TrustWorks On Call: Work is Already Required

Behind the Headlines

Unpacking the forces driving healthcare's biggest stories.

1. Medicaid work requirements rule defines "frailty" narrowly.

The Centers for Medicare and Medicaid Services (CMS) published on Monday the interim final rule instructing states on how to implement the “community engagement” a.k.a. work requirements in Medicaid, as required by last summer’s One Big Beautiful Bill Act.
The rule clarified that to qualify for the statutory “medical frailty” exception to the monthly 80 hours requirement, an enrollee’s medical condition must “significantly impair” their ability to work, a higher burden than states had been briefed to expect, as it does not protect specific conditions like cancer.
States have until Jan. 1, 2027, to institute work requirements, a short timeline made more difficult by these latest changes. Nebraska, which became the first state to implement work requirements in May, included a list of exempted conditions that is not compliant with the final rule.

TrustWorks Take: Medicaid work requirements are premised on a fiction that a meaningful portion of Medicaid enrollees are committing fraud by collecting benefits but choosing not to work. This provides ideological cover for their actual purpose: redirecting government spending away from the social safety net that protects our most vulnerable populations. Case in point: Arkansas’ 2018 experiment with work requirements, which disenrolled 18 thousand Arkansans from Medicaid, produced no effect on employment. Thanks to the Big Beautiful Bill, between three and seven million people are projected to lose Medicaid coverage by 2028 due to work requirements alone.

Medicaid work requirements are a boondoggle of red tape and paperwork that will place undue administrative burdens on both state Medicaid offices and applicants. These under-resourced state offices, implementing arbitrary and complex verification requirements on a rushed timeline, will inevitably disenroll people who are rightfully eligible for Medicaid, and other enrollees will lose coverage due to their own paperwork mistakes. Providers should not only prepare to deliver more uncompensated care, but also prepare to engage with their Medicaid patients on how to navigate these administratively complex policies so that their care relationship can be persevered.

2. FTC approves Ascension-AmSurg deal with conditions.

On Tuesday, the Federal Trade Commission (FTC) approved Ascension’s $3.9B acquisition of ambulatory surgery center (ASC) chain AmSurg, on the condition that Ascension divests seven ASCs in markets where AmSurg is a competitor.
Ascension, the St. Louis, MO-based nonprofit health system with 90 hospitals in 16 states, agreed to acquire AmSurg, which operates over 250 ASCs in 34 states, in June 2025, but obtaining regulatory approval has taken longer than expected.

TrustWorks Take: Ascension has pursued an aggressive portfolio rationalization in recent years, reducing its hospital count from 139 in 2023 to 90 this year, which has helped it shrink operating losses and create positive net incomes in successive quarters. Recognizing that inpatient rationalization alone is not a sufficient strategy, Ascension is acquiring the nation’s third-largest ASC chain to hitch its growth to outpatient services. Ascension’s president stated that he sees the ASC space growing by 9-12 percent over the next five years, “while the inpatient is growing at one percent.” As exemplified by for-profit system Tenet, a national network of hospitals and ASCs can be a highly successful business that is popular with cost-conscious consumers, although the secret to Tenet’s success is its operational efficiency.

The long-term risk embedded in Ascension’s decision is that reimbursement policy continues to push care out of hospital outpatient departments and into lower-cost ambulatory settings. Given the momentum of site-neutral payment reform, systems without a compelling ASC strategy may find themselves defending yesterday's revenue streams to diminishing returns.

3. Trump admin reforms “No Surprises” dispute resolution.

The Department of Health and Human Services (HHS), in conjunction with three other agencies, published a final rule last week to streamline the No Surprises Act’s independent dispute resolution (IDR) process between payers and providers.
The rule improves the IDR process by lowering the per-dispute administrative fee; introducing a new software portal to initiate, manage, and track disputes; making it easier for claims to be batched together; creating unique registration numbers for payers; and formalizing payer-provider communication steps to prevent ineligible disputes from entering the IDR process.

TrustWorks Take: The initial IDR process was a well-intentioned yet poorly calibrated program that failed to anticipate the flood of disputes providers would file, driven disproportionately by a small subset of private equity-backed practices following the incentives to turn nearly every reimbursement disagreement into a formal dispute. The No Surprises Act has been mostly successful in protecting patients from surprise bills, but the IDR process generated $5B in new costs in its first two years, which insurers are passing onto patients via premium increases. The administration's reforms are an attempt to transform IDR from an adversarial legal process into a more scalable administrative process. Payer and provider trade groups have both praised this reform as a step in the right direction, but some payers fear it has not done enough to disincentivize bad-actor providers from gaming the system.

Beyond the Whiteboard

Visualizing key trends from the healthcare industry

Payers and Providers Growing Further Apart
The No Surprises Act IDR portal is not the only avenue of dispute between payers and providers. Looking at the state of contract negotiations, payer-provider relations may have never been more contentious. The last quarter of 2025 saw a record 83 public media reports of health systems or physician groups threatening to terminate a specific payer contract, more than half of which were for Medicare Advantage (MA) plans. The prevalence of these disputes (or at least of their coverage) has increased substantially every year since 2022, as margin pressure for both payers and providers has ratcheted up the negotiating stakes. Not every instance of a reported dispute led to a contract term, and even when contracts lapse, such as with Mount Sinai-Anthem and Memorial Hermann-BCBS, it may only be for a few months. However, these episodes are still disruptive to patient care and a clear sign of a dysfunctional system.

For MA plans, the heart of the issue is usually excessive prior authorizations and utilization management, which payers claim to have made progress on walking back, but it is too soon to say if that will last or turn down the temperature of negotiations. Meanwhile, Medicaid cuts will make commercial cross-subsidies all the more vital for health systems, giving contract negotiations with commercial payers an existential bent for health systems. Under these conditions, we have strayed especially far from the promise of value-based care, where health systems, payers, and patients all share incentives and benefit from positive outcomes.

Dialing In

Sharing insights from our work with clients

Finding the Balance on AI Policy, with Pizza
The Coalition for Health AI recently released a comprehensive governance playbook for health systems to implement AI, which inspired us to reflect on our own observations of health system’s AI policies and governance. By now, most leaders have come around to AI’s transformation of care delivery as a matter of “when, not if,” but opinions on what that “transformation” looks like quickly diverge. If you’re overly conservative or traditional in your approach, AI is merely a tool to supercharge current processes, which also means exacerbating current problems. On the other hand, the most fanatical AI boosters we have met often make the mistake of discounting the human touch that remains the heart of healthcare delivery. Instead, I see AI as an appendage, connected to the heart and extending its reach.

One out-of-industry example I like for how it strikes the balance on AI comes from fast-growing local restaurant chain, Andy’s Pizza. The founder describes AI as a hospitality enhancement not replacement. By helping employees make “hundreds of tiny decisions faster,” AI creates more time and attention for the moments that matter most to customers and require a person’s involvement. The health systems that will be most successful are focused on removing friction, automating routine tasks, and helping providers operate at the top of their license, while recognizing that consumer preferences vary. Taking that a step further, AI should enhance health system’s “consumer relationship” with patients by creating more capacity for person-to-person encounters and by serving as an on-demand clinical advisor for those who want it. The more AI does for providers, the more providers can do for their patients.

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Work is Already Required