Health System Winners and Losers

The payvider thesis holds that health systems with insurance operations are structurally advantaged in a value-based payment environment. The logic is straightforward: a system that controls both the clinical delivery and the insurance risk has aligned incentives, generates encounter data at point of care, and can manage total cost through clinical design rather than administrative denial. That logic has been tested against real market conditions over the past five years, and the results are not uniform. Some systems have seen the thesis validated. Others have demonstrated its failure modes. This article examines five named organizations through the policy changes that are reshaping provider strategy: AHEAD global budgets, encounter-based risk adjustment, D-SNP integration, and ACO performance accountability.

Kaiser Permanente: The Original Payvider at Scale

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Kaiser Permanente is the only organization in the United States that operates a national-scale integrated delivery and financing system as a unified enterprise. The Kaiser Foundation Health Plans insure approximately 12.7 million members across eight regions. The Permanente Medical Groups provide the clinical care. There is no separation between the plan and the delivery system at the operational level: utilization decisions are made by physicians who are members of the same enterprise whose financial performance depends on total cost management. That organizational structure is what every other payvider is trying to replicate, and none have.

The encounter-based risk adjustment transition under V28 reform (MCR-02.04) affects Kaiser materially less than any other large MA operator. Every Kaiser clinical visit generates a face-to-face encounter that produces ICD-10 coded documentation at point of care. The HCC capture happens as a byproduct of clinical care delivery rather than through the retrospective chart review audits that non-integrated plans have relied on to supplement encounter data. As CMS phases out chart review contributions to risk score calculation and shifts to encounter-only data by 2026, plans that have been generating risk scores through chart review will see risk score compression. Kaiser will not. Its risk documentation infrastructure is its clinical infrastructure.

Kaiser’s Southern California and Northern California MA plans are consistently among the most financially stable large MA plans in the country. The stability reflects the HMO model that predates CMMI’s payment reform agenda by decades. Kaiser’s California plans operate on a capitation model in which physicians are accountable for total cost outcomes through their Permanente Medical Group governance structures. The quality performance that follows from clinical integration is not incidental to the financial model; it generates the Star Rating performance that provides CMS quality bonuses and drives the enrollment growth that allows Kaiser to absorb fixed clinical infrastructure costs across more members.

Kaiser’s vulnerabilities are geographic and organizational. The Washington DC and Mid-Atlantic region has historically produced weaker financial performance than the California and Northwest markets, with higher MLRs and more complex competitive environments that limit the cost management advantages that Kaiser’s model generates in markets where it has dominant position. The physician governance model through the Permanente Medical Groups creates decision-making processes that are slower than corporate health systems in some contexts, because clinical leadership must be brought into strategic decisions that a corporate structure could execute through executive authority.

The AHEAD state intersection is relevant for Kaiser’s Northwest and Mid-Atlantic regions. Kaiser operates in Oregon and Washington, both states with characteristics that make AHEAD participation plausible. The global budget accountability that AHEAD imposes on hospital systems intersects with Kaiser’s existing total cost of care accountability through its capitation model in ways that CMS has not fully specified. If AHEAD creates a separate accountability track for hospital spending in a state where Kaiser’s hospitals are already operating under capitated accountability, the attribution and incentive alignment questions become technically complex. MCR-01.08 and MCR-05.07 address the AHEAD mechanics; the Kaiser-specific question is whether its existing capitation infrastructure would allow it to participate in AHEAD on terms that preserved rather than duplicated its accountability structure.

Intermountain Health: The SelectHealth Payvider in the Mountain West

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Intermountain Health’s SelectHealth insurance subsidiary holds dominant MA market share in Utah and significant market share in Idaho and Nevada. The payvider value chain operates in the same direction as Kaiser’s: Intermountain’s clinical quality performance generates the cost outcomes that make SelectHealth’s actuarial model viable, and SelectHealth’s capitation payments provide the revenue predictability that Intermountain uses to invest in clinical infrastructure. The mutual dependence is the structural point. SelectHealth needs Intermountain to deliver efficiently. Intermountain needs SelectHealth to provide the capitated revenue that rewards efficiency.

Intermountain’s clinical quality reputation is among the most documented in the country. The organization has been recognized consistently in Medicare quality performance rankings, and the specific quality measures that drive HEDIS and Star Rating performance reflect genuine clinical process standardization rather than documentation optimization. The distinction matters because plans and systems that optimize for measured quality without improving underlying care will face increasing exposure as CMS shifts quality metrics toward outcomes measures that are harder to game through documentation.

The 2022 merger with SCL Health changed Intermountain’s geographic position materially. SCL Health brought hospital systems in Colorado, Montana, and Kansas, extending Intermountain from its Utah-Idaho-Nevada core into markets with different competitive dynamics and different MA market structures. The integration of SCL Health’s operations has proceeded through 2023 and 2024, and the combined organization now operates as Intermountain Health with a broader Mountain West and Great Plains footprint. The Colorado expansion is strategically significant: Colorado has been discussed as a potential AHEAD state candidate given its prior experience with alternative payment models, and Intermountain’s presence in Colorado through the SCL Health merger means it would be directly affected by any AHEAD expansion into that market.

Utah’s position outside the current AHEAD state group does not insulate Intermountain from AHEAD’s relevance. The model’s geographic expansion logic, as described in MCR-01.08, suggests that states with lower baseline total cost of care and existing accountable care infrastructure are logical candidates for the next expansion round. Utah’s relatively low Medicare spending per capita and SelectHealth’s capitation infrastructure make it a plausible next-wave AHEAD state. If that materialized, Intermountain would be the health system most directly affected and, given its existing accountability structures, likely the best positioned to participate effectively.

UPMC: The Pittsburgh Payvider and the Highmark Conflict

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UPMC Health Plan covers approximately 4 million lives across commercial, Medicaid, and Medicare lines, making it one of the largest hospital-sponsored health plans in the country by enrollment. The MA and D-SNP position in western Pennsylvania is the deepest of any health system-sponsored plan in the region. UPMC’s clinical data infrastructure generates encounter documentation across its employed and affiliated physician network, and the transition to encounter-based risk adjustment is less disruptive for UPMC than for plans depending on retrospective chart review because the clinical documentation system was built for a risk-bearing organization rather than a fee-for-service billing operation.

The D-SNP penetration reflects UPMC’s Medicaid managed care position in Pennsylvania. UPMC Community Care administers Medicaid managed care contracts in the state, giving UPMC the dual eligibility identification and coordination infrastructure that FIDE SNP requirements demand. The integration of UPMC’s MA plan and its Medicaid managed care operations around the same high-need population creates the care coordination capability that CMS is trying to build into the D-SNP integration requirements (MCR-09.03), and UPMC has had that infrastructure longer than most organizations now being asked to build it for the first time.

The Highmark conflict defines the competitive environment for MA in western Pennsylvania in a way that exists nowhere else in the country. UPMC and Highmark BCBS are the two dominant payers in the region, and they compete directly across commercial, Medicaid, and Medicare lines. The network exclusions that have defined the conflict mean that UPMC facilities are either excluded from or out-of-network for Highmark MA plans, and Highmark-affiliated providers are similarly positioned relative to UPMC Health Plan. For Medicare beneficiaries in western Pennsylvania, plan selection is not primarily about premium or supplemental benefits; it is about which hospital system they want access to. The consumer confusion and access disruption this creates has been documented in regulatory filings, academic research, and litigation records.

The AHEAD implication is that if Pennsylvania enters the AHEAD model, both UPMC and Highmark would be within the state’s global budget structure. AHEAD, as described in MCR-01.08, creates a hospital-level global budget accountability mechanism that operates across all payers in the state. The current UPMC-Highmark dynamic is a market structure problem that operates below the global budget level. Whether AHEAD’s accountability framework would reduce the competitive conflict or entrench it by creating new disputed attribution questions has not been worked through in CMS’s model design documentation.

Advocate Health: The Midwest Mega-System Post-Merger

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The 2022 merger of Advocate Aurora Health and Atrium Health created the fifth-largest nonprofit health system in the country by revenue, with a combined footprint across Illinois, Wisconsin, North Carolina, Georgia, Alabama, and Florida. The geographic spread is the analytically interesting feature: Advocate Health operates in both Midwestern ACO markets with well-developed value-based payment infrastructure and Southern state markets with materially different Medicare policy environments, provider market structures, and dual eligible populations.

Advocate Aurora had been one of the more active MSSP ACO participants in the Midwest, with the clinical infrastructure and data analytics capability that ACO performance requires. Atrium Health brought a different profile: a large North Carolina system with significant Medicaid and safety-net exposure operating in a state that has historically been less active in MA and ACO participation than Illinois. The combined organization has had to reconcile these different strategic orientations, and the integration is proceeding across organizations that were independent enough to have developed distinct clinical cultures.

Advocate Health’s ACO REACH participation brings two-sided risk accountability to a system of its scale, and the financial performance data from its REACH participation provides one of the more meaningful public data points on whether large health systems can generate per-beneficiary savings under full accountability. MCR-12.03 covers the ACO performance distribution in detail; the Advocate-specific question is whether a system that spans diverse geographic markets with different baseline cost levels can optimize ACO performance across all of them simultaneously or whether the savings generation is concentrated in specific markets where the clinical infrastructure is most mature.

The workforce dimension at Advocate’s scale is not separable from the policy analysis. Advocate is among the largest employers in Illinois. The workforce cost structure, which includes labor contracts across multiple clinical categories in multiple states, is exposed to both the inflation in clinical wages that has characterized the post-pandemic period and the downstream effects of OBBBA’s Medicaid funding reductions on the patient populations that Advocate’s safety-net hospitals serve. Systems that treat high shares of Medicaid patients face a cost structure that is sensitive to state Medicaid reimbursement rates, which are in turn sensitive to federal matching fund levels. OBBBA’s FMAP changes (MCR-03.01) create fiscal pressure that flows directly to health system operating margins for systems with Advocate’s Medicaid exposure.

Geisinger: The Rural Payvider Model and the Risant Acquisition

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Geisinger Health System has operated a payvider model for rural Medicare populations in central and northeastern Pennsylvania longer than almost any comparable organization. The Geisinger Health Plan has served rural Pennsylvania for decades, and the ProvenCare clinical standardization model that Geisinger developed represents the most documented evidence that clinical protocol standardization produces both quality improvement and cost reduction in a rural health system context. The research literature on Geisinger’s payvider economics, spanning more than two decades of Health Affairs, JAMA, and NEJM publications, is the empirical foundation on which the broader payvider thesis partly rests.

What Geisinger demonstrated is that the payvider model functions in rural markets where the health system has market dominance and the clinical infrastructure investment is sustained over long enough periods to change care delivery patterns. Both conditions are necessary. Market dominance without clinical investment produces a captured payer with no efficiency incentive. Clinical investment without market dominance produces quality improvement that competitors can free-ride on without bearing the investment cost. Geisinger’s rural Pennsylvania position satisfied both conditions over a period long enough to generate the outcomes data that established its reputation.

The Risant Health acquisition fundamentally changed Geisinger’s organizational context. Kaiser Permanente launched Risant Health in 2023 as a subsidiary for acquiring non-Kaiser community-based health systems and replicating the payvider model in markets where Kaiser does not operate. Geisinger was the first acquisition. The strategic logic operates in both directions: Geisinger gains access to Kaiser’s operational infrastructure, capital, and the analytical depth that comes from operating the world’s most studied integrated delivery and financing system. Kaiser gains a tested model for payvider replication in rural and regional markets that its own geographic strategy has not reached.

The implications for the payvider thesis nationally are significant. If the Kaiser-Risant-Geisinger model succeeds in demonstrating that Kaiser’s operational infrastructure can be deployed in non-Kaiser organizational contexts, it becomes a template for scaling payvider economics beyond the handful of organizations that have built integrated systems organically. The alternative payment model environment that CMMI is creating through AHEAD, ACO REACH, and the broader shift toward population-based payment is creating the external incentive structure that makes payvider capability valuable. Risant is the organizational vehicle for making that capability transferable.

Geisinger’s specific position within Risant, and what the integration has meant for its clinical programs, D-SNP strategy, and MA enrollment in Pennsylvania, will be among the more closely watched organizational experiments in health system strategy over the next five years. The rural payvider model that Geisinger built over decades is now the subject of a scale experiment funded by the most capitalized integrated system in the country.

Related Reading

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MCR-05_02 Becoming a Payvider: The Strategic Case for Provider Plan Ownership MCR-04_11 Private Equity in Medicare Delivery: Accountability, Quality, and the Care Model Question MCR-11_06 Ohio, Pennsylvania, and Michigan: The Rust Belt Medicare Reality