Hello and welcome back to TrustWorks On Call—here’s our healthcare business and strategy 411 for the week. If you enjoy our work, please consider forwarding it along to a friend and encouraging them to subscribe!
In this week’s edition, we discuss the problems with wRVUs, share a graphic on drug wholesalers’ oncology group acquisitions, and muse on an attempt to redefine obesity diagnoses. But first, before we get to the admittedly grim news this week, we thought it might be nice to highlight a bright spot up top—yesterday, RFK Jr. finally admitted, “The most effective way to prevent the spread of measles is the MMR vaccine.” Too little, too late? Maybe so, but it’s nice to see someone in the current administration change their tune about a harmful idea. Anyway, here’s our thoughts on the tariffs:
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Behind the Headlines
Unpacking the forces driving healthcare's biggest stories
1. Healthcare industry braces for tariffs.
- Last Wednesday, President Trump announced the imposition of a 10 percent tariff on all countries, effective April 7, as well as “reciprocal tariffs” of up to 50 percent for countries with the largest trade imbalances, effective April 9.
- East Asian countries, such as China and Vietnam, are particularly impacted by the reciprocal tariffs, while Canada and Mexico are largely unaffected by this order; the European Union faces a 20 percent reciprocal tariff.
- As of market close on Monday, the S&P 500 dropped 10.1 percent since April 1, and its healthcare sector index dropped 6.2 percent.
- The reciprocal tariff excludes pharmaceutical products, but the healthcare industry is pushing for more exemptions, including medical devices.
TrustWorks Take: The US economy is both the world’s largest importer—$71B annually—and exporter—$50B annually—of healthcare goods. While other sectors of the economy are able to pass price increases onto consumers, healthcare is limited by its reliance on long-term, fixed-price contracts for many goods and services. Instead, the tariffs will compress margins for companies across the supply chain, depending on the nature of the contracts and the timing of renegotiations. Providers are immediately left in a difficult spot, as reimbursements levels are generally locked in, while rising supply expenses will either be absorbed by manufacturers and distributors, which risks shortages, or through hits to provider margins. The purported benefit of these tariffs is a boost to US manufacturing, but these changes cannot happen overnight, and patient lives will be at stake amid this painful reorganization of the global supply chain.
2. Number of Americans who cannot afford medical care hits new high.
- 29M Americans, or 11 percent of US adults, lack access to quality, affordable healthcare, according to a West Health-Gallup poll released last Wednesday.
- The survey, fielded in November and December 2024, recorded a three-point increase since 2023 for this metric—known as “cost desperate”—which is at its highest level since the survey began in 2021.
- Black and Hispanic adults, and households with annual incomes less than $48K, experienced the highest increases in their inability to pay for needed care.
- Another West Health-Gallup poll, also fielded last November, found that 28 percent of adults took on debt, worth a collective $74B, to pay for healthcare expenses in the past 12 months.
TrustWorks Take: These surveys offer a snapshot of the state of the American healthcare consumer at the end of the Biden administration, when the economy appeared to be in good shape and many providers felt like they were regaining their financial footing. Now, recession fears loom, and tariffs threaten to eat up more household spending, which will only drive further care avoidance. The confluence of public insurance cuts, rising supply prices, and declining care volumes amount to an existential threat for care delivery businesses. As for consumers who can’t afford not to seek care, the burden of medical debt continues to grow, and even uplifting news like the recent buyout of $30B of unpaid medical bills is being cast as insufficient in a system that generated about $74B of consumer debt last year alone.
3. CMS finalizes pared-down MA and Part D rule.
- The Centers for Medicare & Medicaid Services (CMS) issued the 2026 Medicare Advantage (MA) and Part D final rule last Friday, which undid or deferred several policies from the Biden administration’s proposed rule.
- The final rule no longer includes the provision allowing Medicare Part D plans and Medicaid programs to cover anti-obesity medications, although beneficiaries can still receive GLP-1 prescriptions to treat diabetes and heart disease.
- Stronger regulations around the marketing tactics of MA plans, the transparency of their provider network listings, and the use of AI for prior authorizations were postponed indefinitely.
TrustWorks Take: Language in the final rule suggests that, unlike the decision to drop anti-obesity medication coverage, the administration intends to revisit AI, marketing, and network transparency in future MA rulemaking. During his confirmation hearings, newly confirmed CMS Administrator Dr. Mehmet Oz also expressed interest in policing the overuse of prior authorizations in MA, which has become a focal point of discussions around AI regulation. However, the deferral of rulemaking on these issues, already a boon to MA plans in the interim, is likely to result in less strict regulations than originally proposed, not stricter ones. The Trump administration has established clear preferences for deregulation and for MA over traditional Medicare; instead, the fight to watch will be between efficiency hawks, who want to control healthcare spending, and MA boosters, who want to further incentivize and speed along Medicare’s privatization.
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Dialing In
Sharing insights from our work with clients
Moving Beyond Work Relative Value Units (wRVUs)
We recently assisted a group transition from health system employment back to an independent practice, reportedly resulting from health system pressure on compensation to address subsidies and physician frustrations with autonomy. One of the earliest and hardest questions they faced was how to structure compensation. For many of them, wRVUs—predictable, quantifiable, supposedly objective—were all they had ever known. But as we talked about the kind of organization they wanted to build, they kept coming back to one conclusion: "wRVUs tie us to the old ways of doing healthcare, when we want our compensation structure to reflect our forward-looking culture."
The truth is, wRVUs reward volume, not value. They’re rooted in a fee-for-service mindset that doesn’t capture what it really takes to deliver high-quality, team-based care today. Teaching, care coordination, innovation, leadership—none of that shows up in a wRVU report. And worse, wRVUs often obscure the actual economics, as their values are tied to external data sets and not underlying practice economics. Accordingly, a provider can generate high wRVUs and still operate at a loss. Moreover, not all recorded wRVUs may translate to billable revenue for various reasons (e.g. improper unbundling). That’s not sustainable, and it’s not transparent.
The group made the decision to move forward with a net-income-based compensation model. It wasn’t the easiest path, but it was the one that felt most aligned with their values, goals, financial sustainability. The net-income model reconnects compensation with financial performance in a way that’s clear, grounded in practice economics, and fair. Perhaps most importantly, it helps them function as a team. Instead of individual productivity targets that drive competition and siloed behavior, they now have aligned incentives to manage margins and a shared responsibility for financial and non-financial outcomes. There also was an appreciation for the model's adaptability. As the payment landscape continues to evolve—with value-based care, risk-sharing, and new contracting strategies—they feel confident their compensation approach can evolve alongside it.
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Beyond the Whiteboard
Visualizing key trends from the healthcare industry
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Three companies—McKesson, Cencora (formerly AmerisourceBergen), and Cardinal Health—control 98 percent of the drug wholesaler market, but they’ve demonstrated ambitions to evolve beyond their roles as pharmaceutical middlemen. In their quests for vertical integration, each company now owns a generic manufacturer, a group purchasing organization, a retail pharmacy chain, and a variety of provider groups. Oncologists have become subjects of a recent wholesaler bidding war, with the “Big Three” having spent a collective $5.7B acquiring large groups in the last two years. While there are specific interplays between wholesalers and oncologists—e.g. capturing more margin from drug administration, monetizing direct referrals, enabling value-based care contracts with accountable are organizations—this phenomenon exemplifies more broadly the progressive fragmentation of care delivery.
Payers, pharmacies, retailers, and even ambulatory surgery center operators have spent billions over the last decade building care delivery businesses in pursuit of controlling greater shares of a patient’s care journey. For patients, this manifests as an overwhelming menu of siloed channels serving individual needs, in contrast to the omnichannel offerings of health systems. For providers folded into these vertically integrated organizations, the much-needed capital infusions can come at the cost of mission misalignment and inexperienced management. As best evidenced by Walgreens’ potential divestment of VillageMD, these companies can lack the strategic and operational expertise required to capitalize on the theoretical value of these transactions. Compared to retailers, the wholesalers have more experience with managing physician assets and stronger connections to their core business; however, the bidding war for physician talent could still turn out to be a bubble if enough high-profile acquisitions end up as flops.
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Weighing In
Offering our thoughts on a notable topic
Redefining Obesity, or How to Triage GLP-1s
The Lancet recently commissioned a working group to redefine how we diagnose and measure obesity. The problem with body-mass index (BMI), the most common screening tool for obesity, is that it’s overly simplistic and doesn’t account for muscle mass. While BMI is still useful as a surrogate measure for population health, the commission posited that personal diagnoses should rely on direct measures of adiposity. Furthermore, providers should distinguish between clinical and pre-clinical obesity, dependent on whether a patient’s obesity has identifiable clinical effects, like abnormal organ function. The commission’s findings, which are nonbinding, could prove effective at reducing stigma and improving treatment for obesity.
However, clinical conversations around how we define diseases like obesity are quickly subsumed by their policy implications. GLP-1s are highly effective but very expensive treatments for obesity, and codifying a distinction between pre-clinical and clinical obesity could serve as a triage mechanism for who can obtain the drugs. Triage is unavoidable, but (in the US) it is too often based on ability-to-pay and broad disease classifications (i.e. GLP-1s for diabetes, but not obesity), rather than evidence of cost-effectiveness. The problem is, at the current US price point, GLP-1s are generally less cost-effective as an obesity treatment than other drug-therapy treatments and bariatric surgery. Medicare’s selection of semaglutide for its next round of drug price negotiations could change that calculus, but drugmakers protest that lowering the prices too much will stifle future innovation. A robust pipeline of new competition for GLP-1s on the market could also lower prices down the road. Given that semaglutide is relatively inexpensive to manufacture, alternative payment models that pair guaranteed revenues with broader, cheaper access to these drugs could provide a fruitful middle ground for all parties.
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