TrustWorks On Call: Strike-tober Strikes Again

Behind the Headlines

Unpacking the forces driving healthcare's biggest stories.

1. Kaiser Permanente workers go on strike.

An estimated 45K healthcare workers at Kaiser Permanente began a five-day strike today, Tuesday October 14, after negotiations between the employer and several unions broke down following contract expirations at the start of this month.
The United Nurses Associations of California/Union of Health Care Professionals, which represents 31K Kaiser Permanente workers, is now asking for a 25 percent wage increase over four years (down from 38 percent in their initial bargaining), changes to scheduling and staffing, and more say in organizational decision-making.
Kaiser Permanente’s latest public offer includes a 21.5 percent wage increase over four years, which translates to a total payroll increase of $2B by 2029, as well as enhanced benefits and retirement programs.

TrustWorks Take: Labor negotiations are inherently a closed-door affair, despite both sides taking their narratives to the press and public for support, so we can’t say for sure whether one side is holding up negotiations more than the other. The median salary for a registered nurse has risen from $73K in 2019 to $94K in 2024, growing 5.5 percent annually, compared to a 4.5 percent average annual inflation rate. While local markets vary, Kaiser Permanente says it pays its workers 10 percent above the market rate on average, and that the striking workers are part of a union that gets paid 16 percent above market.

How negotiations play out after this strike will have a significant bearing on other contract disputes, starting with ongoing negotiations between the University of California and the California Nurses Association, whose contract is expiring at the end of October. Other West Coast systems will have to offer comparable salaries to Kaiser Permanente, if not match or outdo them, in order to maintain recruitment. At a time of stagnant reimbursement growth, systems feel like their ability to boost wages is capped, while healthcare workers see labor shortages and recent inflation as their excuse to press systems for more.

2. White House lays off HHS workers as shutdown continues.

Last Friday, the Department of Health and Human Services (HHS) issued reduction-in-force (RIF) notices to over 1,100 employees, comprising roughly one quarter of all federal layoffs the White House initiated to pressure Democrats in shutdown negotiations.
Congressional negotiations to end the shutdown, which has already lasted 14 days and is on track to become one of the longest in US history, currently hinge on the Senate finding a compromise to extend the Affordable Care Act (ACA) enhanced subsidies, which could include stricter income caps and fraud protections.

TrustWorks Take: These RIFs during a government shutdown are unprecedented and potentially illegal, but otherwise resemble the normal course of order for the Trump administration, including its sloppy processes leading to rescinded dismissals. Intended as a negotiating tactic, the layoffs appear to be galvanizing the Democrats, and even Senator Susan Collins (R-ME), who has emerged as a key figure in ACA subsidy negotiations, opposed the layoffs and called them “arbitrary.”

Congress has until November 1 to extend the subsidies before ACA enrollees’ premium payments increase by an average of 114 percent, but an important deadline has already passed. When proposing 2026 rates, insurers priced in how the enhanced subsidies expiring would result in a sicker population that’s more expensive to cover. These higher premiums could be returned to ACA enrollees as rebates if Congress extends some or all the subsidies, but no one shopping for ACA plans will choose their plan based on that chance. States could also decide to reopen their rate submission process to reprice plans with the subsidies included, but all these partial or after-the-fact patches won’t significantly move the needle toward the stable risk pool insurers desire.

3. California’s new CPOM rules target PE firms.

Last week, California Governor Gavin Newsom signed into law new restrictions on the corporate practice of medicine (CPOM) that specifically target private equity (PE) firms and hedge funds.
SB 351 prohibits PE firms and hedge funds from influencing physicians’ professional judgment in healthcare decisions, limits those investors’ control over certain operational decisions, and bans their use of noncompete or nondisparagement clauses in employment contracts.

TrustWorks Take: In 2025 alone, over a dozen states have passed laws to reign in PE’s influence on healthcare, largely focusing on two areas of the law: healthcare transactions and CPOM rules. In other words, states have placed limits on which physician groups PE firms can invest in, and how much control they have over those groups. California’s new law doesn’t go as far as one recently passed by Oregon (considered "the toughest state barrier to private equity in healthcare”), which both requires that physicians own a majority stake of their medical practice and limits management services organizations’ control over the clinical decision-making at their medical practices. However, a separate bill passed by the California legislature that needs Gov. Newsom’s signature would strengthen the state's ability to review and delay certain healthcare transactions.

Likely spurred on by the high-profile collapse of Steward Health Care, state governments are placing guardrails on the healthcare activities of PE firms and other corporate investors to ensure that their returns on investment come from providing more and better care, rather than indiscriminate cost-cutting and price-raising tactics. However, what these laws do not address are the economic incentives, pushed but not created by PE firms, that physicians face to maximize revenues and minimize costs in today’s financially challenging environment. Even without the direct influence of PE firms, California’s physician groups will still be choosing between PE-like strategies that push productivity and revenue optimization versus physician-led care model innovation that addresses the underlying economics.

Beyond the Whiteboard

Visualizing key trends from the healthcare industry

The Decline of Your Local (Chain) Drugstore
As we discussed last week, the news of Rite Aid’s final closure comes in context of the broader struggles faced by retail pharmacy chains. This week’s graphic quantifies those trends, which go as far back as 2018. That year, the total number of pharmacies began to decline, specifically driven by chain pharmacy closures, which coincided with “reported increases in planned chain pharmacy closures, mergers and acquisitions, and the integration of [pharmacy benefit managers] with large pharmacy chains.” Since then, these closures have only picked up steam, with CVS closing almost 1,200 locations between 2022 and 2025, Walgreens planning to close 1,200 of its own locations by 2027, and Rite Aid shutting down all locations after operating over 2,000 stores as recently as 2023. The unsuccessful pivot to broader care provision, which Walgreens tried most ambitiously with its purchase of VillageMD, and which CVS teased but abandoned, has also failed to pan out, helping trigger this latest wave of closures.

Suffering from a vicious cycle of closures and declining revenues, chain drug stores have become consumers' least-favorite type of pharmacy, with the greatest decline in customer satisfaction since 2017 (although all pharmacy settings have declined in this measure). Compared to mail-order, mass-merchandiser, and supermarket pharmacies, chain pharmacies offer an inferior consumer experience, and their front-of-store retail offerings lack the selection or prices of their competitors. Still, when they close, their former customers often find that a bad pharmacy was preferable to no local pharmacy at all.

Dialing In

Sharing insights from our work with clients

The Rush to Rural Health Transformation
Last week, we spoke to a policy expert who had a refreshing take on the $50B allocated for the Rural Health Transformation Program in the One Big Beautiful Bill Act (OB3A). But first, he stressed that OB3A still strikes a big blow to rural healthcare. “The math just doesn’t add up”: while $50B is a lot of money, it still pales in comparison to the financial hit rural hospitals will take should the bill’s Medicaid cuts take effect. However, his optimism stemmed from the program taking a different approach from the usual with rural healthcare policy, which has largely focused on paying rural hospitals more for doing the same kind of care, but for fewer patients.

The program’s funding is allocated in two different ways. Half will be distributed equally to all 50 states, regardless of size of a state’s rural population (he quipped, “It’s a great time to be doing rural healthcare in Rhode Island!”). The other half will be distributed based on a competitive bidding process, with applications due November 5th. Given that states will have had less than two months to develop their ideas and submit, “Don’t expect a lot of fully formed ideas and details”, and that consultants will be heavily involved. Winning proposals need to demonstrate how they improve access and outcomes while also bringing new care models that prioritize data and technology to create economies of scale.

Notably, while hospitals can be a part of proposed models, they are not the center: “There are a lot of people out there, including lawmakers, thinking that this is the ‘Rural Hospital Transformation Program’, and that’s not the goal.” Given the urgency, now is the time to engage state policymakers and potential participants, if you have a stake in rural care delivery. We’ll be watching closely to see what promising ideas get the dollars, and how that money spurs innovation toward a more sustainable rural healthcare system.

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Strike-tober Strikes Again