Hello, and welcome back to this year’s final edition of the Gist Weekly. We’ll soon be enjoying our holiday break, before returning to your inboxes on Jan. 10, 2025. In the meantime, we’d like to wish all of our readers a restful holiday season and happy new year. As always, we appreciate your continued readership and invite you to forward this email to friends and colleagues—please encourage them to subscribe as well!
In the News
What happened in healthcare recently—and what we think about it.
- Congress scrambles after Trump and allies quash stopgap spending bill. After congressional negotiators reached an apparent deal on Tuesday to fund the government through March 14, 2025, President-elect Donald Trump and Vice President-elect JD Vance announced on Wednesday their opposition to the bill, highlighting “Democrat giveaways” and the debt ceiling as key concerns. Elon Musk, set to co-lead the new Department of Government Efficiency, also contributed to the chorus of opposition, and the combined pressure led Speaker Mike Johnson to pull the bill. His replacement bill, which stripped some measures and added a debt-ceiling increase, was voted down Thursday night. A government shutdown would begin on Saturday unless new legislation is crafted and passed before then. Healthcare items featured in the scuttled deal included a Medicare telehealth and hospital-at-home extension, reductions to disproportionate share hospital (DSH) and Medicare physician payment cuts, and transparency-focused pharmacy benefit manager (PBM) reforms.
- The Gist: As of this newsletter’s publication, Congress is working on its third effort to reach a funding agreement, with a government shutdown remaining a distinct possibility. Had the original bill been passed, we would have discussed its healthcare implications. Instead, Congressional dysfunction currently threatens several commonsense, bipartisan healthcare policies, such as the Medicare telehealth extension. The scheduled DSH and physician payment cuts could also be left in place as ways to reduce federal spending, which would result in significant hits to providers. However, the possibility remains that the healthcare provisions included in the original deal ultimately still become legislation, whether in this Congress or the next, which in the meantime leaves the healthcare sector uncomfortably in limbo.
- Report projects impact of upcoming CMS bundled payments model. Last week, the Institute for Accountable Care published a policy analysis of the new mandatory bundled payment program from the Centers for Medicare & Medicaid Services (CMS). The Transforming Episode Accountability Model (TEAM), which will begin on Jan. 1, 2026, and run for five years, requires 741 hospitals to take on financial risk for five surgical episodes, from initial hospital stay through 30 days after discharge. On average, these five surgeries comprise about 15% of hospitals’ total Medicare revenue. The model calculates preliminary hospital target prices based on a region-specific historical spending average, each hospital’s risk-adjustment factor, and a 1.5% to 2% discount factor. Hospitals can choose from three risk tracks with different limits on gains and losses, but the model funnels most hospitals into more risk over time. After comparing estimated target prices to actual 2023 spending per episode, the researchers projected that 62% of participating hospitals will see revenue reductions, averaging about a $1,350 loss per episode, while 38% will see increased revenue, averaging about a $900 gain per episode. The distribution depends greatly on region, with Denver, CO-based hospitals expecting some of the largest losses and Minneapolis-St. Paul, MN-based hospitals receiving some of the largest gains.
- The Gist: TEAM is an ambitious follow-up to CMS’s first mandatory bundled payment program, the Comprehensive Care for Joint Replacement (CJR) Model, impacting more than twice as many hospitals and about four times as much Medicare revenue. CMS has noted its voluntary models can suffer from adverse selection, which mandatory models avoid, although they produce their own distribution effects. Due to the regional-average calculations, the net financial effect of TEAM will be to transfer funds “from more expensive hospitals in urban centers to lower-cost institutions in smaller communities.” TEAM demonstrates CMS’s commitment to its goal of using value-based care to lower spending, but hospitals have taken issue with TEAM’s various design flaws, which they say amount to a “thinly disguised payment cut.” For example, the choice of procedures and its 30-day post-discharge window limit opportunities to manage post-acute spending, which the report noted to have previously been “a central aspect of provider strategies to manage spending in bundled payment programs.”
- Alabama woman becomes third pig-grown kidney recipient. On Tuesday, surgeons at NYU Langone Health announced the successful transplant of a kidney grown in a genetically modified pig, a process known as xenotransplantation. The recipient, a 53-year-old Alabama woman named Towana Looney, had waited eight years on the organ transplant list after starting dialysis treatment. Looney became the fifth patient to receive a porcine organ transplant, joining two other kidney and two heart recipients. The Food and Drug Administration approved the first pig-to-human organ transplantation in 2022, under its expanded access or compassionate use program. All four previous recipients died within months, but Looney, who was healthier going into the procedure, has exhibited a promising post-operation response so far.
- The Gist: With over 100K people currently on the national transplant waiting list, about 90% of whom need kidneys, xenotransplantation holds potentially revolutionary promise to alleviate a significant healthcare need. Recent reforms to the Organ Procurement and Transplantation Network may generate greater efficiencies, but a lack of organ supply is likely to remain a key bottleneck. Looney’s recovery will be closely watched, and scientists have admitted they still have a lot to learn, but her example is another step toward widespread xenotransplantation. Looking forward, genetically modified pig kidneys won’t necessarily need to match the efficacy of human-to-human transplantations to be considered effective. A better benchmark for comparison is dialysis, which comes with tremendous financial and lifestyle costs for only a 35% five-year survival rate.
Plus—what we’ve been reading.
- GLP-1s posing a challenge for ESI models. Published in The Atlantic last week, this piece relates the story of “unwitting subjects in an experiment about what happens when patients are given a life-changing drug—only to have it taken away.” In 2019, West Virginia’s Public Employee Insurance Agency (PEIA) began a small pilot program that covered Zepbound and Wegovy, two GLP-1s prescribed for weight loss, for some state employees. These drugs transformed many of the pilot participants’ lives, with high numbers reporting substantial weight loss and overall improved health. However, the pilot abruptly ended in March 2024, leaving patients without coverage for a drug that can be difficult on the body once treatment stops. Adding to enrollees’ frustrations, PEIA proposed premium increases of 14% to 16% this fall, partially due to the cost burden of GLP-1s prescribed for diabetes. Pilot participants reported their dissatisfaction with having to pay more for coverage because of a drug that’s no longer accessible to them, with one reflecting “she would first have to get sicker” to take the drug.
- The Gist: The rise of GLP-1 drugs, particularly for obesity, have put employer-sponsored insurance (ESI) administrators in a difficult position. With demand for the drugs supercharged by Wegovy’s approval for weight management in 2021, employers have been forced to wrestle with whether future healthcare savings could justify the high cost of broad coverage for GLP-1s. Their enrollees clearly desire these drugs, hoping to improve their present well-being and avoid contracting more serious diseases in the future, such as diabetes, which would qualify them for GLP-1s as well. Unfortunately, unless the prices of these drugs were to decrease significantly, most research suggests that the cost of GLP-1s still outweighs their predicted benefits for disease prevention and quality-of-life improvement, making it difficult for employers to justify weight-loss coverage approval.
Graphic of the Week
Rating agencies upgrade not-for-profit hospital outlook
In late 2023, S&P Global and Fitch Ratings viewed the not-for-profit (NFP) hospital sector as negative or deteriorating, reflecting the difficult financial position many were in following the pandemic. In recent weeks, S&P and Fitch upgraded their 2025 sector outlook for NFP hospitals to stable and neutral respectively, joining Moody’s Ratings, which held stable from last year. This week’s graphic illustrates the rating agencies’ latest views on NFP hospitals, which point to a promising but uneven recovery for the industry. Overall, the reports detail that stronger balance sheets, solid revenues, and improved demand have reduced the likelihood of covenant violations and strengthened NFP hospitals’ positions. However, challenges persist that could impede further progress. The labor market, payer environment, antitrust enforcement, and a new administration all present complications for the continued recovery of NFP hospitals. Nonetheless, the reports indicate significant improvement for the industry since the post-pandemic ratings downturn. Fitch’s report noted that the share of NFP hospitals with a stable outlook has reached a three-year high. Meanwhile, S&P reported that there are now almost twice as many NFP hospitals with favorable outlooks compared to unfavorable ones, a dramatic flip from 2023, which had a 3.1:1 ratio of unfavorable to favorable outlooks. These ratings changes reflect the hard work put in by NFP hospitals across the country to improve their financial performance and find new ways to serve their communities sustainably. However, the recovery remains “shaky” and incomplete, and hospitals still face a long road ahead as they reconfigure to a new normal.
This Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
As shown in the Graphic of the Week, the three rating agencies (Fitch, Moody’s, and S&P Global) have all issued stable or neutral outlooks for the not-for-profit hospital sector in 2025. While hospital and health system performance is stabilizing, there are still risks ahead.
At the 2024 Kaufman Hall Healthcare Leadership Conference, the not-for-profit healthcare leads for the three agencies joined Robert Turner and Lisa Goldstein for a panel discussion, summarized here. Among the top issues on their minds were the long-term status of supplemental funding programs, cybersecurity risks, and the fact that many organizations have not yet recovered from the Covid “hangover,” with the median operating margin still short of what the industry needs for long-term sustainability.
On our Podcast
The Gist Healthcare Podcast—all the headlines in healthcare policy, business, and more, in ten minutes or less every other weekday morning.
Last Monday, JC spoke with Ben Leonard, congressional healthcare reporter for POLITICO and the co-author of the POLITICO Pulse newsletter, about President-elect Donald Trump’s picks to lead several healthcare-related agencies and what they could signal about the administration’s healthcare priorities.
Starting this Monday, the podcast will remain dark through the holiday break, returning in 2025 for more breaking news and informative interviews from the healthcare world.
To stay up to date, be sure to tune in every Monday, Wednesday, and Friday morning. Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.
Thanks for reading! We’ll see you next year with our first edition of 2025. Should you find yourself missing our content, check out our Gist Weekly archive to peruse past editions. We also have all of our recent “Graphics of the Week” available here. We greatly appreciate your subscribership through yet another eventful year in healthcare.
Best regards,
The Gist Weekly team at Kaufman Hall
