TrustWorks On Call: There’s No Place Like Home

Behind the Headlines

Unpacking the forces driving healthcare's biggest stories.

1. UHG’s and CVS’s provider arms take hits in Q3 reports.

In its Q3 investor report, UnitedHealth Group (UHG) beat Wall Street expectations and raised its 2025 earnings guidance slightly thanks to improvements from its insurance business, even as its Q3 earnings were down 50 percent from last year.
After a disappointing quarter for UHG’s Optum Health provider arm, Optum CEO Patrick Conway admitted that their value-based care offerings were struggling in part because “the provider network grew too large, [and] the rapid pace of expansion and slower pace of integration resulted in operating inconsistencies.”
CVS Health also raised its earnings expectations for 2025 after strong Q3 performances from its insurance and pharmacy businesses.
CVS still posted a net loss of $3.2B on the quarter after recording a $5.7B goodwill impairment charge from scaling back growth plans for Oak Street Health.

TrustWorks Take: In the wake of these companies’ strategic reckonings and recalibrations, it’s easy to forget that in 2023, UHG's Optum assembling a network of 90K employed or affiliated physicians was the talk of the industry, and CVS was earning its share of headlines by acquiring primary care provider Oak Street Health for $10.6B. The industry’s largest vertically integrated payers looked unstoppable. But as Optum’s CEO plainly admitted, the company underestimated the challenges of integration, costs rose, and performance degraded. These are growing pains UHG would have experienced even if the company hadn’t gone on to suffer a series of largely unrelated crises, starting with the Change Healthcare hack.

Meanwhile, CVS bought Oak Street years before it was expected to turn a profit, only to announce a $2B company-wide cost-cutting initiative one year after completing the acquisition. CVS knows how to make money through its Caremark pharmacy business, and its Aetna insurance arm appears to be back on the right track, but it has yet to put together a compelling healthcare delivery strategy more ambitious than dealing with scrapes and shots at its MinuteClinics. After a wave of physician practice consolidation premised on the idea of value coming from scale, vertically integrated payers and other large platforms are now confronting the reality that scale is only useful to the extent it can be integrated effectively.

2. HRSA approves 340B rebate models.

Last Thursday, the Health Resources and Services Administration (HRSA) approved eight drugmakers’ proposals to issue rebates instead of upfront discounts for certain drugs sold to 340B providers, starting January 1, 2026.
The ten drugs in this pilot program, which HRSA announced last August would be selected from the 2026 Medicare Drug Price Negotiation list, include top sellers like Bristol Myers Squibb’s blood thinner Eliquis, Boehringer Ingelheim’s diabetes treatment Jardiance, and Janssen’s anti-inflammatory drug Stelara.
This rebate pilot program was created after a district court ruling from last May ordered drugmakers to continue paying upfront discounts for 340B drugs unless they could get prior approval from HRSA for their rebate programs.

TrustWorks Take: The battle between drugmakers and providers over 340B has grown with the discount-drug program’s size. Since 2018, annual 340B drug purchases have increased by 175 percent, three times faster than the growth of non-340B drug purchases, with $148B of drugs (by list price) flowing through the program in 2024. Providers, especially Disproportionate Share Hospitals, see it as an essential cross-subsidy and one of the few remaining levers at their disposal to combat margin pressures, whereas drugmakers allege that the program is rife with fraud, such as providing 340B-priced drugs to ineligible patients, which this rebate program could help prevent.

340B providers have protested that, by switching from upfront discounts to paying full prices for 340B drugs and requesting rebates after they’re dispensed, they’ll face higher costs from the added paperwork and cash-flow challenges from the delayed rebates. Drugmakers have always countered that this due diligence is the price providers should pay the discounted drugs. The surprising development here is that HRSA has now come out on the side of drugmakers. 340B providers can hope that the 163 Congressional lawmakers who urged HRSA to abandon the rebate program will intervene, but they may have to deal with these rebates and a less provider-friendly HRSA until Congress gets its act together to take on significant 340B reform.

3. 2026 Medicare PFS trims specialist and facility pay.

On Friday, the Centers for Medicare and Medicaid Services (CMS) published the Medicare Physician Fee Schedule (PFS) final rule, headlined by a 3.26 percent conversion factor increase.
The 2026 PFS also includes a one-year 2.5 percent pay bump for all physicians (added by this year’s budget reconciliation law), as well as a 2.5 percent “efficiency adjustment” pay cut for about 9K “non-time-based” procedures largely performed by specialists.
CMS also reallocated indirect practice expenses from facility-based services to non-facility-based services, by limiting indirect facility expense allocations to 50 percent of non-facility expense allocations.

TrustWorks Take: By pairing this “efficiency adjustment” with the one-time 2.5 percent pay raise for all physicians, CMS can argue that specialist pay isn’t getting cut, but rather that more resources are being directed to primary care services. Unfortunately, anytime Congress passes a single-year boost to physician pay, everyone is going to treat its expiration the following year like a cut. Furthermore, CMS’s stated justification that technology has allowed operative times to decrease, which is resulting in overpayments, is contradicted by at least one recent study. However, while the exact reasoning or methodology can be critiqued, CMS’s goal of increasing primary care pay is laudable, and within the budget-neutral framework of the PFS, that money has to come from somewhere.

The change to indirect practice expense allocations could be even more impactful, cutting facility-based payments to physicians by 7 percent overall in exchange for a 4 percent payment increase for non-facility-based care. CMS claims to be correcting for the growth of physician employment, leading to physicians being less responsible for the overhead costs, like utilities and administrative staff salaries, that constitute indirect practice expenses. However, as the American College of Cardiology points out, employed physicians still incur these overhead costs, whether or not they personally pay for them, so reducing facility payments just means the money has to come from somewhere else.

Beyond the Whiteboard

Visualizing key trends from the healthcare industry

Hospital at Home Programs on Pause
Despite consistent bipartisan support, Congress allowed the Acute Hospital Care At Home waiver program to expire after four years and three extensions when it failed to avert a government shutdown. Over 330 hospitals had used this Medicare waiver to start or expand their own hospital at home program to promising results. One such success story, which has been paused until the waiver is reauthorized, comes from UMass Memorial Health in Worcester, MA. We interviewed its Hospital at Home program’s Medical Director, Dr. Taki Michaelidis, to learn how he, his team, and the UMass Memorial system have responded to sudden loss of regulatory approval.

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Three Questions with Constantinos (Taki) Michaelidis, MD, MBA, MS
Hospital at Home Medical Director, UMass Memorial Medical Center

1. Why did UMass Memorial Medical Center create its Hospital at Home program, and how was it performing prior to the government shutdown?

Before we stood up our program in August 2021, it was not uncommon for us to have over a hundred patients in the emergency department waiting for a hospital bed for the better part of a day, if not days. Our Hospital at Home program was a response to this capacity problem around ED boarding, which of course had all sorts of implications on quality, safety, patient satisfaction, and cost too.

The first year was a little slower going—a lot of communication and change management to familiarize folks with the mode—but after operating for four years, we were rocking it as a team. Last year was the busiest year we'd ever had. We had a peak census of 24 patients, our admissions were 20 percent ahead of budget, our volume was beating all our benchmarks, and our quality and safety and patient satisfaction were phenomenal. For the same costs as traditional inpatient, we were the most patient-centered, highest quality, safest, highest patient-satisfaction unit in my entire health system.

Of all our patients in our EDs who met inpatient status, we could consider about 75 to 80 percent for our program, based on their payer status and geography. Thankfully, we had a great relationship with our payers, who loved that we reduced readmission rates and post-acute utilization, and we were operating in 49 towns and cities across central Massachusetts. So, mostly what we were working on was adding services and advocating for additional nurses, docs, and paramedics to grow Hospital at Home capacity. These were important but manageable micro-challenges, until the regulatory macro-challenge hit.

2. How did your system respond to the expiration of the Medicare Acute Hospital Care at Home waiver program?

The September 30th expiration of the Medicare waivers was definitely challenging and painful. The telehealth and hospital-at-home waivers enjoy strong bipartisan support, and we knew they were just caught up in this budgetary fight that had nothing to do with them. Still, we saw the writing on the wall that they were going to expire, so we stopped admitting new patients and brought our census down to zero before the shutdown began. We hoped it would only last a few days, and now it’s been several weeks, but I still feel very confident that we'll be back when the government shutdown ends.

So, in the meantime, we’ve paused our program and redeployed staff to our brick-and-mortar facilities. We are keeping our cash burn low and adding value in other ways that we can, even if it’s less than we were doing two months ago. The whole episode has actually shown that one of the main strengths of hospital-at-home programs is flexibility.

Imagine that you're a health system CFO, and the government ruled that you're not allowed to put any patients in your new brick-and-mortar 72-bed hospital. How could you possibly redeploy that space to make good on all the capital you’ve spent on it? So, unlike a bed tower that took however many years and millions of dollars to build, our hospital-at-home program can expand and contract with the regulatory environment and the market much more easily. That’s a big advantage.

3. What makes you optimistic about the future of Hospital at Home care?

There’s a lot to be pessimistic about in healthcare these days: rural hospital closures and urban hospitals at overcapacity, an aging population that people are calling a “silver tsunami” coming our way, a Congress that can’t agree on anything, and it just doesn’t feel like we can add enough brick-and-mortar hospital beds in a cost-effective manner to build our way out of this. So, what makes me optimistic is that Hospital at Home programs can help address these problems.

I can’t say if the end game is 3 percent or 50 percent of inpatient care moves home (it’s probably somewhere in between), but we’ve got 30-plus years of randomized control trials showing this type of acute care at home produces great outcomes. We’ve got some of the best health systems across the country, not just ours, building and scaling these programs to great success. And we’ve got bipartisan support in Congress.

So, all we’re waiting for is the regulatory certainty, which is not just another six-month or one-year extension but at least five or ten years, that’ll allow us to really commit to this as one answer to the major challenges we face. Although it can’t take us another thirty years of studies to take those next steps toward of full spectrum of home-based care, we don’t have that kind of time as a country.

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There's No Place Like Home