Tag Archives: Technology

Get Your Healthcare at … Costco?

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Large companies have been spending the last several years getting into—and sometimes subsequently shrinking—their footprint in the healthcare business. Some of them, such as pharmacy retailers like CVS and Walgreens, could be considered “healthcare adjacent” because of their pharmacy component, which is already considered healthcare. As discussed below, these entities have been entering the healthcare space in a few different ways—although primarily through the expansion of primary care and clinic services. This blog provides a high-level overview of how and where these expansions have taken place, how Costco’s latest venture differs from others, and considers important questions for policymakers that these shifts raise.

Both Walgreens and CVS began providing “direct-to-consumer” retail healthcare clinic services within their stores in 2013 and 2016, respectively. Over time, Walgreens expanded the ability of its clinics to provide not just primary care but services for people with chronic health conditions in 2013. Then, in 2020/2021, they created a partnership with an entity known as VillageMD to staff and run hundreds of their healthcare clinics. The growth of these clinics has reversed in recent years, with many closings happening across the country after the company was acquired by private equity firm Sycamore Partners in 2025. As of August 2026, Walgreens was still operating in the neighborhood of 8,000 clinics nationwide.

In the case of CVS, it began providing primary care clinic services in 2016 through the acquisition of MinuteClinic. According to its website and the National Retail Federation, CVS grew to be the largest provider of “retail” healthcare in the US. Perhaps more significant for CVS was its acquisition in 2018 of Aetna health insurance company. The intent of the merger was to provide more coordinated care to a larger share of the population, building on Aetna’s and CVS’s respective strengths. Additionally, in 2023, CVS acquired Oak Street Health, which focuses on helping older adults stay healthy through routine primary care like vaccinations and screenings.

But the growth of these large entities may slow. Just this week, it was reported that CVS plans to split its insurance and pharmacy businesses. David Joyner, the current chairman and CEO of CVS Health, noted of the reason behind the move that “each company will have greater flexibility to adopt the technologies that best fit its needs, improve efficiency and more effectively adapt to the regulatory and other dynamics.” This kind of decision may therefore draw in part from broader public concerns that the size of such entities may result in further scrutiny on the insurance side of their business.

Other big retail companies, such as Walmart and Amazon, have also launched healthcare services. Walmart was operating health clinics as well, but began discontinuing and closing retail clinic services in 2024 because of financial losses. Currently, however, they still provide pharmacy services as well as preventive and health insurance coverage services. Amazon, on the other hand, dramatically expanded its footprint in 2023 when it partnered with One Medical to offer AI-powered in-person and virtual care options with various health systems across the US.

Another way these companies are entering the healthcare space is through partnerships with or acquisition of existing healthcare companies. The latest company to do so via a strategic partnership is Costco, a large wholesale membership company known for selling groceries and other items such as gasoline, eyeglasses, and pharmacy products, at lower cost. In August 2026, Costco announced a partnership with the SCAN Group, which, according to SCAN’s website, provides new ways to deliver evidence-based patient-centered care to older adults. SCAN, a not-for-profit, has several companies that provide everything from healthcare for the unhoused, in-home care, insurance coverage, and primary care—all focused on older adults. They operate in states such as California, Nevada, Texas, Washington, and New Mexico.

What is different about Costco’s arrangement compared to CVS, Walgreens, Amazon, or Walmart is threefold: Costco’s venture into healthcare is (1) not-for-profit, (2) focused on the aging/senior population, and (3) delivering services in the long-term care space such as care management and insurance products (including a Medicare Advantage plan).

With all these nontraditional entities entering the healthcare space in various forms, there are important questions for policymakers and regulators to consider. These include:

  • What are the goals of these entities that are more recently entering the healthcare space versus traditional healthcare providers?
  • What is the impact of these entities on the healthcare marketplace?
  • What is the impact of these healthcare entities on health outcomes for people, and is this a good or bad development generally?
  • What other role should government play as it relates to these changes?
a large sign spins on top of a Caduceus. the five panels of the sign show the logos of amazon, CVS, Costco, Walmart, and Walgreens.
What are the goals of these entities that are more recently entering the healthcare space versus traditional healthcare providers?

The goals of these companies’ ventures into healthcare are not always explicitly stated. For some, the goal was to expand customized consumer experiences. Presumably, each saw a need/demand by customers for more services. For others, entering healthcare may be part of an overall business growth strategy. Still, for others, it may be about integrating care and moving toward value-based outcomes. In the case of Costco, it is targeting a specific market (the aging population) in a different way (insurance). Given the footprint of these entities in healthcare, policymakers may want to consider what is in the best interest of the public good and whether such organizational ventures are resulting in positive or negative impacts—or perhaps a little of both. This leads one to ask a few more questions…

What is the impact of these entities on the healthcare marketplace?

The entry of these entities is seen as disruptive to the traditional healthcare system. But disruption may be viewed as both a positive and negative development for the industry. Disruption can force innovation and broaden choice. At the same time, it is possible it may shift where and from whom consumers access healthcare. One such example is the company created by Mark Cuban, Cost Plus Drugs, which is meant to disrupt the pharmacy industry and lower costs for consumers. Developing a rubric and measures by which to gauge impacts on things such as quality, cost, and outcomes in health should be a consideration for policymakers. Policymakers may also choose to allow new marketplace entrants to see if there might be a positive impact, such as more choice of providers by consumers or a better consumer experience. Monitoring these impacts may be difficult, but some states have started such efforts by better understanding who is entering the market. They are doing so by requiring the reporting of what are known as “material transactions” (i.e., purchases or acquisitions between businesses of a certain amount). Ultimately, if a venture is not needed, is not sustainable, or is done suboptimally, consumers may “vote with their feet” and choose not to use the service.

What is the impact of these healthcare entities on health outcomes for people? And relatedly, is this a positive development generally?

Many of the objective analyses on the entry of nontraditional companies into healthcare have focused on market impacts and not necessarily overall outcomes for consumers. This is, in part, because population health impact is harder to track. But the individual companies that have entered healthcare have done their own monitoring of outcomes. For example, CVS reports that they saw an average reduction in A1C of 1.9 percent (i.e., lower blood sugar, which reduces harm from Type 2 Diabetes) through their Transform Diabetes Care initiative and a 44 percent reduction in hospital admissions through Oak Street Health, which provides primary and specialty care for older adults. One broader positive impact has been on increasing access—primarily to primary care and pharmacies—although many companies have pulled back on their in-person retail clinics. Policymakers could consider requiring any entities in healthcare, including those considered to be nontraditional, to report all the same quality measures that traditional providers do. These measures are largely overseen nationally by the National Committee on Quality Assurance. States also mirror these quality and outcome reporting requirements with their state-based quality measurement systems, such as New York’s Quality Assurance Reporting Requirements.

What other roles should government play as it relates to the growth of nontraditional healthcare providers?

Traditional healthcare (e.g., hospitals, nursing homes, federally qualified health centers, etc.) is highly regulated. To bill for services, providers must enroll in programs to get a National Provider Identifier (NPI number) and be credentialed. In some cases, companies may do this themselves, while others have chosen to buy or partner with entities that are already enrolled providers.

In the case of Costco’s latest venture with SCAN to serve the 65+ year-old Medicare population, the service being offered is itself different because it is a Medicare insurance product. These products have regulations governing participation, marketing practices, and compliance. Should any of the aforementioned companies decide to serve the Medicaid population, which is primarily lower-income individuals or people with disabilities, the regulatory requirements may vary by state because this program is jointly administered by the federal and state government.

Conclusion

As this blog reflects, a growing number of companies that are not traditional healthcare providers have been entering the healthcare marketplace. As discussed, there are new ways companies are entering this space (from retail healthcare to pharmacy to insurance for aging services), and there are potential pros and cons to this development. To ensure that the entry of these companies into healthcare is a more positive development, policymakers may want to consider more evenly applying regulatory requirements and oversight across the marketplace. They may also want to more closely monitor impacts on access to services, costs, and outcomes for consumers to the same degree as is done for traditional providers. In the meantime, it will be interesting to watch how and to what extent these larger retail companies evolve in the healthcare marketplace.

Risant Health’s Integris Deal Tests its Value-Based Care Strategy

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https://www.healthleadersmedia.com/ceo/risant-healths-integris-deal-tests-its-value-based-care-strategy

The acquisition allows Risant to keep growing while giving Oklahoma’s largest nonprofit health system access to technology and investment resources.

KEY TAKEAWAYS

Integris Health would become the third health system to join Risant Health, following Geisinger and Cone Health.

Risant has committed billions of dollars to capital investments and implementation support at its existing health systems.

Risant reports gains in operating margin at Geisinger and reduced clinician documentation time at Cone Health as it seeks to extend its value-based care model.

Risant Health’s planned acquisition of Integris Health will expand its network of community-based health systems and test its ability to spread value-based care practices across differing organizations.

The two systems have signed a definitive agreement, giving Integris access to technology and other resources through Risant, a nonprofit created by Kaiser Permanente to help health systems transition toward value-based care.

For Integris CEO Timothy Pehrson, the arrangement could accelerate investments that would be difficult to achieve independently.

“These are investments and capabilities we couldn’t make or build on our own, not at this scale and not this fast,” Pehrson said in the announcement.

Oklahoma City-based Integris operates 20 hospitals and has the state’s largest physician network. The acquisition would make it the third health system to join Risant, following Geisinger in Pennsylvania and Cone Health in North Carolina.

Risant’s strategy depends on spreading technology and clinical practices across its member organizations while allowing them to retain their local identities. Kaiser Permanente CEO Greg Adams described the goal as moving “from siloed, episodic care to a value-based care approach with an increased focus on evidence-based care that achieves healthier outcomes for more people.”

The acquisition raises questions about how Risant will translate its strategy into results across distinct health systems. Integris reported $3.3 billion in operating revenue and a $22.3 million operating loss in fiscal 2025, highlighting the importance of investments that can support its long-term performance.

Risant points to early results at its existing health systems as evidence of progress. Geisinger has realized benefits equivalent to nearly a 1% improvement in operating margin since joining Risant, according to the organization. At Cone Health, Risant reports that ambient clinical documentation technology has reduced the time clinicians spend on notes per patient encounter by almost 14%.

Those examples illustrate the potential of shared resources to affect clinical workflows and financial performance. The results at Geisinger and Cone Health, however, do not establish how quickly Integris could achieve similar gains.

Risant’s operating revenue reached $6.7 billion in the first half of 2026, up 9.9% from $6.1 billion in the same period a year earlier. Its financial results do not separately disclose operating income for Risant, making it difficult to assess the overall financial performance of its model.

Risant has made substantial capital commitments to its existing health systems. It has pledged to make at least $2 billion available to Geisinger through 2028 and committed at least $1 billion in capital over five years to Cone Health, along with up to $400 million for integration and implementation of its value-based care platform and up to $300 million for growth over the following decade.

For Integris, the immediate appeal is access to investment capacity and capabilities. The longer-term test will be whether those resources help Integris advance value-based care while strengthening its operations.

The agreement remains subject to regulatory approval.

Washington Wants AI Regulation. It Should Start With Health Insurers.

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https://healthcareuncovered.substack.com/p/washington-wants-ai-regulation-it?utm_source=substack&utm_medium=email

As lawmakers develop a national artificial intelligence framework, health insurers are already using automated decision-making tools to influence Americans’ access to care.

Barack Obama spent an hour last week telling House Minority Leader Hakeem Jeffries and a room of Democratic donors that artificial intelligence is “moving very fast in private hands” and that the party needs a real plan before it gets away from them entirely. He said a public framework on AI safety was urgently needed and that Democrats should make AI safety a “central agenda” in January when the next Congress is sworn in and when attention begins to shift to the 2028 elections.

Obama’s remarks were reported this past weekend alongside similar warnings and calls from AI industry leaders.

House Democrats apparently are working on the kind of “framework” Obama called for. Jeffries launched the House Democratic Commission on AI and the Innovation Economy last December, and the commission reportedly has a policy framework due this fall. That’s good news – and a good start. Rules governing how AI is built, tested and deployed will inevitably shape how health insurers can use it. But that framework also has to account for what happens when AI moves into high-stakes, industry-specific decisions. But if it doesn’t mention health insurance by name, it will have missed the industry that is already furthest along in using AI to make decisions about who lives, who dies, and who pays — with almost no oversight at all.

THE BOTTOM LINE: Health insurers are already using algorithms to influence coverage decisions. Any federal AI framework should require meaningful human review, clinician override authority, transparency and patient appeal rights.

This isn’t a hypothetical harm sitting somewhere out on the horizon, the way a lot of the AI safety conversation still is. It’s happening in claims systems right now. And the company doing it loudest and proudest is none other than the biggest and most profitable health insurance conglomerate, UnitedHealth.

UnitedHealth told shareholders and Wall Street financial analysts when it announced first quarter profits in April that it’s spending $1.5 billion on AI in 2026 alone, with executives promising a “conservative” 2-to-1 return within 12 to 18 months. A third of that money is going into new AI software products the company hopes to sell to other health systems. The other two-thirds is going into what Optum Insight’s CEO called “signature end-to-end processes” — the internal machinery of how the company handles care.

Some of that machinery is aimed at speeding up prior authorization decisions, and the company points to real numbers: turnaround times cut, call volumes down, a pharmacy tool that reportedly shrank prescription approval from eight hours to under 30 seconds. That’s good if true and the whole story. Nobody is nostalgic for eight-hour prior auth waits.

But the same earnings calls that tout faster prior auth decisions (denials as well as approvals) are the ones that tout a lower medical loss ratio — the industry’s term for the share of premium dollars that actually goes to patient care. UnitedHealth’s second-quarter medical care ratio fell 270 basis points this year, and executives credited the AI investment directly for that unexpectedly big decline in medical spending. When a company brags to Wall Street that artificial intelligence helped it spend less on medical care, that is not a customer-service story. It’s a story about how the company is boosting profit margins, and patients are the input being optimized.

The algorithms already have a body count

UnitedHealth and Humana are both being sued right now over their use of an algorithm called nH Predict, which families allege was used to cut off coverage for elderly and disabled patients in extended care — sometimes overriding the judgment of the company’s own medical staff — based on a tool plaintiffs say gets it wrong up to 90% of the time on appeal. Cigna is fighting a parallel case over its PxDx system, which ProPublica found had denied more than 300,000 payment requests in a two-month span, with a company doctor spending an average of 1.2 seconds per claim.

Both cases, which are still working their way through the courts, rest on the same basic allegation: that a health plan let software stand in for the individualized medical review its own policies promised. A federal judge has already allowed the Cigna case to move forward on exactly that theory.

Elizabeth Nicholas, writing in Vanity Fair last week about her own fight with her insurer during breast cancer treatment, put the trajectory more starkly than I have. Her argument is that the industry has already trained the humans who run it to set their humanity aside and act like machines — which is exactly what will make humans so easy to replace. (Several big insurers, including Cigna where I used to work, have said they are laying off thousands of workers this year.) Soon, she writes, “there won’t even be executives left to email; only code,” carrying out profit directives with no capacity for hesitation or mercy. Her essay’s whole premise was that she still had a CEO’s name to put in an email she sent begging the insurer to reverse a denial of a life-saving treatment. Take the human off both ends of that exchange and there’s no one left to shame, sue, or vote out.

A handful of states aren’t waiting for Congress. Colorado now requires bias audits and guaranteed appeal rights for AI-driven coverage decisions. But even bias audits raise a bigger question of what exactly counts as bias when an insurer builds these tools? An algorithm can pass checks for discrimination and still be designed to advance the insurer’s financial interests, including reducing spending on medical care. And as insurers increasingly build their tools on general-purpose AI models, biases embedded in those underlying systems can carry into whatever gets built on top of them.

California and Texas have both moved to require that a licensed physician, not an algorithm alone, sign off on any denial based on medical necessity. That’s real progress — and it’s also proof of how far behind federal policy is. Coverage decisions shouldn’t depend on which state you happen to live in.

Jeffries has already put two members of his caucus in charge of a group that presumably will come up with recommendations on health care reform priorities. Alexandria Ocasio-Cortez of New York and Terri Sewell of Alabama are co-conveners of House Democrats’ Cost of Living Healthcare Working Group, tasked with building out the party’s affordability agenda on health care. So far, the public framing of that group has been about premiums, Medicaid cuts, and ACA tax credits. None of that is wrong. But if AI’s growing role in coverage denials isn’t part of what Ocasio-Cortez and Sewell put forward, the working group will have missed the fastest-moving cost driver in the field they were assigned to cover. They’re the two members with the standing and the mandate to put specific, concrete AI proposals on the table — not vague concern, but actual legislative language on human review requirements, transparency, and audit rights. That’s the natural home for this work, and it shouldn’t wait for the broader framework Jeffries is still finishing.

Every argument Obama made to Jeffries about why Democrats need an AI framework applies with more force, not less, to health insurance. He talked about job displacement from AI — insurers are already using it to displace human medical judgment. He talked about AI moving fast in private hands — seven for-profit companies control most of the American health insurance market, and they answer to shareholders, not patients. He said he didn’t want to be a “doomer,” and neither am I. AI genuinely could help identify fraud, speed up legitimate approvals, and cut the paperwork that eats a doctor’s week. Nobody serious is arguing it should be banned from health care.

The argument is narrower than that: When an algorithm is making or heavily influencing a decision about whether a person gets the care their doctor ordered, someone accountable has to be able to explain why, a licensed clinician has to be able to overrule it, and the patient has to have a real path to appeal. Right now, in most of the country, none of that is guaranteed.

Any Democratic AI framework that talks about jobs, misinformation, and existential safety risk while staying silent on the algorithms already deciding who gets a breast cancer treatment, a hip replacement or a nursing home stay isn’t a serious framework. It’s an incomplete one. Jeffries has the chance to make sure it isn’t — and given that he reportedly brought up the resignation letter of an Anthropic employee warning about the dangers of AI development in his conversation with Obama, he’s clearly already thinking about where AI could do real damage. Health insurance should be at the top of that list, not an afterthought to it.

Rural health is ailing. Is $50 billion enough to heal it?

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https://www.managedhealthcareexecutive.com/view/rural-health-is-ailing-is-50-billion-enough-to-heal-it-

Funding from the Rural Health Transformation Program is beginning to flow to the states. The purpose is larger, but some say its success should be measured by whether it preserves access to care at rural hospitals.

The Rural Health Transformation Program represents one of the largest federal investments ever made in rural healthcare, with $50 billion authorized over five years to help states improve access, strengthen the workforce, and modernize care delivery in rural areas. Still, as states move from planning to implementation, the program faces an immediate test: Can it deliver meaningful transformation while rural hospitals continue to face mounting financial and operational pressures?

The answer is not so cut-and-dried.

Some rural health advocates view the program as an unprecedented opportunity to rethink how care is delivered in underserved communities. Others caution that although the funding can accelerate innovation, it was never designed to replace revenue that providers could lose because of Medicaid policy changes, such as work requirements.

Alan Morgan is CEO of the National Rural Health Association.

Alan Morgan is CEO of the National Rural Health Association.

“It’s apples and oranges,” says Alan Morgan, M.P.A., CEO of the National Rural Health Association. “The Rural Health Transformation Program was created to invest in long-term innovation, not to replace Medicaid funding. Comparing the two misses the intent of the legislation.”

At the same time, Morgan acknowledged that rural providers remain deeply concerned about what lies ahead.

“The math just doesn’t work,” he said. “Nearly one-half of rural hospitals already operate at a loss, and hundreds remain at risk of closure if financial pressures continue to mount.”

Innovation versus stabilization

Congress created the Rural Health Transformation Program as part of the One Big Beautiful Bill Act that President Donald Trump signed into law on July 4, 2025. It was added in part to offset the federal Medicaid cuts in the bill, which the Congressional Budget Office estimated will total $911 billion over a 10-year period. The program provides $10 billion annually through 2030 to help states invest in new care models, workforce development, technology and other initiatives intended to improve healthcare delivery in rural areas.

Ryan Cohn is chief strategy officer at Sachs Media.

Ryan Cohn is chief strategy officer at Sachs Media.

Ryan Cohn, chief strategy officer at Sachs Media, who has advised multiple states, health systems and healthcare organizations on Rural Health Transformation Program applications, says that the funding is not sufficient to offset the broader financial challenges facing rural healthcare, noting that the fund was created after lawmakers expressed concern that the Medicaid cuts could disproportionately affect rural providers, especially rural hospitals. And once CMS implemented the program, its focus shifted toward transforming healthcare delivery rather than serving as a financial backstop for struggling hospitals.

“The real question isn’t whether $50 billion is enough money,” Cohn comments. “It’s whether we can stand up a new care model fast enough to replace a hospital that may close in the next few years.”

Harold D. Miller, M.S., president and CEO of the Center for Healthcare Quality and Payment Reform, says he believes the program has the potential to preserve services in rural communities, but only if states have enough flexibility to direct funding where it is needed most.

“The $10 billion per year in new funds under RHTP [Rural Health Transformation Program] could go a long way to preventing the loss of services in rural areas if the money could be directed to the hospitals that are currently being underpaid,” Miller observes.

Instead, he adds, CMS has limited the amount states can use for direct provider payments while encouraging investment in new initiatives and technology.

“Although those investments may ultimately prove valuable, technology alone cannot replace essential healthcare services,” he says. “A phone app can’t deliver a baby, draw blood, stitch a wound or do a CT scan.”

Implementation

After months spent developing applications, states are now beginning the nuts-and-bolts work of turning proposals into operational programs.

According to Cohn, five priorities appear consistently across state plans: workforce development; telehealth and data infrastructure; prevention; new payment and delivery models; and bringing care closer to patients through mobile clinics and regional care networks.

Joe Ganley, J.D., vice president of government and regulatory affairs for athenahealth, says rural practices already operate with no room to spare. “The margin for error has essentially disappeared,” Ganley said.

Joe Ganley, J.D., vice president of government and regulatory affairs for athenahealth, says rural practices already operate with no room to spare. “The margin for error has essentially disappeared,” Ganley said.

Among those priorities, workforce development stands out as the dominant theme, he says. Many states are investing in residency programs, loan repayment initiatives and “grow your own” workforce strategies that encourage students from rural communities to pursue healthcare careers locally in hopes they will eventually remain there.

Technology investments also extend well beyond telehealth. Cohn says states are focusing on improving interoperability so rural hospitals, clinics and emergency medical services can share patient information more effectively. Others are proposing artificial intelligence for population health, drone delivery of medications and laboratory tests, and technology-enabled transportation programs designed to improve access to care.

Even so, implementation presents significant challenges. “This money was built to move fast,” Cohn says. Some states first had to establish entirely new administrative structures before funding could reach providers. Others continue to develop procurement processes while preparing to demonstrate measurable outcomes that will influence future funding allocations.

Sustainability also remains an open question. “A new residency slot or telehealth program only counts if it outlives the initial RHTP funding,” Cohn says. “Not every plan has a fully formed answer for what happens in year six.”

Financial pressures

Although much of the discussion surrounding the Rural Health Transformation Program focuses on future transformation, many providers continue grappling with immediate financial realities.

Joe Ganley, J.D., vice president of government and regulatory affairs for athenahealth, says rural practices already operate with no room to spare. “The margin for error has essentially disappeared,” Ganley said.

When patients delay appointments, ration medications or postpone treatment because of cost, practices experience more than declining revenue. Patients often arrive later with more complex medical needs, increasing clinical and operational burdens. “Providers feel it immediately — in no-shows, in collections and in the clinical complexity of patients who arrive later and sicker,” Ganley says.

Beyond those financial pressures, Ganley notes that rural physician practices also continue to struggle with workforce shortages and limited interoperability.

“Many rural practices operate with one to two months of reserves,” Ganley said. “That’s not a buffer — it’s a cliff. Any disruption to payment flows, whether from coverage losses, billing delays or reimbursement changes, can threaten the viability of organizations that communities depend on as their only access point for primary care.”

He adds that recruiting and retaining clinicians remains difficult, while limited interoperability makes it harder for rural providers to coordinate care and participate in value-based payment models.

Measuring success

Even as the rural health program dollars begin reaching states, many believe it is far too early to determine whether the $50 billion fund will live up to its name and change rural healthcare for the better. “I think it’s too early to determine, and that’s the honest truth,” says Morgan. Many states are only beginning to release requests for proposals and identify where funding will be directed. Although states must obligate the funds within required timelines, many providers are still waiting to learn whether they will receive support and how they will be permitted to use it. “Our members are concerned,” Morgan adds. “Are we going to receive any of the money? How are we going to be able to use the funds? There’s just a lot yet unknown.”

Miller notes the program’s success should not be measured by the number of grants awarded or technology projects launched. He says he believes there is a relatively simple way to take stock of the program.

“If hospitals continue to close and eliminate services in 2026 and 2027, even with $10 billion in new funds available each year, the Rural Health Transformation Program should be viewed as a failure,” Miller says.

In his opinion, preserving essential healthcare
services — including obstetrics, emergency care and primary care — must remain the priority. Even if federal Medicaid policy changes were reversed tomorrow, many small rural hospitals would continue struggling because reimbursement from Medicare Advantage, commercial insurers and other payers often fails to cover the cost of providing care in sparsely populated communities.

The No. 1

Morgan said workforce issues remain the No. 1 concern among rural hospitals, followed closely by financial stability. He’s particularly optimistic about states using the rural health funds to create “grow your own” workforce initiatives that recruit students from rural communities, train them locally and encourage them to practice close to home
after graduation.

“I think that’s going to be interesting,” Morgan says, noting that locally trained clinicians are far more likely to remain in rural communities over the long term. Cohn heard similar priorities while working with states on their applications. “Workforce development is in most states’ plans because providers everywhere are facing significant staffing shortages,” he says.

Some states are investing in rural residency programs, loan repayment initiatives and accelerated licensing efforts. Others are combining workforce initiatives with telehealth and regional partnerships designed to extend scarce clinical expertise across larger geographic areas.

Ganley notes that technology can help relieve administrative burdens, but only if it simplifies clinicians’ work rather than adding complexity.

“The practices that will sustain access are the ones that can operate efficiently under financial constraints, reduce administrative burden without growing their administrative head count and connect their patients to the right level of care regardless of where that care is delivered,” he says.

Behavioral health providers are experiencing many of the same pressures. Shannon Werb, CEO of Array Behavioral Care, says that disruptions in Medicaid coverage often interrupt outpatient behavioral healthcare, causing patients to delay treatment until they require crisis care.

“When patients lose coverage or face affordability challenges, they often delay care until their condition reaches a crisis point,” says Werb. “At that stage, the emergency room becomes the default access point for treatment.” The result, he said, is longer behavioral health boarding times, increased uncompensated care and additional strain on hospitals.

The long haul

The biggest question about the infusion of federal funds into rural healthcare is whether the investment will continue paying dividends after federal funding expires. For a problem that has been decades in the making, five years is not that much time, and $50 billion is not that much money.

Because the program is scheduled to end after five years, healthcare leaders repeatedly emphasized the importance of building sustainable systems rather than launching short-lived projects.

“The real measure isn’t dollars spent or programs announced,” Cohn says. “It’s whether a rural patient can access care in 2028 that they couldn’t get in 2025.”

Morgan agrees that outcomes, not spending, will determine whether the initiative succeeds. The first warning sign, he says, would be an increase in rural hospital and rural health clinic closures. He says life expectancy is the ultimate yardstick. “We continue to see a decline in the overall life expectancies of rural communities versus urban. At the end of the day, that’s the measure that really matters.”

Healthcare’s Big Problem: Public Support

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Healthcare’s Big Problem: Public Support

As the nation pivoted to its Back-to-School routines last week while the Senate and House were recessed, the new cycle paid attention to familiar stories:

On page one…

  • US involvement in Iran and Ukraine wars.
  • Inflation, prices, jobs and costs of living for food, gas and housing.
  • Mid-term election primary results and surprises.
  • Weather-related disruptions in Hawaii, Iowa and the persistent heat wave.

On page two…

  • Courtroom proceedings around Lindsay Clancy (mother of 3 who killed her children), Glen Murdoch (SC lawyer alleged to have killed his wife and son) and Luigi Mangione (alleged killer of UnitedHealth executive Brian Thompson).
  • Ongoing fallout from proposed vaccine policy changes by HHS.
  • Data center pushback and everything else.

I am a news junkie. I depend on real-time news feeds across the spectrum from conservative to progressive thru traditional and unconventional sources.

I am a healthcare guy: I study the health system to monitor trends, emergent themes and credible studies that influence its policies, performance and winners and losers.

And I am a consumer: I live a relatively normal life hoping to take care of my family and spend time on matters that matter. Increasingly, that involves the health and wellbeing of those I love.

Last week was inconsequential in the big scheme of healthcare: media attention was limited. The 3 court proceedings carried underlying themes of mental health. Reporting about the economy centered on costs of living sans household health costs chronically overlooked in business reporting. And posturing for the November 3 general election sparked commentary about Democratic socialism and Republican intent to make political points on healthcare.

This week will be no different. Healthcare news will largely be subordinate to Page One headlines unless a pandemic at home is declared or a celebrity’s personal health challenge is disclosed on a slow news day.

National media with few exceptions cover healthcare incompletely and inconsistently. In-depth coverage is rare. Investigative reporting is pre-wired toward misdeeds and corporate greed. Local media is equally inclined but budget limitations limit local coverage.

And social media are all over the place: misinformation, inadequate verification/validation of primary sources, and bias are systemic.

I believe the U.S. health system’s loss of trust and confidence is a direct result of its inadequacy in communicating. That’s not to say it hasn’t tried but it’s strategies and tactics have failed for obvious reasons:

  • The business of U.S. Healthcare prefers a low profile. Most healthcare companies prefer to promote their successes and hide their failures. Transparency has never been welcome.
  • The business models that dominate U.S. healthcare are driven by consolidation and corporatization. Access to capital is the gatekeeper. Consolidators are winning and independents aren’t. The industry’s become Big Business to most. It espouses concern for affordability without making it reality.
  • The public’s at a loss to pursue alternatives. Polls show dissatisfaction with hospitals, drug companies, insurers, et al is at all-time highs. Polls show the majority think the system is fundamentally flawed and a change necessary. But fear of alternatives is even higher, especially a system engineered by the federal government.
  • Regulation of the industry at the state and federal levels has protected its incumbents and sustained its profitability. Its B2B (business to business) model reinforces value creation for investors and limits B2C (business to consumer) intrusion. Insiders with their trade associations and lobbyists seek incremental changes that protect the status quo and keep others out.

The future of the U.S. health system is uncertain. It faces huge barriers to sustaining its “too big to fail” big brands. Its biggest hurdle will be public support.

  • The public wants a seamless system that’s easy to navigate and comprehensive, not a patchwork of clinics, specialties, facilities and programs accessible to some but not all.
  • The public wants a system that’s transparent: clinical evidence, outcomes, errors, business practices, executive compensation, costs and prices easily accessible when needed.
  • The public wants a system that’s personalized: impersonal service thru automated telephony and AI-generated prompts in the name of efficiency are suspect.
  • The public wants a system that’s cheaper. It believes there’s a Costco solution in healthcare and they’re not afraid to try it.

The entire industry is now on the defensive. Old playbooks used to tell its stories no longer work. It’s a challenge for most.

Beyond Coverage Loss: The Real Financial Fallout of ACA Disruptions

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https://www.healthleadersmedia.com/cfo/beyond-coverage-loss-real-financial-fallout-aca-disruptions?utm_source=HealthLeaders&utm_campaign=52ada68df2-EMAIL_CAMPAIGN_2026_07_30_01_43&utm_medium=email&utm_term=0_adc94e5966-52ada68df2-532959885&mc_cid=52ada68df2&mc_eid=71a6a1464f

Why CFOs must prepare for more than just coverage loss.

KEY TAKEAWAYS

Higher deductibles and cost sharing are driving collection challenges even among patients with coverage.

ACA and Medicaid policy changes can quickly alter payer mix, making financial flexibility a competitive advantage.

Strengthening payer partnerships, optimizing revenue cycle performance, and investing in sustainable growth are becoming unarguably critical.

The expiration of enhanced ACA premium subsidies is not just a policy issue, but a steep revenue cycle and margin challenge. The loss of the subsidies represents far more than a temporary decline in insurance coverage, it’s a structural shift in payer mix, revenue predictability, and financial strategy that is reshaping how health systems plan for an uncertain future.

Recent earnings reports from major for-profit systems underscore the reality of the challenge. HCA Healthcare, Community Health Systems, and Tenet Healthcare have all reported that the impact of ACA marketplace disruptions has been more severe than expected. Rather than transitioning to employer-sponsored coverage or delaying care, many patients who lost subsidized exchange plans are continuing to seek treatment without the ability to cover their growing financial responsibility—meaning rising uncompensated care, higher bad debt expense, and increased pressure on operating margins.

CFO outlook is overall optimistic, and although healthcare demand has remained remarkably resilient, patients’ ability to pay has not. That reality is playing out in real time at hospitals across the country.

Bill Pack, CFO of Methodist Le Bonheur in Tennessee, describes the expiration of ACA subsidies as one of the system’s most significant financial headwinds. According to Pack, enrollment in Gold, Silver, and Platinum marketplace plans has fallen by approximately 70%, while enrollment in Bronze and catastrophic plans has increased by nearly 30%. For Pack’s organization, the disruption is driving a sharp increase in self-pay patients.

“To a certain extent, the mindset of a lot of people in government is ‘COVID’s over, so we don’t need these things anymore,'” Pack says. “But I don’t think there’s a good appreciation for the impact that has had.”

Technically patients are still insured, but many now carry substantially higher deductibles, copayments, and coinsurance obligations than they cannot realistically afford.

“This just adds to the self-pay as well because a lot of people are not going to be able to pay that patient portion,” Pack says.

Pack and his organization’s experience reflects a broader national trend. According to an HFMA analysis, the expiration of enhanced ACA premium tax credits is expected to leave approximately five million Americans without marketplace coverage, increasing uncompensated care while reducing hospital revenue. As a result, traditional payer mix metrics will likely no longer tell the full financial story, making revenue cycle performance and patient collections even more vital to margin preservation.

Further, this is also a subtle but meaningful evolution of the revenue cycle challenge: collections become more difficult, bad debt increases, and cash flow becomes less predictable despite stable patient volumes. At the same time, policy uncertainty is making long-term planning increasingly difficult.

Beyond labor shortages, inflation, reimbursement pressure, and supply chain costs, CFOs are now preparing for additional changes to Medicaid eligibility and future federal policy. Pack says the experience of the past several years has fundamentally changed how organizations approach financial planning.

“One thing we learned from COVID is no matter how hard we try, we cannot predict the future,” he says. “We’ve got to be very flexible. We’ve got to be nimble.“

That philosophy is growing amongst CFOs, ultimately because it has to.

Rather than relying on typical assumptions about reimbursement and payer mix, systems are building flexibility into their financial planning. For this Pack’s system, this means strengthening managed care contracting, deepening relationships with commercial payers, pursuing strategic service-line growth, maintaining disciplined cost management, and making thoughtful capital investments while preparing for potential Medicaid policy changes.

As the challenges persist, optimization is becoming the star of the CFO’s playbook. Today health systems depend on how they can optimize payer strategy, improve revenue cycle performance, make disciplined capital allocation decisions, and invest in services for long-term demand.

Are Hospitals Sacrificing Tomorrow’s Leaders to Solve Today’s Problems?

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https://www.healthleadersmedia.com/ceo/are-hospitals-sacrificing-tomorrows-leaders-solve-todays-problems?utm_source=HealthLeaders&utm_campaign=a04d4a348c-EMAIL_CAMPAIGN_2026_07_30_01_46&utm_medium=email&utm_term=0_adc94e5966-a04d4a348c-532959885&mc_cid=a04d4a348c&mc_eid=71a6a1464f

As hospitals and health systems flatten their organizational structures to control costs, they risk weakening the pipeline that develops future leaders.

KEY TAKEAWAYS

Leadership development has become a recurring priority in conversations with hospital CEOs as workforce challenges evolve beyond staffing shortages.

Administrative restructurings are reducing middle management roles, creating fewer opportunities for emerging leaders to gain operational experience.

Hospitals need to treat leadership development as a workforce strategy and invest more intentionally in preparing the next generation of decision-makers.

One topic that has been part of nearly every conversation I’ve had with hospital and health system CEOs over the years has been the clinician workforce shortage. But as we’ve moved further into the post-COVID-19 era and workforces have somewhat stabilized, I’ve noticed another workforce challenge emerging that is eliciting real long-term concern among organizations: the lack of a leadership pipeline.

Hospitals are being forced to reckon with the next workforce question. After recruiting and retaining clinicians through a period of unprecedented disruption, who will prepare the next generation of leaders?

I’m not talking about leadership capacity at the highest levels, although elevated hospital CEO turnover and overall C-suite churn are major threats to organizational stability in their own regard. That’s a conversation for another day. The potential leadership gap that I’m referring to resides more in the middle of organizations, where positions are increasingly being hollowed out and deemphasized, lessening opportunities for future leaders while removing layers of on-the-ground contact with frontline workers.

During my interviews with hospital CEOs, leadership development has continuously surfaced as a priority. Organizations are thinking about how to develop managers, strengthen clinician leadership, and create pathways for emerging leaders to take on greater responsibility.

At the same time, hospitals are making tough calls around their administrative structures to mitigate financial pressures, with labor costs often the biggest driver of rising expenses. Over the past year or so, I’ve covered restructuring after restructuring. The details change, but the pattern that remains fairly consistent is that the positions being eliminated often sit between frontline caregivers and the executive suite.

It’s understood why those positions are the ones on the chopping block. Having leaner organizations where the talent is concentrated on the front lines and at topmost levels makes sense when resources are limited. But while the balance sheet may benefit in the short term, the consequences of “The Great Flattening” are likely to be felt when today’s emerging leaders have fewer opportunities to become tomorrow’s executives.

Reducing waste remains a focus, but as Fairview Health Services president and CEO James Hereford recently told me, layoffs must be weighed with careful consideration.

“On the people side, we’re such a labor-intensive business, the temptation is always if you have economic issues, you look at what levers you can pull,” Hereford said. “You start to say, ‘Okay, well people, that’s a huge expense.’ It is, but if you put people in a bad system and then you blame the people, that’s not an equation for success. So we concentrate a lot more on the system.”

“That’s the that’s the danger, right, is you make too many cuts on the people side and then you actually damage your ability to do the things you’re there to do. And we’re trying to be very careful about making sure that we don’t make those kinds of changes.”

The Need for Intentional Leadership Development

That tension—between hospitals pursuing restructurings and the downstream costs on leadership—is not exclusive to healthcare, of course. This is happening across corporate America.

I’ve also wondered if the flattening of workplace hierarchies accelerates leadership development by placing more power and responsibility on all employees, not just managers.

However, the stakes in healthcare differ wildly from other industries. There’s a fine line between honing the leadership skills of a working clinician and overburdening someone who is already prone to burnout. Without specific opportunities for clinicians to willingly take on leadership duties, development can become more fragmented and random.

If flatter organizations are here to stay, there has to be more intentionality with leadership development. Without those management layers, it’s incumbent on CEOs and C-suites to more directly invest in emerging leaders. Succession planning shouldn’t be limited to the top of the organizational chart.

It also means recognizing that leadership capacity is a workforce issue. A hospital can address staffing challenges and still be on the back foot if it doesn’t have enough leaders prepared to guide employees through change.

Healthcare has spent years focused on having enough people to provide care. Going forward, I’m convinced it requires equal attention on preparing the people who will lead those teams.

Why a Conversation May Be the Highest-ROI Investment a Healthcare CEO Can Make

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https://www.healthleadersmedia.com/hlm-exchange/check-ins-charles-why-conversation-may-be-highest-roi-investment-healthcare-ceo-can?utm_source=HealthLeaders&utm_campaign=a335f23e8b-EMAIL_CAMPAIGN_2026_07_07_12_38&utm_medium=email&utm_term=0_adc94e5966-a335f23e8b-532959885&mc_cid=a335f23e8b&mc_eid=71a6a1464f

One of the most impactful leadership tools isn’t a new technology, consulting framework, or operational initiative. It’s being human. 

Hospital and health system leaders spend countless hours reviewing financial dashboards, quality metrics, staffing ratios, and strategic plans. Yet one of the most impactful leadership tools is much more simple: lunch.

Yes, as in food and conversation. Specifically in this case, a simple practice called “Check-ins with Charles.”

At our June 2026 HealthLeaders CEO Exchange in Avon, Colorado, some of healthcare’s top executives gathered for an honest conversation about leadership, culture, financial performance, and the future of the industry.

During the discussion I moderated, Charles Williams, regional president at Baylor Scott & White, covered everything from revenue cycle management and physician engagement to CEO succession planning.

Yet one of the most compelling ideas shared that afternoon (and that had all the other CEOs rapidly engaging) had nothing to do with technology, reimbursement models, or operational restructuring. It was Williams’ leadership initiative “Check-ins with Charles.”

The concept is remarkably simple. On a regular basis, Williams invites a randomly selected group of employees—from nurses and environmental services staff to finance professionals and administrative team members—to an informal Chick-fil-A lunch. There is no PowerPoint presentation. There are no scripted talking points. There is no formal agenda. The purpose is simply to listen.

As Williams explained during the discussion, the impact has gone far beyond an hour spent sharing a meal.

“When that email goes out,” he told the group, “it’s not that guy, it’s Charles.”

That distinction may sound small, but in today’s healthcare environment, it represents something much larger: trust.

Healthcare executives spend enormous amounts of time analyzing financial statements, reviewing quality metrics, discussing workforce shortages, and developing strategic plans. Those activities are essential. But as the CEO Exchange conversation repeatedly demonstrated, strategy only succeeds when people believe in the leaders asking them to execute it.

Trust Before Strategy

Healthcare leaders often focus on execution. We talk about operating margins, revenue cycle performance, patient experience scores, physician productivity, employee retention, and quality outcomes.

Those metrics matter, but execution doesn’t begin with dashboards. It begins with trust.

One of the recurring themes throughout the CEO Exchange was that organizations often fail to communicate proactively because leaders and employees simply don’t know one another well enough. Everyone is busy. Calendars are full. Meetings dominate the day. Yet when leaders become disconnected from the frontline, small problems stay hidden until they become expensive crises.

Williams described how “Check-ins with Charles” has become one way to eliminate that disconnect.

The informal lunches allow employees to speak openly in a setting where titles disappear. Clinical and non-clinical staff have an opportunity to ask questions, offer suggestions, and discuss concerns directly with the CEO.

He complements those lunches with another simple communication strategy: a monthly three-minute video message. Sometimes the videos are intentionally lighthearted—wearing a Valentine’s shirt covered in hearts or joking with employees—to demonstrate vulnerability and approachability.

The objective isn’t entertainment, it’s accessibility, and employees stop seeing “the president” and begin seeing a person.

That shift has produced measurable results.

Williams shared that following these consistent communication efforts, his organization achieved the highest employee engagement survey participation rate in its history.

Participation itself isn’t the end goal, but it is an important indicator. Employees generally do not take time to provide honest feedback unless they believe leadership is genuinely listening and prepared to act on what they hear.

Communication Is Operational Strategy

Several executives around the table reinforced the same lesson with their own experiences.

One CEO of a health system in Connecticut described taking over responsibility for revenue cycle despite coming from a nursing background. Rather than pretending to understand every technical aspect of billing and coding, she gathered everyone into one room and admitted what she didn’t know.

Many of those employees had worked in the same building for years but had never truly collaborated.

Together, they established shared expectations, defined key performance indicators, and began meeting regularly.

The results were dramatic.

Claim denials declined significantly. Departments that previously blamed one another started solving problems together. Frontline registration staff, physicians, coding teams, and revenue cycle leaders finally understood how each person’s work affected the others.

The improvement didn’t begin with a new software platform. It began with communication.

Another executive discussed regularly spending half a day shadowing frontline employees. Dressed in scrubs, he works alongside environmental services, nurses, and other team members—not as a symbolic exercise, but as a learning opportunity.

Those interactions consistently reveal operational problems that never surface in executive conference rooms.

Employees become comfortable sharing frustrations, identifying inefficiencies, and suggesting improvements because the hierarchy has temporarily disappeared.

Another participant emphasized that finance leaders should spend time in clinical environments, while clinicians should gain greater appreciation for financial decision-making. When each group understands the other’s daily challenges, collaboration replaces conflict.

As one executive noted, communication is often the bridge between operational excellence and financial performance.

The Hidden ROI of Listening

Communication is frequently categorized as a ‘soft skill,’ and honestly my boss always told me to stay away from these soft stories, but the executives at the CEO Exchange argued exactly the opposite.

Strong communication produces measurable business outcomes.

Research has indicated that organizations that foster open dialogue often experience:

  • Higher employee engagement and retention
  • Better cross-functional collaboration
  • Earlier identification of operational issues
  • Faster execution of strategic initiatives
  • Greater psychological safety for innovation
  • Stronger patient experiences driven by more engaged caregivers

These observations align with broader workforce research. The firm Gallup has consistently found that highly engaged business units outperform less engaged teams across profitability, productivity, turnover, safety, absenteeism, and customer satisfaction. While healthcare has its own unique challenges, the underlying principle remains the same: Engaged employees produce stronger organizational performance.

The roundtable offered numerous examples.

Finance leaders make better decisions after seeing clinical operations firsthand.

Clinicians become more thoughtful stewards of organizational resources when they understand how financial performance affects future investments.

CEO Turnover Comes at a Cost

The conversation eventually shifted to another challenge facing healthcare organizations: executive turnover.

Participants noted that the average tenure of a hospital CEO today is generally somewhere between three and five years, a figure that aligns with data from the American College of Healthcare Executives (ACHE), which has long reported average hospital CEO tenure at approximately five years nationally.

The executives argued that frequent leadership turnover carries enormous organizational costs.

Every leadership transition requires employees to learn a new leadership style, interpret new priorities, and adapt to another strategic vision.

One executive described the experience as traumatic for organizations.

Instead of concentrating on executing strategy, employees spend valuable time trying to understand the expectations of the incoming CEO.

Another participant observed that boards are often searching for a “silver bullet” during difficult financial periods, replacing leaders before long-term strategies have time to mature.

The result can be an endless cycle of organizational resets.

Several executives pointed to health systems where senior leaders have remained in place for more than a decade as examples of how leadership stability creates a competitive advantage.

Williams discussed Baylor Scott & White’s intentional focus on developing internal leadership pipelines. Potential future presidents and chief operating officers are paired with experienced mentors well before succession becomes necessary, ensuring continuity and preserving organizational culture rather than forcing each new leader to reinvent it.

Culture Isn’t Built in the Boardroom

Perhaps the most memorable story shared during the discussion came from another longtime hospital CEO.

While ordering lunch in the cafeteria, he asked for a very small salad.

The cafeteria employee smiled, placed a single piece of lettuce into the bowl, and asked, “Is that small enough for you?”

Rather than feeling disrespected, he viewed it as one of the proudest moments of his career.

The interaction demonstrated that an employee felt comfortable enough to joke with the CEO.

There was no fear, there was trust.

That, the group agreed, is what culture looks like.

Not mission statements.

Not values posters hanging in hallways.

Not speeches from the executive suite.

Culture is built through everyday interactions that convince employees they are seen, heard, respected, and safe enough to speak honestly.

Leadership That Listens

Healthcare continues to face unprecedented pressure—from workforce shortages and financial uncertainty to AI, rising consumer expectations, and increasing regulatory complexity.

No CEO can personally solve every challenge facing a modern health system.

Every CEO, however, can create an environment where employees feel comfortable identifying problems early, collaborating across departments, and contributing ideas before issues become crises.

That is the real lesson behind “Check-ins with Charles.”

It isn’t really about Chick-fil-A or even about lunch. It is about replacing hierarchy with humanity.

The conversations in Avon made one thing abundantly clear: Organizations that invest time in authentic communication build trust. Trust strengthens culture. Strong cultures execute strategy more effectively. And better execution ultimately produces stronger financial performance.

For healthcare leaders searching for a competitive advantage in an increasingly complex industry, one of the highest-return investments may not be found in the next technology platform or consulting engagement.

It may simply be sitting down at a table, sharing a meal, and asking one question:

“What do you think we could do better?”

The Fragile Economics of Safety-Net Care

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https://www.healthleadersmedia.com/cfo/hennepin-healthcares-rescue-package-reveals-fragile-economics-safety-net-care?utm_source=HealthLeaders&utm_campaign=513090240d-EMAIL_CAMPAIGN_2026_06_18_02_52&utm_medium=email&utm_term=0_adc94e5966-513090240d-532959885&mc_cid=513090240d&mc_eid=71a6a1464f

Minnesota lawmakers approved a $205 million funding package to stabilize Hennepin Healthcare, but it underscores that the safety-net risk is escalating. Here’s what Hennepin told us.

KEY TAKEAWAYS

Hennepin’s financial struggles highlight how hospitals with heavy Medicaid and uninsured populations remain vulnerable when reimbursement growth lags expense inflation.

CFOs should model scenarios involving Medicaid funding reductions, rising uncompensated care, and sustained labor-cost pressures to assess liquidity and capital needs.

While government funding can provide short-term relief, finance leaders should focus on long-term sustainability through revenue diversification, service-line optimization, and proactive advocacy efforts. 

Hennepin Healthcare’s financial crisis has become one of the most closely watched healthcare stories in the country. Now bolstered with state funding, its story illustrates the mounting pressure on safety-net hospitals.

The CFO Take Away

Think of this headline as an underscore to the growing vulnerability of health systems whose payer mix is concentrated in government programs. Hennepin Healthcare’s situation demonstrates that even large, clinically essential institutions can find themselves in liquidity crises when reimbursement growth consistently trails expense inflation.

CFOs should view this as a warning to stress-test their organizations against scenarios involving Medicaid funding reductions, higher uncompensated-care volumes, and continued labor-cost pressure. The strategy lesson here is that traditional margin-improvement initiatives alone may not be enough. CFOs should be strengthening advocacy efforts, diversifying revenue streams where possible, reassessing service-line profitability, and building long-range capital plans that assume greater reimbursement volatility.

The market is tightening, and the broader takeaway is that safety-net economics are becoming a board-level risk issue. Organizations that wait until cash reserves deteriorate before pursuing structural solutions will find themselves relying on emergency legislative interventions rather than executing deliberate financial strategy.

The System

Hennepin Healthcare leaders have warned lawmakers that the organization faces severe financial challenges driven by a combination of factors: rising labor and operating costs, inadequate reimbursement from government programs, and a heavily Medicaid-dependent population.

The system has already tried to shrink costs by reducing beds and eliminating services, while seeking additional state support to stabilize operations. But policymakers ultimately negotiated a funding package worth approximately $205 million to help preserve the organization’s role as Minnesota’s largest trauma center and a critical provider for vulnerable and low-income populations.

In an email to me, the system stated:

“Hennepin Healthcare is deeply grateful to the lawmakers who acted with urgency and collaboration, and to our employees, patients, and advocates whose voices brought needed attention to this crisis. The stabilization funding does not resolve the long-term impacts of HR1 or the structural deficits that uniquely challenge safety-net hospital systems. But it does accomplish two essential things: it delivers historic support that sustains us, and it gives us the time and stability to work with the state on durable, long-term solutions.

Our immediate priorities are to stabilize our team and invest in patient care while carefully stewarding the funds allocated to us. We have essential needs that have been deferred because of financial challenges, including staffing, equipment, and other investments that support patient care.

Looking ahead, our strategy is focused on both operational improvement and long-term sustainability. We will continue working with state leaders, the Governor-appointed task force, and our future professional governing board to identify lasting solutions that strengthen Minnesota’s healthcare safety net and ensure Hennepin Healthcare can continue serving patients for generations to come.”

It’s clear the system views the package only as a bridge. It’s obviously not a solution. But beyond that, it’s also clear that this is not a Minnesota-confined story.

Hennepin Healthcare showcases the financial fragility of safety-net hospitals nationwide. In 2023, well before any of today’s Medicaid chaos, safety-net hospitals provided roughly $11 billion in uncompensated care.

Roughly three-quarters of Hennepin Healthcare’s patients are uninsured or covered by public insurance programs, creating a structural gap between the cost of care and reimbursement levels.

Hennepin Healthcare was projecting up to $50 million in operating losses for 2026 and a staggering $1.7 billion in deficits over the next decade. The organization’s repeated losses and dependence on government intervention underscore the challenges many urban safety-net systems face as Medicaid funding uncertainty, amongst other pressures, converge.

Nonprofit-private equity joint ventures worth scrutiny, PESP report says

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https://www.fiercehealthcare.com/finance/nonprofit-private-equity-joint-ventures-worth-scrutiny-pesp-report-finds

At least 568 healthcare facilities operate through nonprofit-private equity joint ventures, according to a new report calling for scrutiny into those arrangements.

The figure is likely an undercount, considering only public data were used. The report (PDF) was published by the Private Equity Stakeholder Project (PESP), a nonprofit that advocates for more disclosure about private equity deals.

More than a fifth of private equity (PE)-owned hospitals operate under joint venture arrangements with nonprofit health systems. Apollo Global Management-owned Lifepoint Health, for instance, runs nearly two-thirds of its hospitals through joint ventures.

Such joint ventures extend beyond hospitals, spanning subsectors such as inpatient rehab, hospice, home health, behavioral health, ambulatory surgery centers and urgent care, per the report. And regulations have not kept up with these evolving complex ownership structures. 

“While joint ventures may be advantageous configurations for the businesses involved, PE-backed joint ventures may still represent the risks associated with PE buyouts in healthcare,” the report said.

The report identified several patterns related to such arrangements. First, joint ventures with a provider offer an opportunity for a PE-backed company to expand into new markets. Joint ventures may also help companies get around regulatory restrictions, like in some states that forbid non-doctors from owning medical practices. It may help avoid the challenges associated with converting a health system from a nonprofit to a for-profit. Joint ventures also grant access to private capital and may drive revenue from the sale of real estate, a practice critics have said fueled high-profile health system bankruptcies in recent years. 

One negative pattern, the report cautioned, is patient and caregiver risks due to poor facility conditions, declining care quality, reduced services and higher prices. PESP gave as an example Lifepoint’s involvement in Duke, where associated facilities have seen poor quality of care and have cut services. Lifepoint was the subject of a recent bipartisan Senate investigation, supported by other PESP research, which found underinvestment has affected patient care.

Another example worthy of caution, per the report, is Ascension, which, in addition to having a joint venture with Lifepoint, also works with PE firm TowerBrook Capital to acquire healthcare companies. This case study shows how executives and PE businesses make outsized profits from entering healthcare markets, despite clinician concerns about future negative impacts to patient care. 

While much of the public and an increasing share of policymakers have been wary of PE’s involvement in healthcare due to these cases and others, proponents contend that funds can help fill in gaps where public funding for healthcare falls short, such as by supporting services in underserved areas or providing resources and managerial expertise that would otherwise be out of reach. 

PESP’s report said the examples it documented “expose significant gaps in federal and state oversight of private equity in healthcare.” 

To address this, PESP recommends that the IRS update its joint venture guidance; that the HHS Office of the Inspector General update its guidance on anti-kickback statutes; and that CMS clarify whether exceptions to Stark Law—which protects medical decisions from financial conflicts of interest—apply in PE-backed joint ventures. PESP also called on the Federal Trade Commission and the Department of Justice to better scrutinize joint ventures that don’t trigger individual premerger review, but still amass market influence. 

Additionally, the report was accompanied by a public searchable database of 568 nonprofit-PE joint ventures as identified by PESP. The database is embedded on PESP’s site.

“Patients, payers and employees need protection from the risks associated with PE ownership of healthcare systems and joint ventures expose significant gaps in oversight and regulation,” the report concluded.