How Managed Care Is Changing What It Means to Lead a Health System

For decades, managed care was predictable. Healthcare organizations negotiated contracts. Renewed rates. Managed denials. Then hit rinse and repeat the following year. Revenue cycle teams managed the day-to-day, while executive leadership focused on broader issues related to growth, access and clinical transformation.

That operating model is disappearing, as managed care is becoming one of the most important drivers of financial performance. In 2026, managed care affects everything from reimbursement and revenue cycle to strategic planning and enterprise development. Amid the confluence of new pressures facing health systems, what was once viewed as an annual contracting exercise now demands greater executive attention and cross-functional leadership.

Healthcare organizations are simultaneously navigating several significant challenges:

• Growing payer friction: Nearly eight in 10 hospitals and health systems report that their experience with commercial insurers is moving in the wrong direction.
• Rising administrative burden: The cost of managing denied claims increased from $43.84 per claim in 2022 to $57.23 in 2023, a 30 percent increase in a single year.
• A changing reimbursement landscape: Medicare Advantage has become the dominant coverage model in many markets, introducing new reimbursement dynamics and utilization management requirements. 
• Increasing regulatory complexity: Federal oversight of Medicare Advantage continues to evolve, bringing greater scrutiny to prior authorization, payment practices and plan accountability. 

These changes are challenging the traditional contract-by-contract approach to managed care, requiring organizations to take a longer-term, strategic approach. Payer strategy is critical for an organization’s financial resilience, competitive position, physician alignment and ability to invest in future growth. Every contract shapes cash flow, care delivery, capital planning, physician economics and the capacity to pursue strategic priorities. 

Why the Managed Care Playbook Has Changed

Contracts are static financial agreements, but the rapidly changing environment can have significant impacts on the financial consequences. Changes in payer policy, authorization requirements, denial practices and reimbursement rules can materially alter contract performance mid-stream, long before there’s an opportunity to discuss modified financial terms.

The simultaneous and cumulative margin pressures facing health systems are changing the question executives should be asking. It’s no longer, "Did we negotiate a favorable contract?" Instead, the question should be, "Do we have the organizational capabilities to manage payer strategy continuously?"

Every payer decision has become interconnected with organizational strategy, and no managed care agreement exists in isolation. A well-negotiated contract can be undermined by shifts in payer mix, while favorable reimbursement rates may lose value if administrative burdens continue to increase. 

Rather than evaluating contracts individually, heath systems should manage their payer portfolio as an interconnected strategic asset, assessing payer mix, reimbursement trends, utilization patterns and contract performance together to understand their aggregated impact on enterprise value.

Managed Care as an Enterprise Discipline

Managed care has traditionally lived in contracting or revenue cycles. Finance reviewed the outcomes. Operations managed the consequences. Value-based care teams pursued separate objectives. 

That disconnect, in margin-sensitive environments, can serve as a competitive disadvantage.

Leading organizations aren’t just tackling managed care through an enterprise lens. They’re also strengthening the data and intelligence they bring to payer relationships. This has traditionally been a lopsided exercise, with payers benefiting from greater visibility across markets and greater access to performance-analysis resources. Health systems are working to narrow that gap by examining payment accuracy, yield, administrative burden, utilization patterns and overall contract performance. This broader view helps them understand which relationships create value and which introduce unnecessary friction. And the resulting visibility helps leaders make more informed decisions about both contract strategy and operational priorities.

Organizations that consistently outperform are unifying finance, revenue cycle, managed care, value-based care and operational leadership to evaluate payer performance collectively — not as separate initiatives but instead as components within a single enterprise strategy. 

During a recent discussion with healthcare financial leaders led by Premier, representatives from Texas Health Resources (THR) described a management structure in which finance, revenue cycle and contracting leaders jointly evaluate payer performance, contract strategy and financial implications. Rather than operating independently, the Texas Health team approaches payer strategy as a shared enterprise responsibility.

A Different Way to Think About Managed Care Maturity

Building a more strategic managed care capability also requires understanding those forces shaping payer behavior. Health plans face many of the same pressures affecting providers, including tightening margins, evolving regulatory requirements and rising administrative complexity. Organizations that understand these dynamics are likely better positioned to negotiate agreements that align incentives, improve operational performance and create long-term value for both parties.

If the rules have changed, healthcare organizations need a different way to evaluate whether they are keeping pace. Rather than measuring success solely by reimbursement rates or denial performance, the framework below helps organizations evaluate their managed care aptitude across four stages of organizational maturity:

• Reactive: Organizations respond to payer activity as it occurs.
• Operational: Foundational processes begin to improve visibility and consistency.
• Analytical: Data, benchmarking and cross-functional accountability begin informing decisions. 
• Strategic: Payer strategy becomes integrated with enterprise strategy, predictive analytics and board-level governance. 

The true value of the framework lies not in assigning a score, but rather in helping leaders recognize that payer strategy has become an organizational capability that develops over time.

The most telling observation Texas Health leaders shared in their conversation with Premier was that they believe many organizations still operate somewhere between the first two stages. This isn’t necessarily because they’ve ignored the reality in front of them. Rather, the market itself has changed more quickly than many health systems have been able to respond and adapt. 

Advancing from reactive contract management to a more strategic managed care capability requires more than better negotiations. It demands stronger analytics, broader market intelligence and the ability to connect payer strategy with financial and operational decision-making across the enterprise.

Through its Financial Transformation Advisory Practice, Premier partners with health systems to build those capabilities. By combining reimbursement expertise, utilization data, predictive analytics and extensive payer-side experience, Premier helps organizations evaluate their managed care portfolio, strengthen contract strategies and create a more sustainable approach to payer performance. 

Most Organizations Haven’t Reached the Highest Managed Care Stages

For decades, healthcare leaders have talked about transformation: digital. Workforce. Clinical. Managed care warrants a place at this table.

As reimbursement becomes more complex and financial pressures intensify, healthcare organizations will differentiate themselves not only through clinical excellence or operational efficiency, but through their ability to understand, anticipate and strategically respond to payer dynamics. 

The health systems best positioned for the next decade won’t necessarily negotiate the highest reimbursement rates. They’ll build the organizational capabilities to continuously understand payer performance, anticipate market shifts and align financial, operational and clinical decision-making around a common strategy. 

That’s the difference between managing contracts and managing enterprise value.

As managed care evolves into a strategic enterprise capability, healthcare leaders need a new playbook for navigating an increasingly complex reimbursement environment.

Watch our on-demand webinar to learn how leading health systems are transforming their managed care practices, why managed care has become a board-level issue and what executives should prioritize next as they compete in the new margin battleground.

Through the launch of its Managed Care Collaborative, Premier has seen health systems respond to these challenges in different ways. Some continue to manage payer relationships reactively. Others are building the enterprise capabilities needed to anticipate challenges, align decision-making and use data to guide strategy.