Sarah Roller (00:00): Those market trends have broader ripple effects than any one of these policies specifically. We're kind of missing the forest for the trees if we just home in on this very specific policy change. Abby Burns (00:14): From Advisory Board, we're bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. I'm Abby Burns. (00:23): Last week, we talked about what the outcomes of the fall elections might mean for healthcare in 2025 and beyond. But before we get too far ahead of ourselves, we should pause because there's been a lot moving in the policy space this year, including things we haven't had a chance to dig into on Radio Advisory. Today, we're going to rectify that. We're going to dig into a couple of important policy areas that have probably been on your radar this year and probably need to be going forward. (00:53): We're going to do things a little differently today. You'll hear my conversations with three different Advisory Board experts about three different policy areas. It was admittedly very hard to whittle our list of potential topics down, but today we're going to talk about Medicare drug negotiations, changes to physician employment and payment, and a mandatory bundle payment model coming down the pike called the TEAM model. (01:17): Our goal here is to push beyond just telling you what's happening with these policies and, instead, to have our experts unpack two things. One, how these policies are affecting the industry, and, two, perhaps most importantly, how much mental bandwidth you should be putting toward each of them. Borrowing from a game we play at Advisory Board for each one, is it a big deal, a little deal, or no deal? (01:43): To start, we're coming out of election season. Of course, we're talking about drugs, but specifically we're talking about Medicare drug negotiations, which kicked off this year. Quick refresher, part of the Inflation Reduction Act passed in 2022 allows Medicare to negotiate directly with pharmaceutical companies for the highest spend drugs, goal being to reduce national spend on drugs. It's progressive, meaning it started with negotiations for 10 drugs this year. Next year, that number will be 15, then 20 drugs every year after that. (02:18): Now, it made a big splash when Medicare announced that first list of 10 drugs back in August of 2023 and an even bigger splash when they announced the final negotiated rates in August of this year. But beyond inflaming passions and ad spend, I want to know what impact Medicare drug negotiations are actually going to have on the industry. I'm turning to Advisory Board's managing director of life sciences, pharmacy, and diagnostics research, Gina Lohr. Hey, Gina. Gina Lohr (02:48): Hey, Abby. Abby Burns (02:48): Welcome back to Radio Advisory, a friend of the podcast. Gina Lohr (02:51): Absolutely. Abby Burns (02:53): Gina, we're going to get into the nitty-gritty here, but first give us your read on Medicare drug negotiations. Big deal, little deal, no deal? Gina Lohr (03:03): Conceptually, it's a big deal. You have the biggest payer in the country now negotiating directly with pharmaceutical manufacturers around the prices that are paid for those drugs, but I think right now we're still in this incremental rollout. It feels like in 2024, in 2025, it's a little deal. We're still learning a lot. There's a lot of questions about the impact it will have, how much of an improvement it is on the existing system. Abby Burns (03:36): I have to say I'm pretty surprised to hear you say little deal. I feel like when the announcements about the drugs and the prices were made, it felt like everything's on fire. I'm seeing ads flood my inbox opposing the negotiations, but you're saying maybe in the short term little deal. Gina Lohr (03:53): Right. A lot of that comes with questions about how much savings is this really bringing. Is this going to be the sea change that is expected for Medicare and really truly turning the tide on high drug costs? Abby Burns (04:12): Yeah. Gina Lohr (04:12): Probably not. Is this something new and different that's never been done before and that could have the potential to change how drugs are paid for in the US? Maybe. Abby Burns (04:23): Yeah. Now, I'm understanding why you said conceptually big deal when we look at, actually, financial impact to Medicare. To, I believe, the pharmaceutical companies that have the 10 drugs that are on the list, potentially a littler deal. Gina Lohr (04:35): Right. And how much is Medicare saving this year? Abby Burns (04:38): Yeah. Gina Lohr (04:39): Littler deal. Abby Burns (04:40): Gina, I'm curious, given we're recording this the week after the elections. How does the fact that we are heading into a federal government that is a Republican trifecta factor into that evaluation? Gina Lohr (04:54): I think that's a really interesting question and I'm going to do the thing where I give you a long answer that is no answer right now, because when I think about a Republican trifecta, I know that Republicans have traditionally favored policy solutions that rely more on private sector actors than creating larger roles for public agencies. That might say, "Let's find a private sector actor who can do the negotiations instead of having the government do them." But we have that actor, that actor is the PBMs, at least for pharmacy benefit drugs. Yet we know that there has been a lot of negative press about PBMs and pharma. Both have been pointed at as actors that might be actually raising drug costs over the past few years. It seems unlikely that Congress would say, "Oh, actually, here, we have a solution. Let's take away drug price negotiations. Let's just have PBMs do their job." It feels unlikely that they would just repeal that law and we're back to where they were before. Also, interestingly, back in 2016, Trump was an early advocate for Medicare negotiating drug prices. Abby Burns (06:06): Yes. I think people forget that a lot. Gina Lohr (06:08): Right. He was talking about this eight years ago. And also, conceptually what is more Trump than a big fat negotiation between the government and pharmaceutical companies to say, "Hey, look what I did to lower prices"? You can see reasons for both camps as far as whether this would stay in place or not. Abby Burns (06:31): Yep. You mentioned the impact to Medicare at least in year one. Probably not as big as we might have thought. I think CMS estimated that the rates they negotiated would've saved Medicare $6 billion in drug spend if they were in effect in 2023. I think that number has been called into question a little bit. I'm wondering how that $6 billion figure impacts different stakeholders that make up the admittedly very confusing web that is drug purchasing and distribution. If I can ask my question in a little bit of a more direct way, when we think about Medicare drug negotiations up to this point, who is winning here? Who is losing so far? Gina Lohr (07:15): I would say it's hard to identify clear winners and losers. The federal government, the Biden administration would like to say, "Hey, we're winners. Look, there's 6 billion in savings." If you look at that, that's about a 22% savings over the net costs for those drugs from 2023. Great, there's savings there. The real savings in 2026 of these drugs would probably be lower than that because many of these drugs were already seeing annual price decreases and because some of these drugs will have generic competition soon after that. It seems not quite true to say there's a $6 billion cost reduction because roll the tape forward and it wouldn't have been that much. Abby Burns (08:12): Yep. So government winning slightly but not a huge gain. Gina Lohr (08:19): Right. Right. Hopefully, many patients will feel the savings through lower out-of-pocket costs. Patients, I would also put in the winning camp, although I think there are still a lot of caveats around whether patients will actually feel those savings and how much patients. For example, there's an out-of-pocket cap going into place for Part D. Many patients who are on these expensive drugs will hit that cap anyway, and so that might mute the effect that they would feel from the individual drug negotiations, for example. Abby Burns (08:54): Yep. Gina Lohr (08:55): Certainly, manufacturers are feeling some impact. We've seen some belt tightening, some layoffs in the life sciences space, but we have also heard their messaging to investors saying, "We think we're going to be just fine." I think one interesting thing there, and this might be a difference between administrations, so I think it's interesting to watch out for. With the Biden administration, they were really clear that they weren't pushing for rock bottom prices in the negotiations. They weren't going for a scorched earth negotiation policy and, in fact, they were trying to recognize value where it existed in these drugs and some of the comparative value for patients. Assuming that the negotiations move forward under the Trump administration, it'll be interesting to see what type of approach that administration lays out. Abby Burns (09:43): And that maybe, Gina, brings us to the next round of negotiations, because this first round of drugs was only for the Medicare Part D drugs or the prescription drugs that patients go to the pharmacy and buy. In a few months in February, CMS is going to release the next list of 15 drugs and that list and every list thereafter could include Part B drugs or provider-administered drugs, the things that people receive in outpatient clinics, things like infusions. I want to get your take on the same question. Once Part B drugs are eligible to be on this list, who wins versus loses in these future rounds? What are you keeping an eye out for there? Gina Lohr (10:23): The new stakeholder that is introduced when we talk about Part B drugs are providers and, I think, they are really concerned right now that they might be on the losing end of these negotiations. Abby Burns (10:36): How so? Gina Lohr (10:37): The big difference between a provider-administered drug and a pharmacy benefit drug in how they're paid for is, for Medicare patients, the provider purchases the drug and then they will charge a flat fee that includes the cost of that drug plus an administration fee or a markup for administering the drug. If the cost of the drug goes down, then how much do they get paid for administering? It goes down as well. It's unclear exactly how the mechanics of the negotiated drug places will come into play for providers. Abby Burns (11:13): So essentially this represents a potential revenue hit to providers. Gina Lohr (11:16): Yes, exactly. Exactly. We hear especially cancer center leaders are concerned about this, because so many of the provider-administered drugs are for cancer or are, at the very least, infused in the cancer center. Abby Burns (11:29): That's exactly where my mind went and a lot of the conversations that we've been having recently on Radio Advisory has been about hospital and health system sustainability, sustainable growth, and the volatility in both the revenue and cost side of the operating equation. This sounds like potentially a pretty substantial revenue hit. Gina Lohr (11:48): Yeah, it could be. It's so hard to quantify. I think another area that makes Part B drugs different than Part D drugs is that there isn't a PBM typically who's already negotiating discounts for Part B drugs, and so there may actually be more room for the government negotiations to take a bigger cut off of those prices. It still remains to be seen. Abby Burns (12:12): Gina, you're pushing us toward perhaps my final question for you, which is what impact do you see these negotiations, current round, next round, rounds thereafter. What impact do you see that having on the way that pharma interacts with plans and providers? Again, back to this ecosystem idea. Gina Lohr (12:28): I mean, it's such an interesting question. Will this have an impact on the relationships there? I think one question that I am asking... Not having answers to your question, but will the fact that a drug has a Medicare-negotiated price change a prescriber's likelihood of prescribing it? And does that change how pharma needs to work with prescribers? We know there's some research that shows that prescribers that own an infusion center may prescribe more expensive drugs to get that higher revenue, but at the same time, medical groups, health systems providers that are at risk for the costs of care may actually prefer the lower cost drugs because they're not looking at that fee for service revenue. They're looking at, "How do we provide the best care to our patients at the lowest cost?" I think maybe it makes more of a differentiation between providers by their ownership model and I think there are similar questions around whether plans will adjust their benefit design. Abby Burns (13:25): Yep, that's exactly where my mind went. Gina Lohr (13:27): Yeah. I mean, you can see the likelihood of some guiding patients to the lowest cost drug for similar reasons and others wanting to guide patients to the drugs with the highest rebates, which would lead them away from perhaps these negotiated drugs. The other piece that we haven't talked about is just the lawsuits that are out there and I think that does just add a layer of questioning over the whole process. Will this continue to go as planned, go into effect in 2026 and move forward, or will this all be much ado about nothing? Abby Burns (14:02): Gina, thank you. Gina Lohr (14:04): Thank you, Abby. Abby Burns (14:07): The question about drug price negotiation at the highest level is really a question about how are we going to try and manage the portion of money in the national piggy bank that goes toward healthcare? The next question I want to turn to is about the people delivering the care and, in particular, policy changes related to how they're employed and paid. (14:29): There's been a lot going on in the world of physicians this year. Two things I want to talk about today. First, in April, the FTC issued a ban, preventing employers from using non-compete agreements. This is important for healthcare because it's estimated that 40% of physician employment contracts include non-competes. Federal judge in Texas overturned the ban. Most people expect the subsequent appeal to end up at the Supreme Court, so this is an ongoing question. (14:58): More recently, in the first week of November, CMS finalized a nearly 3% cut to the Medicare physician payment rate for calendar year 2025. That makes five years in a row that CMS has reduced physician reimbursement, which is especially controversial, given that operating costs have skyrocketed over the same period. To help us understand what's going on in the world of physician related policy, I'm talking with Advisory Board's managing director over physician research, Sarah Roller. Hi, Sarah. Sarah Roller (15:28): Hi, Abby, Abby Burns (15:29): Sarah, both of these policies have attracted a lot of attention. They both pertain to the financial side of the physician landscape conversation. But in my mind, there are distinct issues, where might there be overlap between these two areas that we should be aware of. Sarah Roller (15:48): Yeah. When we picked these issues and really felt like we wanted to talk about both of them, one of the biggest things that stood out to me is that they are each a microcosm of this bigger landscape trend that is happening with physicians. Neither is in a vacuum, they're both kind of representative of something bigger going on, and those bigger things that are going on, those market trends have broader ripple effects than any one of these policies specifically. I think, in both case, we're missing the forest for the trees if we just home in on this very specific policy change or policy continuation in the case of physician payment. Abby Burns (16:29): If I could use the measure that I've had in the back of my mind, each one of these policies potentially not that big a deal on their own, but perhaps representative of something that is a bigger deal. Sarah Roller (16:39): Yes, exactly. Abby Burns (16:41): Let's talk about that. Let's start with physician non-competes. What are the questions or reactions you're hearing from leaders? And actually given you said a lot of folks are missing the forest for the trees, what questions do you want them to be asking instead? Sarah Roller (16:56): Yeah. I'm hearing two different reactions. When the FCC ban was first announced, the biggest reaction I heard was fear that getting rid of non-competes would hinder the ability to retain physicians. Organizations often use these as a primary retention lever for their physicians. I think the tide has shifted a bit between now and April, where most folks are either ignoring it, whether because the ban technically does not apply to not-for-profit organizations. Most health systems non-for-profit, they think they can look the other way. Abby Burns (17:35): I want to talk about that in a second, but what's the second reason people are ignoring this? Sarah Roller (17:40): They're banking on what is probably the reality, which is that this ban itself is probably not going to be something that survives a Supreme Court ruling, which it looks like that's where it's headed. Abby Burns (17:52): Yep. Sarah, you said technically does not apply to not-for-profits. What do you mean by that? Sarah Roller (17:59): Technically, how it reads is that if an organization acts in a for-profit way, that organization could fall under the ruling. Kind of a little murky as to what would end up being classified as acting in a for-profit way, but it's not as cut and dry as your tax status automatically looping you in or out of the ruling. Abby Burns (18:25): In other words, it's not a get-out-of-jail-free card if you have that 501(c)(3) status. Sarah Roller (18:30): Yes, exactly. Abby Burns (18:32): So what is the conversation we should be having? Sarah Roller (18:35): I think the thing that organizations are missing when they ask those questions that are very specific to, "Will this apply to me?" That's the tenor of those questions, and so they're missing this forest that we've been talking about, which is around how the power dynamics are shifting as it relates to physician employment. I mentioned before, we use non-competes as a retention lever for docs all the time, but I think of non-competes as holding physicians hostage to their employers. They often can substitute for creating an environment where physicians want to work for you and keep working for you. We use these contractual levers instead of creating an environment where we are attracting the type of employees we want. Abby Burns (19:25): That feels really important, especially because we know the rates of physician burnout are high, have trended positive. Sarah Roller (19:31): Yeah. I think the market for physician talent is hyper-competitive right now. We have shortages in certain specialties. We have an impending retirement wave across the board where we have majority or almost half of our docs in most specialties are within 10 years of technically reaching the retirement age. We're also seeing new opportunities for employment and different employers who are offering different levers of engagement and retention for docs. We talked a lot on this podcast and in other Advisory Board resources about corporate medical groups and how they're shaking up the employment environment and those dynamics. (20:15): All of that collectively, for me, when I talk to organizations, I recommend having more of a proactive strategy for winning and retaining physician talent, something that's more proactive than a non-compete. Use something that is attracting rather than preventing physicians from leaving your organization. Abby Burns (20:36): Sarah, I want to shift our attention and talk about physician pay cuts. Provider advocacy groups like the American Medical Association, they're always opposed to reimbursement cuts. You track these every year and it seems like we fall into a pretty similar pattern. Pay cut gets announced, public outcry, at the end of the day usually we see Congress move to insulate provider organizations from drastic rate changes. We're in a lame duck period right now. Do we have any reason to think that this year is going to be different? Sarah Roller (21:09): Before I respond to that, I want to give just a bit of a caveat, which is that talking about this is loaded. Pay cuts are hard for physicians. They're particularly hard for smaller independent practices. This is a trend that, while consistent over time, is really challenging to the folks who are delivering care and running small physician practices especially. With that in mind, when you adjust for inflation, physician pay has dropped by almost 30% since 2001. We have just seen this consistent decline in how physicians are paid or how much physicians are paid at the same time, as you pointed out, cost keeps rising. Abby Burns (21:56): Yeah. I think the latest number is, for health systems, 20% increase in operating costs over the past three years Sarah Roller (22:02): Yeah. And then imagine, scale that down to a small practice where you have five physicians or two physicians. Really, that margin is teetering on a very fine margin at that level, so it can be felt really acutely. I think the reality is we're going to see the same pattern that we've seen year over year. Congress will probably come in, "save the day," mitigate a portion of those cuts. They never get rid of the cuts. They just make them a little less bad, but I don't know that that will happen necessarily in the lame duck period. It will happen, I think... At some point, it typically happens in the spring, so I expect that that will happen again. I think the bigger deal or the bigger conversation that we need to be having here is around how and how much physicians get paid. Abby Burns (22:52): Sarah, that sort of invites the question, do the election results affect the way that this might shake out? Sarah Roller (22:58): I would say no if I was a vetting person. Historically, this is a pretty bipartisan effort to reduce the cuts that we're experiencing and there's often just broader bipartisan support of broader Medicare payment changes as well. It tends to be pretty popular and I don't expect the election to change that. Abby Burns (23:22): With non-competes, this is an instance where we are focusing on the trees and perhaps we should be focusing on the forest, or you would say we should be focusing on the forest. What is the longer term conversation that we should be having when it comes to physician payment? Sarah Roller (23:36): I'd love for us to be focusing on, obviously, how much physicians get paid is important and, like I said, it's important to the bottom line, but I think the bigger question is how physicians get paid. What are physicians getting paid for? What does the mechanism look like? What are we valuing in how we approach physician compensation? Abby Burns (23:57): Sarah, I was counting down until the word value came out of your mouth. Sarah Roller (24:01): It's one of my favorites, but I think the reality is when we think about physician payment, how you pay an organization for the care that a physician delivers trickles down to then how you are rewarding your physicians. That value equation is really important and it impacts what we are prioritizing as an industry. Abby Burns (24:22): I think, also, you talked about the volatility of, yes, there's a predictability to there's a pay cut, there's outcry, there is Congress coming in. There's predictability to that, but there's also instability inherent in it. And so what you're talking about is let's take that instability volatility out of the equation. Sarah Roller (24:38): Yeah. I mean, if you look at the industry, there is a steady move towards we have an older, sicker population, costs are rising. We're broadly shifting treatment economics from procedure-based to drug-based. We're thinking about shifting from inpatient to outpatient. There are these bigger trends that are happening that aren't necessarily reflected in how we pay physicians for the services that they're doing. I mean, it has been a long, steady, very slow march towards value-based care, but I think that's the bigger picture here, which is how do we pay physicians for delivering higher quality care at lower costs? That is the big question that we have to solve as an industry that physician pay cut or lack thereof are not solving. Abby Burns (25:28): Well, Sarah, thank you. Sarah Roller (25:31): Thank you. Abby Burns (25:37): I want to pick up on the thread Sarah just left us with. When it comes to drug negotiations and physician payment, I think it's safe to assume both topics have at least been on the periphery of most leaders' radar. What I think leaders are far less aware of is a new value-based payment model aimed at reducing spending for a critical slice of care that hospitals deliver called the TEAM model. That's where I want to go next. (27:07): In April, the Centers for Medicare and Medicaid Innovation or CMMI introduced its latest value-based care model called the Transforming Episode Accountability Model or TEAM. This is a mandatory bundle payment model that will launch in January of 2026 and run for five years. Essentially under the TEMA model, Medicare will use bundle payments to pay participating hospitals for the 30-day episode of care around five of the highest volume procedures. (27:35): I said participating hospitals. Hospitals are allowed to opt in, but in September, CMMI released the list of the 741 hospitals across the country that must participate. To help us put this model on leaders' radar, I've invited Advisory Board's provider operations expert, Paul Trigonoplos. Hey, Paul. Paul Trigonoplos (27:55): Hey, Abby. Abby Burns (27:58): Paul, when it comes to value-based care models, we're not usually throwing the word must around, so I have to say this feels somewhat significant. But in the same breath, I also know that a lot of provider leaders, including those with hospitals on the list to participate in TEAM, aren't aware of or particularly familiar with this model. Give me your read. Is the team model a big deal, little deal, or no deal? Paul Trigonoplos (28:26): My takeaway here is that if you are one of the 741 hospitals that have been plucked from the 6 or 7,000 or so hospitals that exist in the country to mandatorily participate in the program, it is going to be a big deal for you. At the other end of the spectrum, I don't know if I could argue that it is still a huge deal if you are not one of those selected hospitals. I'm aware of the fact that margins are thin, everyone has their own operational and revenue and growth focus areas going right now, a new bundle payment that still needs to get vetted for a year, which we'll get into, that doesn't immediately impact you. I'm not sure it's the biggest deal for them. Abby Burns (29:08): Yeah, it doesn't need to rise to the top of the priority list, but you started off with saying for the 13 or so percent of hospitals that are mandatorily affected, it is a big deal. Why is that? Paul Trigonoplos (29:21): A few reasons. One, to your point, it is mandatory. CMMI generally initiates voluntary bundles. We've seen some mandatory uptake in the past. This is the latest ones, but no opt-out. Two, CMMI is targeting places where there's a big opportunity or potential for financial disruption here. We're looking at hospital finance. We did an analysis to check just how big of an impact are the selected DRGs broadly. Abby Burns (29:52): And when you're saying DRG, Paul, you're talking about... Paul Trigonoplos (29:56): The diagnosis codes, specific procedures that are captured in the five. The five procedures are coronary artery, bypass graft or CABG, major bowel procedure, surgical hip, lower extremity, which is code for knee, and then spinal fusion. Abby Burns (30:12): I'm guessing those procedures are setting off alarms in listeners' ears. CABG is a huge procedure, a huge revenue driver. Total hip, total knee orthopedic procedures are huge, so definitely significant. Paul Trigonoplos (30:27): Yeah. In our analysis, we found that if you just took the list of DRGs and applied them broadly to the whole country, this would make up about 6% of total Medicare inpatient procedure volumes and 10% of Medicare inpatient procedural revenue. Obviously, that needs to be adjusted, because only 741 hospitals are going to be affected immediately, but those are pretty sizable numbers when we're talking about razor-thin margins and margins around the edges, right? Abby Burns (31:00): Yep. Paul Trigonoplos (31:00): The third question or the third reason why I think it's a big deal is they're actually focused on geographic markets that are maybe underdeveloped or haven't had the exposure to value-based care. They're looking at these markets where actually it's a little bit of a spreading the love goal. If I had to read markets and hospitals that haven't really participated a ton in the other 40 or 50 CMMI models before, they are starting to get looked at here to build some broader foundations in the industry, I would say. Abby Burns (31:33): Paul, I want to run at what is perhaps the elephant in the room here, which is sort of the VBC of it all. I think there's a lot of skepticism around the effectiveness of value-based care in terms of the Medicare trust fund and keeping the Medicare trust fund solvent. And in fairness, that is for good reason. If we look at the history of CMMI, which was essentially created to test new payment models, only 6 of the 49 models created so far have generated statistically significant savings. What is it about the TEAM model that, looking at the CMMI track record, makes you confident, actually, for the folks affected, this is a big deal. Paul Trigonoplos (32:13): Yeah. I mean, it's a very important point to clarify. As I'm having conversations, I would say the skepticism or the disillusionment that people have is probably somewhat founded, you could say. I mean, to your point, 6 out of the 40, 50 models have actually garnered some savings. As of 2020, CMMI has actually increased spending by 5 or $6 billion. Abby Burns (32:36): Which we should say is what 0.1%? Paul Trigonoplos (32:37): Sure, it's small, but, again, taking the cynics view or the skeptics view, I think there's an argument for it. I would think about the TEAM model a little bit differently than before. Some of these overlap with what I said before. Some of them are different. Again, first, this is mandatory. This is different than how most models are run. CJR in 2021 became mandatory after several years of... Abby Burns (32:59): As comprehensive joint replacement bundle payment model? Paul Trigonoplos (33:02): Yeah. Yeah. This is taking from that. It's mandatory off the bat. Two, inpatient procedures, the revenue size we talked about. Abby Burns (33:11): Yes. Paul Trigonoplos (33:12): Inpatient is really important to think about here. Usually, a lot of models target upstream, right? Primary care, physician care. This is a hospital-delivered care, so really targeting that high-cost, high-revenue potential for variation reduction. Abby Burns (33:27): Yeah. Paul, this is, again, I think an important conversation as we've been talking about the financial health of health systems and how are they preserving their revenue streams, given hits to revenue that Sarah and I just talked about, given higher operating costs. So the fact that this represents 10% of Medicare inpatient revenue, to your point, I think it makes sense that it feels a little bit different. (33:52): I have a little bit of a crystal ball question for you, Paul, but I think it is an important one. How likely is it, especially given the results of the election last week, that this program is enacted in January 2026 as written? In other words, it's mandatory, it has the provisions in place that it has been published with. Paul Trigonoplos (34:14): Yeah. This is probably the frame of mind that a lot of leaders are thinking about it through. Abby Burns (34:21): Right. Yeah. I mean, the question behind my question is do leaders need to start getting ready? Paul Trigonoplos (34:25): Sure. Abby Burns (34:25): Can they take a wait-and-see approach? Paul Trigonoplos (34:27): There's over a year before January 1st, 2026. Trump, I'm sure you time dated this, it's the 14th at 2:00 PM, hasn't announced who's leading HHS yet. We don't know. That selection will dictate how do we feel about mandatory bundles versus voluntary bundles. What's the appetite for expanding CMMI versus shrinking it? Things like that. Also, the legal landscape, there's probably going to be movement in the courts to try to argue that this is unfair for certain groups. Abby Burns (34:57): Overreach. Paul Trigonoplos (34:58): Yeah, overreach. As of now, where I land, until those updates happen, it's mandatory for now. I also would see this as a signal of CMMI and where they want to go. If not this, then the next one is going to be mandatory. The more glass-half-full way to look at the 49 or 50 models that CMMI has rolled out over the years is that that's just a ton of learning experience. Now, they may be better suited to pick what's mandatory, what might work. Abby Burns (35:27): What I'm hearing from you is the hospitals that are on that list, the 741 hospitals, they should assume that it's going to continue, they should get ready accordingly. Paul Trigonoplos (35:37): Yeah. Abby Burns (35:38): What should those hospitals be doing to prepare? And I also want to think about what should organizations, vendors, other folks that work with those hospitals be doing? Paul Trigonoplos (35:47): Yeah. There's two broader points I would make here that actually make the question of what should health systems and hospitals be doing, maybe less of a daunting task. One is when you look at just bundle payment popularity, a lot of systems are already participating in some version of a bundle. We did a survey of providers and found out about 68% of them had some sort of episode-based care arrangement. One, there's a little bit more of exposure there. (36:16): The other point I would make is a lot of the recommendations we would give hospitals and health systems are just things they should be doing anyway. It's a good business practice to thrive and continue to improve their margins in a world where excess costs is just not really tolerable. Abby Burns (36:34): Yeah. What are a couple of things that rise to the top of the list in your mind? Paul Trigonoplos (36:38): If I was a health system leader or chief of surgery or any of the service lines being affected, I would start with benchmarking and I would figure out how is my performance relative to my peers, the nation, figuring out where I'm at risk for really missing some of the benchmarks. Two, I would start to enfranchise providers and surgeons in this work. This is like care variation reduction. It is long and tedious in a partnership, but starting soon is probably important. (37:05): I mean, I was on a call the other week with one of the systems that had been chosen out of the 741 and I was asking like, "Are you aware of this? Do you understand the details?" And he said, "Oh, I just got an email about this three days ago." That's the attitude, I think, a lot of people are coming into it. Again, based on what we said, I think it's founded a little bit. (37:24): The third one is just being super judicious about your fundamental OR efficiency, pre-op scheduling, cutting down unnecessary tools in your OR so that you don't actually need to prep your post-op recovery and getting people out. (37:38): That leads me to the number four one is super, super important and at risk of being overlooked, but it's the post-acute side. You started by saying that this is a 30-day episode. It initiates when they get into the hospital and goes 30 days after, so managing your post-acute network, finding your highest performers, making sure you're supporting them to avoid readmissions, things like that. Abby Burns (38:02): Paul, I want to close with a big picture question. What do you think this TEAM model signals for the future of value-based care? Paul Trigonoplos (38:11): I think that this focus on bundles, again, covering some points we said for hospitals, for high cost, high revenue inpatient procedures, I think it's reflective of the trajectory of our bundled payment attention has gone and where hospitals are right now. Value-based care, some version of it, is just going to be an element of something they're going to have to do and balance perpetually. All the signals point to bundles being popular, where CMMI is putting attention on a lot of the success and their history has been on bundles. I see this as another chapter in that story just continuing. Abby Burns (38:50): Well, Paul, thank you. Paul Trigonoplos (38:52): Thank you. Abby Burns (38:58): I position this conversation as big deal, little deal, no deal for each of these distinct policy areas, but the thing I'm actually taking away is that each of these policies signal bigger, perhaps structural, shifts in the healthcare business. In particular, the way we manage ballooning costs, the way we value physicians, and the way we pay for care. Remember, as always, we're here to help. (39:34): New episodes drop every Tuesday. If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts, and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Abby Burns, as well as Rae Woods, Chloe Bakst, and Atticus Raasch. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was Leanne Elston and Erin Collins. Special thanks to Natalie Trebes, Jocelyn Herrington, Lindsey Paul, and Daniel Kuzmanovich. We'll see you next week.