The online version of STAT’s weekly email newsletter Health Care Inc. didn’t come out yesterday in honor of MLK Day, but we’re back right after Indiana University became national champions. I also want to know why the maple leaf emoji is used so frequently in patients’ medical charts. Palm over face emoji. Runner emoji, mail emoji: [email protected].
NEW TRUMP HEALTH PLAN
Don’t spend a lot of time analyzing President Trump’s “Great Healthcare Plan.” After Trump released the 825-word “fact sheet” last week, PR reps and others filled my inbox, ready to offer just about anyone to give a take on it. But it’s less of a plan and more of a political document, just like the budgets that every president releases.
This plan, in particular, is a piece of paper that can be waved around during a midterm election year in which Americans are getting hammered on their health care premiums. It’s the Trump administration learning what medical loss ratios are and wanting hospitals to print out pricing spreadsheets and plaster them on their walls.
But it would not reshape the structure of Medicare, Medicaid, or the health insurance plans people get through their jobs. It would not repeal Obamacare. And it would require Republicans in Congress to act, even though they have explicitly shot down some of these ideas in the recent past — like the most-favored nation policy for drug prices.
Many people will live their lives, never having read a word of it. And that’s OK. You don’t have to either. But my colleagues Daniel Payne, John Wilkerson, and I did just in case.
Hospitals kept a low profile, on stage and off
Usually at the J.P. Morgan Healthcare Conference, nonprofit hospital presentations are full of chest-thumping about market share and investment income war chests. This year, not so much, my colleague Tara Bannow reports from the confab.
Tara searched her Otter transcripts and found 17 examples of executives talking about stability or consistency. Ascension pointed to its “stable operating performance,” and SSM Health touted its “culture of stability.” And instead of bragging about being more profitable than its peers, AdventHealth declared that “it all begins and ends with consistent financial performance.”
Tara found a similar vibe at a swanky yacht club on the sidelines of JPM, when hospital leaders enjoyed wine and caviar and then listened to CMS Administrator Mehmet Oz and four of his top officials speak. Even though Oz dismissed concerns about a $1 trillion cut in Medicaid funding over a decade as “catastrophizing,” insinuated that a lot of Medicaid enrollees are couch potatoes, and called state-directed payments “legalized money laundering,” most executives nodded along and, talking to Tara afterward, declined to push back on any of it.
Hospitals were somewhat coy over their use of AI. AdventHealth is transforming its 13,000 inpatient rooms into “virtual care smart rooms.” Intermountain has processed over 70,000 IT help desk tickets using an AI tool.
But hospitals’ presentations also showed the technology’s potential to exacerbate the divide between the haves and the have-nots. Wealthier systems like Mayo Clinic and Cleveland Clinic had plenty to say about how they’re deploying AI, whereas those just trying to break even, like Ascension, CommonSpirit, and SSM, didn’t mention it as much.
It’s a theme Eric Klein, a lawyer who co-leads Sheppard Mullin’s national health care practice, hears frequently: Hospitals that can’t afford to invest in AI “need to cut services or partner or figure out a way to raise enough capital to do the transformative work with AI.”
Klomp and circumstance
While in San Francisco, Tara spoke with Chris Klomp, the director of Medicare at CMS, who reports to Oz.
One of the Trump administration’s first actions on Medicare Advantage was expediting audits known as risk adjustment data validation, or RADV. But officials announced this program even though CMS has been stuck in litigation over those same RADV audits. So Tara asked him, what’s up with all that?
Klomp: “We can continue the audits under the status quo. For us to audit all the claims would probably be physically impossible because it would cripple the system. Like, literally, there would be no one providing care because everyone would be doing audits. And so we’re working on some alternatives. I won’t talk about those especially because they’re still in play.”
“I’d say the bigger principle is we want patients, lawmakers, the American people to have confidence that MA is being a wise steward of the taxpayer resources that we administer, that that industry makes use of to provide care. It’s pretty clear that right now, trust, for whatever reason, has been compromised. We are serious about ensuring a restoration of integrity in that program. And there are a variety of ways to do that. RADV is one tool of many. But we’re totally serious about it, and we’ve hardly relented.”
Going up while going down
Total Medicaid spending increased by 7%, hitting almost $1 trillion in the 2025 federal fiscal year, according to federal data analyzed by the consulting firm Health Management Associates. That happened even though Medicaid enrollment dropped by 3%. What gives?
The explosion of state-directed payments.
It’s not the prices? It kinda still is?
Last summer, CMS’ actuaries informed us we are now a $5.3 trillion health care system. Those numbers remained the same in their final 2024 analysis released last week.
Mike Chernew, a health policy professor at Harvard Medical School, wrote an accompanying article in Health Affairs explaining how the growth in health spending in 2024 was “not the prices, stupid” — a riff on the famous 2003 article that details how the U.S. spends more on health care than other countries simply because it charges higher prices.
There’s a lot of truth to Chernew’s thesis: CMS actuaries told reporters last week that “non-price” factors like use and intensity of care were bigger factors in the spending growth. In a recent article by Chernew, the focus was on hospitals acquiring physician practices and the impact of AI on coding wars that are driving up healthcare spending. Chernew highlighted the contradiction in the healthcare system, pointing out that the use of expensive products is a significant factor in the rising costs. The U.S. spends a staggering amount per person on healthcare compared to previous years, indicating that not only are more services and drugs being utilized, but they also come at a higher price.
One of the major contributors to increased healthcare spending is the rising prices of hospital care, which saw a 3.4% increase in 2024. This was the highest rate of increase since 2007, with hospital executives openly admitting to planning significant price hikes post-pandemic. With new negotiated contracts set to take effect in 2026, it is expected that prices will continue to rise substantially in the future.
In the healthcare industry, there have been several notable developments. Kaiser Permanente recently settled allegations of Medicare Advantage fraud, agreeing to a $556 million settlement. Hospitals are pressuring CMS to change a survey regarding drug costs, while a study at the University of California San Francisco found that AI scribes can boost physician revenue by $3,000 per year. Pharmaceutical company Genentech made a significant shift in its pharmacy benefit manager, opting for a smaller PBM, Rightway.
On the labor front, nearly 15,000 nurses in New York City went on strike, marking the largest nursing strike in the city’s history. Additionally, Kaiser workers in California and Hawaii are set to strike as well. Employers are increasingly opting for “level-funded” health plans, but insurance expert Frank Pennachio warns of the hidden risks associated with these arrangements.
In a major acquisition move, Boston Scientific announced the purchase of Penumbra for $14.5 billion, solidifying its position as a key player in the cardiovascular medical device market.
Overall, the healthcare industry is facing challenges on multiple fronts, from rising costs and labor disputes to evolving insurance arrangements and mergers. It is crucial for stakeholders to navigate these complexities to ensure the delivery of quality care while managing costs effectively.
