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Happy Thursday Hospitalogists,

Thank you guys for all of the kind words about the recent sends, especially Medvi. They’ve been some of my most responded to essays and I deeply appreciate how thoughtful Hospitalogists are.

Today I’m recapping a recent conference I went to - the HPA Spring Forum - because it was chock full of useful operating information and intel for you guys. Enjoy!

PLUS - Here’s something I’m excited about!

On May 19th, I'm keynoting the 2026 Transformation Summit in Tampa. It’s one day, 50 seats, application based. Spots are reserved exclusively for the people driving workforce transformation and operational change at large health systems and IDNs — CHROs, CNOs, CFOs, and the leaders responsible for strategy and execution.

Large conferences are great, but small events like these tend to be where the most important conversations happen. Hence my excitement.

If this sounds like the right room for you, applications are open. Space is limited and they're being thoughtful about who's in the room.

Apply here.

Was this email forwarded to you?

• A former managed care CEO said flat out: "Do not buy AI. Partner." The advice extended to all M&A diligence — before any acquisition, understand how AI will disrupt the target's business model, or you'll regret it in six months.
• Health systems are moving to ‘enterprise wide thinking. Health plan-owned systems are finally doing the "whole house math" and the more tightly aligned strategies are changing the conversation. One plan discovered that a pharmacy strategy change by its parent system silently shifted $60M from rebates to hospital-side profits, causing major pains to the plan's risk pool without anyone connecting the dots until it was too late.
• The direct-to-employer movement is accelerating. One employer swung $81.2M in plan benefit costs over two years by building zero-dollar-copay pathways of care. Health systems are actively experimenting in this arena.
• PBM reform isn't killing PBM margin, but relocating it. A former PBM-side executive warned the room: "No PBM is going to let all that margin go away. They're going to get it in fees, data services. They're coming to get it." But this shift is creating opportunity for negotiating leverage. So negotiate and ask for transparency.

I spent a couple days at the Health Plan Alliance spring forum, and the hallway conversations alone were worth the trip. Chatham House rules apply so no names, but panels included some great, experienced, thoughtful folks health plan c-suite, consulting actuaries, and physicians building direct-to-employer products and health tech players supporting the ecosystem. The below contains some of my thoughts surrounding the intimate, authentic event. And if you’re not a member of HPA but qualify, I highly recommend checking out their organization. Very high quality sessions and conversation - one of the best events I’ve attended from a substance and people standpoint.

The headliner session featured a former CEO of a large health plan, and I really appreciated the candor and directness from the fireside chat. Two themes immediately stuck out to me around M&A strategy and AI.

This individual’s M&A decision-making framework:

• Root every bet in strategy. Not deal fever.
• Ensure your financial underpinning is solid before you swing.
• Understand how AI will disrupt the target before you close.
• Always have someone on the deal team whose job is to throw the flag. "Deal teams like to do deals." This executive shut down transactions at the five-yard line because something didn't check out.

Blunt but sage AI Advice

This was the bluntest thing I've heard from a healthcare executive this year. It went something like this (paraphrased quote):

"Do not buy AI. You can't be the expert. Partner instead. Companies in the space are spending gobs of money that you can't match and investing in areas at a faster pace than you can manage internally. If you try to buy as a health plan, you'll be in trouble in six months."

On where payers should focus AI bets: customer interaction (navigation, scheduling, referral coordination) and predictive clinical insights. "Service and clinical delivery is where I would focus my time and energy. And you could do it for not a lot of money." Meanwhile, one in five providers are using AI in primary care today. That number will change dramatically in 3–5 years…and I mean let’s be honest - it probably already has.

On PBM Reform and shifting profit pools

PBM reform (de-linking, rebate transparency, spread pricing elimination) represents one of the most consequential structural changes in the industry's history. But the hard question nobody is asking: what is a PBM after all of that? And the answer lies in formulary design, network contracting, product design. A much smaller box.

But no PBM will let that margin disappear. Let’s not be naive fam. They're publicly traded companies with enormous PBM earnings. They'll find the margin in fees, data services, consulting…whatever they can relabel and repackage.

The action items for anyone on the other side of a PBM negotiation, whether you’re an employer or health plan:

• Demand transparency. Then verify it. If you don't have someone skilled at this, hire one.
• Push for pass-through pricing models.
• Push hard on biosimilars for specialty pharmacy.
• Develop a GLP-1 strategy. 10M Americans on GLP-1s today, expected to hit 25–30M in 5 years. You can't afford to cover them, but you can't afford not to. And nobody's thinking about post-GLP-1 management (what happens when patients come off and gain the weight back).
• If you're a regional plan: protect your independent pharmacies. They're a community asset the nationals can't replicate.

This competitive positioning bit was the icing on the cake for the session. How does a subscale provider sponsored plan compete with the BUCAs?

Nationals have scale. But they also have "probably the worst NPS scores ever."

Healthcare is local. Regional plans can win on service, provider relationships, and community trust in ways that nationals structurally cannot. Health systems are taking that to heart.

This session was designed to be provocative, and it delivered. A physician-entrepreneur who consults for self-insured employers laid out five shifts he's seeing in the market that I think every health plan and system executive needs to sit with.

1. "I want to know where every dollar goes." The mindset has moved from "manage trend" to full dollar-level transparency. Pre-payment adjudication, post-payment adjudication, clawbacks. Anyone who won't share data won't get the contract.

2. Renting a national network is no longer the automatic default. One large employer is working with Mark Cuban's team to build regionally contracted provider networks, carving out geographic areas from their existing BCBS product for direct contracting pilots. Cuban publishes those contracts, by the way. You can check them out yourself.

3. Zero-dollar pathways of care are producing jaw-dropping results. One company built pathways across five clinical areas (cancer, diabetes/endocrine, hypertension/cardiovascular, emotional health, musculoskeletal). This company was $40M over budget two years ago. Last year, $41.2M under budget. $81.2M swing. The executive behind it is now talking to Fortune 500 orgs.

4. PBM carve-outs are accelerating. Specialty carve-outs, transparency mandates, niche players like Stellus Rx assigning individual pharmacists to high-risk patients. The bundled PBM default is fragmenting.

5. Employers want a strategic quarterback, not a broker. The consulting model is shifting from relationship-driven to data-driven. Employers want someone who can get into deep conversations about population health and individual-level clinical economics, not just present three carrier options. Goes in line with recent bets on the brokerage space like Gyde. Ripe for disruption.

One large health system representative described their approach through a newly created "care coverage organization" - meaning a care delivery and employer solutions under the same umbrella, separated by what they called "a thin fence you can see through." They're taking everything from 2-life small groups to 10K+ life ASO carve-outs.

The philosophical question they're wrestling with is the right one: whose total cost of care are we optimizing? The employee's, the family's, the employer's, or the system's? And their observation that plan design alone won't solve anything (most designs are "within 3% of an actuary, so who cares" outside of extreme steerage models) was a solid reality check.

Another representative from a large health system with a sizable MA presence described trying 100% risk arrangements, finding they didn't produce enough change because the system's P&L still rewarded volume ("a good day is when census is full"), and now moving to 50/50 risk-sharing while actively shifting financial reporting so hospital administrators see premium-based risk revenue rather than fee-for-service volume. Their goal is to make every administrator think like a cost center manager. Which is obviously a massive cultural shift for a system that's recognized revenue on the hospital side for 50 years.

This was the most operationally detailed session, and honestly the most useful for anyone running a provider-owned plan or navigating the payer-system interface.

One representative on the panel said their health system CEO noted the one thing in his career they never got right was the plan-system relationship, and figuring it out would be his leadership legacy. It’s an important point we can’t forget when setting out strategy: You need buy-in from the C-suite.

What this organization built to align all parties involved:

• A value-based enterprise structure with the system CFO as president, overseeing the delivery system, the plan, the CIN, and their population health company
• An "enterprise first" organizing principle baked into strategy refresh (this is becoming increasingly pervasive and important)
• Joint bid planning with clinicians from the CIN sitting alongside actuaries and product teams
• Centralized IT (plan IT moved under system IT)
• Migration to Epic Care Platform (described as "transformational")
• Annual quality and affordability target: $52M in identified savings, with programs already in workflows from January

The provider-side cultural reframe was a great discussion. Their chief primary health officer is driving a distinction I think the whole industry should adopt: value-based care is a care delivery model, not a reimbursement model. Thinking about VBC as just financing is myopic, and we’ve moved past this framing. When you position VBC as the opposite of fee-for-service, providers mentally check out. When you frame it as "always provide high-value care regardless of how you're paid," the conversation becomes about clinical excellence rather than contract mechanics.

Folks on the panel mentioned one financial epiphany that changed everything: when you add up total members (510K), employees and families (65K), ACO, GPM contract, Medicaid, at-risk MA — this organization holds roughly $6B in premium they have the opportunity to manage. What they previously dismissed as a $20M shared-savings rounding error is actually a $6B premium management opportunity.

It’s the ‘shift the hospital operating model to a cost center’ approach which sounds so compelling, but the devil is in the details.

Traditional P&L vs. Whole Enterprise P&L

Revenue: Inpatient volume, ED visits, surgeries VS. Premiums

Expenses: Labor, supplies VS. Hospitalizations, procedures (all those "revenue" lines)

Margin: Volume-driven VS. driven by reimbursement optimization, cost of care reduction, admin efficiency, network integrity

This organization also demanded a single set of metrics across all payer contracts for their 5,000-provider CIN. So standardization was huge. No more 20 different dashboards for 20 different payers. Some payers even agreed to compensate based on the aggregated performance across all contracts. Massive simplification win for provider engagement.

This provider sponsored plan’s story was about building integration from scratch. The plan had operated with an independent mindset for years, and the new leadership spent year one just getting people to talk to each other.

Key context: This health system is within the top 20 health systems by revenue. But the plan itself is heavily government programs (85% Medicaid on day one of the new leadership), and shared lives with the care delivery system only ~15% at the time. Compare that to plans at 50–70% overlap, and you can see why the conversation about enterprise value is totally different.

Their biggest wins so far:

• Joint PBM RFP with the system's HR/employee benefits team. Combined purchasing power extracted transparency concessions and pricing terms neither side could have gotten alone.
• System-funded investment in Epic Tapestry despite challenging financials — a signal of how important the plan's success is to the enterprise.
• Revenue diversification away from 85% Medicaid concentration.

The contracting intelligence lesson was eye-opening. Last year, one of their hospital markets went into a major contract dispute with United and ultimately went out of network. The plan picked up a wave of unexpected lives. Had they known it was coming, they would have priced products differently. It’s what my mom always taught me…communication is the key to success and having the right people in the right conversations (with appropriate legal guardrails) creates informational advantages that directly impact pricing strategy.

What’s interesting and compelling to me about this whole shift to enterprise level thinking is that the moderator of this panel noted this area has shifted dramatically - firewalls that were treated as absolute even 5 years ago are becoming far more permeable.

This organization has multiple health system sponsors, which means communication challenges are multiplied and compounded, creating governance issues. They built joint operating committees, executive operating committees, and finance/clinical work groups from scratch over the past 3 years. But the pharmacy story was the showstopper.

What happened: Two sponsor systems changed how they processed specialty pharmacy prescriptions, doubling down on 340B programs. The change shifted roughly $60M from plan-side rebates to hospital-side pharmacy profits. The plan didn't know it was happening. Didn't adjust pricing. And so the risk pool took an unexpected hit.

So when one sponsor looked at the line-of-business financials in isolation and questioned whether to exit large group entirely, the plan had to explain: "If you walk away, you're also losing $20M in pharmacy revenue on the hospital side."

That should tell you everything you need to know about why enterprise-level financial visibility isn't a nice-to-have, but a strategic imperative in 2026. Any strategic decision made in a silo by one part of the enterprise can create unintended consequences for another.

This individual created a "whole house math" framework and that framework is now tracking value across several dimensions:

• Risk share arrangement surplus/deficit
• Hard cap pass-through margin
• Provider margin on rendered services
• Network control (market protection from competitor systems)
• Payment policy savings (claim edits, payment accuracy)
• Medical policy value (covering things other plans don't)
• Joint strategic planning alignment

Getting all plan sponsors to see the same picture, using the same data, with the same definitions is easier said than done.

Organizations that will win over the next five years are the ones doing the enterprise math.

Not the plan math.

Not the hospital math.

Not the pharmacy math.

The whole picture.

And they're building the communication structures, data infrastructure, and leadership alignment to actually act on what that math reveals.

Employers are demanding it. Technology is enabling it. And current economic margin pressure is requiring it (just look at how many PSHPs are being divested or downsizing). The only question is whether leadership is willing to do the uncomfortable work of disrupting their own organizations before someone else does it for them.

MISCELLANEOUS MADDENINGS

Rory! What a win for the lad at the Masters. I couldn't believe he held on, especially after falling behind by 3 early. But none of the other golfers took advantage and they also felt the pressure. Can't help but think Scottie birdies 15 if he doesn't hit that tree branch and puts quite a bit of pressure on Rory on 18. But Scottie didn't take advantage of the par 5's at all!

Side note: I can't help but think I would shoot 120 at Augusta.

Thanks for the read! Let me know what you thought by replying back to this email.

— Blake  

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