TrustWorks On Call: IPPS-O FACT-O

Behind the Headlines

Unpacking the forces driving healthcare's biggest stories.

1. CMS finalizes mandatory bundled-payment model for hospitals.

The Centers for Medicare and Medicaid Services (CMS) published the 2027 Inpatient Prospective Payment System (IPPS) final rule, including an average net payment increase of 2.3 percent, slightly below the 2.4 percent proposed increase from last April.
CMS also finalized a mandatory bundled-payment model, the Comprehensive Care for Joint Replacement Expanded (CJR-X) Model: starting in January 2028, most hospitals nationwide will receive episode-based payments (via end-of-year reconciliation) to cover a patient’s joint-replacement surgery, hospitalization, and initial 90 days of recovery.

TrustWorks Take: The original CJR model, which ran from 2016 to 2024, was a modest success, as it maintained quality outcomes while generating $113M in cost-savings over its final two performance years, about 4.5 percent of baseline spending. Most of the benefit came from reductions in post-acute spending, with hospitals better incentivized to serve as effective care coordinators. Hospitals responded by standardizing care pathways, engaging patients (through activities like joint camps), improving discharge planning, and encouraging home-based care. Expanding CJR nationally is a good thing and a step toward value, even if many hospitals will groan at the risk of reduced payments.

However, this is also an example of how the adoption of value-based payment has taken too long. We have known since the Medicare Acute Care Episode demonstration, a three-year bundled-payment pilot that started in 2009, that episode-based payments can reduce post-acute spending without sacrificing care quality or undermining hospital operations. Thirteen years after results were published, we are finally seeing Medicare’s first nationwide, mandatory bundled-payment model implemented.

2. Senate confirms Dr. Erica Schwartz as CDC director.

On Wednesday, the Senate voted 51-44 to confirm Erica Schwartz, MD, as the next director of the Centers for Disease Control and Prevention (CDC), filling the vacancy about a year after the previous director, Susan Monarez, was fired.
Dr. Schwartz served as a deputy surgeon general during the first Trump administration and was a rear admiral in US Public Health Service, where she oversaw the Coast Guards’ healthcare system.

TrustWorks Take: 18 months into Trump’s second term, the CDC has had a permanent director in place for only one month. The beleaguered employees of the CDC will get a much-needed moral boost from once again having a confirmed agency lead. By all accounts, Dr. Schwartz is qualified and competent, but the real test of her mettle will be whether she defends evidence-based decision-making amid political pressures from her boss, Health Secretary Robert F. Kennedy Jr. When Susan Monarez stood up to him, he fired her, but Secretary Kennedy knows the Senate will be very displeased with him if it is forced to hold yet another confirmation hearing for CDC director.

We received another indication this week that the administration is moderating on the Make America Healthy Again agenda: the Food and Drug Administration finally approved Moderna's mRNA flu vaccine, after the agency resisted reviewing Moderna’s application. The quick production timeline for mRNA vaccines should significantly reduce the guesswork involved in designing each season’s flu strain, resulting in better targeted and more effective flu vaccines.

3. Risant CEO Dr. Jaewon Ryu steps down.

Kaiser Permanente announced that the founding CEO of Risant Health, Jaewon Ryu, MD, is stepping down for personal reasons to “focus on his family,” with Dale Maxwell, the former president and CEO of Presbyterian Healthcare Services coming out of retirement to serve as interim CEO.
Kaiser Permanente formed Risant Health in 2023 to acquire health systems and accelerate their adoption of value-based care; Risant's first health system was Geisinger, where Dr. Ryu was CEO, and the company has since added Cone Health.

TrustWorks Take: When a CEO abruptly steps down for vague “family reasons,” it inevitably prompts a closer look at the state of the company. In this case, Risant appears behind schedule on its initial goal of acquiring five systems with $35B of combined revenue within five years. Now about halfway to 2028, Risant only has two systems with combined revenues of about $11B (based on pre-acquisition figures, as Kaiser Permanente has notably chosen not to split out Risant’s standalone revenue in its financial reports).

Because Kaiser Permanente has not been transparent about Risant’s financial and operating success so far, we can only evaluate what we can see from the outside. Along with the slow progress on acquisitions, it is concerning that Risant tapped Dale Maxwell as its interim CEO. Although he has bona fides for having led a successful risk-driven integrated delivery network at Presbyterian, it is not a great sign that Risant needed to bring someone out of retirement whose last act as a health system CEO was helming a cancelled merger between Presbyterian and UnityPoint. Still, the ambition of Risant’s mission, which aims to infuse locally controlled systems with the resources of a national value-oriented system, will inevitably take time to bear fruit, so we should not be too quick to judge.

Beyond the Whiteboard

Visualizing key trends from the healthcare industry

There is More to Strategy than Merging
After regulatory and economic uncertainties slowed hospital transactions at the start of the Trump administration, deals began to pick up as 2025 wound down. The first six months of 2026 then saw the second-most announced hospital M&A transactions of any half-year stretch since COVID. Federal healthcare payment cuts are leading systems to once again look for shelter in scale. However, the exuberant resurgence in dealmaking may serve as cover for a more concerning question: is M&A the only strategic muscle health systems know how to flex? Any system unable to change its position in a market or its relationship with its consumers can always tell itself that tapping into a new market, or joining a larger system, will change its fortunes. The more difficult work of realizing that value through the integration of capabilities into collective efficiencies, or the creation of “systemness,” is too often overlooked and underrated.

Dialing In

Sharing insights from our work with clients

Physicians Don’t Want AI to Change Everything
“This isn’t why I went to medical school,” a primary care physician seated next to me muttered during a health system meeting on how agentic AI should transform their care delivery pathways. She was reacting to a slide showing how a physician’s panel size could be expanded from 2K to 12K patients by using AI to automate all patient communication and all-but-the-most acute or complicated patient encounters. “I like talking to my patients, and I don’t want to be stuck dealing with only the hardest cases,” she confided in me.

Healthcare AI developers promise to reduce physicians’ burnout by removing the pajama time and busywork that take up too much of a physicians’ day, allowing them to focus instead on deeper, more meaningful patient encounters. This promise will be undercut if panel sizes expand to the point that a physician instead spends a significant portion of her day directing a panel of AI agents to deliver care and communicate with patients. Expanding care access is a goal worth pursuing, but pushing for it too hard could easily result in a physician revolt. Health systems should resist this rush to extremes that AI technologies encourage and remember to preserve the elements of practicing medicine that make a physician’s job worth doing.

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