From Budget Battles to Consumer Backlash: Paul Keckley on the Future of U.S. Health Care

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The U.S. health care industry is approaching a critical inflection point, according to veteran health care strategist Paul Keckley. In a candid and thought-provoking keynote at the 2025 Healthcare Marketing & Physician Strategies Summit (HMPS) in Orlando, Keckley outlined the challenges and potential opportunities health care leaders must navigate in an era of unprecedented economic uncertainty, regulatory disruption, and consumer discontent.

Drawing on decades of policy experience and his signature candid style, Keckley delivered a sobering yet actionable assessment of where the industry stands and what lies ahead.

Paul Keckley, PhD, health care research and policy expert and managing editor of The Keckley Report

Health care now accounts for a staggering 28 percent of the federal budget, with Medicaid expenditures alone ranging from the low 20s to 34 percent of individual state budgets. Despite its fiscal significance, Keckley points out that health care remains “not really a system, but a collection of independent sectors that cohabit the economy.”

In the article that follows, Keckley warns of a reckoning for those who remain entrenched in legacy assumptions. On the flip side, he notes, “The future is going to be built by those who understand the consumer, embrace transparency, and adapt to the realities of a post-institutional world.”

A Fractured System in a Fractured Economy

Fragmentation complicates any effort to meaningfully address rising costs or care quality. It also heightens the stakes in a political climate marked by what Keckley termed “MAGA, DOGE, and MAHA” factions, shorthand for various ideological forces shaping health care policy under the Trump 2.0 administration.

Meanwhile, macroeconomic conditions are only adding to the strain. At the time of Keckley’s address, the S&P 500 was down 8 percent, the Dow down 10 percent, and inflationary pressures were squeezing both provider margins and household budgets.

Economic uncertainty is not just about Wall Street,” Keckley warns. “It’s about kitchen-table economics — how households decide between paying for care or paying the cable bill.”

Traditional Forecasting Is Failing

One of Keckley’s key messages was that conventional methods of strategic planning in health care, based on lagging indicators like utilization rates and demographics, are no longer sufficient. Instead, leaders must increasingly look to external forces such as capital markets, regulatory volatility, and consumer behavior.

“Think outside-in,” he urges. “Forces outside health care are shaping its future more than forces within.”

He encourages health systems to go beyond isolated market studies and adopt holistic scenario planning that considers clinical innovation, workforce shifts, AI and tech disruption, and capital availability as interconnected variables.

Affordability and Accountability: The Hospital Reckoning

Keckley pulls no punches in addressing the mounting criticism of hospitals on Capitol Hill, particularly not-for-profit health systems. Public perception is faltering, with hospital pricing increasing faster than other categories in health care and only a third of providers in full compliance with price transparency rules.

“Economic uncertainty is not just about Wall Street. It’s about kitchen-table economics — how households decide between paying for care or paying the cable bill.”

“We have to get honest about trust, transparency, and affordability,” he says. “I’ve been in 11 system strategy sessions this year. Only one even mentioned affordability on their website, and none defined it.”

Keckley also predicts that popular regulatory targets like site-neutral payments, the 340B program, and nonprofit tax exemptions will face intensified scrutiny.

“Hospitals are no longer viewed as sacred institutions,” he says. “They’re being seen as part of the problem, especially by younger, more educated, and more skeptical Americans.”

The Consumer Awakens

Perhaps the most urgent shift Keckley outlines is the redefinition of the health care consumer. “We call them patients,” he says, “but they are consumers. And they are not happy.”

Keckley cites polling data showing that two out of three Americans believe the health care system needs to be rebuilt from the ground up. Roughly 40 percent of U.S. households have at least one unpaid medical bill, with many choosing intentionally not to pay. Among Gen Y and younger households, dissatisfaction is particularly acute.

“[Consumers] expect digital, personalized, seamless experiences — and they don’t understand why health care can’t deliver.”

These consumers aren’t just passive recipients of care; they’re voters, payers, and critics. With 14 percent of health care spending now coming directly from households, Keckley argues, health systems must engage consumers with the same sophistication that retail and tech companies use.

“They expect digital, personalized, seamless experiences — and they don’t understand why health care can’t deliver.”

Tech Disruption Is Real

Keckley underscores the transformative potential of AI and emerging clinical technologies, noting that in the next five years, more than 60 GLP-1-like therapeutic innovations could come to market. But the deeper disruption, he warns, is likely to come from outside the traditional industry.

Citing his own son’s work at Microsoft, Keckley envisions a future where a consumer’s smartphone, not a provider or insurer, is the true hub of health information. “Health care data will be consumer-controlled. That’s where this is headed.”

The takeaway for providers: Embrace data interoperability and consumer-centric technology now, or risk irrelevance. “The Amazons and Apples of the world are not waiting for CMS to set the rules,” Keckley says.

Capital, Consolidation, and Private Equity

Capital constraints and the shifting role of private equity also featured prominently in Keckley’s remarks. With declining non-operating revenue and shrinking federal dollars, some health systems increasingly rely on investor-backed funding.

But this comes with reputational and operational risks. While PE investments have been beneficial to shareholders, Keckley says, they’ve also produced “some pretty dire results for consumers” — particularly in post-acute care and physician practice consolidation.

“Policymakers are watching,” he says. “Expect legislation that will limit or redefine what private equity can do in health care.”

Politics and Optics: Navigating the Policy Minefield

In the regulatory arena, Keckley emphasizes that perception often matters more than substance. “Optics matter often more than the policy itself,” he says.

He cautions health leaders not to expect sweeping policy reform but to brace for “de jure chaos” as the current administration focuses on symbolic populist moves — cutting executive compensation, promoting price transparency, and attacking nonprofit tax exemptions.

With the 2026 midterm elections looming large, Keckley predicts a wave of executive orders and rhetorical grandstanding. But substantive policy change will be incremental and unpredictable.

“Don’t wait for a rescue from Washington. The future is going to be built by those who understand the consumer, embrace transparency, and adapt to the realities of a post-institutional world.”

The Workforce Crisis That Wasn’t Solved

Keckley also addresses the persistent shortage of health care workers and the failure of Title V of the ACA, which had promised to modernize the workforce through new team-based models. “Our guilds didn’t want it,” Keckley notes, bluntly. “So nothing happened.”

He argues that states, not the federal government, will drive the next chapter of workforce reform, expanding the scope of practice for pharmacists, nurse practitioners, and even lay caregivers, particularly in behavioral health and primary care.

What Should Leaders Do Now?

Keckley closed his keynote with a challenge for marketers and strategists: Get serious about defining affordability, understand capital markets, and stop defaulting to legacy assumptions.

“Don’t wait for a rescue from Washington,” he says. “The future is going to be built by those who understand the consumer, embrace transparency, and adapt to the realities of a post-institutional world.”

He encouraged leaders to monitor shifting federal org charts, track state-level policy moves, and scenario-plan for a future where trust, access, and consumer empowerment define success.

Conclusion: A Health Care Reckoning in the Making

Keckley’s keynote was more than a policy forecast; it was a wake-up call. In a landscape shaped by economic headwinds, political volatility, and consumer rebellion, health care leaders can no longer afford to stay in their lane. They must engage, adapt, and transform, or risk becoming casualties of a system under siege.

“Health care is not just one of 11 big industries,” Keckley says. “It’s the one that touches everyone. And right now, no one is giving us a standing ovation.”

The Four Questions Healthcare Boards must Answer

In 63 days, Americans will know the composition of the 119th Congress and the new occupants of the White House and 11 Governor’s mansions. We’ll learn results of referenda in 10 states about abortion rights (AZ, CO, FL, MD, MO, MT, NE, NV, NY, SD) and see how insurance coverage for infertility (IVF therapy) fares as Californians vote on SB 729. But what we will not learn is the future of the U.S. health system at a critical time of uncertainty.

In 6 years, every baby boomer will be 65 years of age or older. In the next 20 years, the senior population will be 22% of the population–up from 18% today. That’s over 83 million who’ll hit the health system vis a vis Medicare while it is still digesting the tsunami of obesity, a scarcity of workers and unprecedented discontent:

  • The majority of voters is dissatisfied with the status quo. 69% think the system is fundamentally flawed and in need of major change vs. 7% who think otherwise. 60% believe it puts its profits above patient care vs. 13% who disagree.
  • Employers are fed up: Facing projected cost increases of 9% for employee coverage in 2025, they now reject industry claims of austerity when earnings reports and executive compensation indicate otherwise. They’re poised to push back harder than ever.
  • Congress is increasingly antagonistic: A bipartisan coalition in Congress is pushing populist reforms unwelcome by many industry insiders i.e. price transparency for hospitals, price controls for prescription drugs, limits on private equity ownership, constraint on hospital, insurer and physician consolidation, restrictions on tax exemptions of NFP hospitals, site neutral payment policies and many more.

Fanning these flames, media characterizations of targeted healthcare companies as price gouging villains led by highly-paid CEOs is mounting: last week, it was Acadia Health’s turn courtesy of the New York Times’ investigators.

Navigating uncertainty is tough for industries like healthcare where demand s growing, technologies are disrupting how and where services are provided and by whom, and pricing and affordability are hot button issues.  And it’s too big to hide: at $5.049 trillion, it represents 17.6% of the U.S. GDP today increasing to 19.7% by 2032. Growing concern about national debt puts healthcare in the crosshairs of policymaker attention:

Per the Committee for a Responsible Federal Budget: “In the latest Congressional Budget Office (CBO) baseline, nominal spending is projected to grow from $6.8 trillion in Fiscal Year (FY) 2024 to $10.3 trillion in 2034. About 87% of this increase is due to three parts of the federal budget: Social Security, federal health care programs, and interest payments on the debt.”

In response, Boards in many healthcare organizations are hearing about the imperative for “transformational change” to embrace artificial intelligence, whole person health, digitization and more. They’re also learning about ways to cut their operating costs and squeeze out operating margins. Bold, long-term strategy is talked about, but most default to less risky, short-term strategies compatible with current operating plans and their leaders’ compensation packages. Thus, “transformational change” takes a back seat to survival or pragmatism for most.

For Boards of U.S. healthcare organizations, the imperative for transformational change is urgent: the future of the U.S. system is not a repeat of its past. But most Boards fail to analyze the future and construct future-state scenarios systematically. Lessons from other industries are instructive.

  • Transformational change in mission critical industries occurs over a span of 20-25 years. It starts with discontent with the status quo, then technologies and data that affirm plausible alternatives and private capital that fund scalable alternatives. It’s not overnight.
  • Transformational change is not paralyzed by regulatory hurdles. Transformers seek forgiveness, not permission while working to change the regulatory landscape. Advocacy is a critical function in transformer organizations.
  • Transformation is welcomed by consumers. Recognition of improved value by end-users—individual consumers—is what institutionalizes transformational success. Transformed industries define success in terms of the specific, transparent and understandable results of their work.

Per McKinsey, only one in 8 organizations is successful in fully implementing transformational change completely but the reward is significant: transformers outperform their competition three-to-one on measures of growth and effectiveness.

I am heading to Colorado Springs this weekend for the Governance Institute. There, I will offer Board leaders four basic questions.

  • Is the future of the U.S. health system a repeat of the past or something else?
  • How will its structure, roles and responsibilities change?
  • How will affordability, quality, innovation and value be defined and validated?
  • How will it be funded?

Answers to these require thoughtful discussion. They require independent judgement. They require insight from organizations outside healthcare whose experiences are instructive. They require fresh thinking.

Until and unless healthcare leaders recognize the imperative for transformational change, the system will calcify its victim-mindset and each sector will fend for itself with diminishing results. No sector—hospitals, insurers, drug companies, physicians—has all the answers and every sector faces enormous headwinds. Perhaps it’s time for a cross-sector coalition to step up with transformational change as the goal and the public’s well-being the moral compass.

PS: Last week, I caught up with Drs. Steve and Pat Gabbe in Columbus, Ohio. Having served alongside them at Vanderbilt and now as an observer of their work at Ohio State, I am reminded of the goodness and integrity of those in healthcare who devote their lives to meaningful, worthwhile work. Steve “burns with a clear blue flame” as a clinician, mentor and educator. Pat is the curator of a program, Moms2B, that seeks to alleviate Black-White disparities in infant mortality and maternal child health in Ohio. They’re great people who see purpose in their calling; they’re what make this industry worth fixing!

A New Kind of Primary Care Comes to America

A group of nurses in East Baltimore is piloting a bold plan to bring basic primary care to everybody no matter their age, income or insurance. Can this idea from abroad take root in the United States?

Raquel Richardson arrived at work in the Johnston Square Apartments in East Baltimore this February expecting to have just another Tuesday. The 31-year-old typically spends her days solving residents’ problems, answering questions at reception and making maintenance rounds.

That day, however, she noticed a team offering free blood pressure checks in the lobby — and decided to sit for one too. Tiffany Riser, a nurse practitioner, was so alarmed by Richardson’s high reading that she checked it twice. The young woman, the nurse confirmed, was at immediate risk for a stroke.

Riser only caught this threat to Richardson’s health because she was offering convenient, preventive care as part of a new program called Neighborhood Nursing. The idea is to meet people where they are and offer them free health checks, whether they realize they need them or not. If Richardson had waited until symptoms arose, Riser says, the results could have been disastrous. 

Instead, Richardson quickly got on a new blood pressure medication and received additional information from Riser about how to reduce hidden salt in her diet. Months later, her pressure remains at a healthy level. 

Bringing care out of the clinic and into the community

Neighborhood Nursing’s teams of nurses and community health workers have started making weekly visits like these to the lobbies of three apartment buildings in Johnston Square, one of Baltimore’s most marginalized neighborhoods. By next year, the team aims to visit more than 4,000 people in the Baltimore metropolitan area at least once a year.

“We’re trying to turn primary care on its head and deliver it in a completely different way,” says Sarah Szanton, dean of the Johns Hopkins School of Nursing and leader of the project, which is a collaboration with the Coppin State, Morgan State and University of Maryland nursing schools.

“What’s revolutionary,” Szanton says, “is that it’s for everybody” — whether they are sick or healthy, rich or poor, young or old, and no matter if they have private insurance, Medicare, Medicaid, or no insurance at all. 

The visits are free to the patient and prioritize each person’s unique goals, from managing chronic back pain to finding safer housing. They can take place in people’s homes, senior centers, libraries or even laundromats.

The idea is modeled after a similar program first tried in Costa Rica about 30 years ago, when that country was grappling with the same core problem that the U.S. is experiencing today: Patients are struggling to access preventive primary care, especially in poor and rural areas. Hospitals are overflowing and basic needs from hunger to high blood pressure are spiraling into bigger, costlier problems.

Szanton believes the U.S. — which lags behind other high-income countries on many measures like infant mortality and obesity — is sorely lacking bold solutions.

Compared to other countries, the U.S. spends far more resources on treating illnesses than on preventing them. America only puts about 5 cents out of every dollar spent on health care toward primary care — and spends less than peer nations on social supports like food and housing.

“It’s like if 10% of our houses were on fire, we would say we don’t have enough firefighters,” Szanton says. “But really what you need to do is prevent fires, which we’ve never done for medical care in this country.” 

A primary care approach imported from a land 2,000 miles south

Costa Rica’s national approach to primary care is very different. “It’s pretty much night and day,” says Asaf Bitton, a primary care doctor who has studied Costa Rica’s model and directs Ariadne Labs, a health innovation center at Harvard School of Public Health.

The Central American nation of 5 million people has pioneered a nationwide version of Neighborhood Nursing. Teams of health workers visit residents’ homes at least once a year, whether the patients live in cities, on banana farms or in remote villages reachable only by boat. After three decades of this approach, the results are remarkable.

Deaths from communicable diseases like tuberculosis and hepatitis have fallen by 94%. Disparities in access to health care have improved too — as have outcomes for chronic conditions like diabetes and heart disease. Costa Rica has achieved all this progress while spending less than 10% of what the U.S. spends per person on care.

“There’s both an incredible economic efficiency and effectiveness,” Bitton says of Costa Rica’s system, “and a deep humanity to it — a sense of reciprocal responsibility for every single person in the country.”

Other factors, including national investments in nutrition and sanitation programs, contributed to the country’s gains, but researchers like Bitton say that keeping nearly every single Costa Rican connected to basic primary care has helped drive significant improvements in health. Other countries, including Sri Lanka and Brazil, have borrowed from Costa Rica’s primary care playbook. 

Still, it’s unclear whether Costa Rica’s model can take root in the U.S.

“The evidence is great,” says Chris Koller, president of the Milbank Memorial Fund, and coauthor of a landmark national report on how to strengthen primary care in the U.S. “The challenge,” Koller says, “is how do you graft it onto our current method of delivering and financing health care?”

Who should fund preventive care?  

Funding is arguably the greatest puzzle facing the Neighborhood Nursing team. The goal is to build something akin to a public utility, serving everyone regardless of the type of health insurance they do — or don’t — have. Health insurers are the most likely to finance a program like this, which is designed to keep costs down by improving members’ health. 

But getting insurers to pony up would require Neighborhood Nursing to earn buy-in from a dizzying number of entities. The residents of a single county, for example, are typically covered by as many as 50 different insurers, from Medicaid plans to private Medicare plans to employer plans. “You try to keep it simple,” says Ann Greiner, president of the Primary Care Collaborative, a nonprofit group, “But inevitably when you move toward implementing a model, you come up against this complexity.”

Insurers have collectively funded projects like statewide vaccination programs, so there is precedent for pooling resources to support all consumers, regardless of their coverage. An investment in the type of care that Neighborhood Nursing aims to deliver door to door, however, would represent a significant leap in scope.

Finding a path through an overstretched system

Health policy analysts also believe the program will likely struggle to connect patients to the country’s sprawling health and social services systems. If Neighborhood Nursing effectively opens a new, more welcoming front door to those systems, what awaits patients on the other side?

In many cases, unfortunately, that next step is into a complex maze that’s short on resources and heavy on bureaucracy. For example, Baltimore, ground zero for Neighborhood Nursing’s pilot program, leads all big cities in opioid overdose deaths, yet treatment options there are limited. Challenges to capacity plague Costa Rica’s successful primary care system, too, where patients can wait months to see specialists or get surgeries. 

In the U.S., specialty care comes with additional hurdles like the need to secure approvals from a person’s insurance plan for certain procedures or medications. People needing significant social support, such as help with affordable housing, can face years-long wait lists.

“There’s no magic pill to change those structural conditions,” says Lisa Stambolis, a nurse and Neighborhood Nursing’s senior project manager. “But there are still things we can do, and we should do.”

Neighborhood Nursing has included community health workers on their teams to help people navigate these complex systems. The program is also training staff in mental-health first aid and simple techniques of cognitive behavioral therapy to make that type of basic help immediately available.

 Team nurses are prepared to go the extra mile, too, to help patients like Raquel Richardson, the East Baltimore worker with high blood pressure that nurse Tiffany Riser encountered in February. Richardson initially resisted seeking care, citing past bad experiences she’d had at a local hospital. Instead of giving up, Riser switched strategies, calling a local clinic, convincing the staff to squeeze Richardson in for an urgent care visit. Nurse Riser even accompanied her patient to the doctor. “Because I had a professional with me, I felt like they took me more seriously,” Richardson says. 

Early signs of community buy-in

The Neighborhood Nursing project is still in its pilot phase, building trust and gathering feedback from the community. By 2025, staff members hope to expand their services to four neighborhoods — two within Baltimore, one in the suburbs and one in a more rural area.

So far, the evidence the approach works is only anecdotal, but the team says they are already seeing a difference in the level of trust from community members. And a trusting connection between patient and provider is key. “The first couple weeks we showed up, it was like, ‘Who are they?’” says community health worker Terry Lindsay. “Now people are opening up the doors to their homes, saying, ‘Come on in and sit down.’”

One other sign of progress, said Sarah Szanton, is that the larger neighborhood is taking ownership and helping to shape the project. 

Long-time Baltimore resident Regina Hammond and a few of her neighbors told the team they needed safer options for exercise. Together they hatched a plan to start a weekly neighborhood walking group.

“Some people walk other days too, now, as a result of meeting each other at the walking group,” Hammond says. A woman with depression joined the group and soon felt better. Another walker said he liked his neighborhood more after he discovered some new parks and an urban garden he’d never known about, despite living in the area for seven years.

The goal is to improve the health of individuals, says Szanton, and empower communities to create happier, healthier places to live.

“I think of what we’re building as like pipes in a water system,” Szanton says, “Where there’s a resource that’s flowing to every household and that connects them to each other.”

Has U.S. Healthcare reached its Tipping Point?

Last week was significant for healthcare:

  • Tuesday, the, FTC, and DOJ announced creation of a task force focused on tackling “unfair and illegal pricing” in healthcare. The same day, HHS joined FTC and DOJ regulators in launching an investigation with the DOJ and FTC probing private equity’ investments in healthcare expressing concern these deals may generate profits for corporate investors at the expense of patients’ health, workers’ safety and affordable care.
  • Thursday’s State of the Union address by President Biden (SOTU) and the Republican response by Alabama Senator Katey Britt put the spotlight on women’s reproductive health, drug prices and healthcare affordability.
  • Friday, the Senate passed a $468 billion spending bill (75-22) that had passed in the House Wednesday (339-85) averting a government shutdown. The bill postpones an $8 billion reduction in Medicaid disproportionate share hospital payments for a year, allocates $4.27 billion to federally qualified health centers through the end of the year and rolls back a significant portion of a Medicare physician pay cut that kicked in on Jan. 1. Next, Congress must pass appropriations for HHS and other agencies before the March 22 shutdown.
  • And all week, the cyberattack on Optum’s Change Healthcare discovered February 21 hovered as hospitals, clinics, pharmacies and others scrambled to manage gaps in transaction processing. Notably, the American Hospital Association and others have amplified criticism of UnitedHealth Group’s handling of the disruption, having, bought Change for $13 billion in October, 2022 after a lengthy Department of Justice anti-trust review. This week, UHG indicates partial service of CH support will be restored. Stay tuned.

Just another week for healthcare: Congressional infighting about healthcare spending. Regulator announcements of new rules to stimulate competition and protect consumers in the healthcare market.  Lobbying by leading trade groups to protect funding and disable threats from rivals. And so on.

At the macro level, it’s understandable: healthcare is an attractive market, especially in its services sectors. Since the pandemic, prices for services (i.e. physicians, hospitals et al) have steadily increased and remain elevated despite the pressures of transparency mandates and insurer pushback. By contrast, prices for most products (drugs, disposables, technologies et al) have followed the broader market pricing trends where prices for some escalated fast and then dipped.

While some branded prescription medicines are exceptions, it is health services that have driven the majority of health cost inflation since the pandemic.

UnitedHealth Group’s financial success is illustrative

it’s big, high profile and vertically integrated across all major services sectors. In its year end 2023 financial report (January 12, 2024) it reported revenues of $371.6 Billion (up 15% Year-Over-Year), earnings from operations up 14%, cash flows from operations of $29.1 Billion (1.3x Net Income), medical care ratio at 83.2% up from 82% last year, net earnings of $23.86/share and adjusted net earnings of $25.12/share and guidance its 2024 revenues of $400-403 billion. They buy products using their scale and scope leverage to  pay less for services they don’t own less and products needed to support them. It’s a big business in a buyer’s market and that’s unsettling to many.

Big business is not new to healthcare:

it’s been dominant in every sector but of late more a focus of unflattering regulator and media attention. Coupled with growing public discontent about the system’s effectiveness and affordability, it seems it’s near a tipping point.

David Johnson, one of the most thoughtful analysts of the health industry, reminded his readers last week that the current state of affairs in U.S. healthcare is not new citing the January 1970 Fortune cover story “Our Ailing Medical System”

 “American medicine, the pride of the nation for many years, stands now on the brink of chaos. To be sure, our medical practitioners have their great moments of drama and triumph. But much of U.S. medical care, particularly the everyday business of preventing and treating routine illnesses, is inferior in quality, wastefully dispensed, and inequitably financed…

Whether poor or not, most Americans are badly served by the obsolete, overstrained medical system that has grown up around them helter-skelter. … The time has come for radical change.”

Johnson added: “The healthcare industry, however, cannot fight gravity forever. Consumerism, technological advances and pro-market regulatory reforms are so powerful and coming so fast that status-quo healthcare cannot forestall their ascendance. Properly harnessed, these disruptive forces have the collective power necessary for U.S. healthcare to finally achieve the 1970 Fortune magazine goal of delivering “good care to every American with little increase in cost.”

He’s right.

I believe the U.S. health system as we know it has reached its tipping point. The big-name organizations in every sector see it and have nominal contingency plans in place; the smaller players are buying time until the shoe drops. But I am worried.

I am worried the system’s future is in the hands of hyper-partisanship by both parties seeking political advantage in election cycles over meaningful creation of a health system that functions for the greater good.

I am worried that the industry’s aversion to price transparency, meaningful discussion about affordability and consistency in defining quality, safety and value will precipitate short-term gamesmanship for reputational advantage and nullify systemness and interoperability requisite to its transformation.

I am worried that understandably frustrated employers will drop employee health benefits to force the system to needed accountability.

I am worried that the growing armies of under-served and dissatisfied populations will revolt.

I am worried that its workforce is ill-prepared for a future that’s technology-enabled and consumer centric.

I am worried that the industry’s most prominent trade groups are concentrating more on “warfare” against their rivals and less about the long-term future of the system.

I am worried that transformational change is all talk.

It’s time to start an adult conversation about the future of the system. The starting point: acknowledging that it’s not about bad people; it’s about systemic flaws in its design and functioning. Fixing it requires balancing lag indicators about its use, costs and demand with assumptions about innovations that hold promise to shift its trajectory long-term. It requires employers to actively participate: in 2009-2010, Big Business mistakenly chose to sit out deliberations about the Affordable Care Act. And it requires independent, visionary facilitation free from bias and input beyond the DC talking heads that have dominated reform thought leadership for 6 decades.

Or, collectively, we can watch events like last week’s roll by and witness the emergence of a large public utility serving most and a smaller private option for those that afford it. Or something worse.

P.S. Today, thousands will make the pilgrimage to Orlando for HIMSS24 kicking off with a keynote by Robert Garrett, CEO of Hackensack Meridian Health tomorrow about ‘transformational change’ and closing Friday with a keynote by Nick Saban, legendary Alabama football coach on leadership. In between, the meeting’s 24 premier supporters and hundreds of exhibitors will push their latest solutions to prospects and customers keenly aware healthcare’s future is not a repeat of its past primarily due to technology. Information-driven healthcare is dependent on technologies that enable cost-effective, customized evidence-based care that’s readily accessible to individuals where and when they want it and with whom.

And many will be anticipating HCA Mission Health’s (Asheville NC) Plan of Action response due to CMS this Wednesday addressing deficiencies in 6 areas including CMS Deficiency 482.12 “which ensures that hospitals have a responsible governing body overseeing critical aspects of patient care and medical staff appointments.” Interest is high outside the region as the nation’s largest investor-owned system was put in “immediate jeopardy” of losing its Medicare participation status last year at Mission. FYI: HCA reported operating income of $7.7 billion (11.8% operating margin) on revenues of $65 billion in 2023.

Walgreens’ VillageMD exits the Florida market

https://mailchi.mp/f9bf1e547241/gist-weekly-february-23-2024?e=d1e747d2d8

Walgreens announced this week that it will be shutting down all of its Florida-based VillageMD primary care clinics. Fourteen clinics in the Sunshine State have already closed, with the remaining 38 expected to follow by March 15.

This move comes in the wake of a $1B cost-cutting initiative announced by Walgreens executives last fall, which included plans to shutter at least 60 VillageMD clinics across five markets in 2024.

Last month VillageMD exited the Indiana market, where it was operating a dozen clinics.

Despite downsizing its primary-care footprint, Walgreens says it remains committed to its expansion into the healthcare delivery sector, having invested $5.2B in VillageMD in 2021 and purchased Summit Health-CityMD for $9B through VillageMD in 2023. 

The Gist: Having made significant investments in provider assets, Walgreens now faces the difficult task of creating an integrated and sustainable healthcare delivery model, which takes time. 

Unlike long-established healthcare providers who feel more loyal to serving their local communities, nontraditional healthcare providers like Walgreens can more easily pick and choose markets based on profitability.

While this move is disruptive to VillageMD patients in Florida and the other markets it’s exiting, Walgreens seems to be answering to its investors, who have been dissatisfied with its recent earnings.

Cano Health files for bankruptcy

https://mailchi.mp/1e28b32fc32e/gist-weekly-february-9-2024?e=d1e747d2d8

On Sunday, Miami, FL-based Cano Health, a Medicare Advantage (MA)-focused primary care clinic operator, filed for bankruptcy protection to reorganize and convert around $1B of secured debt into new debt.

The company, which went public in 2020 via a SPAC deal worth over $4B, has now been delisted from the New York Stock Exchange. After posting a $270M loss in Q2 of 2023, Cano began laying off employees, divesting assets, and seeking a buyer. As of Q3 2023, it managed the care of over 300K members, including nearly 200K in Medicare capitation arrangements, at its 126 medical centers

The Gist: 

Like Babylon Health before it, another “tech-enabled” member of the early-COVID healthcare SPAC wave is facing hard times. While the low interest rate-fueled trend of splashy public offerings was not limited to healthcare, several prominent primary care innovators and “insurtechs” from this wave have struggled, adding further evidence to the adages that healthcare is both hard and difficult to disrupt.

Given that Cano sold its senior-focused clinics in Texas and Nevada to Humana’s CenterWell last fall, Cano may draw interest from other organizations looking to expand their MA footprints.

A Ground-Breaking Transaction

In mid-January, General Catalyst (GC) and Summa Health announced the
signing of a non-binding LOI for GC to acquire Summa, which, if
consummated, would be a groundbreaking transaction.
Summa Health is a
vertically integrated not-for-profit health system located in Akron, Ohio that operates acute care hospitals, a network of health care services, a physician group practice, and a health plan. Like much of the health system sector, Summa has found the operating environment for the past couple of years to be challenging.


GC is a venture capital firm that had approximately $25B in assets under management at the end of 2022, across a dozen fund families and a number of sectors, including its Health Assurance funds, that have a stated mission of “creating a more proactive, affordable & equitable system of care.”


Health Assurance has investments in more than 150 digital health companies worldwide and has implemented working relationships with more than a dozen of the country’s most noteworthy health systems and hospital operators.


In October, GC announced the formation of a new venture called the Health Assurance
Transformation Corporation (HATCo),
for the purpose of providing financial and operational advisory assistance to health systems, including using GC’s suite of digital health companies. At that time, HATCo announced plans to buy a health system in order to drive transformation in the delivery of care by leveraging technology, updating workforce/staffing models, and becoming more proactive in creating revenue streams for health systems.

Their plans included an intent to streamline operations
and find efficiencies using technology, as well as implementing value-based payment models,
including fully capitated risk contracts to incentivize better utilization management, an initiative that requires significant data analytics.


GC had been looking for a system with market relevance and a sweet spot in terms of size – big enough to have a full complement of services, but nimble enough to accept significant change. In Summa, it has also found a system that maintains its own health plan, which GC can use to help accelerate the shift to capitated models.


The transaction that Summa and GC are contemplating is a new and innovative attempt at
addressing the underlying problems that plague the acute care industry.

In particular, 1) a continued
reliance on fee-for-service revenue
when reimbursement has been pressured from every angle and rate increases have failed to keep pace with the rising cost of providing care, 2) capital to fund a growing list of competing needs, and 3) the challenges of staffing for quality in a tight market for clinical labor. Summa appears to be banking on the idea that GC and the data- and technology driven solutions that reside within their portfolio companies can ease those pressures.


HATCo’s proposed purchase of Summa requires a conversion of the health system to for profit. The purchase price of the health system will contribute to the corpus for a large foundation that will address social determinants of health in the Akron community, and the operating entities would become subsidiaries of HATCo.


HATCo has stated publicly that it will continue Summa’s existing charity care commitment, that Summa’s existing management team will stay in place, and the health system Board will continue to have local community representation. HATCo has also emphasized that
it plans to hold Summa for an extended period and have it serve as a digital innovation testing ground and incubation site for new healthcare IT, where it believes that aligning incentives will drive financial improvement and better care.


Innovative approaches to meaningful problems should be applauded but there is skepticism.

Will bottom line pressures affect the quality of care?

Will the typical investment horizon of venture capital align with the time frames needed to prove these solutions are taking hold?

Health system evolution has traditionally been measured in decades, rather than the 5-7 year hold periods that private capital prefers. There are also perceived conflicts to consider as Summa will be paying the GC-owned companies for their services.
Acute care hospitals are central elements of their communities and their constituents are broader than most companies, often including large workforces, union leadership, politicians, government regulators, and of course patients and their families.

This transaction will receive significant scrutiny with any number of constituents taking issue with a health system’s purchase by a venture capital firm. One hurdle is the conversion process itself, which requires review and approval by the Ohio Attorney General and regulators may want to impose restrictions on GCs ability to operate that are incompatible with its plans. The hurdles to closing are daunting, but the challenges facing health systems are equally daunting.

And while this proposed combination may not come to fruition, the need for innovative solutions remains.

One System; Two Divergent Views

Healthcare is big business. That’s why JP Morgan Chase is hosting its 42nd Healthcare Conference in San Francisco starting today– the same week Congress reconvenes in DC with the business of healthcare on its agenda as well. The predispositions of the two toward the health industry could not be more different.

Context: the U.S. Health System in the Global Economy


Though the U.S. population is only 4% of the world total, our spending for healthcare products and services represents 45% of global healthcare market. Healthcare is 17.4% of U.S. GDP vs. an average of 9.6% for the economies in the 37 other high-income economies of the world. It is the U.S.’ biggest private employer (17.2 million) accounting for 24% of total U.S. job growth last year (BLS). And it’s a growth industry: annual health spending growth is forecast to exceed 4%/year for the foreseeable future and almost 5% globally—well above inflation and GDP growth. That’s why private investments in healthcare have averaged at least 15% of total private investing for 20+ years. That’s why the industry’s stability is central to the economy of the world.

The developed health systems of the world have much in common: each has three major sets of players:

  • Service Providers: organizations/entities that provide hands-on services to individuals in need (hospitals, physicians, long-term care facilities, public health programs/facilities, alternative health providers, clinics, et al). In developed systems of the world, 50-60% of spending is in these sectors.
  • Innovators: organizations/entities that develop products and services used by service providers to prevent/treat health problems: drug and device manufacturers, HIT, retail health, self-diagnostics, OTC products et al. In developed systems of the world, 20-30% is spend in these.
  • Administrators, Watchdogs & Regulators: Organizations that influence and establish regulations, oversee funding and adjudicate relationships between service providers and innovators that operate in their systems: elected officials including Congress, regulators, government agencies, trade groups, think tanks et al. In the developed systems of the world, administration, which includes insurance, involves 5-10% of its spending (though it is close to 20% in the U.S. system due to the fragmentation of our insurance programs).

In the developed systems of the world, including the U.S., the role individual consumers play is secondary to the roles health professionals play in diagnosing and treating health problems. Governments (provincial/federal) play bigger roles in budgeting and funding their systems and consumer out-of-pocket spending as a percentage of total health spending is higher than the U.S. All developed and developing health systems of the world include similar sectors and all vary in how their governments regulate interactions between them. All fund their systems through a combination of taxes and out-of-pocket payments by consumers. All depend on private capital to fund innovators and some service providers. And all are heavily regulated. 

In essence, that makes the U.S. system unique  are (1) the higher unit costs and prices for prescription drugs and specialty services, (2) higher administrative overhead costs, (3) higher prevalence of social health issues involving substance abuse, mental health, gun violence, obesity, et al (4) the lack of integration of our social services/public health and health delivery in communities and (5) lack of a central planning process linked to caps on spending, standardization of care based on evidence et al.

So, despite difference in structure and spending, developed systems of the world, like the U.S. look similar:

The Current Climate for the U.S. Health Industry


The global market for healthcare is attractive to investors and innovators; it is less attractive to most service providers since their business models are less scalable. Both innovator and service provider sectors require capital to expand and grow but their sources vary: innovators are primarily funded by private investors vs. service providers who depend more on public funding.  Both are impacted by the monetary policies, laws and political realities in the markets where they operate and both are pivoting to post-pandemic new normalcy. But the outlook of investors in the current climate is dramatically different than the predisposition of the U.S. Congress toward healthcare:

  • Healthcare innovators and their investors are cautiously optimistic about the future. The dramatic turnaround in the biotech market in 4Q last year coupled with investor enthusiasm for generative AI and weight loss drugs and lower interest rates for debt buoy optimism about prospects at home and abroad. The FDA approved 57 new drugs last year—the most since 2018. Big tech is partnering with established payers and providers to democratize science, enable self-care and increase therapeutic efficacy. That’s why innovators garner the lion’s share of attention at JPM. Their strategies are longer-term focused: affordability, generative AI, cost-reduction, alternative channels, self-care et al are central themes and the welcoming roles of disruptors hardwired in investment bets. That’s the JPM climate in San Franciso.
  • By contrast, service providers, especially the hospital and long-term care sectors, are worried. In DC, Congress is focused on low-hanging fruit where bipartisan support is strongest and political risks lowest i.e.: price transparency, funding cuts, waste reduction, consumer protections, heightened scrutiny of fraud and (thru the FTC and DOJ) constraints on horizontal consolidation to protect competition. And Congress’ efforts to rein in private equity investments to protect consumer choice wins votes and worries investors. Thus, strategies in most service provider sectors are defensive and transactional; longer-term bets are dependent on partnerships with private equity and corporate partners. That’s the crowd trying to change Congress’ mind about cuts and constraints.

The big question facing JPM attendees this week and in Congress over the next few months is the same: is the U.S. healthcare system status quo sustainable given the needs in other areas at home and abroad? 

Investors and organizations at JPM think the answer is no and are making bets with their money on “better, faster, cheaper” at home and abroad. Congress agrees, but the political risks associated with transformative changes at home are too many and too complex for their majority.

For healthcare investors and operators, the distance between San Fran and DC is further and more treacherous than the 2808 miles on the map. 

The JPM crowd sees a global healthcare future that welcomes change and needs capital; Congress sees a domestic money pit that’s too dicey to handle head-on–two views that are wildly divergent.

How Elevance Health plans to integrate ‘food as medicine’ across its lines of business

In June, Elevance Health named Kofi Essel, MD, as its first food as medicine program director, signaling a paradigm shift within one of the country’s largest healthcare organizations. 

Dr. Essel is a community pediatrician by training, having most recently worked at Children’s National Health System in Washington, D.C. Before that, he was the director of the culinary medicine program at George Washington University’s School of Medicine and Health Sciences. 

He sat down with Becker’s to discuss how Elevance is building a food as medicine strategy intended to eventually touch and improve the lives of its more than 47 million members nationwide.

Question: How do you define “food as medicine” as it relates to your role at Elevance Health?

Dr. Kofi Essel: The definition I’ve been leading around “food as medicine” are the strategies or interventions that work alongside healthcare and give access to high-quality foods, and a focus on prevention, management and treatment of disease. We also love to center this around health equity and thinking strongly about the importance of high-quality nutrition education as well.

Q: What’s your plan to integrate the “food as medicine” concept into Elevance Health’s insurance and other product offerings?

KE: We as a company strongly believe in the concept of whole health and really recognizing that the health of our members around the country is far more than what’s happening in the four walls of the clinical setting. We also believe that because we get great insight into the lives of our members in a variety of different settings, we are uniquely positioned to be able to respond to their whole health, including socioeconomic and behavioral health backgrounds. Food as medicine fits into this concept because we’re thinking about challenges around food and nutrition insecurity, and diet-related chronic diseases. This is a quite prevalent issue across the country, and we’re thinking about this through every line of business in Medicaid, commercial and Medicare. 

We’ve been doing a lot of work in this space as an organization, and our philanthropic arm has committed $30 million over a three-year period to authentic foods as medicine solutions. One of the grantees that we supported in their community based efforts has been Feeding America, the largest umbrella organization for the majority of food banks around the country. They’ve been doing some phenomenal work creating what we call food pharmacies, which team up with health clinics. We’ve seen them collect some unique data, so we’re really excited about what we expect to see from that partnership in particular. 

I will also say one of the big things that I’ve been working with our teams around is building our actual strategy. How are we going to incorporate this concept into every line of business? We are getting ready to roll out some pilots because the data is quite clear that these interventions are effective.

Q: Are there emerging trends or innovations in nutritional science that you think can enhance traditional health plans?

EF: The science around food as medicine is emerging and exciting and exists — and the data is quite clear that diet affects disease and health outcomes. There are a few different kinds of food as medicine interventions, such as medically tailored meals, medically tailored groceries and produce prescriptions.

There’s also strategies around using federal nutrition programs and other population or community-level policies and programs that we can lean into, including around quality nutrition education. I reviewed one recent study that looked at the power of produce prescription initiatives, which a lot of people have asked me, “What’s the point?” I point them to the data: One in 10 adults and children consume enough fruits and vegetables, meaning our consumption of fiber and other nutrients is quite low. 

When families are provided a produce prescription, we see significant changes in hemoglobin A1C, which is a marker for diabetes. We see significant changes in blood pressure and significant improvement in weight management and overall health outcomes. So the data that these interventions can work is a powerful reminder to keep this great work going.

Q: Why should every major healthcare organization employ someone in your role?

EF: When you look at professional guidelines for organizations addressing a variety of different diet-related chronic diseases, one of the first things you’re going to see as an intervention option for patients is using lifestyle components such as food as a priority.

Unfortunately, the reality is we as medical providers aren’t always given the training that’s necessary to be able to engage in these meaningful conversations with our patients and families. It’s important to have a paradigm shift in how we incorporate this priority topic into how we engage with members across the country. Having a food as medicine director, or prioritizing food as medicine within an organization, is a key element to improving the health of patients and members. 

Will health system M&A soar or dive?

The health system deal market heated up in 2023.

Big, industry-shaking acquisitions including Oakland, Calif.-based Kaiser Permanente’s purchase of Danville, Pa.-based Geisinger, could redefine healthcare delivery with an eye toward value. Regional deals, such as Detroit-based Henry Ford Health’s planned joint venture with Ascension Michigan and St. Louis-based BJC HealthCare’s plan to acquire Saint Luke’s Health System to create a $10 billion organization, have also made waves.

There were 18 hospital and health system transactions announced in the third quarter, up from 10 transactions over the same time period in 2022, according to Kaufman Hall’s third quarter M&A report. Financial pressures with inflation catapulting staffing and supply costs, and reimbursement rates growing much more slowly, have forced some systems to look for a buyer while others aim to increase market share.

Academic health systems are also seeking community partners at a higher rate than in the past, according to the Kaufman Hall report.

But not all announced deals have gone according to plan.

The Federal Trade Commission is scrutinizing deals more closely than ever before to ensure costs don’t increase after an acquisition in some cases. In other cases, the two partners aren’t able to agree upon the details after announcing their plans. The dissolved merger between Sioux Falls, S.D.-based Sanford Health and Minneapolis-based Fairview Health Services fell apart amid contention in Minnesota, and West Des Moines, Iowa-based UnityPoint Health’s plans to merge with Presbyterian Healthcare Services in Albuquerque, N.M., was halted without a publicly stated reason.

Will there be more or fewer health system deals in the next three years?

Seth Ciabotti, CEO of MSU Health Care at Michigan State University in East Lansing, thinks so, at least when it comes to academic medical centers.

“There will be more consolidation to mitigate risk,” he told Becker’s. “I believe we are heading down a path of having only a dozen or so non-academic medical centers/health systems being left in the near future in the U.S.”

Mark Behl, president and CEO of NorthBay Health in Fairfield, Calif., has a similar outlook for the next three years.

“I suspect we will see more mergers and acquisitions with a continued desire to grow larger and remain relevant,” he told Becker’s. “Independent regional health systems will fight for relevance, and sometimes survival.”

And health systems won’t be the only buyers. Private equity, health insurers and non-traditional owners are on the hunt for health systems. General Catalyst has strengthened its healthcare presence recently and announced it plans to acquire a system in the near future.

“I believe that over the next three years, the landscape of acquisitions, divestitures and joint ventures will continue to reshape the healthcare industry,” said Dennis Sunderman, system director of HR M&A, non-employee and provider services at CommonSpirit Health, told Becker’s. “Current and proposed legislation, the continued evolution of ownership groups, nonprofit, for profit, and private equity, and the drive to hire and retain exceptionally talented teams, will lead to new innovations and an enhanced focus on the associates affected by the transaction.”

Health systems will need to optimize their operations to expand their value-based care efforts and digital transformation, including telehealth and remote patient monitoring services. Not all systems have the expertise and resources to fully make this transition, but with the right partners and strategic alignments, they can accelerate care transformation.

“There will likely be more collaborations and partnerships to expand services and increase access versus brick and mortar acquisitions,” said Cliff Megerian, MD, CEO of University Hospitals in Cleveland. “Innovative thinking is critical for success and quite frankly survival in our industry, so health systems should already be investing in growing in-house expertise dedicated to ideating new models of care, but in three years, these efforts should be producing tangible results.”

Michelle Fortune, BSN, CEO of Atrium St. Luke’s Hospital in Columbus, N.C., pointed to recent collaborations between Mercy, Microsoft and Mayo Clinic as examples of how health systems can partner on important initiatives such as improved data sharing, generative AI, digital transformation and more.

“I expect to see an increase in collaborations and connections between health systems to a degree that has never existed before as part of the focus on bringing the right care to people across the full continuum, when and where they need it,” she said.

Kaufman Hall sees more minority ownership deals ahead, which allows the smaller system to maintain near-autonomy while benefiting from the resources of a larger system.

“Health systems are also engaging in creative transaction structures that allow partners to maintain their independence while building strategic alliances that enhance access to care,” the report notes. “Announced transactions in Q3 included [Charlottesville, Va.-based] UVA Health’s acquisition of 5% ownership interest in [Newport News, Va.-based] Riverside Health System as part of a strategic alliance design ‘to expand patient access to innovative care for complex medical conditions, transplantation, and the latest clinical trials.'”