Last week, the American Hospital Association released a study by Kaufman Hall, its preferred data vendor, that took issue with methodologies used by critics of hospital consolidation:
“These findings suggest that a more comprehensive analysis of hospital M&A transactions, one that considers impacts on all patients served, broadens the focus to impacts beyond pricing, and considers the consequences if an M&A transaction is not permitted to proceed, would ensure not only competitive but also healthy hospital markets that can continue to provide the fullest possible range of services.”
The report discusses how hospital merger reviews should look beyond the potential impact on commercial insurance prices and consider what proposed transactions mean for all patients, particularly the nearly 60% of hospital patient days attributable to Medicare, Medicaid and Medicare Advantage beneficiaries whose payment rates are largely set by government programs.” Drawing on analyses of challenged and canceled transactions, the report also finds that hospitals seeking partners often serve more vulnerable communities and face greater financial pressures, and that when proposed deals do not move forward, struggling hospitals can experience significant financial deterioration that threatens services, workforce stability and access to care.”
Kaufman Hall added this disclaimer: “The findings contained in this document may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. Past performance is not necessarily indicative of future results. Kaufman Hall accepts no responsibility for actual results or future events.
Also last week, a Health Affairs commentary “In 2026, States Are Leading On Health Care Affordability” noted that “Research has consistently shown that hospital prices are the largest driver of commercial health care spending growth. Hospital markets are dominated by monopolies, which enable hospitals to charge higher prices without improving quality or outcomes. State policymakers are increasingly looking for options to limit excessive hospital prices. Our research shows that capping the highest, most egregious prices charged by hospitals can meaningfully improve health care affordability while still allowing hospitals to generate a healthy margin…
A key driver of rising health care prices is consolidation in health care systems, including through hospital acquisitions of physician practices. These acquisitions, which are a form of vertical integration, increase hospital prices by 3 to 5%. This can be attributed to greater bargaining power, more intensive coding practices, and hospitals charging facility fees at what were previously independent physician practices but are now treated as “hospital outpatient departments.” To address these issues, states are increasingly considering facility fee bans or “site-neutral” policies that would cap prices for certain routine hospital outpatient services that could be provided safely in an office setting.”
Both positions are defensible.
Not for profit and public hospitals are at a disadvantage in managing their finances because they’re obligated to serve entire communities without regard to local economies or population health. Investor-owned hospitals and insurance companies have fewer restrictions and can exit markets at will.
And almost every hospital is dependent on reimbursement from commercially insured patients to offset what is the widely-accepted calculus that Medicare and Medicaid reimbursement doesn’t cover the total cost of care provided enrollees. Thus, across the hospital industry, the playbook has been straightforward: to optimize hospital finances….
- Maximize the attractiveness of hospital services that attract privately insured patients via contracting with private insurers.
- Negotiate favorable rates with private insurers to enhance cost-shifting to Medicare and Medicaid by private plans.
- Optimize leverage (scale) over insurers by consolidating hospitals, acquiring physician practices, expanding ancillary activities and deploying capital to potentially profitable ventures.
- Advocate for state and federal laws that dissuade hospital price caps, 340B cuts, site-neutral payments, unreasonable price transparency requirements and limits on private-equity partnerships.
- Assert that hospitals are efficient stewards of the public’s trust but disadvantaged by corporate insurers and drug companies that are allowed to enter and exit markets at will, price at “what the market will bear” and put shareholder profit above all else.
This scheme has worked for 40 years to enable hospitals to control at least 50% of total health spending: 31% for traditional hospital services, 12% of total physician services, and ventures, partnerships, ancillary services and post-acute services in addition. In the aggregate, hospitals are the most important cog in the healthcare wheel. They’re labor intense, capital intense, complicated businesses that enjoy public trust that’s slipping away, especially among the 25 million who work in the industry. Complicating matters, distinctions between rural and government safety net hospitals and highly profitable investor-owned and not-for-profit systems are attracting unwanted scrutiny from regulators and in media coverage.
While Kaufman Hall raises legitimate questions about current methodologies used by state and federal regulators to assess consolidation, it does not answer the bigger question: what role should hospitals play in the U.S. system as AI-derived clinical innovation proliferates, labor and supply costs accelerate and fewer people can afford services?
It’s not clear.
- Should “hospital services” be redefined bifurcating facility-dependent inpatient services (Part A) and an expanded set of services inclusive of self-care provided in homes, schools, workplaces and virtually?
- Should “community-benefits” and “charity care” be redefined so that methodologies are consistent and gaming to receive tax benefits eliminated?
- Should hospital clinical performance be linked to improved outcomes and lower costs (affordability)?
- Should local primary care and preventive health services (inclusive of nutrition, physical and mental health, prophylactic dentistry) be integrated with hospital services to improve population health and control demand for hospital services?
- Should specialized tertiary and quaternary hospital programs be rationalized to optimize outcomes and improve efficiency?
- Should consolidated hospital systems disclose administrative costs, functions and allocation methodologies publicly?
- Should hospital boards be required to conduct scenario planning that’s comprehensive?
- Should hospital administrative services and costs be standardized to facilitate caps on spending and management performance comparisons?
- Should physician ownership of hospitals be enabled to increase competition?
And many others.
The American Hospital Association is right to be concerned about how regulators are addressing hospital consolidation and its impact on prices. And they’re right to challenge methodologies applied to questions about hospital prices and competition. But they fall short in offering a vision for the future of the health system that’s plausible, affordable and compelling. Rather, they offer a hospital-centric vision based on suspect assumptions and inadequate sensitivity to market trends not directly associated with traditional health services.
Paul
PS: This week, I’ll be in Raleigh NC where program integrity is a major focus in the state. The Governor is a Democrat and the legislature is Republican controlled. But they’re aligned on the statutory and regulatory framework necessary “to prevent, detect, investigate, and correct fraud, waste, abuse, overutilization, and medically unnecessary care in the Medicaid program.”
Every stakeholder in the health system—including hospitals and physicians—face heightened pressure to eliminate unnecessary utilization and costs due to willful or unknowing fraud. Just as insurer prior authorization practices have been frustrating to providers, unnecessary care is confounding to regulators and employers. The use of agentic AI tools to examine appropriateness of tests, procedures, medications and visits will exponentially change how “quality of care” is defined and regulated, and how its delivered. It’s a big deal everywhere, especially in Medicaid programs.
A New Approach to Hospital Mergers & Acquisitions | AHA
In 2026, States Are Leading On Health Care Affordability | Health Affairs
Sections in Report Today
- Hospitals
- Physicians
- Polling
- Population Health
- Prescription Drugs
Hospitals
Hospital price caps: “Research has consistently shown that hospital prices are the largest driver of commercial health care spending growth. Hospital markets are dominated by monopolies, which enable hospitals to charge higher prices without improving quality or outcomes. State policymakers are increasingly looking for options to limit excessive hospital prices. Our research shows that capping the highest, most egregious prices charged by hospitals can meaningfully improve health care affordability while still allowing hospitals to generate a healthy margin.
Last year was a landmark year for state hospital payment cap policies. Indiana and Vermont capped the prices that hospitals could be paid across commercial payers, and Washington and New Mexico capped hospital payments under their state employee health plans. The latter two states have already begun implementing their caps and are set to begin yielding state savings as a result.
The biggest development in hospital payment policy in 2026 took place in Delaware, where lawmakers unanimously passed SB 1 to establish reference-based price caps for the state’s employee health plan, individual market, and fully funded commercial market… “
Other hospital price cap legislative activity noted: Massachusetts, New Jersey, Oklahoma, Michigan, New Jersey, West Virginia. New Mexico, New York
In 2026, States Are Leading On Health Care Affordability | Health Affairs
Census Report: 2026 Coverage: Highlights
- In 2025, 26.7 million people (7.9%) were uninsured for the entire year, not statistically different from 2024.
- Of the subtypes of health insurance coverage, employment-based insurance was the most common, covering 53.5% of the population for some or all of the calendar year, followed by Medicare (20.1%), Medicaid (17.1%), direct-purchase coverage (10.5 % TRICARE (2.8%), and VA and CHAMPVA coverage (1.2%).
- The share of individuals covered by public health insurance was 35.8% in 2025, not statistically different from 2024. While Medicare coverage increased by 0.6 percentage points, Medicaid coverage decreased by 0.5 percentage points.
- Public coverage for adults ages 19 to 64 declined by 0.5 percentage points in 2025 to 17.3%. This was driven by a 0.6 percentage-point decrease in Medicaid coverage for adults ages 19 to 64.
- In 2025, 41.5 percent of adults age 65 and older held private coverage, down 2.8 percentage points from 2024. This decrease was driven by a 1.5 percentage-point drop in employment-based coverage and a 1.4 percentage-point drop in direct-purchase coverage for adults age 65 and older.
Health Insurance Coverage in the United States: 2025 https://www.census.gov/library/publications/2026/demo/p60-291.html
Physicians
Sullivan Cotter 2026 Physician Compensation and Productivity Survey: “This year, median physician total cash compensation (TCC) rose year-over-year across all major specialty categories. Adult medical specialties again posted the largest increase, up 7.2% from 2025 to 2026 for a cumulative gain of 25.2% over the past five years. Work RVU (wRVU) productivity increases were modest, with year-over-year changes ranging from 0.8% in primary care to 2.8% in adult medical specialties. This is the second consecutive year in which adult medical specialties have shown the highest growth in productivity.
The 2026 survey findings show that base salary and wRVU productivity remain the most prevalent components of compensation plans for primary care, medical, and surgical specialties. As for physician incentive pay, individual productivity and patient experience remain the most common measures, each used by 73% of responding organizations. Clinical outcome measures saw the biggest shift, rising 8% from 2025 to 2026 to a prevalence of 55%, continuing a multi-year climb impacting physician incentive design.
Sign-on bonuses are becoming table stakes in an increasingly competitive market. The number of physicians receiving sign-on bonuses reached nearly 95% in 2026. Looking for other differentiators, 49% of respondent organizations offer student loan repayment programs. For many new physicians, financial security and work-life balance outweigh the risks and variability of incentive-focused models.”
Physician Comp & Productivity Survey | SullivanCotter
Study: Association between private equity ownership and cost reduction “Ours is a correlational study with selection into PE ownership as the core mechanism. We analyzed 98,014 Medicare Advantage patient-year claims over a six-year period (2018–2024) from investor-backed primary care platforms using fixed effects and event-study models with controls for demographics, comorbidity, geography, payer, preventable conditions, time, and practice effects. Results:
Average post-investment costs were statistically lower. Event-study analysis showed modest pre-investment cost declines and statistically significant additional cost reductions emerging three to four years after acquisition. This suggests that selection explains part of the observed association between investment and cost declines, and benefits from post-investment capability changes may manifest in the longer term. A temporary cost increase occurred during the investment year, likely due to amplified outreach. Unlike FFS, external investment did not reverse the downward trend.”
Polling
Gallup-Pivotal survey on women’s health: Highlights:
- 42% of women say that in the last five years, their health has caused them to feel they could not do everything they wanted to do in life.
- 54%) report at least one health-related impact on their family life or relationships in the past five years, while 42% report an impact on their work or career and 32% on their community participation or voice.
- Women who were unable to get needed care despite trying are particularly likely to report health-related impacts across these major areas of their lives: 79% report an impact on their family life or relationships, 66% report at least one health-related impact on their work, and 59% report an impact on their community participation or voice.
- The findings come as one in four women rate their physical health as fair or poor, rising to 35% of Black women and 28% of Hispanic women, compared with 22% of White women. Twenty-seven percent of women say the same about their mental health—and nearly half (48%) of all women surveyed reported a current or past mental health condition such as depression, anxiety or PTSD.
More Than Half of U.S. Women Report Negative Healthcare Experiences https://www.pivotal.com/media/more-than-half-of-us-women-report-negative-healthcare-experiences
Commonwealth: Affordability survey: Per findings from the Commonwealth Fund’s 2025 Affordability Survey of 6,353 U.S. adults ages 19 to 64 from July 22 to October 27, 2025:
- About one-third (32%) of working-age adults with private insurance are paying off medical bills or debt over time. Rates are highest for people with low or moderate incomes (38%), women (37%), people who are Black (41%) or Hispanic (38%), and people living in the South (39%).
- Families experiencing medical debt suffer emotionally and financially, with some forgoing needed health care: 68 percent said their unpaid medical bills caused worry and anxiety; 37% said they used up all or part of their savings to pay their bills; and 30 % delayed or avoided needed health care.
- 64% of people paying off medical balances said the debt was from hospital services, either inpatient or outpatient care or emergency room care. But debt also resulted from more routine care, including doctor’s office visits (43%) and lab work or diagnostic tests (38%).
- 46% of people with medical debt had unpaid bills totaling $2,000 or more. About one in four adults with debt were making payments to a collection agency, and a similar share said that their bills or debt had been reported to a credit rating agency.
- Majorities of people paying off bills blamed insurance companies (64%) and/or the broader health care system (57%) for their experience.
How Medical Bills and Debt Impact Americans with Private Insurance | Commonwealth Fund
Harris Poll: Gen Z workforce: Nearly 6 in 10 healthcare workers plan to search for a new role within the next year, with Generation Z the most likely to eye the exit, according to the 2026 Healthcare Workforce Barometer. Five things to know:
- Seven in 10 Gen Z respondents said they plan to search for a new role within the next year…Overall, 59% of the healthcare workforce is looking to leave.
- Despite the high turnover intent, Gen Z workers show signs of wanting to eventually settle down: 65% expect to stay with one employer for five or more years, and 95% value job stability and long-term security.
- Gen Z workers place a higher premium on career advancement than their older colleagues. 89% said clear opportunities for advancement are important to them, compared to 77% of workers from older generations. 86% think education or learning new skills will help them move up.
- Trust is a sticking point: Only 26% of employees have a great deal of trust that their employer will support their long-term career growth, while 47% of employers point to a lack of advancement, professional development or education opportunities as the top reason employees leave.
- 75% of healthcare workers are interested in continuing their education through degree programs, certifications or skills-based learning, and 81% would be interested in an employer-sponsored education benefits program.
Why 70% of Gen Z Healthcare Workers Are Job Hunting https://theharrispoll.com/articles/why-gen-z-healthcare-workers-plan-to-leave-their-jobs/
Edelman Trust Poll: Survey of 12,988 adult respondents in 13 countries: Two key items:
- When I have gotten conflicting health recommendations from doctors and other sources, I always did what the doctor recommended GLOBAL 51% vs, US 37%
- Consumers fluent with AI can do at least one of these tasks as well as, or better than, a doctor
- Triage care (26%)
- Perform basic medical procedures (19%)
- Determine proper treatment or medication (19%)
- Diagnose illness or condition (16%)
2026 Edelman Trust Barometer Special Analysis with the Yale School of Public Health
Population Health
KFF on Rural Health Transformation Funding status: “On July 4, 2025, President Trump signed a budget reconciliation bill—once known as the “One Big Beautiful Bill”—into law that included significant reductions in federal health care spending…To help mitigate the impact on rural areas, the law created the Rural Health Transformation Program (referred to here as the “rural health fund”), which will award $50 billion in state grants from 2026 to 2030 to support rural health care. Status:
- The $50 billion fund could mitigate but will not fully offset estimated cuts to federal Medicaid spending in rural areas ($137 billion over ten years according to KFF analysis) included in the same law. Unlike most of the federal Medicaid spending cuts, the fund is also time limited.
- While the fund was established in part to address concerns about the impact of the reconciliation law on rural hospitals, the funding is being used for a much broader set of purposes, and there are restrictions on how hospitals can benefit.
- Half of the funding is being divided equally among approved states. The rest is being distributed based on measures of state need, state initiative scores, state policy, and other factors.
- All 50 states were approved, with first-year awards ranging from $147 million to $281 million. First-year awards per rural resident range from less than $100 in ten states to more than $500 in eight.
A Closer Look at the $50 Billion Rural Health Transformation Program | KFF
Prescription Drugs
Study: Prescription drug use: “We examined prescription drug use, polypharmacy, and therapeutic drug class use to provide an updated assessment of long-term drug use patterns across the US adult population.
Among 58,201 adults…. Prescription drug use increased from 46.7% in January 1999 to December 2000 to 56.4% in January 2017 to March 2020, while polypharmacy increased from 7.8% to 16.7% within those periods. Increases in prescription drug use and polypharmacy were observed across age, sex, and racial and ethnic groups. The largest increase in polypharmacy occurred among adults 65 years or older (21.9% to 40.7%), whereas polypharmacy remained uncommon among adults aged 20 to 39 years (1.3% to 3.4%) …”
Prescription Drug Use Among US Adults | Public Health | JAMA Network Open | JAMA Network
