Hello, and welcome back to this week’s edition of the Gist Weekly, where we deliver executive-level commentary and insights from the healthcare industry. One programming note up top, we’ll be taking off next Friday to enjoy a nice Thanksgiving break, and we hope you do too. 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.
- Trump picks HHS and CMS nominees. Last week, President-elect Donald Trump announced that Robert F. Kennedy, Jr. would be his nominee for Secretary of Health and Human Services (HHS). He followed this up on Tuesday with his selection of Dr. Mehmet Oz as his nominee for the Centers for Medicare and Medicaid Services (CMS) Administrator. If confirmed, the two men would replace Xavier Becerra and Chiquita Brooks-LaSure, respectively. Kennedy, who ended his independent presidential campaign and endorsed Trump in August, has become known for his heterodox views on public health, including vaccine skepticism and opposition to water fluoridization. Dr. Oz, first famous as a TV personality and more recently a Republican candidate for Pennsylvania Senator, is a strong proponent of Medicare Advantage, having co-authored an op-ed advocating for “Medicare Advantage for All” in 2020.
- The Gist: These nominees, especially Kennedy, hold a number of personal beliefs at odds with the public health consensus. They are both likely to be confirmed, however, as the last cabinet nominee to be rejected by the Senate was John Tower in 1989. (This does not include nominees who have chosen to withdraw themselves from consideration, as former Representative Matt Gaetz has just done.) Should they be confirmed, they will be responsible for implementing not their own but President Trump’s agenda, the specific priorities of which also remain relatively undefined. However, possible consensus points between Trump and his nominees include public health cuts and deregulation, greater scrutiny of pharmaceutical companies, and a favoring of Medicare Advantage over traditional Medicare.
- Major PBMs sue FTC over insulin pricing action. On Tuesday, CVS Health, UnitedHealth Group (UHG), and Cigna filed a lawsuit against the Federal Trade Commission (FTC), arguing that the agency’s administrative complaint targeting the insulin pricing tactics of their pharmacy benefit managers (PBMs) is unconstitutional. The PBMs of these companies—CVS Caremark, UHG’s OptumRx, and Cigna’s Express Scripts—control about 80% of the PBM market. The FTC’s complaint, filed in September in an administrative court, alleges that the rebate schemes of these PBMs have artificially raised insulin prices for some consumers. The three payers will argue before the US District Court for the Eastern District of Missouri that the FTC’s in-house proceedings violate their due process rights under the Fifth Amendment.
- The Gist: The increasingly messy battle between the FTC and PBMs may become moot should the next administration pursue a different tack with PBMs, but this case also could have significant constitutional implications if it proceeds. In its 2024 term, the Supreme Court ruled, on Seventh Amendment grounds, that the Security Exchanges Commission’s use of an administrative law judge violated the defendant’s right to a jury trial. Recent appeals court decisions have affirmed the FTC’s administrative law process, but the Supreme Court has yet to directly weigh in on this aspect of the FTC’s powers. In either the case of the FTC dropping its complaint or the courts restricting the FTC’s administrative law powers, legislative interventions remain on the table. Congress is currently considering various PBM reforms, and 17 states have passed laws targeting PBMs in 2024 alone.
- DEA, HHS extend controlled substance telehealth flexibilities a third time. Last Friday, the Drug Enforcement Agency (DEA) and HHS jointly issued another extension of telehealth flexibilities allowing clinicians to prescribe controlled substances without an initial in-person appointment, as well as across state lines without a separate DEA registration, contingent on medical licensing. These requirements, originally waived during the COVID pandemic, were set to expire with the end of the federal public health emergency in May 2023, only to be extended to November 2023, then through the end of 2024, and now through the end of 2025. The two agencies have been working on a permanent standard for telehealth prescriptions of controlled substances since at least March 2023, when they promulgated two notices of proposed rulemaking on the subject that received over 38K public comments. This latest extension is meant to allow providers time to adjust to a final rule on the matter, although regulators have not indicated when those regulations will finally be released.
- The Gist: Providers may feel some mix of relief and frustration with this latest extension. It would be more disruptive to allow these flexibilities to expire, or to transition abruptly to more stringent regulations, but regulators have now taken years to craft a permanent solution. They’re attempting to balance concerns between preserving patient access, notably for opioid use disorder, and preventing prescription abuse, driven especially by online “pill mills” peddling Adderall and other stimulants. The matter is delicate and undeniably complicated, but these repeated, temporary extensions make it harder for responsible providers to plan for the future, while being permissive enough to allow bad actors to flourish.
Plus—what we’ve been reading.
- Free medical school not delivering desired outcomes. Published recently in the Atlantic, this piece dives into the efficacy of a new “popular social cause of the uber-wealthy.” Several prominent medical schools are now tuition-free thanks to the generous donations of philanthropists. These donors believe that without the burden of student loans, more graduates will pick lower-paying specialties and practice in underserved communities. Additionally, these benefactors believe this policy will encourage a more economically and racially diverse applicant pool. Despite the good intentions, research has illustrated that this approach has not delivered on these objectives and may have exacerbated persistent inequalities in medical school admissions.
- The Gist: Given the projected shortage of more than 68k primary care physicians by 2036, with a particular impact on non-metro areas, philanthropists have correctly identified this as a problem worth solving. However, their solution is apparently ineffective, since tuition is not as significant a motivator for medical students as their potential lifetime earnings. Young doctors are more drawn to high-paying specialties and care more about their work-life balance than previous generations. Increasing the overall supply of doctors, by investing in class size-expansion or advocating for higher residency funding, could better address these looming primary care shortages. Targeting disadvantaged students who are more likely to practice in underserved areas could also help.
Graphic of the Week
A key insight illustrated in infographic form.
More states and hospitals utilizing state-directed payments
This week’s graphic highlights the increasing prominence of state-directed payment (SDP) arrangements for Medicaid programs nationwide. Introduced in 2016, these payments were meant to encourage provider participation in Medicaid managed care organizations, thereby improving access for recipients. More than three quarters of states utilized SDP programs in 2022, compared to just 20% of states in 2017, and this growth has only continued. When comparing the 19 months prior to Feb. 1, 2023, to the 18 months following that date, the number of approved, unique directed payment arrangements increased 21% and associated spending rose nearly 60%. Additionally, hospitals now make up a greater share of approved payment arrangements compared to prior years. Thanks to these payments, hospitals are more financially stable and are better equipped to improve Medicaid access. Some prominent not-for-profit health systems put their SDP funds towards initiatives that have substantially improved care outcomes for underserved patients. With CMS finalizing a rule setting the upper limit for an SDP payment to a service’s average commercial rate, hospitals’ will hopefully be able to expand these efforts and provide more critical support for Medicaid beneficiaries.
This Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
Evolving dynamics in the radiology and imaging arena are requiring health systems to rethink their imaging strategy.
In a new article, Courtney Midanek, Adnan Qureshi, and Quinn Manfredini explore how factors such as continuing growth in the radiology market, a shift in imaging services to the outpatient market, and a limited expected supply of radiologists are reshaping the imaging market. They describe how partnerships with major regional and national imaging companies can offer a unique value proposition for health systems looking to meet the radiology and imaging needs of their patients.
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 Scott Christensen, Senior Vice President for Kaufman Hall’s Strategy and Business Transformation team. He recently wrote about retail healthcare disruptors. In the first part of their conversation, they talked more about some of the negative trends impacting retailers and their healthcare business.
The Monday after Thanksgiving, Dec. 2, we’ll hear the second half of JC and Scott’s conversation, where they talk more about what hospitals and health systems can learn from the retail healthcare delivery space.
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 on the first Friday of December with a new edition. In the meantime, have a lovely Thanksgiving! If you find yourself missing our content during the break, check out our Gist Weekly archive to peruse past editions. We also have all of our recent “Graphics of the Week” available here.
Best regards,
The Gist Weekly team at Kaufman Hall
