ALBANY, N.Y. – March 20, 2025 – As a physician-founded, not-for-profit health plan, CDPHP values the partnerships we share with local health care providers. The plan has a history of working tirelessly with local doctors to improve the quality, accessibility and affordability of care in the communities we serve. However, CDPHP along with other health plans in New York state and nationwide have faced unprecedented financial pressures, especially as the cost and demand for health care continues to rise. The financial pressures have required the plan to make the difficult yet necessary decision to not return its 2024 provider withhold.
What’s a Provider Withhold?
A provider withhold is a portion of health care dollars held by a health plan as part of a risk-sharing agreement with doctors. According to our provider contracts, payment of the withhold is contingent upon both the provider meeting certain quality metrics and the health plan’s financial performance.
“CDPHP recognizes that our decision will negatively impact our deeply valued provider partners. However, given ongoing market pressures, this decision was necessary to strengthen the plan’s long-term financial health,” said CDPHP chief financial officer, Paul Kahlon.
What’s Driving Costs?
Changes to the Medicare Wage Index by the federal government have resulted in CDPHP reimbursing hospitals an additional $150 million more for care provided to Medicare Advantage members without a corresponding premium increase from the federal government. Because CDPHP has more than 50 percent of the region’s Medicare Advantage market share, the Medicare Wage Index is having a highly disproportionate effect on CDPHP.
At the same time, the industry as a whole is grappling with the rising cost of health care services. These cost increases are due to a combination of factors, including an increased demand for high-cost drugs, new taxes, fees, and mandates imposed by state and federal governments, as well as skyrocketing hospital costs.
While CDPHP understands the critical role our hospital partners play in keeping our community healthy, hospital care is the single largest cost driver in the state at 39 percent of overall health care spending – and rising, according to a recently published report by the Community Service Society of New York. This figure alone is up twice as much as wages and four times as high as inflation over the last 10 years.
In addition to rising hospital costs, CDPHP is also seeing an increased demand for health care services due to an aging population that is historically sicker than previous generations:
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59 percent of CDPHP members are living with two or more chronic conditions
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40 percent of adult CDPHP members have been diagnosed with one or more mental health conditions
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30 percent of adult CDPHP members have been diagnosed with obesity
In 2024 alone, CDPHP spent more than $2.6 billion on medical and drug benefits for members, an 11 percent increase over 2023.
These factors combined have led to multiple years of losses for our not-for-profit health plan, which budgets for slim net margins below 1 percent. The small financial margin leaves very little room to withstand unprecedented financial impacts, like changes to the Medicare Wage Index. CDPHP recently reported a net loss of $168 million for 2024, and, unfortunately, our plan is not alone, as some health insurers have reported operating losses of more than one billion dollars.
What is CDPHP Doing About It?
Unlike larger, for-profit health insurers which have exited the market due to the Medicare Wage Index, CDPHP is committed to the community we call home. We are working with our partners in government – as well as other not-for-profit health plans in Upstate NY – pushing for relief from the federal government.
With regard to the contentions by Capital Cardiology Associates (CCA), we are working with all of our provider partners to collaboratively develop community-based solutions for improving quality of care and ensuring fair payments to providers. It is regrettable and counterproductive for CCA, and their for-profit, private equity owners, to publicly criticize CDPHP for its efforts.
“As a not-for-profit health plan, CDPHP works hard to be a good steward of our members’ premium dollars,” said CDPHP chief financial officer, Paul Kahlon. “To manage rising costs, we’re taking a thoughtful and strategic approach to reducing administrative expenses while maintaining our high standards of service. This includes implementing process improvements, technology enhancements, and operational efficiencies to focus resources where they matter most – delivering value to our members, employer groups, and provider partners. While we navigate our financial turnround, we are making difficult yet necessary decisions to ensure the long-term stability of CDPHP and our ability to serve this community for years to come.”
CDPHP cannot shoulder these issues alone. We will continue to work with the entire health care system to find even more ways to come together to preserve access to high-quality care and build a more sustainable health care system for the future.
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About CDPHP®
Established in 1984, CDPHP is a physician-founded, member-focused and community-based not-for-profit health plan that offers high-quality affordable health insurance plans to members in 36 counties throughout New York. CDPHP is also on Facebook, X, LinkedIn, and Instagram.