Providence Health Plan’s decision to wind down most of its insurance business starting in 2027 is the latest example of a payvider model failing, and it raises a question of who controls where patients go next when the health system that owns both the plan and the referral network exits the payer business.
What Providence is shutting down and when
Providence will shutter most of its insurance business beginning in 2027, ending more than 40 years as a regional payer and affecting 440,000 members. The plan reported a $102 million net loss on $2.5 billion in revenue in 2025, driven by rising utilization and a prior drop to a 3.5-star Medicare Advantage rating. Providence Health Plan will exit the ACA market, stop renewing employer group contracts, and transfer its Medicaid and Medicare supplement programs to other organizations.
“We are doing this because changes in the healthcare environment, including state and federal regulation, have made it increasingly difficult for regional, not-for-profit health plans like PHP to thrive,” Providence President and CEO Erik Wexler said. “And it has become harder to support both running a health plan and delivering care. Meanwhile, the larger insurance companies have consolidated significantly, giving them the size and resources to operate more efficiently. This has left us in an untenable situation.”
Providence is not alone. Mr. Wexler said it is “disappointing to see this trend of provider plan closures across the country,” signaling that Providence’s exit reflects a broader structural problem for health system-owned regional plans rather than an isolated financial failure.
The payvider thesis and where it breaks
The payvider model — health systems owning insurance plans to control the full patient journey — was built on the logic that integration reduces friction and cost. Health system-owned plans are in the unique position to own an insured person’s journey as both a patient and a member, but the execution can sometimes miss the mark, EY-Parthenon principal Deblina Ghosh told Becker’s.
“Historically, we have seen payers start with horizontal scale first, like adding members, markets and improving their negotiating leverage overall. Then it moved toward vertical integration. You saw a lot of PBM, care delivery, home health and any of the services around the premium dollar that the member is paying,” she said. “Right now, what you see is an era of optimization and discipline. They are very deliberate on where they put their capital and they are very focused on answering the question of, ‘Where do I have the right to win?’”
The Providence collapse is the execution failure made concrete. The plan achieved four-star MA ratings for both the 2026 and 2027 revenue years and implemented significant rate increases, and still could not sustain viability against national payers with greater scale, capital and administrative efficiency.
A handful of health plans planned to wind down operations leading up to 2026, including plans run by Urbana, Ill.-based Carle Health and Ann Arbor-based Michigan Medicine. Carle Health’s Health Alliance had more than 380,000 members, and FirstCarolinaCare — owned jointly with Pinehurst, N.C.-based FirstHealth of the Carolinas — had more than 15,000 members. U-M Health Plan had roughly 64,000 members.
What it means for ASCs in Providence’s markets
For independent ASCs in Oregon and Washington, Providence’s exit creates both a risk and an opportunity. The risk: 440,000 members currently covered by Providence Health Plan will need to find new coverage for 2027. If those members migrate to national payers with narrower networks or different facility preferences, ASCs contracted or preferred under Providence may find themselves outside the new network or negotiating rates from scratch with a payer.
The opportunity: Providence said its facilities will remain available through other insurers’ networks and that it is working to be included in additional networks ahead of the transition. That outreach creates a window for independent ASCs to make the same move.
The broader pattern
Providence is the most prominent recent closure but reflects a pattern that has been building. More than 23 health systems have dropped Medicare Advantage plans in 2026 alone, including Providence Clinical Network going out of network with UnitedHealthcare MA in January. The MA network exits and the full plan closures represent two versions of the same underlying dynamic: health systems are retreating from the insurance function under financial pressure, leaving the contracting relationships of those plans governed up for renegotiation.
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