On May 24, the House of Representatives passed One Big Budget Bill that now heads to the Senate for its version this week. The stakes for hospitals are high as the House version includes $700 billion (10-year) Medicaid cuts that adversely impact lower and working-class households and most hospitals.
The American Hospital Association has made its case against these cuts using advertising, lobbying and grass-roots advocacy through its vast network of state associations, trading partners and affiliated associations with a central message: the proposed Medicaid cuts put coverage for up to 14 million at risk and will force the closure of hospitals, especially rural and safety net hospitals that depend on Medicaid and Medicare payments disproportionately more than other hospital-types. It comes at a particularly difficult time for hospitals already facing lawmaker pushback against the 340B drug discount program, lawmaker support for site-neutral payments, anticipated changes in CMS’ value-based purchasing programs, shortages of clinicians in primary care and rural communities, growing labor costs and discontent in the hospital workforce, increased tension between hospitals and insurers and, perhaps, most importantly: erosion of public confidence.
Consider the findings below on four items in Jarrard’s 2025 National Community Benefits Survey* released last week:
Q- “Do you agree or disagree with each of the following statements:
- 69% agree that ‘Hospitals in the U.S. are mostly focused on making money’—up from: 23% in 2021
- 31% agree that ‘Hospitals in the U.S. are mostly focused on caring for patients’ vs.77% in 2021.
Q- “Community benefit” is often defined as providing services designed to improve community health and help increase access to healthcare. In general, how much community benefit do…”
| More than enough | About the right amount | Not quite/nearly enough | Don’t Know/
Not Sure |
|
| U.S. hospitals provide” | 9 | 28 | 57 | 6 |
| Hospitals in your area provide” | 9 | 31 | 45 | 15 |
Q- “Now, considering what we’ve asked about, do you agree that nonprofit tax-exempt hospitals…
| Strongly/
Somewhat Agree |
Strongly/
Somewhat Disagree |
Unsure | |
| …in the U.S. provide enough community benefits to keep their nonprofit status?” | 51 | 38 | 11 |
| …in your area provide enough community benefits to keep their nonprofit status?” | 49 | 34 | 17 |
Q- “Please indicate whether you think each of the following groups makes too much money, about the right amount of money or not enough money.”
| Too Much | About Right | Not enough money | |
| Hospitals & health systems | 54 | 36 | 11 |
| Hospital executives | 74 | 24 | 2 |
| Health Insurance Companies | 79 | 18 | 3 |
These findings suggest the public holds a somewhat negative view of hospitals, especially among younger adults. The majority of U.S. adults think hospitals are not addressing community needs adequately and spending too much on executive pay. But they think hospitals are ‘less quilty’ of making ‘too much money’ than insurers.
My take:
These findings are no surprise: the public’s trust and confidence in the U.S. health system and its three major institutions—hospitals, insurers, drug companies—has been eroding for 2 decades (Gallup Institutional Trust). Its doctors, nurses, pharmacists and frontline caregivers still remain among the most trusted, but even these have slipped. The public majority is more inclined to see hospitals as ‘big business’ than ‘big purpose’ and increasingly sensitive to distinctions between ‘corporate systems’ and struggling standalone facilities. And ownership status—public, private not-for-profit or investor-owned seems increasingly to be a non-factor for most.
As the Senate convenes to take up the Big Beautiful Bill, the public predisposition toward hospitals is operative: there’s recognition among some GOP Senators that Medicaid cuts will hurt rural hospitals more than others (i.e. Hawley R-MO), but a stronger sentiment among Senate GOP members that “waste, fraud and abuse” is widespread across healthcare and its hospitals.
The reality is that “waste, fraud and abuse” in hospitals is less than what the public (and Senate) thinks but still significant. Regulatory red-tape is a culprit. AI-enabled solutions that reduce administrative errors and clerical workforce are promising solutions. New approaches to outsourcing, performance improvement programs, clinical process re-design, workforce modernization et al are priorities (though rarely recognized in consumer polling). And every hospital is doing more with less—some quite profitably and some to stay afloat.
Changing the trajectory of public opinion about hospitals will require more than better messaging and messengers. Public opinion changes as a result of significant events and enduring symbols. An objective, comprehensive assessment of a hospital reputation that probes underlying beliefs about a hospital’s purpose, efficiency, effectiveness, affordability and desired role is a necessary start. Trade-offs between program availability, access and cost need exploration. How much “profit” is needed to sustain programs deserves probing. How local social services and hospitals can integrate programs and reduce redundancy is worth exploring with consumers. How community benefits, charity care, executive compensation plans, unpaid caregiving, scope of practice constraints, price transparency and chronic care management programs are designed would benefit from deeper understanding of how consumers digest messages and assess hospital efforts.
Hospitals are among the most complex businesses in the U.S. economy. They employ 7 million, half the physicians in the country, 31% of total health spending and 5.5% of the GDP. All pledge to serve the public’s interest. Some appear to do it better than others. Per Milliman, average annual costs (spending) increases for hospital outpatient care have averaged 6.1%, “far outpacing any other household expense. No other cost category has risen as steeply or as consistently over the past two decades. Outpatient facility care saw the largest increase of any category, rising 286% since 2005, reflecting the growing complexity of procedures now handled outside of inpatient settings. Over the past 20 years, healthcare costs have gone up by 188%, while wages have gone up 84%.” That’s why the public’s paying attention to hospitals: they’re impacting every household’s financial security and wellbeing.
Is the public losing confidence in its hospitals? Yes, but more for some than others, and responding requires more than better marketing.
Paul
PS: Today is UnitedHealth Group’s Annual Shareholders Meeting. It comes at a turbulent time for the company which is arguably among the industry’s most visible brands. Given its public visibility, instructions to shareholder attendees today are telling:
“The views of all shareholders are welcome. However, the meeting is not to be used as a forum to present general economic, political or other views that are not directly related to the business of the Company. Questions at the Virtual Annual Meeting shall be properly focused solely on the business of the Company. The meeting Chair or the Secretary may rule the following discussion topics as out of order and not present:
- irrelevant to the business of the Company or the conduct of its operations;
- derogatory or otherwise inappropriate (and such remarks will not be presented to shareholders during the Virtual Annual Meeting);
- related to pending or threatened litigation;
- substantially repetitious of statements made by other shareholders; or
- discussions related to personal grievances.
THANK YOU FOR YOUR COOPERATION. ENJOY THE MEETING.”
Resources:
Community Benefit Survey – Jarrard Inc
A turbulent month for UnitedHealth Group – Becker’s Payer Issues | Payer News
Sections in today’s Report
- Quotables
- Corporate Healthcare
- Economy
- Hospitals
- Insurers
- Physicians
- Polling
- Public Health
- Regulators and Lawmakers
Quotables
Shortell on system transformation: “A common thread in efforts to improve the system is to become more patient-centered, as emphasized in the landmark Institute of Medicine Report, “Crossing the Quality Chasm,” nearly 25 years ago. To date, various combinations of regulations/rules and incentives have been used in attempts to make the system more affordable, higher quality, safer, and more attuned to patient needs and preferences. These have met with mixed success at best. The missing element in many of these initiatives is the practical wisdom that enables clinicians and the organizations in which they work to adapt the regulations/rules and incentives to meet the changing needs, preferences, and circumstances of individual patients.
Practical wisdom is the moral will to do the right thing and the skill to figure out what doing the right thing requires. It draws on Aristotle’s belief that most human activities have their own, specific telos, or purpose, and that internalizing this purpose motivates people to do the activity well and virtuously. ..
The ground-breaking 2001 Institute of Medicine (now the National Academy of Medicine) report “Crossing the Quality Chasm” put forth 10 rules to continuously improve patient-centered care. Underlying all the rules (including the need to move away from care based on visits and fees) was the need for wise judgment in fostering trustworthy, healing relationships with patients. Practical wisdom is particularly needed to address ambiguous, complex, and uncertain situations that are associated with the chronic illnesses faced by a growing number of Americans. It is instructive to note that other countries, such as the Netherlands and Germany, that spend far less on health care than the US, have better health outcomes and health system performance. Their approach is characterized by having strong patient-centered primary care systems in which clinicians have considerable autonomy to use their judgment, their practical wisdom, in adapting rules/regulations and incentives to meet their patients’ needs.
Improving The US Health Care System: The Case for Practical Wisdom | Health Affairs
Scott on independent practice settings: “The share of doctors working in practices wholly owned by physicians is unraveling under compounding pressures. The cumulative impact of burdensome regulations, rising financial strain, and relentless cuts in payment poses a dire threat to the sustainability of private practices.
After adjusting for inflation in practice costs, Medicare physician payment has fallen 33% over the past quarter century, which has severely destabilized private practices and jeopardized patients’ access to care. Payment updates are necessary for physicians to continue to practice independently.”
Bruce Scott, MD, President AMA: Physician private practice ‘unraveling’ due to low payment, high costs, administrative burdens May 29, 2025
Jarrard on Tax Exempt Hospitals: “The term “community benefit” can be a proxy for a lot of things. Sometimes it may refer to community clinics. Other times to uncompensated care. It can mean education, access to healthy food, mobile care. And so much more.
For legislators, it’s increasingly used as a window into whether hospitals deserve to keep their tax-exempt status.
Against the backdrop of threats to Harvard University and others, the question of whether nonprofit institutions deserve their tax exemptions has gone from the fringes to the front page. If revoking tax-exempt status is now viewed as an available tool for “reining in” nonprofit institutions, hospital and health system leaders should take seriously that lawmakers could make an example of nonprofit hospitals.”
A Perception Chasm: Unmet Expectations and the Tax-Exempt Status Threat – Jarrard Inc May 30 ,2025
AMA on private equity in healthcare: “Private equity differs from other for-profit investments by aiming to maximize profitability while minimizing long-term holdings in such investments. Valuation for private equity acquisitions in health care has grown to over 150 billion dollars since 2020, and expansion continues. In the health sector, private equity has both clinical and ethical implications that deserve our close attention. One reason is that private equity firms are, generally, not interested in managing patient panels, clinician personnel, or service delivery streams. Another reason is that influx of private equity investment in health care tends to consolidate markets for health care services, undermining competition among health care organizations and escalating prices. Antitrust concerns are also clear and numerous. Despite that patients rarely benefit from private equity investment in health care, especially over the long-term, many clinicians and health care organizations sell their practices, health service delivery streams, and other key assets without seeming consideration for hyper-consolidation risk or compromised stewardship.”
May 2025: Private Equity in Health Care | Journal of Ethics | American Medical Association
AHA (Pollack) on Senate deliberation: “After approval in the House last week by a one vote margin, the One Big Beautiful Bill Act — a sweeping package that would enact many of President Trump’s legislative priorities on taxes, border security, energy and deficit reduction, including significant changes and cuts to Medicaid and other health care programs — now moves to the Senate…
However, the reconciliation package’s move to the Senate really is starting over in many respects as we expect the chamber to consider substantial revisions to the package. Even President Trump said, “I want the Senate and the senators to make the changes they want. I think they are going to have changes. Some will be minor, some will be fairly significant.”
The bottom line: At this point, nothing is settled, and we still have opportunities to influence the discussion in the Senate and the legislative package they will consider.”
Note: Pollack was quoted about the reconciliation bill in Sunday’s Meet the Press stating the negative impact its Medicaid cuts will have on hospitals, especially rural.
Rick Pollack, May 30, 2025 AHA Today
Corporate Board responsibility: “No matter how celebrated the leadership or bold the strategy, credibility with investors is earned daily. Past alliances don’t guarantee future loyalty, and silence in the face of shareholder unease can be costly.”
Corporate Board Member May 30, 2025
UnitedHealth Group Medicare Advantage strategy: “This is the fundamental flaw at the heart of Medicare Advantage. Plans are beholden to shareholders, who seek short-term profits. Profits are only achievable through the widespread denial of care. Meanwhile, plans use these profits to buy up entities along the health care supply chain, whose clinicians and other employees can do the insurance company’s bidding.
A growing number of members of Congress from both parties are sounding the alarm…
Meanwhile, traditional Medicare chugs along, costing Americans 20% less than its for-profit rivals while besting them on a majority of care metrics. It turns out the federal government is a much better steward of taxpayer dollars than rapacious executives and shareholders. Yet, traditional Medicare now only covers a minority of Medicare patients.
It’s time to face the truth. Medicare Advantage — like all private health insurance — is structurally unsound. Nothing short of a complete overhaul can cure the U.S. health care system of this disease.”
UnitedHealth’s collapse reveals the flaw at the heart of Medicare Advantage
LoSasso on health cost containment: “Everyone claims to support making healthcare cheaper and more efficient. But when concrete steps are taken to do exactly that — even when backed by evidence — they’re often met with outrage. That outrage rarely stems from legitimate concern about patient harm. More often, it comes from health systems or providers trying to protect a lucrative revenue stream. Add to that a third-party payment system that shields patients from the true cost of care, and you’ve got a perfect recipe for ever-rising healthcare spending…The broader pattern is clear: whenever one healthcare stakeholder tries to pay less for care that achieves the same outcomes, another stakeholder’s revenue is threatened — and the knives come out.
The result is a kind of cost-control paralysis. We talk endlessly about unsustainable healthcare spending, but when we identify solutions that save money and maintain quality, we recoil, most commonly because the people who benefit most from the status quo know how to mobilize opposition. To be sure, not every cost-containment policy is benign…
While there is no silver bullet to reform, we can’t make progress until we recognize this dynamic. We want an environment in which payers, both public and private, strive to pursue clinically sound, lower-cost alternatives — whether that means shifting infusion to the home, implementing site-neutral payment policies, or encouraging the use of generics. At the same time, we need to better connect patients to the real cost of care, through pricing transparency and benefit designs that reward high-value choices.”
Tony LoSasso, PhD, is chair of the Economics Department at DePaul University in Chicago
Why It’s So Hard to Cut Healthcare Costs | MedPage Today
Professional associations on alternative payment model continuation: “On behalf of the 24 undersigned physician and health care associations and more than 550 accountable care organizations (ACOs), health systems, hospitals, physician practices, health clinics, and accountable care stakeholders we call on Congress to support continued investment in Medicare’s transition to advanced APMs that take on accountability for costs and outcomes of their patient populations. APMs reduce health care spending and improve outcomes by providing physicians, hospitals, and other health care providers with incentives and tools to manage patient populations proactively. APMs focus on management of chronic conditions and reward prevention across the continuum of care. This approach has proven successful with Medicare as ACOs, the largest APM in Medicare, lowered spending by more than $28 billion over the last decade”.
APM-Stakeholder-Sign-On-Letter-2025-05-29.pdf
Bloomberg on CEO shortage, capabilities shift: “…the dominance of the traditional CEO factories is fast becoming a thing of the past. The companies most notably taking their place: consulting firms. Alumni of Accenture, Deloitte, PwC, EY and even little-known Swiss staffing firm The Adecco Group have all grabbed a bigger share of global CEO roles over the past 15 years… Meanwhile, the influence of storied CEO factories like GE and IBM has diminished…
The rise of a new type of CEO factory reflects new demands on CEOs. Businesses today increasingly sell services and “solutions,” putting a premium on fluency in digits and data. Globalized supply chains and markets require statesmanship to navigate a new wave of geopolitical storms. Corporate cultures have become more collaborative and purpose-driven, necessitating social skills like listening, empathy and the ability to communicate a vision. And technology keeps upending business models, with recent advancements in artificial intelligence underscoring the need for leaders who can anticipate disruptions. Soon, picking a CEO who doesn’t grok AI could be as dangerous as choosing one who didn’t grasp the Internet in 2000.”
Why So Many CEOs Start at Consulting Firms Like Accenture, PwC – Bloomberg
Business Insider on CEO turnover: “Nearly halfway through 2025, the number of CEO changes for S&P 500 companies is on pace to reach 14.8% for the year, according to data from The Conference Board and ESGAUGE. That would be the highest rate of turnover in data going back to 2001. The average over the same period is 11.3%.
In the first three months of the year, a record 646 US CEOs left their roles, according to Challenger, Gray & Christmas. That followed a busy 2024, when the number of departing chiefs rose to the highest annual level since the staffing and coaching firm began keeping tabs on CEO turnover in 2002…
Nevertheless, some companies are managing to woo outsiders. Among the companies that make up the broad S&P 1500 index, 44% of new CEOs in 2024 were external hires, according to data from the executive search firm Spencer Stuart. It’s the largest share of outsiders since the firm began tracking the data in 2000.”
CEO Departures Are up, and Finding Their Replacements Could Be Tough – Business Insider
Corporate Healthcare News
Hinge, a virtual musculoskeletal health company, contracts with employers, pharmacy benefit managers and large insurance companies to provide physical therapy and pain relief services. The company went public last Friday at $32 per share at the top of its $28 to $32 range. The IPO got off to a fast start and has remained strong all week, closing at $39.16 per share on Thursday.
Digital chronic condition management company Omada Health will serve as another early test case as the company. Omada’s IPO price is expected to be set between $18 and $20 per share, according to a news release from Thursday.
Hinge Health’s IPO eases concerns for venture capital investors | Modern Healthcare
Amsurg-Ascension: “Amsurg, the ambulatory surgery company once part of Envision Healthcare, is in advanced talks to sell itself to Ascension Health for about $3.9 billion, according to people with knowledge of the matter. Amsurg operates upwards of 250 outpatient surgery centers across the U.S., according to its website. The deal would give Ascension, one of the biggest nonprofit health systems in the U.S., added scale amid a broader shift in which care is moving toward lower-cost settings outside of traditional hospitals.”
Ascension nears $3.9B deal for Amsurg outpatient centers | Modern Healthcare
Tenet: “In 2018, Tenet acquired a 95% interest in United Surgical Partners International, which leads the company’s ASC side. According to Tenet’s SEC filings, in 2016, outpatient care represented 9.2% of its revenue and 25% of its EBITDA. In 2024, those numbers grew to 22% and 45%, respectively. In addition, USPI now holds an 8.1% share of the ASC market, with interests in 518 ASCs (375 consolidated) and 25 surgical hospitals (seven consolidated) across 37 states. In 2024, the company added at least 57 new ASCs, with another 10 to 12 standalone centers planned for 2025. De novo facilities are a growing focus alongside acquisitions.”
ASCs now drive 50% of Tenet profits – Becker’s ASC
Economy
Public sentiment: “US consumer sentiment rebounded in late May from one of the lowest readings on record earlier in the month and long-term inflation expectations retreated as concerns about the economy eased after the rollback of China tariffs.
The 52.2 final May sentiment index marked an improvement from the preliminary reading of 50.8, according to the University of Michigan. It was unchanged from April, one of the lowest levels on record. The median estimate in a Bloomberg survey of economists called for a final May reading of 51.5.
Consumers were also more sanguine about the longer-term inflation outlook. They saw costs rising an annualized 4.2% over the next five to 10 years, down from 4.4% in the prior month and the first decline this year.
Consumers expect prices to rise 6.6% over the next year, up just modestly from the 6.5% seen a month earlier, the data released Friday showed. The preliminary May figure was 7.3%”
The improvement sentiment from earlier in the month reflected a pickup among political independents as well as Democrats. Confidence among Republicans eased.
US Consumer Sentiment Recovers in Final May Michigan Survey – Bloomberg
Milliman on health costs and affordability: “Annual growth has averaged 6.1%, far outpacing any other household expense. No other cost category has risen as steeply or as consistently over the past two decades. Outpatient facility care saw the largest increase of any category, rising 286% since 2005, reflecting the growing complexity of procedures now handled outside of inpatient settings.”
Over the past 20 years, healthcare costs have gone up by 188%, while wages have gone up 84%, according to Milliman.
The higher costs come at a time when many Americans are struggling to understand their healthcare costs and afford healthcare. A survey last year by KFF found that about half of U.S. adults say it is difficult to afford healthcare costs, and one in four say they or a family member in their household had problems paying for healthcare in the past 12 months.
About one in four adults said they postponed care because of costs; 21% said they have not filled a prescription because of the cost. About one in ten adults say they have cut pills in half or skipped doses of medicine.
Healthcare costs for the average person increased 6.7% in 2025, according to the Milliman Medical Index (MMI), which estimates annual healthcare costs for people covered by a typical employer-sponsored health plan. The Index estimates that for 2025, healthcare costs for a hypothetical family of four rose to $35,119. For individuals, the average cost is $7,871, with pharmacy costs increasing by 9.7% and outpatient facility care costs rising 8.5%.
“Pharmaceutical costs have been a leading driver of healthcare spending in recent years. This year, outpatient facility services and pharmacy costs together accounted for nearly 70% of the total cost increase. Much of the outpatient growth is linked to high-cost drugs administered in outpatient settings.”
In this model, outpatient facility care and pharmacy now represent 37% of the total amount in the Milliman Medical Index, up from 30% in 2005. Outpatient facility care rose the fastest, from $1,858 in 2005 to $7,173 in 2025. Prescription drugs rose from $1,785 in 2005 to $5,954 in 2025.
Employee contributions and out-of-pocket costs have also grown over the 20-year period from 2005 to 2025. Employees now pay more through payroll deductions; their contributions rose from 21% in 2005 to 27% in 2025, while employee out-of-pocket spending decreased from 18% to 15%.
Milliman researchers also looked at pharmacy rebates. They projected that rebates in 2025 would be approximately 31% to 33% of allowed drug costs for an average person, and if employers were not receiving the rebates, the average person’s cost would have been $768 (or 9.8%) higher.
In a separate survey by KFF, about 30% said that it was somewhat or very difficult to understand how much they would have to pay out-of-pocket when they use their health insurance. Additionally, 25% of insured adults said it was somewhat or very difficult to understand terms such as “deductible,” “copay,” “coinsurance,” “prior authorization,” or “allowed amount.”
Milliman: Healthcare Costs for Americans Have Almost Tripled in 20 Years
Hospitals
AHA: cost of caring: “Despite escalating expenses, Medicare reimbursement continues to lag behind inflation — covering just 83 cents for every dollar spent by hospitals in 2023, resulting in over $100 billion in underpayments…From 2022 to 2024, general inflation rose by 14.1%, while Medicare net inpatient payment rates increased by only 5.1% — amounting to an effective payment cut over the past three years.
The AHA estimates that this erosion in payment value due to inflation resulted in $8.4 billion in lost hospital revenue during that period, further straining hospitals’ ability to care for Medicare beneficiaries, who make up a large share of most hospitals’ patients. In total, hospitals absorbed $130 billion in underpayments from Medicare and Medicaid in 2023 alone. These shortfalls are worsening — growing on average 14% annually between 2019 and 2023Specifically, in 2024 alone, total hospital expense grew 5.1%, significantly outpacing the overall inflation rate of 2.9%.
Costs of Caring | AHA April 2025
Hospital Community Benefit origin: “The obligation to invest in health and health care in the communities they serve is a hallmark of federal policies that establish the conditions under which nonprofit hospitals can obtain tax-exempt status. In 2012, more than half of all U.S. hospitals operated as nonprofit corporations, and their numbers surpassed 2900 that year. Community benefit obligations applicable to nonprofit hospitals date to a 1969 IRS policy that broadened the classes of activities in which hospitals could engage3 – beyond the provision of charity care – in order to maintain their tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. Many states in turn follow IRS policy when determining whether their nonprofit hospitals will be entitled to tax-exempt status.”
“Community Benefit and the ACA A Brief History and Update” HCF_CBACA overview.pdf
Blake Madden: Hospital Q1 Round-up: “A good quarter for the for-profits. Expanding margins, rising acuity, favorable payor mix from exchange volumes, decreased length of stay, a low point in the labor market, operating expense leverage, strong utilization and same-store volumes, murky tariff and policy (Medicaid) on Capitol Hill, supplemental payments flux, and more.”
For-Profit Hospital Q1 Breakdown – Hospitalogy
Strata: Monthly Healthcare Financial Benchmarks: U.S. hospitals saw no movement in operating margins in April as expense increases counteracted long-running gross revenue growth. Highlights from the April 2025 data include:
- Hospital operating margins were stagnant in April, showing no change versus the same time last year or the prior month, while U.S. health system operating margins saw minimal improvement.
- Rising hospital supply expenses contributed to higher non-labor expenses, which — incorporating rising purchased service and drug expenses — once again outpaced labor expense increases.
- April marked the 24th consecutive month of YOY growth in gross revenues for hospitals nationally across operating, inpatient, and outpatient revenues.
- Patient demand continued to grow YOY across most metrics in April, with outpatient visits seeing the largest gain at 4.9%.
- Physician expenses also remained on the rise, with physician practices seeing a median per-physician expense of $1.2 million for April annualized, up nearly 20% from 2023.
For many hospitals, a surge in patients leads to windfalls
Patient Volume Changes, March 2025
| Visit Type | Change from February 2025 | Change from March 2024 |
| Inpatient Admissions | +6.6% | +4.6% |
| Observation Visits | +8.6% | +1.9% |
| Emergency Visits | +5.5% | +1.8% |
| Outpatient Visits | +7.9% | +5.6% |
Strata, Monthly Healthcare Industry Financial Benchmarks, April 2025
STAT analysis: Not-for-profit hospital finances: “Mickey Mouse wishes he had the profit margins of some hospitals.
AdventHealth is currently more profitable than the average company within the S&P 500. The tax-exempt, religious system, which runs 53 hospitals across nine states, generated a 17% operating margin and 23% net margin, inclusive of investments, in the first three months of 2025. Its net margin was larger than that of Amazon, ExxonMobil, and, yes, Walt Disney.”
AdventHealth, a tax-exempt, religious health system running 53 hospitals across nine states, generated a 17% operating margin and 23% net margin, inclusive of investments, in the first three months of 2025.
While AdventHealth’s level of profitability is an outlier, many hospitals across the country are having no problems making money, thanks to an increase in patients and continued FEMA funding for Covid-related costs…
STAT examined the financial documents of 50 nonprofit hospital systems that were filed to bondholders within the past several weeks. The documents cover the first three months of 2025. The organizations range from single-state hospitals with $1 billion of annual revenue to multistate systems of hospitals, medical groups, and health plans with more than $20 billion of annual revenue. Combined, the sample systems generate more than $600 billion annually.
A majority, roughly four out of five, had positive operating margins in the first quarter of this year. President Trump’s tariff proclamations created drops in the stock market, but the threat of tariffs didn’t sap hospitals’ investments, yet. “
Hospitals thrive in Q1, but Medicaid cuts, policy shifts cloud future | STAT
Black Book Analysis: Reconciliation Bill Impact on Medicare/Medicaid Payment Disruptions (Trump 2.0): Projected revenue shortfalls up to 8%, with payment cycles potentially delayed by 45-90 days due to stricter Medicaid requirements in Trump’s “One Big Beautiful Bill.”
- Federal Grant Consolidation (RFK Jr.): Consolidation of NIH, CDC, HRSA, and FDA into the “Administration for a Healthy America” (AHA), potentially eliminating 20,000 federal jobs and disrupting grant processes.
- FDA Device Approval Slowdowns (RFK Jr.): Clearance times could double from 12 to 24 months following FDA layoffs, severely impacting hospital procurement schedules.
- ACA Rollbacks (Trump 2.0): Potential loss of enhanced subsidies for 12 million patients; community hospitals face 10-14% reductions in outpatient revenue.
- Medicaid Block Grants (RFK Jr.): Proposed state-level caps on funding may slash rural hospital budgets by 20-30%, threatening service viability.
- Blockchain Reimbursement Models (DOGE): DOGE’s digital governance initiatives may replace traditional CPT codes with blockchain smart contracts, risking fines up to $500K per compliance violation.
- Telehealth & Mental Health Grant Cuts (Dr. Oz): Critical funding relied on by 62% of community hospitals faces uncertainty; 58% have no contingency plans.
- Workforce Training Fund Reductions (RFK Jr.): Proposed 20% cuts in Graduate Medical Education funding threaten residency programs; 54% of teaching hospitals are unprepared.
- Tariffs on Imported Medical Equipment (Trump 2.0): Medical device prices could surge by 7-12% due to tariffs, yet 78% of hospitals have not adapted supply strategies.
- Alternative Medicine Reimbursement Reforms (Dr. Oz): Reimbursement policies restricting coverage to traditional clinical evidence could limit Medicaid optional services.
- Rescission of Biden-Era Executive Orders (Trump 2.0): Executive Order 14151 eliminates federal DEI program support, potentially rolling back anti-discrimination enforcement.
- Capped Medicaid Per-Enrollee Payments (Congressional GOP): Proposed Medicaid reforms in Trump’s legislation may reduce total Medicaid funding by $42 billion over five years.
- Labor Shortages Tied to Immigration Shifts (Trump Cabinet): Immigration policies worsening healthcare staffing shortages by 12-15% in states reliant on immigrant workers.
- Changes to Refugee/Asylum-Based Care Funding (RFK Jr.): Up to 18% of budgets for urban safety-net hospitals at risk due to broader HHS restructuring
Hospitals in the Line of Fire: Black Book Releases Urgent Federal Policy Risk Report for 2025-2026 Black Book Research May 28,2025 Healthcare Centric Competitive Intelligence, Surveying and Independent Opinion Research Company – Black Book Market Research
Study: hospital price variation: “Prices charged by hospitals in commercial markets are, on average, high and growing rapidly, and they vary within markets. The narrative around these facts has focused on hospitals gaining market power through mergers and acquisitions. Hospitals may also increase their market power by investing in capacity, services, or amenities that, although potentially desirable, increase demand and differentiate them from competitors. Independent of market-power changes, average prices may increase if volume shifts toward high-price hospitals. This study investigated the market dynamics linking hospital capital expenditures during the period 2010–19 to changes in volume, market share, and prices. We found that hospitals investing more in capital gained market share and raised prices, whereas hospitals investing relatively less in capital lost market share and increased prices less. Taken together, these forces perpetuate a cycle of expanding and withering hospitals. Study findings suggest important limits to antitrust as a mechanism to address high and rising prices, and the findings could inform policies to forestall or eliminate the financial decline of withering hospitals, thereby preserving access and promoting competition.”
Study: Mortality rate variation in PE-owned hospitals: “Private equity (PE) firms have increasingly invested in US hospitals, raising concerns about their effects on the quality of surgical care. We evaluated the impact of PE acquisition of acute care hospitals on outcomes from four common general surgical operations among Medicare beneficiaries, using a difference-in-differences approach. Our study included 67 hospitals acquired by PE and 634 control hospitals not acquired by or previously owned by PE. We found that PE acquisition was associated with a 2.7-percentage-point increase in thirty-day postoperative mortality compared with control hospitals, driven primarily by an increase in failure to rescue (3.9 percentage points), with no observed change in the rate of complications. Subset analysis revealed that the increase in mortality was particularly pronounced for unplanned (emergent) surgeries, whereas no significant changes were observed for planned (elective) surgeries. Our findings suggest that PE acquisition may adversely affect the management of emergent surgical cases, raising critical considerations for policy makers and health care stakeholders regarding the influence of PE ownership on patient safety.”
Insurers
JD Power Report: Health Plan Performance: “A new class of health plan leaders is emerging, distinguished by their ability to deliver clear communication, digital convenience and meaningful member support…While overall satisfaction with commercial health plans declined slightly year over year, the study reveals widening performance gaps across brands, making the member experience a key competitive differentiator. The findings reflect broader industry pressures, as plans respond to rising expectations around cost transparency, digital access and personalized service.
Brand performance gaps in the commercial health insurance market are no longer subtle—they’re widening in ways that directly affect satisfaction, retention and competitive strength…”
2025 U.S. Commercial Member Health Plan Study | J.D. Power
Study: Low Income Subsidies subsidies and Medicare mortality: Background: 14 million Medicare beneficiaries receive the Low-Income Subsidy (LIS), which reduces cost sharing in Medicare Part D. Losing the LIS may impede medication access and affect mortality. Researchers analyzed 2015–2023 Medicare data to identify dual-eligible Medicare–Medicaid beneficiaries: who automatically receive the LIS, and calculated annual rates of Medicaid and LIS loss. Findings:
Those with early Medicaid disenrollment averaged 13.6 cumulative months of the LIS in the 17 months after disenrollment, as compared with 15.3 months for those with late disenrollment. At 17 months after Medicaid disenrollment, cumulative mortality was higher among persons with early disenrollment (78.3 per 1000) than among those with late disenrollment (75.3 per 1000), a difference of 3.0 deaths per 1000. Mortality differences between persons with early disenrollment and those with late disenrollment were amplified among those in the highest quintile of baseline Part D spending (5.6 deaths per 1000) and users of medications for cardiovascular disease, chronic lung disease, or human immunodeficiency virus infection. Loss of drug subsidies after Medicaid disenrollment was associated with higher mortality among low-income Medicare beneficiaries.”
Physicians
Study: medical school ranking and practice choices: “Of the 83, 833 physicians in 2015, those from top-ranked medical institutions had 52% lower odds of practicing in socioeconomically deprived areas compared with physicians from lower-ranked institutions (odds ratio with similar findings in 2020. Compared with primary care physicians, specialists from 11 of 13 specialties had lower odds of practicing in socioeconomically deprived areas in 2015, whereas 8 of 13 had lower odds in 2020.
The distribution of physicians across the US was different when comparing physicians from top-ranked institutions and lower-ranked institutions…The findings underscore the need for targeted initiatives to incentivize physicians, particularly specialists and top medical graduates, to practice in socioeconomically disadvantaged regions.
Polling
Axios-Harris Poll: Corporate Reputation: Conclusions from: “Value is the story this year: Nearly half (46%) of all corporate reputations declined than improved (37%), as consumers criticized businesses for passing along higher costs, delivering poorer perceived quality for their stretched dollars, and even capitalizing on tariffs to pad profit margins:
- 77% of Americans say companies often sell lower-quality products and services while charging higher prices.
- 70% believe companies are taking further advantage of inflation to increase their profit margins.
- 60% feel companies will use tariffs as an opportunity to raise prices more than needed to boost profits.
This comes as Americans are split over whether the economy is improving and whom to blame for their personal financial situation. Among those who feel stuck (39%) and falling behind (28%) – a quarter (26%) fault business for their predicament. And among those with a declining opinion of business, their number one reason cited was “companies not doing enough to keep prices fair from inflation”. And over half of all Americans said they had recently stopped doing business with a company due to unreasonably high prices (63%) and quality falling below expectations (54%).
Themes of value, quality and allyship emerge across the best ranked companies.
- Inflation fighters come out on top: Prioritizing the consumer paid off for some companies with Trader Joe’s experience the sixth largest increase in score (+3.5) to take the top spot. New-comer Arizona Beverage Co. (99 cent price policy) emerges at #7.
- Perceived quality is falling: Consumers are twice as likely to say the quality of goods and services is falling behind their current prices than exceeding them (48% v. 22%). Especially as two-thirds (69%) report a noticeable decline in the quality of their everyday items.
- Quality products/quality culture:American consumers point to quality as the most important consideration when considering company reputations today, followed by customer service, employee treatment and prices. As over three-quarters (79%) say brands with the best reputation are the ones prioritizing consumer wallets.
2025 Axios Harris Poll Ranks Trader Joe’s #1 for Corporate Reputation – Harris Poll
Public Health
Study: Nutritional content changes in ready to eat children’s cereals: “From 2010 to 2023, 1200 children’s RTE cereals in the US market were newly launched. Figure 1 illustrates the yearly trend in new children’s cereal product launches, showing that launching activity peaked around 2016. New packaging was the most common type of launch, and new formulation was the least common. Total fat per serving showed a 33.6% increase from 1.13 g. in 2010 to 1.51 g) in 2023. Sodium content exhibited a 32.1% increase during the study, increasing from 156.0 mg to 206.1 mg…
Sodium and fat content showed the most pronounced increases during the study, whereas the mean carbohydrate content was 26.44 g from 2010 to 2019 and 32.64 g from 2020 to 2023. Sugar content showed a more modest increase from 2017 to 2022 before a slight decrease. Comparatively, protein and fiber, as important nutritional content for children, have decreased over time.
Analysis of newly launched children’s RTE cereals from 2010 to 2023 revealed concerning nutritional shifts: notable increases in fat, sodium, and sugar alongside decreases in protein and fiber. Children’s cereals contain high levels of added sugar, with a single serving exceeding 45% of the American Heart Association’s daily recommended limit for children. These trends suggest a potential prioritization of taste over nutritional quality in product development, contributing to childhood obesity and long-term cardiovascular health risks. This study is limited in that it covered newly released cereals and thus does not represent the entire cereal market, nor does it allow for an assessment of the impact on children’s overall nutrient intake”
Report: The cost of addiction: Opioid use disorder in the United States: “In 2022, over 6 million people in the United States reported having an opioid use disorder (OUD)…To evaluate the costs of OUD and the benefits and cost savings associated with OUD treatment, Avalere Health conducted secondary research and modeled the costs as well as the savings…Key findings:
- OUD prevalence: OUD cases per capita (the percentage of individuals per state with OUD) ranged among states from 0.75% to 2.99%.
- Cost burden of OUD: The average annual total cost per OUD case OUD is approximately $695,000 across all stakeholders analyzed. The annual cost per OUD case, excluding the patient burden to the individual with OUD, is approximately $163,000, spread across public and private stakeholders. Including lost quality and length of life, the patient burden of OUD is approximately $532,000 per year… (lost productivity for employers ($438 billion), employees ($248 billion), and households ($73 billion). Health insurance and uninsured costs were $111 billion, criminal justice costs are $52 billion, and other substance use treatment costs are $12 billion.
- Treatment benefits of OUD: Medications and behavioral therapy to treat OUD are associated with significant average cost savings per case. Estimated annual per-case savings net of treatment cost from ambulatory treatments are estimated to be $144,000 for behavioral therapy alone, $271,000 for behavioral therapy plus methadone • $271,000 for behavioral therapy plus sublingual buprenorphine • $295,000 for behavioral therapy plus LAI buprenorphine.”
Avalere-Health-White-Paper_The-cost-of-opioid-addiction_OUD-in-the-United-States.pdf
Regulators & Lawmakers
CMS issues guidance on pediatric sex change surgery: The Centers for Medicare & Medicaid Services (CMS) advisory to select hospitals performing pediatric sex trait modification procedures outlining urgent concerns with both the quality standards adherence and profits related to these harmful procedures. New requirements:
- Detailed explanations of how informed consent is obtained for pediatric patients and whether parental involvement is mandatory;
- Any planned updates to clinical guidelines considering comprehensive review of scientific research;
- Documentation requirements for adverse outcomes, including cases involving regret or de-transition; and
- Provider financials, including billing codes utilized for sex trait modifications, facility and provider level revenue, facility and provider level profits, and projected revenue for these service lines.
Hospitals are expected to respond within 30 days
White House response to Court tariff challenges : The U.S. Court of International Trade May 29 blocked a series of tariffs issued by the Trump administration under the International Emergency Economic Powers Act, a law granting the president authority to regulate various economic transactions following the declaration of a national emergency. That same day, a second federal court also found the Trump administration’s tariffs to be unlawful.
The Trump administration immediately filed a notice in the U.S. Court of Appeals for the Federal Circuit, which soon after granted a temporary stay pending the appeal.
FDA: The FDA has approved Moderna’s next-generation Covid-19 vaccine, but said that people aged 12 to 64 should only get the shot if they have a health condition that puts them at risk from the virus.
FDA approves Moderna’s next-gen Covid vaccine
CMS’ Kidney Care Model: “The U.S. Centers for Medicare & Medicaid Services’ (CMS) Innovation Center is overhauling its Kidney Care Choices (KCC) payment model. Consequently, palliative care providers could see new payment pathways in certain geographic regions.
CMS is revising the financial methodology and participation options of the KCC Model while also extending its duration and geographic reach. Sunsetting the model in 2027 versus its initial expiration in 2026 will allow the agency to address early concerns about spending and implement quality improvements, according to CMS.”
CMS Revamps, Extends Kidney Care Choices Model – Hospice News
CMS on MA audits: Last week, CMS announced “a significant expansion of its auditing efforts for Medicare Advantage (MA) plans. Beginning immediately, CMS will audit all eligible MA contracts for each payment year in all newly initiated audits and invest additional resources to expedite the completion of audits for payment years 2018 through 2024…. Currently, CMS is several years behind in completing these audits. The last significant recovery of MA overpayments occurred following the audit of payment year (PY) 2007, despite federal estimates suggesting MA plans may overbill the government by approximately $17 billion annually. The Medicare Payment Advisory Commission (MedPAC) estimates this figure could be as high as $43 billion per year. CMS’s completed audits for PYs 2011–2013 found between 5% and 8% in overpayments.”
CMS Rolls Out Aggressive Strategy to Enhance and Accelerate Medicare Advantage Audits | CMS
CMS crackdown on Medicaid access for illegal immigrants: “The Centers for Medicare & Medicaid Services (CMS) announced today increased federal oversight to stop states from misusing federal Medicaid dollars to cover health care for individuals who are in the country illegally….As part of the action, CMS is ramping up financial oversight across the board to identify and stop improper spending. This includes:
- Focused evaluations of select state Medicaid spending reports (CMS-64 form submissions);
- In-depth reviews of select states’ financial management systems; and
- Assessing existing eligibility rules and policies to close loopholes and strengthen enforcement”
CMS Increasing Oversight on States Illegally Using Federal Medicaid Funding for Health Care for Illegal Immigrants May 27, 2025 www.hhs.gov/news
CDC guidance on child immunization at odds with HHS Secretary: “Days after Health Secretary Robert F. Kennedy Jr. announced that Covid shots would be removed from the federal immunization schedule for children, the Centers for Disease Control and Prevention issued updated advice that largely counters Mr. Kennedy’s new policy.
The agency kept Covid shots on the schedule for children 6 months to 17 years old with a new condition. Children and their caregivers will be able to get the vaccines in consultation with a doctor or provider, which the agency calls “shared decision-making.”
The shots will also continue to be available under those terms to about 38 million low-income children who rely on the Vaccines for Children program, according to an emailed update from the C.D.C. on Friday…
C.D.C. Contradicts Kennedy and Keeps Advice That Children May Get Covid Shots – The New York Times
New CDC vaccine schedule at odds with HHS announcement
