Why Flat MA Reimbursement = More Denials and Financial Strain 

By Cheryl Ericson, RN, MS, CCDS, CDIP  

On January 27, 2026, CMS announced that 2027 Medicare Advantage (MA) reimbursement rates will remain nearly unchanged from 2026, marking a significant development for the healthcare revenue cycle. This decision is so consequential that U. S. News and World Reports estimate U.S. health insurer shares would lose about $80 billing in market value.  

Healthcare finance operates as a zero-sum game. When reimbursement stagnates, payers protect margins by any means necessary, which may include increasing denials. With minimal base rate growth and ongoing pressure to control medical cost inflation, insurers will increasingly use denials and utilization management tactics to maintain profitability.

Payers Have Already Gone “All In” on the Risk Model Adjustment  

Over the past decade, managed care plans, especially those with a significant Medicare Advantage (MA) presence, have positioned themselves to benefit from MA’s risk-adjusted payment model.

Payers have invested in: 

• Proprietary technology platforms that aggregate, analyze, and stratify risk data; AI-enabled algorithms to optimize risk adjustment; and automated denials workflows. 
• Ownership or affiliation with physician practices.

This strategy increased revenue share. However, with CMS proposing a 0.09% net increase for 2027, well below expectations, the approach now faces a critical turning point. 

Flat Reimbursement and HCC Scale Back Doesn’t Reduce Cost — It Reduces Margin 

Flat reimbursement does not reduce costs. Inflation in labor, pharmaceuticals, chronic care, and outpatient utilization persists. At the same time, changes to Hierarchical Condition Category (HCC) scoring and risk adjustment are expected to further reduce revenue needed to maintain margins. 

With limited growth in capital income, payers will likely respond with stricter claim adjudication. The healthcare industry is also likely to see more health plans implement reimbursement policies that reduce hospital payments like Aetna’s decision to reduce inpatient hospital payments using MCG criteria. Expect more medical-necessity denials, aggressive plan edits, tighter pre-authorization requirements, and increased pre- and/or retrospective reviews are expected to increase. Hospitals should prepare for rising denials as payers shift focus from growth to margin protection. 

What This Means for Hospitals 

• Longer revenue cycle timelines, 
• A higher volume of complex and contested denials,
• The need to investment in technology and staffing to minimize revenue leakage and appeal denials.

Hospitals, especially those with large Medicare and Medicare Advantage populations, face two main concerns: 

1. Expense inflation continues to outpace revenue growth. 
2. Reimbursements remain flat, widening the cost-to-care gap.

Strengthening revenue integrity through efficiency and expertise is now essential. External Physician Advisor experts can help hospitals anticipate payer tactics. 

Why External Physician Advisor Support Matters 

As Medicare Advantage pressure increases, hospitals need more than reactive denial management. They need proactive clinical and revenue protection. 

A Physician Advisor team that understands both patient care and payers’ tactics can help hospitals: 

• Spot denial trends early, so problems are addressed before they impact revenue. 
• Strengthen documentation to clearly support medical necessity, and appropriate DRG assignments.
• Reduce preventable denials by aligning revenue cycle decisions with payer rules from the start. 
• Support physicians in real time with guidance on status, utilization, and documentation.
• Protect earned revenue by improving claim defensibility and appeal success. 
• Reduce the administrative burden placed on bedside providers associated with defending admission orders. 

Instead of constantly playing defense, hospitals gain a proactive Physician Advisor partner at Brundage Group who helps protect revenue, strengthen clinical decision-making, and helps hospitals play offensive to stay ahead as payer scrutiny intensifies.