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Board Season 2025
September 23, 2025
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Hello and welcome back to TrustWorks On Call, here with your 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!
We’re doing something a little different this week. We’ve prepared a primer to commemorate the official end of summer and the start of Board Season, when like fall foliage, all the year’s strategic objectives come into view before we frantically sweep them into neat piles. First, we go Behind the Headlines on the four stories defining healthcare in fall 2025. After that, we'll take you Beyond the Whiteboard with a framework on how health systems can position themselves as anchors in the care ecosystem. Finally, we're Dialing In on our industry’s need for a strategic rallying cry.
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Behind the Headlines
Unpacking the forces driving healthcare’s biggest stories.
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1. Policymaking proceeds without respect for precedent.
- On March 3, 2025, the Department of Health and Human Services (HHS) published a rule rescinding the Richardson Waiver, which required notice and comment procedures for regulations relating to public property, loans, grants, benefits, or contracts.
- The Trump administration’s efforts to reduce the size of the federal healthcare workforce by about 25 percent have been caught up in the courts, with the Supreme Court allowing some cuts to proceed, while another injunction protecting certain HHS employees is still standing. Throughout this, many nonpartisan healthcare civil servants, including top experts and leaders, have chosen to or been forced to resign.
- HHS Secretary Robert F. Kennedy Jr.’s decisions to fire all 17 members of the Advisory Committee on Vaccines (ACIP) and replace them with some known vaccine skeptics, who in turn have presided over tense meetings and recommended limitations on vaccines, have served as flash points for the Trump Executive Branch’s approach to healthcare policy.
- Public opinion polls fielded in August have found that confidence in federal healthcare agencies has dropped about ten points since last September.
| TrustWorks Take: Despite the preeminence of the US Constitution and the magnitude of the Federal Register (some years reaching nearly 100K pages), the US government itself is largely governed by norms and unwritten rules. For example, the rule that most healthcare regulation requires a notice and comment period can be undone with a new rule, issued without notice or comment. Even actions that may be against “the rules,” such as the dismissal of some federal healthcare workers, are up to the interpretation of a judicial system headed by a Supreme Court that has steadily ceded more authority to the Executive Branch. In theory, future administrations could reverse these actions, but in practice, we may be experiencing a “Humpty Dumpty” moment: our institutions could be broken in ways that cannot be put back together again. The damage is both internal, by losing top scientists and institutional knowledge, and external, by losing the public’s unquestioning trust. Even if new leadership comes to town, it will take years to rebuild what it took months to destroy. Without the federal government as the single source of truth on important healthcare decisions, such as vaccine safety and coverage, the burden falls on health systems, payers, physicians, and patients to find their own sources of guidance, expertise, and truth. |
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2. Government “efficiency” is here to stay.
- This year’s budget reconciliation law, known as H.R. 1 or the One Big Beautiful Bill Act, is projected to reduce federal Medicaid spending by $990B and enrollment by about 7.5M over the next ten years, and cut federal spending on the exchanges by about $213B and enrollment by 2.4M.
- Spearheaded by the Department of Government Efficiency (DOGE) initiative, the Trump administration has pursued massive cuts to science and healthcare research funding, including $4.5B of National Institutes of Health (NIH) grants and almost $1B of National Science Foundation grants, impacting research into vaccines, cancer, and infectious disease. The 2025 White House budget request includes a 43 percent cut to NIH funding.
- Healthcare is again expected to feature in Congressional deliberations this fall, including a likely extension on Medicaid Disproportionate Share Hospital (DSH) payments, which serve more low-income patients, and an uphill battle to preserve Marketplace premium tax credits before they expire at the end of this year.
| TrustWorks Take: There’s no sugar coating to be found on these scheduled cuts to public insurance programs, which will painful everywhere, but especially disastrous in Medicaid expansion states with large rural populations. Providers can hope that a future Congress will reverse course before most of the cuts have taken effect (76 percent of the Medicaid cuts are scheduled for 2030-2034), but they should prepare for a future where this law is fully enacted. And more cuts could be on the way. Under Administrator Dr. Mehmet Oz, the Centers for Medicare and Medicaid Services (CMS) have been advancing site-neutral payment reforms, and there’s growing bipartisan interest in using them as a tool for cost savings. These efforts dovetail with the continued privatization of Medicare through Medicare Advantage (MA), which is now getting bipartisan attention for potential reform due to excessive upcoding and prior authorizations. Medicare benefits have long been a “sacred cow” that Congress would never consider cutting, but the new logic of “efficiency,” especially when applied to MA’s well-documented history of fraud, could be the rhetorical tool that permits Congress to do the previously unthinkable. |
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3. Corporate healthcare has lost its momentum.
- Medicare Advantage payers are undertaking a significant retrenchment by pulling back on the number of plans they offer and markets they serve, driven by rising medical costs and slowed growth of federal reimbursements.
- UnitedHealth Group (UHG) has particularly struggled this year with higher-than-expected medical costs, as consecutive quarters of declining profits have shaken investor confidence after UHG had earned a reputation for reliable profit growth.
- Across the last two years, the healthcare ventures of several retail giants have wound down amid disappointing financial returns: Walmart Health closed, Walgreens sold VillageMD, CVS replaced its CEO and closed hundreds of stores.
- Private equity (PE) firms are struggling to find strategic exits after rolling up physician groups into larger platforms; one study found that, for PE groups that acquired dermatology, ophthalmology, and gastroenterology groups between 2016 and 2020, 98 percent of investment exits were through sales to another PE group.
| TrustWorks Take: Corporations with the size and scale of UHG or CVS should never be counted out, but they can temporarily falter. One year ago, CVS was a disaster and on the verge of firing CEO Karen Lynch, whereas UHG was still an unstoppable giant whose biggest headache was the Change Healthcare hack. Now, Wall Street loves CVS for its recovery and has no faith in UHG after its series of missteps. The opposing narratives around these two companies are the talk of Wall Street, but stock analysis can obscure the structural problems they both face: the commercial insurance and MA markets are destabilizing and delivering unsteady returns. In response, vertically integrated payers, only a few years removed from expansionary dreams, have entered retrenchment cycles focused on cost containment over membership growth. Meanwhile, the PE firms betting on these corporate players to back their strategic exits for their physician platforms are instead passing the bag to larger PE firms to extract even more efficiencies. Even for corporate giants with nearly endless scale, there’s no replacing a good strategy, and these days strategic stasis abounds. |
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4. Challenges on both sides of the balance sheet threaten the health system business model.
- The not-for-profit hospital sector continues to recover from the pandemic, especially the impacts on labor spending. The sector’s median operating margin in 2025 rose to 1.1 percent from 0.4 percent last year, according to Fitch Ratings.
- The current policy environment is expected to exacerbate revenue and cost problems for health systems and medical groups, including statutory cuts to public insurance hurting revenues, tariffs increasing the costs of drugs and supplies, and immigration restrictions, such as President Trump’s recent order that H-1B visa applications will now cost employers $100K instead of less than $5K, reducing the supply of healthcare workers and driving up labor costs.
| TrustWorks Take: For providers, the threat of expense growth outpacing revenue growth is at the same time existential and all-too familiar. Medicare payment updates have lagged inflation for years, the outpatient shift has moved more procedures that were once vital sources of inpatient revenue, and vertically integrated payers have been consolidating insurance markets and encroaching on care delivery for decades by now. Today, these longstanding forces are converging in a weakened post-COVID fiscal environment that’s at risk of total destabilization by the chaotic policy environment. These uncertainties compound the bread-and-butter challenges of maximizing operational efficiency. The writing is on the wall: systems that are eking out a positive margin today could lose it soon if they don’t commit to strategic transformation that weans them off the cross-subsidy business model. |
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Beyond the Whiteboard
Visualizing key trends from the healthcare industry
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A Positive Vision for Health Systems
Against the backdrop of unprecedented threats to the health system business model, we’d like to offer an organizing principle for health system strategy: health systems should strive to serve as the trusted “anchor” for consumers across their health journey. To do so, they must move beyond episodic encounters and build comprehensive, relationship-based care anchored in four core components: hospital and procedural care, primary and specialty care, care personalization, and care coordination. These components may be delivered directly or through curated partnerships, but always within a health system-connected network. Episodic care alone won’t sustain loyalty, revenue, or long-term viability. The “anchor” role requires health systems to deliberately curate a connected ecosystem of services, whether owned or partnered, that keeps patients inside their orbit. That means making trust, continuity, and personalization as core to the strategic plan as capital investments. The real differentiator requires evolving from just providing care to orchestrating the entire healthcare journey in a way that consumers and families feel supported over time and across life. That’s where health systems can translate their legacy of clinical credibility into durable consumer relationships, which is our bet for the future’s true competitive advantage.
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Dialing In
Sharing insights from our work with clients
Curing “Strategic Stasis”
Despite all the lip service toward lofty goals like transformation, building scale, or moving to value, most health systems and medical groups these days seem stuck in a holding pattern. There’s plenty of excuses, such as the unstable political and economic environments, for why staying the course is preferable at this time, but I often find these excuses coming from Baby Boomer CEOs who I know are only a few years from retirement. But whatever the underlying cause may be, the diagnosis is clear: our industry is sick with a “strategic stasis,” and the lack of a common direction across providers is keeping many systems standing still.
Twenty years ago, systems focused on innovation and clinical technology to fuel service line growth. The passage of the Affordable Care Act in 2010 launched accountable care organizations and other initiatives focused on managing population risk. When value-based contracts were slow to materialize, even the most motivated systems still focused primarily on fee-for-service growth. Many then shifted to a docket of consumer-focused strategies, boosted by the momentum of telemedicine during COVID. Today, there is not a single strategic rallying cry across the provider industry. Health systems have to look at their individual strengths and market position to set direction, without the cover of what everyone else is doing. Watching the market and retrenching in fee-for-service, inpatient-focused growth won’t slow the shifting demographics, disruptive competition, and outpatient migration undermining the current cross subsidy-based business model. Financial challenges will continue to mount. Providers will be pressured to make cuts. But without a vision for where they’re going, the first things axed from the budget are often the investments to fuel innovation. The pace of change hasn’t slowed. Standing still today means providers will start to fall behind.
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Thank you for tuning into this week’s TrustWorks On Call. We’ll see you next Tuesday with another round of TrustWorks Takes. With your help in sharing TrustWorks On Call (subscribe here), we’re living up to the Collective in TrustWorks Collective. And if you ever need help thinking through a healthcare problem, don’t hesitate to reach out to us.
Best Regards,
Anthony D’Eredita and TrustWorks Collective
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