TrustWorks On Call: Succession (Healthcare Edition)

Behind the Headlines

Unpacking the forces driving healthcare's biggest stories.

1. CMS proposes 340B cuts and broadens site-neutral payments.

The Centers for Medicare and Medicaid Services (CMS) published its Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Center (ASC) proposed rule, which includes a 2.4 percent outpatient payment increase, as well as important changes to 340B and site-neutral payment policies.
CMS wants to reduce the discrepancy between hospitals’ 340B drug acquisition costs and their subsequent Medicare reimbursements by lowering payments for 340B drugs from 106 percent of average sale price to 66 percent of average sale price.
Because of budget neutrality, the drug savings generated by this change, amounting to $5.7B in 2027, would be redistributed as higher outpatient payments to hospitals across all non-drug services.
CMS is also proposing to pay hospital outpatient departments at the same rate as physician offices for imaging services without contrast, expanding on last year’s rule that equalized payments for drug administration services.

TrustWorks Take: This is the second time that the Trump administration has tried to align Medicare payments to 340B acquisition costs. In his first term, the CY2018 OPPS rule attempted to reduce 340B payments by almost 27 percent, only for the Supreme Court to overturn the policy on technical grounds that CMS must conduct a survey of hospital acquisition costs before it adjusted reimbursements. This time, CMS claims that survey data shows average acquisition costs for 340B drugs were just 66 percent of average sale price, and thus proposed an even steeper payment cut than in 2017.

Hospital groups will fight this proposed rule, and litigate whatever makes it into the final rule, but changes are surely coming to the 340B program. However, regulators need to walk a fine line: curb the unchecked growth of the 340B program without removing altogether the financial lifeline that 340B offers safety-net and rural hospitals, especially as Medicaid payment cuts phase in.

2. ACA plans will see another double-digit premium increase.

The median premium increase for Affordable Care Act (ACA) marketplace plans will be 14 percent next year, according to preliminary analysis of the rate filings submitted to state regulators.
Of the 77 marketplace insurers that have filed so far, 20 have requested average premium increases of over 20 percent, and none held flat or decreased rates.

TrustWorks Take: This is the second-highest proposed premium increase since 2018, beat only by the 18-percent proposed increase that went into effect this year with the enhanced ACA subsidies expiring. ACA enrollment in February 2026 was already down 13 percent, or almost three million people, compared to the year prior. Enrollment will continue to decline steadily, first from members failing to make payments over the rest of this year, and then from next year's premiums becoming even more unaffordable. A KFF survey from February found that among 2025 marketplace enrollees who lost ACA coverage in 2026, one in three failed to find an alternative source of coverage and became uninsured, suggesting roughly one million people may have become uninsured in just the first two months after the subsidies expired.

On top of the common factors making all health plans more expensive, such as rising utilization and the introduction of expensive drugs, ACA plans are caught in a vicious cycle of adverse selection. Healthy enrollees are priced out of coverage, leaving the remaining risk pool sicker and more costly to cover, which fuels another round of rate increases and even more relatively healthy people dropping out of the market. When an insurance market destabilizes, it can take a long time to recover, if it does at all.

3. Epic president announces surprise departure.

Sumit Rana, president of electronic health record (EHR) company Epic Systems since 2024, informed employees last Friday that he will step down from his position on August 14 to spend more time with his family.
Rana was seen as a likely successor to Epic CEO Judy Faulkner, who has run the company since its founding in 1979; Faulkner, at 82 years of age, has said she has no immediate plans of stepping down.

TrustWorks Take: Epic has a unique internal culture, shaped by its notoriously private CEO and marked by its commitment to promoting from within. Rana joined the company in 1998 as a software developer before ultimately rising the ranks to president and second-in-command. Among those who have worked closely with Epic, Rana was regarded as an indispensable presence with strong connections to Epic’s customer base. It is telling that his responsibilities will be distributed across the leadership team, leading to speculation that there is no designated successor to the successor.

Faulkner has delivered a remarkably successful, near-five-decade run as Epic’s CEO, but she cannot lead the company forever. While its hold on the hospital EHR market remains largely unchallenged, the company can ill afford a succession crisis, as it faces greater scrutiny from federal regulators over its market power while positioning itself as an industry leader in healthcare AI. Even setting aside Faulkner’s eventual departure, Epic will take time to adjust to the absence of Rana’s day-to-day leadership over internal operations.

Beyond the Whiteboard

Visualizing key trends from the healthcare industry

UHG Reversing Out of a Ditch
UnitedHealth Group (UHG) has experienced a few difficult years, to say the least. The Change Healthcare hack, the murder of Brian Thompson, and federal investigations and lawsuits drained the company’s morale and operational focus, resulting in a financially disastrous 2025. Its company-wide margin was cut in half compared to 2024, and its Optum Health provider arm lost money on operations after years of consistent profitability. Only its Optum Rx pharmacy benefit manager (PBM) division improved its margin from a year prior.

UHG’s leadership has made no bones about needing to “change and reform.” Across the organization, UHG has committed $3B to AI spending by the end of 2027, dedicated to everything from faster processing of prior authorizations, to selling AI products to other payers and health systems, to launching an AI assistant à la Siri. “Transparency” is another key theme, as its latest insurance and PBM products promise clear, upfront, fee-based pricing. And perhaps most radically, Optum is shrinking both its employed and affiliated physician networks, while drawing a sharper line between the two. While headlines a few years ago touted Optum surpassing 90K employed or affiliated doctors, the company now emphasizes that it employs fewer than 10K physicians and has reduced its total network size to about 85K.

Dialing In

Sharing insights from our work with clients

An Outgoing CEO Describes His Successor
Health systems are seeing a wave of CEO retirements, in what feels like a generational sea change for healthcare leadership. We recently got dinner with one such outgoing CEO, who was leaving his relatively small, Southern system in good shape after a decade in charge. He spoke frankly about where the industry was headed. “Honestly, [the path forward] is not clear,” he admitted. “If I was 20 years younger, I’d be excited by all this uncertainty, but getting us back to stable after the pandemic took a lot out of me.”

He wants his successor to oversee big changes to how the system funds and delivers care, taking advantage of their state’s growing population and permissive regulatory environment. Too many systems have been stuck in “strategic stasis,” as a generation of leaders that succeeded with the playbook of commercial cross-subsidies, hospital volume growth, and facility expansion are being asked to reinvent themselves and their industry. That takes “vision, vigor, an appetite for risk, and the energy to see things through,” which are the qualities our retiring friend wanted to see in his successor.

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Succession (Healthcare Edition)