Provider-Sponsored Health Plans: Bridge or Anchor?
A CFO/CEO Perspective on the Future of Vertically Integrated Health Systems
Provider-sponsored health plans (PSHPs) were designed to hedge against declining fee-for-service margins, capture premium dollars, and accelerate the shift toward value-based care. The idea was compelling: If health systems could also act as payers, they could better control costs, keep patients within their networks, and reinvest surpluses into mission.
Today, this narrative is unraveling.
- UCare, Minnesota’s second-largest Medicare Advantage (MA) carrier, lost $504 million in 2024 and announced a full MA exit by 2026.1,2 More than $400 million in reserves remain tied up and unavailable for redeployment.
- McLaren Health continues to debate divestiture as its plan has weakened enterprise margins and drawn scrutiny from lenders.6
- Centra Health exited Medicare Advantage and outsourced commercial operations after sustained losses.7,8
- Baylor Scott & White Health (Texas) and Sutter Health (California) both scaled back PSHP ambitions after struggling to balance growth with capital demands.9,10
Meanwhile, only a handful of systems have achieved scale and capabilities. UPMC Health Plan has more than 4 million members, Priority Health has grown through acquisitions to more than 1.3 million members, and Intermountain’s SelectHealth covers more than 1 million members.11,12,13
The central message for CFOs and CEOs: A PSHP is never neutral. It is either a bridge to integration, enterprise value, and resilience—or it is an anchor that drains liquidity, ties up reserves, raises borrowing costs, and undermines strategic focus.
Why Health Systems Sponsor Plans: Promise vs. Reality
The promise of PSHPs has always been rooted in diversification and control. As inpatient margins eroded under fee-for-service, boards and CFOs were drawn to the idea of capturing premium revenue and investing in population health.
But history has shown how difficult it is for systems to succeed in the payer business. Insurance is a fundamentally different competency: Actuarial science, risk adjustment, regulatory capital, distribution, and claims administration are not rooted in most hospital DNA.
- Health systems originally pursued PSHPs to capture premium revenue in order to hedge against shrinking inpatient margins.
- They also sought to integrate care delivery with financing, advancing population health capabilities.
- Another common rationale was to gain leverage with payers and employers by competing directly with them.
- Approximately 60 PSHPs exist nationally today, covering around 14 million lives.12
- Fewer than 15% of PSHPs formed since 2010 have reached sustainable profitability.4
- Many mid-size systems, including McLaren, and Centra, have been destabilized by plan losses.3,4,7,6
- Rating agencies increasingly cite PSHP performance in negative credit outlooks.5,6
Read the full analysis for a CFO decision tree and clear thresholds to determine whether your PSHP is a bridge or an anchor.
References
- Star Tribune. UCare terminates Medicare Advantage plans for 2026 amid financial turmoil. Aug 29, 2024.
- Becker’s Payer. UCare to exit Medicare Advantage market in 2026. Aug 30, 2024.
- Becker’s Hospital Review. June 2025.
- WHYY. July 2025.
- Moody’s Investor Service. Credit opinion: Jefferson Health. July 2025.
- Fitch Ratings. U.S. not-for-profit hospitals: outlook incorporates payer-owned plan risks. Dec 2024.
- Centra Health. Centra to discontinue Medicare Advantage offering. Sept 2022.
- Centra Health. Centra outsources commercial plan operations. Dec 2023.
- Sutter Health. Sutter Health announces exit from select commercial insurance lines. Oct 2021.
- Baylor Scott & White Health. BSW Health plan strategy adjusted amid market challenges. Apr 2022.
- Becker’s Payer. Priority Health to acquire Physicians Health Plan of Northern Indiana. Dec 2023.
- Milwaukee Journal Sentinel. Priority Health expands into Wisconsin. Jan 2024.
- Intermountain Health. SelectHealth reaches 1 million members milestone. Mar 2023.
