will be essential to minimize revenue loss and improve operational efficiency. Treating these investments as critical steps toward resilience enables healthcare organizations to address the immediate complexities of managed care while laying a stronger foundation for long-term financial stability in a value-based care landscape.

As a partner with The Bonadio Group’s Strategic Advisory and Consulting division, Jonathan Miller works with clients within the healthcare and human services industries on a variety of advisory engagements. He focuses on providing services such as financial statement analysis, operational improvement strategies and strategic guidance to executives and boards of directors in these sectors. Jon also lends his expertise to advisory and consulting projects that involve mergers, acquisitions, financial forecasting, strategic planning and governance guidance.

Aimee Jozic is a partner in The Bonadio Group’s Assurance practice and has been with the firm since 2005. She focuses on the healthcare and higher education industries and specializes in providing auditing services for clients, with a primary focus on tax-exempt organizations. She has experience in various engagements, from financial statements and single audits to cost report certifications and informational tax return preparation. She is involved in the local community, serving as treasurer on The Hochstein School Board and on St. John Fisher University’s Accounting Alum Committee.