While the healthcare industry largely waits to see what lies ahead, including how budgets and networks may be impacted by the new administration, there remain numerous insights that remain actionable. In this quarter’s outlook, we assess the current status of things as they stand, and make recommendations about clear paths forward.
In the meantime, we all await the fate of Medicaid.
Tariff Uncertainties and the Supply Chain
Health systems will do well to begin shoring up their supply chain if they haven’t already, as tariffs take effect in various forms.
The last several years have been a continual challenge for the healthcare supply chain. More recently, IV solution manufacturer Baxter has been working to get production back up to peak capacity following Hurricane Helene’s major impact on North Carolina. The North Cove plant has 10 manufacturing lines going, according to a company update from January 25.
Hospitals must continue to fine-tune supply chain operations to guard against disruptions. Top considerations we’re seeing for hospitals and health systems:
- Domestic sourcing strategies are being given more thought to mitigate risk and disruptions to international trade.
- Analytics and logistics specialists are being brought in to forecast seasonal demand.
- Collaboration with vendors and trusted partners is becoming more vital to control costs while exploring new channels.
Related news:
- Baxter alerts providers to potential high-risk issues with devices | AHA News
- White House announces tariffs on steel and aluminum imports | AHA News
CMS’ TEAM Bundled Payment Plan Inches Closer
CMS’ broader push to incorporate more value-based payment plans is nearing an important date as we approach the Transforming Episode Accountability Model’s (TEAM) go-live date on January 1, 2026. The new, mandatory payment model will bundle payments for 5 common procedures at select hospitals for 30 days following the procedure in either in-patient or out-patient settings.
Due to the unique method of selecting hospitals within census-based regions, there are likely to be vast differences between individual hospitals that require significantly different (and strategic) changes to operations and networks.
How selected hospitals are starting to prepare for TEAM:
- Assess network partners and prioritize quality care and cost-containment
- Analyze hospital costs and identify significant spending outliers
- Assess drug utilization to identify potential cost controls that can be implemented through formulary interventions
M&As and Strategic Partnerships Bring a Mixed Bag of Cause and Effect
With operating margins tightening, health systems are increasingly looking to strategic partnerships over traditional M&As to expand services and future growth. Here are the trends we’re observing:
- Capital Constraints and Higher Interest Rates – Deal flow slowed and interest rates are still too high to spur much more activity in the short term. This has driven up the cost of acquisitions and expansions. Financing large deals is becoming less attractive with costly loans eating into potential ROI.
- Scrutiny vs. Risk-Sharing – Large M&As that have the potential to disrupt competition in local markets are increasingly facing more scrutiny from regulatory bodies. In contrast, there is a strong case around the potential benefits of large networks that can more effectively pool resources and share risk as payment models gravitate more toward value-based arrangements.
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