As a growing number of hospitals and health systems walk away from Medicare Advantage contracts, Cleveland Clinic is moving in the opposite direction, betting that the path forward runs through the payer’s side of the table, not away from it.
“I understand the fight back that the provider sector is trying to do, but for Cleveland Clinic and the services that we provide to the Medicare population, that is not a good strategy for us,” Dennis Laraway, executive vice president and CFO of Cleveland Clinic, said during an April 13 fireside chat at Becker’s Annual Meeting. “We’re looking to flip the model. We want to be on [the payer] side of the table. We want to be in a shared position of managing the member, managing the total cost of care — not just being paid claim by claim for episodic care. So we’re willing to put our system at risk and take delegated premium.”
Cleveland Clinic entered into two value-based care risk agreements at the start of 2025, and the system now has three such arrangements in place, according to Mr. Laraway. The health system has set a goal to reach $1.4B in Medicare Advantage premiums by 2028.
The strategy is to take delegated premium from Medicare Advantage plans — effectively accepting financial responsibility for managing the total cost of care for attributed members — rather than remaining locked in the traditional claims-based model that has generated mounting friction across the industry.
The model carries real risk, particularly given that Cleveland Clinic’s patient population skews toward high-complexity cases. The system holds the highest Medicare case mix index in the country, at 3.28, according to Mr. Laraway, who argued that risk can be managed through rigorous documentation and coding that accurately reflects patient acuity in the premium.
“If we do a really good job of documenting the risk of our members and the services that we provide, and that’s harvested upstream to the premium being delegated to us, then it will align with the risk of the population and the cost that we’re incurring,” he said. “But there’s a lot of ifs in that equation.”
The “new muscles” Cleveland Clinic is building include managing panels of members, deploying point-of-care tools for primary care physicians and specialists, harvesting HEDIS measures and quality metrics tied to Medicare Advantage star ratings and premium revenue, and accurately capturing the risk scores and risk factors that flow back into delegated premium.
“We’re building new capabilities and new competencies with our own providers and our alliance partners,” Mr. Laraway said. “This helps us be a better community health system, not simply an academic medical center enterprise. It allows us to align with providers in our community and it allows us to get paid and drive a margin for managing care, not just rendering care.”
After one year under the delegated model, Mr. Laraway said Cleveland Clinic is about at break even.
“We got those contracts pretty much right,” he said. “It’s really important to understand what a good contract looks like in risk delegation compared to what a bad one looks like. We’re hitting the sweet spot; we just need to develop some more competency and muscle along the way.”
Cleveland Clinic has its sights set on expanding the model to include UnitedHealthcare and Elevance, two of the largest Medicare Advantage players in the country.
“I really want United and I want Elevance Anthem to be Medicare Advantage risk delegation to Cleveland Clinic,” Mr. Laraway said. “It’ll change our relationship with those payers. It’s not that we don’t have a good one today — we do — but it’s claims based, it’s rate based, it’s a grind. I think we all in this industry know what that activity is like. It could be a different relationship, far more productive, less costly, less friction. So I’m hoping we’re going to be successful in getting them to the table.”
On the broader question of technology and prior authorization friction, Mr. Laraway pushed back against the narrative that health systems should use AI to fight back against insurers deploying the same tools to deny claims.
“That is a zero sum game and is not good for healthcare,” he said. “We have been playing a zero sum game between payer and provider for a long time and that has us where we are today — a lot of friction, denied claims and patient involvement in some of this administrative activity that has our HCAHP scores and our experience ratings at low points, which also affect premium dollars and star ratings and so forth.”
Instead, he argued, AI should be deployed collaboratively between payers and providers, building shared rules engines that allow the vast majority of claims to be auto-adjudicated without dispute.
“If we can use AI productively to get behind the rules engines and create agreement — a contract between payer and provider — then 95% of claims should be auto pay. What we’ll be arguing about with the payer is over what time period are you going to pay that claim,” Mr. Laraway said. “I could tolerate the time drag on the money; I’ll figure that out some other way. But the friction and the denial rates and the cost that we spend going from 15%, 20% initial denial rates to sub-2% as a net controllable loss — that’s a lot of cost between those two endpoints. And the payer’s incurring that cost too. That is wasteful.
“We need to use technology smarter — like partners. That’s one reason we moved to premium in Medicare Advantage. We need to learn how to partner with the plans and make this a better experience up and down the continuum and drive a lot of cost and waste out of the U.S. healthcare system.”
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