Hospitals are getting shortchanged by Medicare Advantage insurers to the tune of 10 cents on every dollar, according to Ensemble, one of the largest hospital billing firms in the U.S. — a gap significant enough that the company has built an entirely new practice to help finance chiefs manage it.
The firm, which processes $55 billion in patient revenue for hospital clients, this summer rolled out what it calls an “Office of the CFO”: a team of former hospital finance executives embedded directly with clients to catch revenue problems before they hit quarterly results.
“We built a team of leaders who have sat in the CFO seat,” Ensemble founder and Chief Executive Officer Judson Ivy said in announcing the unit. “They’ve managed the month-end close, presented to boards and navigated the same pressures our clients face today.”
The move comes as hospital finance departments grapple with rising denials, slower payments and swelling receivables — much of it tied to Medicare Advantage, the privately administered alternative to traditional Medicare that now covers more than half of all Medicare beneficiaries.
The gap, explained
Hospitals sign Medicare Advantage contracts expecting payment at parity with traditional Medicare. They’re not getting it.
“Providers are contracted at 100% of Medicare rates, so they expect that payment to be equal to traditional Medicare. What we see is that Medicare Advantage is only paying roughly 90% on average,” Stacie Sutter, Ensemble’s vice president of payer strategy, told Thomson Reuters on August 13, 2026.
Some of that gap comes down to classification. Traditional Medicare follows the “two-midnight rule,” a billing standard that determines whether a patient is admitted as a full inpatient or held in lower-paying observation status. Many Medicare Advantage insurers skip it, Sutter said.
The upshot: more denials, longer appeals, slower cash. Sutter’s analogy — a grocery store agreeing to wait 180 days to get paid after the milk leaves the shelf.
From back office to boardroom
The strain has climbed the org chart. Rising accounts-receivable days and thinning margins now rank among the top concerns Sutter hears from hospital CFOs.
That’s the market Ensemble’s new unit is chasing. Matthew Ennen, who runs it and previously held finance roles at HCA Healthcare and Prime Healthcare, says the pitch is experience plus data: “Our team combines that lived experience with Ensemble’s data infrastructure and predictive capabilities so we’re not just handing clients a dashboard.”
Not everyone sees a crisis
Zoom out, and the picture softens.
Fitch Ratings’ annual hospital sector report, published August 4, tracks not-for-profit hospitals broadly — not Medicare Advantage specifically. It found operating margins climbing for a third straight year, to 1.5% from 1.1%. Cash-to-debt ratios improved to 188% from 169.2%. Debt-to-capitalization fell to 28.9% from 30.7%. Days cash on hand dipped slightly to 212.2 from 215.1 — still above pre-pandemic levels, Fitch noted.
Kevin Holloran, who leads Fitch’s hospital ratings team, says the Medicare Advantage narrative overstates how unique the problem is. “I would unfortunately characterize the current relationship between payor and provider as challenging, regardless of the product being discussed,” he said in an emailed response. High-profile MA contract terminations, he said, have drawn outsized attention, but disputes over “delayed payments, denials, and subsequent ‘back and forth’ efforts by both parties” show up across commercial and Medicaid contracts too.
There’s also no reliable industry-wide scoreboard, Holloran said — which is part of why Ensemble’s 90-cents-on-the-dollar figure doesn’t necessarily show up in sector-wide numbers. “I am unaware of any centralized place where that impact is measured,” he said, noting the clearest evidence lives “issuer by issuer” in individual hospitals’ audited financials.
Still, the friction isn’t free. Most disputes eventually get resolved, Holloran said — “the vast majority are successfully resolved” — but only after both sides burn cash fighting. He put a rough shape on it: “a significant amount of global expense tied up on both sides, that in theory could/should be eliminated.”
Walking away
Some hospitals are testing what happens when they simply drop a plan. It’s a trade, Holloran said: providers “may see patient volumes go elsewhere, but improve its per-patient collections.” It usually works out, he said, “although that is not always the case, and it can take a while for things to smooth out.” Fitch only flags it as a ratings risk when a lost contract is big enough — and permanent enough — to hand a rival lasting market share “without any means to pull them back.”
Bottom line from Fitch: hospitals are eating Medicare Advantage losses from a position of strength, not weakness. That could change. Holloran warns new Medicaid eligibility rules under the One Big Beautiful Bill Act may mean the current calm is “a brief operational peak before conditions become more challenging” once the rules bite in 2027.
Getting choosier
The economics are already reshaping how hospitals negotiate. Commercial insurers typically pay 150% to 300% of Medicare’s base rate, Sutter said. That drops to 100% once a patient ages into traditional Medicare — and to roughly 90% under Medicare Advantage, for treating the identical patient.
Hospitals used to sign with nearly every MA plan on offer to avoid losing patients. Now, Sutter said, the calculus is whether “participation in that plan creates a sustainable value financially.”
Patients left confused
The fallout reaches patients directly. Sutter says she regularly hears versions of: “I thought I had Medicare. Why can’t I see my doctor?” — a sign of how blurry the line between Medicare and Medicare Advantage remains for many seniors until they hit a denial or an out-of-network doctor.
Emergency care is unaffected — hospitals treat first and settle payment later. But Ensemble estimates roughly 3 million people could see disruptions in 2026 tied to dropped MA contracts or insurers exiting markets outright. Those affected can shift to traditional Medicare or a new plan during open enrollment.
The takeaway
Sutter doesn’t expect Medicare Advantage to vanish, but expects continued consolidation as insurers weigh whether the administrative fight is worth it. Holloran’s view runs parallel but distinct: this is a payer-provider story, not an MA-only one — and hospitals are weathering it now from a cushion that could thin out fast once Medicaid changes land in 2027.
Either way, Ensemble’s new advisory unit is itself a data point: Medicare Advantage friction has stopped being a line item and started being a boardroom problem.
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