Medicare Margins Continue To Erode as Value-based Care Upends Traditional FFS Model

One of the major headwinds confronting hospitals is contracting margins. As Medicare margins continue to erode (see chart), one-time gains many hospitals and health systems experienced as a result of Medicaid expansion or private exchanges have been offset by other adverse developments. Headwinds facing hospitals include:

  • Continuing pressure on Medicare margins
  • Value-based care upending historic business models and posing significant transition risk for health systems assuming more risk in caring for¬†populations
  • Disruption posed by new entrants focusing on niche offerings that decant profitable business

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