Rae Woods (00:20):
From Advisory Board, we're bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods. You can call me Rae.

(00:31):
We know that a lot has happened, a lot is happening, and will continue to happen in the policy and regulatory world. And while my job here at Radio Advisory is not to report breaking news, I do know healthcare. And healthcare leaders are understandably a bit overwhelmed by the flood the zone strategy that we're seeing from the Trump administration.

(00:53):
All of this has created a general sense of confusion. A lot of healthcare leaders that I'm talking to aren't sure what they should be watching or how they should respond. I'm getting questions about proposed cuts. I'm getting questions about reduced funding for research. I'm getting questions about tariffs and supply chain. Everyone is thinking about public health. We're in a moment of mistrust around our industry and more and more and more.

(01:19):
My goal for this conversation is to clarify some of the chaos, to distill what's most important for health leaders to understand, and to help focus your efforts on the most pressing and ultimately the most inflectible items. To accomplish all of that, I'm turning to Advisory Board's experts, Natalie Trebes and Max Hakanson. Natalie, Max, welcome back to Radio Advisory.

Max Hakanson (01:42):
Glad to be back.

Natalie Trebes (01:42):
Too soon to be back.

Rae Woods (01:46):
Our audience should know by now that if you two are on the pod, we're talking about big things in healthcare. We're talking about policy, we're talking about the future of our business. We're talking about what executives need to know. I brought out the big guns this week.

(01:59):
And I did that because we're overdue in talking about what this second Trump administration has done already with healthcare and where it might be going next. A lot has actually happened in a short amount of time. So I want to start with an overview. Help me understand the regulatory changes, the policy changes in the works that will actually impact healthcare. What's actually happened so far? And what's on the table?

Natalie Trebes (02:25):
Big question. How many days do you have? I think you can kind of group it into executive action, legislative action or thoughts rather, and judicial action. The main thing that has happened is a lot of executive action. So you've got executive orders, you've got activity by different parts of the executive office of the president, which includes the US DOGE service. It's kind of running around the whole federal government.

(02:55):
And then you've got a lot of lawsuits in response to a lot of this executive action that's sort of working its way through federal circuit courts. So you're seeing pushback from different industries and groups that have been affected by these executive orders. And we'll have to see where a lot of this unfolds.

Rae Woods (03:12):
You're also doing a good job of reminding me and our audience of just how the basic civics of this all works, which I think is important. No, truly, given that there's just a lot of confusion right now. And I kind of want to level set because this moment feels a bit chaotic in part because of how quickly things are moving. Is this normal? Or is this the new normal?

Max Hakanson (03:36):
Is it the new normal? Right now it is. Historically, we have not seen things like this. In Trump's first administration, things were moving quickly, but not nearly this quickly. We're seeing a lot more stuff thrown at us at once. It's all a lot to absorb and that's really why we're here today to help you separate out the news from the noise. But no, this is not normal compared to what we've seen in the past.

Rae Woods (04:01):
You're getting at exactly what our listeners are kind of concerned about, is that this moment is a bit chaotic and this moment is a bit unpredictable. Between the executive orders, the spending cuts, right? Our listeners don't really know where to focus their attention or their energy or frankly their business strategy. Let's dig into it. What topics should listeners actually be paying attention to now?

Natalie Trebes (04:24):
So as Max said, there's sort of a flurry of different things and it just feels hard to keep track of everything. And so topics is maybe a hard word to orient on, but I like to think about three kind of categories of impacts to the healthcare industry that help you kind of process through.

(04:41):
First and foremost, and I think the big one on everyone's minds, is what are the actual cuts that are brewing for healthcare coverage in particular? And just kind of government-funded health insurance payments? That's where you're hearing a lot of conversation right now and that's going to really depend on Congress. We can talk about that.

(04:59):
Next is around more in the clinical day-to-day setting and public health more broadly, but patient engagement and clinician-patient relationships. Trust in healthcare, how we manage public health, population health in general. And so that implicates misinformation. Management of these outbreaks like measles, bird, flu, all of those sorts of things. So what's the infrastructure we have there?

(05:24):
And then lastly, I also think this is today, but also more about where we head in the future. Healthcare organizations are having a hard time with kind of the business environment for how you strategically plan for what the economy is going to look like in the next few years, what healthcare research is going to look like. And so that's tariffs, that's also NIH funding, and just sort of the general direction for the structure of our industry.

Rae Woods (05:51):
Let's start with cuts, because if I'm honest, this is taking up the majority of the conversations I'm having with health leaders. This is a good moment to timestamp when we're recording this conversation. We're recording this on Thursday, March 20th, and I cannot have a conversation without talking about potential cuts to Medicare and Medicaid. Let's start at a high level. What cuts are even on the table? And how would they work?

Natalie Trebes (06:18):
I like that that is the high level because that to me is the actual in the weeds. That's the big billion, trillion dollar question, maybe $8 trillion question. So to give us some framing, right now the House and the Senate are attempting to help legislate what Donald Trump and his administration's priorities are.

(06:39):
So they want to make laws that will get what Trump promised, which was tax cuts, increasing defense and security spending. Those are the big things that he wants done in law. And so they need to find a way to make that work to get passed. And so-

Rae Woods (06:56):
They have to pay for it.

Natalie Trebes (06:56):
They have to pay for it with an asterisk there, but they have to prove that they can pay for it, right? So that's the situation we're in. The House and the Senate both set up two different approaches for the framework they're going to use to try to go after these. And the Senate has said they're really just going after funding defense and security right now. That's their first priority. They're going to handle the tax cuts later.

(07:20):
The House said, "No, we're going to do it all at once." So right off the bat, we don't know which direction we're going, and they are ultimately going to have to come to agreement.

(07:30):
Once they figure out what their overarching framework is going to be. They need to figure out how to pay for $4.5 trillion in tax cuts. And they also have this issue of over the summer, we are probably going to be more in the terrain of defaulting on debt and we've already passed the debt ceiling. So that's the tricky place.

(07:51):
They can't just outright raise our spending without also raising the debt ceiling or cutting other spending to pay for the tax cuts. And so what we're looking at is a set of cuts to other big sources of spending, which is probably healthcare, which is probably Medicaid. And then some potential tweaks in how they try to define what is actually spending and gets really, really wonky really fast. But we think they're going to try to do a combination of those things.

Rae Woods (08:21):
So you said cuts probably in healthcare, cuts probably in Medicaid. I have to imagine that some of our listeners are thinking, "Wait, wait, I was promised that those cuts weren't going to happen at least from a political perspective." Because we know that cuts to either Medicare or Medicaid are politically tricky. Why are we confident that that is going to happen?

Max Hakanson (08:42):
That's where the money is, right? If you want big spending, it's got to be in healthcare, defense, social security. One of those three places is how you make up that big 4.5 trillion in funding you need. So that's where it's going to come from, one of those three places.

Rae Woods (08:58):
And then why do we think Medicaid is most likely? Because I'm just thinking about this purely from a numbers' perspective, an opportunity perspective. Medicare is the more expensive federal program. So why do we think that Medicaid is more likely to be cut?

Natalie Trebes (09:13):
Yeah, so I mean there's a political angle of Medicare is squarely in the block of individuals that votes at the highest frequencies. So really hard to touch politically. Also, from an industry perspective, lobbying perspective, is absolutely still the backbone of just the general healthcare payments across the board. So really hard to extricate from both society and our industry.

Rae Woods (09:42):
But does that mean that changes in Medicare are not going to happen?

Natalie Trebes (09:45):
No. I think Medicare payment also on the table, just the size or the massive approach towards it, probably not so much. But that's a good entry into the other thing I want to talk about with respect to Medicaid. And also let's bring in Affordable Care Act's individual market into this too because that's another big bucket of spending.

(10:04):
One of the things that the administration and GOP leaders in Congress are orienting around is that they want to strengthen these programs and using their words, and they want to eliminate fraud, waste, and abuse in these programs. And so those are the angles that they are taking when they talk about the modifications they want to make. So they are saying the types of cuts they want to engage in are going to make these programs better or more efficient. That's how they are talking about it.

(10:35):
Now obviously we are all in healthcare and we've been looking at healthcare spending for decades. We know that making healthcare better and more efficient is something that is very much in the eye of the beholder at any given time, right? A lot more complex and open to interpretation than just that word alone means. Or fraud, waste, and abuse can mean a bunch of different things to a bunch of different people.

Rae Woods (10:57):
But I take your point that the messaging here matters quite a bit, which actually makes me think about the first Trump administration. And the big change that we saw in Medicaid was around work requirements. Is that something that we expect to come back on the table?

Natalie Trebes (11:12):
Yeah, I think that's the number one thing that everyone should basically at this point definitively guaranteed prepare for. So start thinking about what that looks like.

Rae Woods (11:22):
What impact is that going to have then?

Natalie Trebes (11:23):
Right. So that is a combination of you will see a drop in Medicaid enrollment full stop when we apply work requirements. Now this is going to apply to healthy, able-bodied adult populations. It's not going to apply to those who have disabilities or are eligible for Medicaid through their age. It's just out of the population that you think could work. They are going to require the proof of having engagement in work for a certain number of hours per week.

(11:57):
That, what we've seen the last time in a few states that pursued that under the Trump administration the first term, that largely leads to losing enrollment. Not necessarily because someone wasn't working, but because they didn't fill out all the paperwork and meet all of the different hurdles. So when we look at surveys of this population, generally speaking about 75 to 80% of them are already working if they can.

(12:26):
And so we're not actually really talking about kicking off a lot of people because they're not working. We're talking about kicking off a lot of people because it's just hard to go through all of the steps to prove that you are working in the ways that these structures are set up.

Rae Woods (12:40):
I am having flashbacks to our conversation about Medicaid redeterminations after the public health emergency.

Natalie Trebes (12:46):
It's a great, that's a great callback.

Rae Woods (12:49):
Let's put some numbers to this. How many folks do we think would lose coverage if, and I should say when work requirements come back?

Max Hakanson (12:57):
A recent estimate would be between four and five million adults would lose coverage, particularly in those states that have expanded Medicaid.

Rae Woods (13:06):
Okay, let's continue with numbers. What would that mean in terms of savings? Because that's ultimately what the administration is trying to find to fund their political priorities.

Natalie Trebes (13:15):
Yeah, so all of this is, you can estimate it a bunch of different ways. What the GOP at the congressional proposal says is that they think it would save about 100 billion in federal spending. So you might see also some additional savings at the state level if enrollment is dropping off.

Rae Woods (13:35):
And how much are we ultimately trying to carve out of healthcare?

Natalie Trebes (13:39):
So the reason that we are all having this conversation around cuts is going back to this question of why are they going to touch Medicaid or Medicare? Is this politically viable? Speaker Johnson would actually say nowhere in the bill that's been passed so far does it say Medicaid. So how do we even know we're talking about this?

Rae Woods (13:57):
Back to your messaging point.

Natalie Trebes (13:59):
We look at the framework, the biggest cuts that Congress has been directed to get, at least on the House side, is 880 billion out of energy and commerce's jurisdiction, which largely includes Medicaid for the most part. There's a little bit that they have with Medicare and then they have jurisdiction over the individual marketplaces, but the bulk of what they get to control is Medicaid. And so that's why we are seeing all this attention about cuts coming to Medicaid the most.

Max Hakanson (14:30):
Natalie, you mentioned before the savings for the federal government. There is some debate on how much it's going to save states because it's costly to continually check to see if people are eligible for Medicaid. So it's really costly to run that program. So checking that is also going to cost states money.

(14:47):
We've also seen, this is well researched, it does not lead to higher employment in the state. That is one thing that you might hear talked about as a talking point. The research shows otherwise. It does not actually increase employment.

Natalie Trebes (15:00):
Yeah, Max, that's a good theme across the board from when we talk about Medicaid. A lot of this is again, pulling money out from the federal side, which leaves states with this decision about do they want to make up that difference and spend their own money? Or do they want to just let this happen?

(15:18):
And so if states don't put a lot of effort into managing the work requirements and helping beneficiaries confirm their eligibility, then they will see reductions in enrollments. And then they won't have to pay for those beneficiaries, but they will suffer the consequences in other ways by not getting federal matching money.

Rae Woods (15:38):
And two things we need to remember here is first of all, states have to balance their budget every year, right?

Natalie Trebes (15:43):
Yeah.

Rae Woods (15:43):
They have to do that. And this is also reminding me of the conversation that you had with Abby in the beginning of January about this administration just continuing to push more things to the states. This feels kind of similar to that.

(15:56):
But if I come back to our numbers, we're looking for 880 billion. Work requirements maybe gets us 100 billion. That tells me there's still more change to come in Medicaid.

Natalie Trebes (16:09):
Most definitely.

Rae Woods (16:11):
What else is on the table?

Natalie Trebes (16:12):
So you think about, well, there's certainly a lot of different things the Biden administration had done to improve just how the Medicaid program runs through regulations. So there's repeal of regulations that kind of streamlined eligibility management and made it a little easier for beneficiaries to just confirm their eligibility and that's all the redeterminations. So there's ways that that would reduce costs as well.

(16:37):
But I think the other big piece for our listeners to be aware of is in all the ways that states try to get more money from the federal government to support their Medicaid program. Because it is a joint program and so states are putting money in and the federal government is putting money in. And states would really like to amp up the amount that they're getting from the federal government without having to put as much in themselves.

(17:04):
So there's lots of different tools that they try to use. One of them is provider taxes and MCO taxes where they effectively tax the healthcare industry so that they can raise money for the state share of what they're paying for Medicaid. And because that number is up, they can then get the federal government to contribute more and then they can afford to pay higher Medicaid reimbursement rates back to those MCOs and providers.

(17:33):
So it's a little convoluted, but basically it's a way of raising costs in the beginning so that you can get more funding from the federal government and ultimately pass that on back to the industry. And that is one that I think is easy to... When we come back to that fraud waste and abuse messaging mindset, that's one where you can kind of see from the federal government's perspective, is that really fair? Is that an appropriate, effective, efficient way of managing money in Medicaid? I think that's a question.

(18:04):
It's something that researchers and analysts have talked about for a decade. It came up in the Obama administration. What the concern is, I think, is that a lot of states right now have used that to help shore up their healthcare industry and just kind of keep hospitals operating and everyone has grown dependent on that. And so ripping that away overnight is really the challenge that everyone is worried about, more so than this question of like, "Is this actually the best way we could possibly finance Medicaid?" Maybe not.

Rae Woods (18:35):
And what you're talking about here is the FMAP, for folks that are kind of up to speed with some of the inner workings of how states are paid. What will this ultimately mean for states? And I assume you're going to tell me that this is going to impact different states differently depending on how much they're able to borrow or ask for from the federal government.

Natalie Trebes (18:56):
Yeah, and you said the FMAP, so that's the Federal Medical Assistance Percentage. And basically that's the, if I put in a dollar from the state, what percentage back does the federal government put in? And right now there are a lot of rules on how that's calculated and what the limits are.

(19:12):
And everyone is supposed to get at least 50%, but that's the floor that's been put in place and one of the proposals on the table is to take that off. And so it would just be calculated based on income purely. So if you're a richer state, you might have to pay even more and the federal government might not contribute much at all.

(19:31):
The other change to this FMAP, this match rate, is if we think back to the Affordable Care Act, the way that the federal government got most of the states to expand Medicaid to that additional adult population was to say, "Hey, we'll pay 90% of this forever. You just need to put in 10% and you can cover a bunch more people."

(19:53):
There is a proposal to take that 90% away and put it to that income-based rate. So if you're a richer state that expanded Medicaid, you are probably looking at way less contribution from the federal government. And so we're going to see that play out differently.

Rae Woods (20:10):
Do you actually know though, which states will be most or least likely to be affected? Are we at a point where we can kind of share, even lift the hood a little bit?

Natalie Trebes (20:19):
So I can tell you which states, if you rip away the 90% match rate and you rip away the floor, so no longer guaranteed 50, but it's totally income-based, you are probably hitting certainly DC, New York, California, Washington, very heavily.

Rae Woods (20:39):
Massachusetts.

Natalie Trebes (20:40):
Massachusetts. We've done some calculations. We've also got Louisiana, Nevada on there too. And so some of this is a little wonky. There's a lot of different things that play in, but that's in terms of the total percentage increase in the bill the state would have to foot.

(20:55):
The other thing to keep in mind as we talk about that Medicaid expansion match, if that goes away, a lot of states actually have laws, especially some of the states that were later to adopt that said, "Hey, okay, we'll take all this amazing money from the federal government. It would kind of be like fiscal malpractice at this point to not. But if that ever goes away, we're dropping this like a hot potato, we are getting out."

(21:19):
And so they have laws that say if the match is changed, their expansion ends. And so we have to take that into consideration. They might not be as affected on a pure state spending basis because we are already accounting for the fact that they're going to get out of expansion. That doesn't mean that they're not affected. They are losing coverage for a huge portion of the population in that state.

Rae Woods (21:43):
Because there's a trigger law that basically takes-

Natalie Trebes (21:44):
Because there's a trigger law.

Rae Woods (21:45):
Got it. Got it.

Natalie Trebes (21:46):
Yeah.

Rae Woods (21:47):
We talked a little bit about Medicare, we talked a lot about Medicaid, but there was one other area that we needed to focus on, which is changes in the ACA. What likely cuts should we be thinking about there?

Max Hakanson (21:59):
Yeah, the big one to watch are the enhanced subsidies that were part of the Inflation Reduction Act. This makes insurance premiums much more affordable for those folks. Those are supposed to expire at the end of 2025 and it's highly likely they will not get extended.

(22:14):
It's projected it would cost about 335 billion over 10 years to extend those. So we do not predict that they're going to be extended. That means it's going to get a lot more expensive for folks on the ACA to afford their premiums. Premiums will also go up. And we're also likely to see a lot of job loss associated with that from both healthcare individuals and just hits to the general economies in those states.

Rae Woods (22:40):
Max, I'm curious, back to numbers. Do we have a sense of how many folks will lose coverage if those enhanced subsidies go away? Which we think they will?

Max Hakanson (22:46):
Yeah, it'll be an estimated four million people.

Rae Woods (22:50):
That obviously has a huge impact for people, but what impact does that and the cuts we were talking about with Medicaid, and maybe even some of the things we haven't had a chance to talk to yet about Medicare, what impact is that actually going to have on business?

Max Hakanson (23:02):
For the plan side, the health insurance side, obviously this means a lot less individuals eligible to be insured on Medicaid, on the ACA marketplace. This has been a huge expansion area for health plans in recent years, and so there's going to be a lot less lives there to cover.

Natalie Trebes (23:19):
And they'll probably have to do, in Medicaid at least, they will have to do a lot more work to help beneficiaries maintain eligibility. So there was leniency before, this just makes it harder for health plans to get every single life that they are trying to cover.

(23:36):
For providers, I think that translates to a couple things off the bat. Just fundamentally fewer people insured means probably fewer paying patients. You might see more uninsured patients, which increases costs for hospitals. That's also, we talked a little bit about Medicare just alluding to some of the things, but one of the pieces on the table is changing how the federal government compensates for uninsured uncompensated care.

(24:06):
And so sometimes they try to give hospitals a little bit to make up for that, understanding that they have to see patients who can't pay. If you're going to see changes that decrease uncompensated payments from the federal government through Medicare and increases in un-insurance, that's a little bit of a double whammy in terms of what payer mix looks like.

(24:27):
And then just across the board, this is probably going to mean, certainly for Medicaid, but I think there's pushes in Medicare too, for lower reimbursement rates to providers. So the prices that they can get paid for that care is decreasing as well.

Rae Woods (26:40):
When you all had this conversation about what executives need to know headed into 2025, we were already talking about a fragile kind of payment environment. We were already talking about payment squeezes.

(26:49):
And everything that I've heard from you thus far is turning up the dial on how much money is potentially coming in the door, particularly for health systems and providers. And that leads me to ask what they should be doing about it?

(27:04):
And I want to name something that I'm hearing in the market. And that is this kind of desire to actually hold and wait and see how this ultimately shakes out. Is holding and waiting and seeing even a move that's on the table?

Natalie Trebes (27:19):
I think I'd frame it more as pacing yourself, right? I think holding implies you don't do anything, and I think this environment is more about careful pacing. So at some point in the future we will know what the actual real proposals are that make it into draft legislation. At that point, you should have some pretty strong opinions on what those mean exactly for you.

(27:44):
Prior to that, what you should be focused on is scenario planning. So thinking about what could potentially happen. You should be really understanding what your organization's dependencies are? How your business model works? What are your core revenue streams? What drives that? What are your core customer bases? What are your core costs? And understanding how that might intersect with some of these changes so you can get ready.

(28:13):
And then number one, I think is really relationship building. And hopefully a lot of organizations have already done this for decades, but now is absolutely the time to make sure you have really good solid lines of access to your local state representatives and federal representatives. And that they just understand who you are, what you do for the community.

(28:36):
Much more in the kind of holistic sense than any specific you ask you have for them. It's about telling your story and making it clear how valuable and important you are for that particular representative's constituents.

Rae Woods (28:50):
I like that you talked about pacing and kind of pushing our listeners to think about what do I do now? What do I do in the kind of medium term? What do I do in the long-term? And this balance of short and long-term actually is really relevant in the conversation about public health. Because there are public health changes and challenges happening literally today, and there are kind of concerns about the future of public health infrastructure.

(29:13):
I think it is easy to kind of conflate the questions around public health with merely vaccine scrutiny, with merely thinking about RFK being our health secretary. But I actually think that misses a bigger impact of public health that we've been tracking and that may continue to put pressure on our business. I wonder if you can walk me through the big changes happening in public health.

Natalie Trebes (29:37):
I mean, I'll need your help too for this, Rae. I think you follow this pretty closely, but I think there's so many. It comes back to the chaos. There's so many different vectors here.

(29:47):
Number one is just the general disruption of federal operations happening as DOGE kind of goes through different agencies. Combined with the different orders, executive orders, especially the one on DEI. That's really put a lot of confusion out there to different health agencies about what data they're allowed to publish.

(30:09):
So we saw a lot of data disappear, go dark, some of it has come back, it's being reframed in different ways. I'm hearing just a little bit of churn all the time about what data sets are available and what they include. And so because of those orders, data sets that include stratification by race, ethnicity, gender, et cetera, that are pretty valuable for public health measures, it is harder for researchers and clinical workers to get access to those on a reliable basis.

(30:40):
So that kind of changes just the playing field we have for those who depend on those agencies as information resources. And then I think there's also the role that they play in terms of pushing out public health initiatives. And so that's a lot more of the active prevention and promoting and nurturing vaccine development that we've talked about.

Rae Woods (31:00):
And it's not just information that's being cut, it's also funding being cut, right?

Natalie Trebes (31:05):
Yeah.

Rae Woods (31:05):
Particularly when you think about research funding for some of those terms that are now deemed as kind of red flag terms. Terms that are used regularly in science, frankly terms like women, are now being targeted for cuts. You talked about information being taken down.

(31:21):
And just kind of chaos and confusion even in, are we going to be able to have a flu vaccine for the 2025, 2026 flu season? Turns out we are. We almost didn't. But that kind of speaks to the chaos of the moment, and even just the immediate communication that you need to be able to have with your own team to talk about what's happening and where they can get information.

Natalie Trebes (31:43):
Right, yeah. There were cancellations of meetings that normally happen and so all of the usual cadence of engagement that the federal health agencies have with the rest of the industry just kind of upended overnight. And there was a lot of uncertainty and we're kind of getting that back in fits and starts.

Rae Woods (32:01):
And this is happening at the same time. You kind of mentioned this in passing, but it's actually a huge deal that we're at a moment where there is a lot more mistrust with the healthcare system, with public health, even with physicians themselves. And this all seems like a pretty bad combination for actual health outcomes. Is that what we're thinking could happen next?

Max Hakanson (32:25):
It's certainly an area we're watching closely. Obviously when we were on a couple months ago, we talked about the change in utilization patterns. We're seeing obviously an aging population. We are seeing younger, sicker folks. How is this going to impact that? That is obviously to be determined, but something we are going to continue to watch closely.

(32:45):
Since public health is broad, it's going to impact obviously all of us, but it's really hard to predict. It's so early on, the funding cuts, the changes to public trust. There's so many questions up in the air that it's something we're going to continue to follow. But it's really hard to look into that crystal ball right now and know exactly what that future looks like.

Rae Woods (33:03):
But our listeners can take action and impact what that future ultimately looks like. So when it comes to public health, what do you want our listeners to be doing today to prepare for potential challenges in the future?

Natalie Trebes (33:15):
I think everyone has to figure out how much they depend on the federal government's public health agencies as their single source of truth. Or whether they need to start looking to state agencies. Or band together in their market to figure out what do they want to set as the public health ambition at a more local level.

(33:37):
So there's a little bit of this, what's the vacuum that's emerging? And how much do you want to step into that? That I think is going to require some soul-searching.

(33:45):
The other piece of this I think is there's a really fine delicate balance between misinformation and reductions in public health and empowering patients and supporting patient autonomy. And I think there's a good intention version of that and a bad intention version of that, right?

(34:07):
There's a really valid case to be made that we need to be better at listening to patients. I would argue that probably is difficult to do without some kind of culturally sensitive DEI-related research. So difficult water to tread there.

Rae Woods (34:21):
Or changes to workflow, was where my brain went immediately.

Natalie Trebes (34:23):
Right. But I think there's really some valid appetite to better empower and engage patients, and that's kind of listening to this mistrust and pain that's been brewing. There's a reason that patients have been so interested in voices that say you're getting led astray or they're telling you what to do.

(34:45):
That's a real pain that patients have, but we need to be careful in our desire to make sure we're serving patients well. That we navigate that towards valid science and evidence and appropriate medicine without leaning too hard in the other direction, right? This is a difficult balance.

Rae Woods (35:03):
And understanding the valid concerns at the root of the a-ha movement, right?

Natalie Trebes (35:08):
Exactly.

Rae Woods (35:08):
Those concerns are valid even if the solutions are somewhat misplaced or not grounded in science. And so we need to be careful there.

(35:17):
And the word that you used that perked my ears, Natalie, was actually vacuum. That there could be a public health vacuum. There could be a vacuum in funding. That is something every AMC that I'm talking to is concerned about. There can be a vacuum in information. The question that comes to mind for me is, is anyone going to step in and fill voids if vacuum is ultimately a place that we could potentially get to?

Natalie Trebes (35:39):
Yeah, I think life sciences companies might need to take up the research arm here. So I think that's some of the medical evidence piece. We've been talking with life sciences companies for ages about more real-world outcomes data and making research accessible to patients and frontline clinicians.

(35:59):
And so I think that actually there's room for life sciences companies to go further here. And I think more importantly, there will be appetite from the care delivery community for more partnership there. So I think that's something to pay attention to.

(36:15):
I also think there's a room for medical societies to step in more aggressively and assertively with really what their recommendations are and also how to be flexible appropriately, right? We all need to be thinking about how do you incorporate patient autonomy into the public health needs that we also are trying to accomplish here?

(36:37):
So those things are in tension, but they don't have to be, per se if we have coherent guidance and leadership around that. And I think that's also maybe going to be, I don't want to assume it will automatically be good, but I think some local level connections might be positive there.

Rae Woods (36:57):
Let's talk about broader business transformation, broader strategic planning. I want to actually come back to a conversation we've been having quite a bit on this podcast over the last six months, which is about growth.

(37:09):
We spent a lot of time talking about the fact that providers, even health plans, they're recalibrating their focus from top line growth to long-term sustainability. It sounds to me that that is even more important in the context of all of the business squeezes that we have been talking about. The payment squeezes, the changes in kind of public health infrastructure, and the changes to come. Is that insight still right?

Max Hakanson (37:35):
Yeah, I absolutely think it is. I feel like we need to double down and say exactly what we did before and say it even harder this time because the environment is even tougher. There's more uncertainty. We talked about all the cuts. We haven't even talked about tariffs and the potential impact those could have on businesses.

(37:52):
So all of this uncertainty happening at the same time that long-term business challenges were impacting the healthcare industry, all kind of converging at the same time. This puts so much pressure on healthcare organizations. So sustainability, incredibly important and even more costly than ever. So I think that message still holds true today.

Rae Woods (38:12):
Let's rapid fire some things then when it comes to sustainable strategy. You said tariffs, so let's go there. How are people thinking about managing their supply chain, thinking about business planning, thinking about infrastructure? How is that changing things as we push towards more sustainability?

Max Hakanson (38:27):
This is coming up in a lot of conversations, especially with health systems. They are worried. They don't know what to do. There's so much uncertainty because one day the tariffs are on, the next day they're off, the next day they're back on. So it's really hard to operate in an environment with this much uncertainty.

(38:42):
It's impacting their CapEx, their future. They don't know how much construction is going to be. They don't know how to project those costs out. It's impacting their OpEx because obviously supplies are going to cost a lot more if they're coming from certain places. So it's really impacting all of the different components of their business. This is certainly top of mind for health systems right now.

Natalie Trebes (39:02):
When you hear the word uncertainty in business, what you should equate that to is cost. And I think healthcare leaders should know that very well because what is health insurance but putting a price on uncertainty? And so I think what we're seeing is baking uncertainty into the cost of healthcare now.

Rae Woods (39:20):
We talked about tariffs. The other one on my mind is value-based care and payment transformation. Should leaders be recalibrating their approach there?

Max Hakanson (39:29):
This one's tough to know. We definitely have seen cuts at CMMI, which is the Innovation Center for CMS. We saw some of their different models get abandoned. There's still pushes forward though. We still see the Ahead model in Maryland continuing.

(39:44):
So it's hard to know. I don't think it's going away. I wouldn't abandon the efforts. I think there still will be a push there. But going back to this uncertainty message, which programs will survive? Which will be abandoned? Will we see new ones? Those are all questions we have, and it's really hard to know right now.

Rae Woods (40:00):
What about recalibrating our very approach to medical and scientific innovation?

Natalie Trebes (40:06):
Ooh, that is the question that stretches across today and into decades from now, right? Because right now we are literally seeing academic medical centers in particular, are really affected by all the shakeups happening with NIH funding. So combination of, there's been a proposal to limit indirect funding, so that helps them support lots of research, that is currently got lots of lawsuits going. So not sure where that's going to land. But huge threat there alongside, again, the DEI related research restrictions that we've seen.

(40:41):
So that's the present for AMCs. But what I'm actually really concerned about is the future of basic health research as the foundation for where life sciences companies jump from to do all of the rest of their medical innovation, right? They are not starting from square one when they invest in a biotech firm and try to take something to clinical trials. They're looking at research that's already been started to pick up interesting promising places.

(41:09):
And so you can kind of think of the federal government as almost an angel investor that's just exploring a lot of different options to hopefully see if in 20 years that bears fruit. And the life sciences companies are kind of coming along and building from that. And I think a really good example of, do you guys know about the origins of Ozempic and the Gila monster?

Rae Woods (41:30):
No, go on.

Natalie Trebes (41:33):
In the '80s, I think it like extends prior to this, but where it gets really interesting is in the '80s in Brooklyn, a VA research center, some research scientist, I'd have to get his name, we should put it in the show notes to give them some credit, but was experimenting on Gila monster spit and found some interesting enzymes. And then 40 years later, we are looking at Ozempic.

(41:56):
And so that is like the time horizon and the absurdity level that we're talking about when we talk about basic science research has a very long tail. And you can't quite tell from the beginning what effects it's going to have down the line. It's a much more complicated story than that. Definitely worth everyone reading up on.

Rae Woods (42:14):
And googling a picture of a Gila monster, which I just did while we were recording this episode.

(42:18):
All right, we have covered so, so much. I cannot believe I ever thought that this episode was going to be the length of a standard Radio Advisory episode. But I want to give you the chance for final thoughts, things that we haven't had a chance to talk about, and anything you want our listeners to add to their to-do list or to take off their to-do list as we think about this moment.

Max Hakanson (42:38):
We talked a lot about uncertainty today. How do you respond to that? Nimbleness is probably easy answer, obviously much easier said than done. But being able to pivot on very rapidly is going to be even more crucial than ever, given the speed that all of these changes are happening. So staying up to date, listening to Radio Advisory, following Advisory Board materials, and then being ready to act very quickly.

Natalie Trebes (43:03):
And I'd add two things. One is be candid with your staff. And obviously you got to be careful about communications and what's public facing versus internal, but your staff are hearing a lot of scary things constantly. And so figuring out how to be transparent and honest and real with them.

(43:23):
And recognizing that it's a scary time without scaring them too much is really important and I think goes a long way. And I can't tell you how much variety in communications I'm seeing out there from friends who work in various healthcare organizations.

(43:38):
And then secondly, I think from an institutional level, your organization really needs to figure out where do you want to align with your sector and stick up for each other collectively? Versus where do you want to go it alone? Because I think right now we're seeing a lot of organizations kind of approach this uncertainty with a hunker down mindset.

(43:59):
And that might be appropriate for some aspects of what's going on right now so that you're not getting targeted. But at the same time, you're going to need to figure out where you want to hold hands and draw lines in the sand together to protect your entire community.

Rae Woods (44:14):
Well, Natalie, Max, thank you for everything that you and your teams are doing to just keep us all up to speed on everything that's happening and give some actionable guidance to our listeners and to Advisory Board members.

Max Hakanson (44:25):
Thanks, Rae.

Natalie Trebes (44:26):
Thank you for guiding us through this conversation. It's a lot to cover.

Rae Woods (44:33):
The word that we said the most in that episode was probably uncertainty, and that's clearly the era that we're operating in. I know that you and we can't predict the future, but here's what you can do.

(44:47):
First, you can focus. There's a lot of noise. And seriously, we at Advisory Board, we at Radio Advisory want to help you separate what's really noise versus what change requires your attention and your resources.

(45:02):
Second, lay the groundwork for your future success. We don't want to wait indefinitely. There are certainly steps you can do now and pace yourself for what you need to do in the future, because ultimately you want to build yourself a soft place to land.

(45:18):
Natalie and Max and their team have these epic working documents that we are willing to share with our members and our clients, especially if you can also help shape our research. We want to understand the challenges that you're dealing with, the strategies you're putting in place today, so that we can help as many people as possible.

(45:38):
If you want to get in touch with us, and yes, that even means getting a hold of some of those working documents, see the link in the show notes. Because remember, we really are here to help.

(46:18):
If you like Radio Advisory, please share it with your networks. Subscribe wherever you get your podcasts and leave a rating and a review.

(46:25):
Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Abby Burns, Chloe Bakst, Morghen Philippi, and Atticus Raasch. The episode was edited by Dan Tayag, with technical support provided by Katy Anderson, Chris Phelps, and Joe Shrum. Additional support was provided by Leanne Elston and Erin Collins.