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Happy Thursday, Hospitalogists! As I announced in Tuesday's newsletter, I'm opening up 3 additional tickets for the sold-out Hospitalogy VBC retreat, exclusively for folks working at health systems, ACOs, or payvidors. That's right. I'm fully comping your ticket and you'll join other VBC leaders and me in Austin for a full day of conversation and networking around how to move the needle forward in healthcare. Here's the agenda, covering topics like macro themes in VBC entering 2026, policy outlook given the OBBBA, the future outlook of payor-provider dealmaking, state of venture and sustainability of VBC, practical drilldowns of AI in VBC, and much more. Apply for a ticket here! |
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SPONSORED BY MEDALLION Elevate 2025, Medallion's flagship virtual conference, returns Wednesday, September 17, 2025. Now in its fourth year, Elevate brings together healthcare's boldest thinkers, doers, and leaders to reimagine what's possible when we collaborate across every side of the table. I've attended Elevate in the past and found great value in the conversations as they always hit on timely topics. This year's Elevate is no exception. The theme, "Elevate the Present. Reframe the Future," is a call to action for healthcare leaders navigating today's complexities while building tomorrow's innovations. Expect dynamic conversations and actionable insights on: Generative AI and the future of administrative efficiency Next-generation revenue cycle strategies Patient-centric technologies and healthcare consumerization Shared operational models and VBC transformation Wind down at the end of the day with a live, interactive mixology class! Don't miss it. |
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BLAKE'S BREAKDOWN: August Roundup |
Going deeper on an interesting topic, theme, or trend |
Resources and Notable News from August |
Optum is still making splash physician practice acquisitions in areas that matter - reports surfaced in mid August that the giant specialty arm SCA Health acquired PE-backed US Digestive quietly back in January (and quietly for good reason). US Digestive is a massive GI practice with 250 gastroenterology physicians and clinicians across 40 clinics / OBLs and 24 ASCs in Pennsylvania and Delaware. This deal is also what I imagine to be a notable exit for Amulet Capital Partners which formed the PPM in 2019. Look at that density in PA. The private equity PPM strategy, laid bare for you to see, and now owned by Optum, which will leverage US Digestive for its vertical integration strategy. |
Meanwhile Optum also acquired Holston Medical Group - 200 physicians and clinicians across 70 sites of care - in Tennessee and southwest Virginia. Side note - how is it possibly conceivable for us to learn about an Optum acquisition of a huge GI platform 6 months after the fact? A practice that size is probably throwing off $150M+ in revenue. This GI Q1 2025 update from KPMG is a great read on the current state of the GI PPM M&A environment. |
The DOJ probe into UnitedHealth expanded its scope beyond Medicare (and will probably be a nothing-burger, in all likelihood). But for now you should know the DOJ is probing billing practices at OptumRx along with how it handles intercompany physician payments for OptumHealth physicians. I would be shocked if they find anything, especially on that compensation piece. Speaking of United, they just closed their acquisition of Amedisys after some required divestitures, as noted on Tuesday's send. Charles Gaba's overviews and analyses of ACA enrollment fallout by state is great. Read them here. Corewell Health formed a joint venture with Quest to outsource all lab management functions for its 21 inpatient and outpatient labs. Then on top of that partnership, the two will co-develop a 100,000 square foot facility to feature 'advanced technologies' in lab and diagnostics. Quest will own 51% of the venture. Relatedly, in July, Community Health Systems sold its outreach lab services to Labcorp for just under $200M. Epic made huge waves this month by announcing their ambient suite including an AI Scribe (powered by Nuance). Meanwhile other non-Epic ambient players are spreading their roots deeper into organizations - Abridge announced a partnership with Highmark on real-time prior authorization, and Ambience says their AI *"surpasses clinician performance by 27% in medical coding."*. Finally, amid OpenEvidence (who launched Visits this week) and Doximity's love feud we're seeing a fascinating AI arms race play out in multiple arenas. Here are some nice additional reports and overviews of hospital economics in 2025. Community members can read my hospital Q2 review and rest of 2025 outlook here (you can also search your email for the newsletter that went out earlier in August). - Fitch Ratings - 2025 outlook: short-term recovery with a murkier longer-term outlook.
- The sector's median operating margin rose to 1.1% from 0.4% the prior year, with gains supported by easing labor market pressures, reduced reliance on contract labor, and higher patient volumes. Operating EBITDA margins improved across all rating categories, with the 'AA' category at 7.2%, 'A' at 5.9%, and 'BBB' at 4.7%, illustrating a broad-based recovery, though credit quality continues to diverge at sector extremes.
- Liquidity metrics remained robust with days' cash on hand stable at 215.1 days and cash-to-debt improving to 169.2% from 163.7% year-over-year. Leverage also improved with median debt-to-capitalization falling to 30.7%. These strengths provide a cushion as the sector prepares for future challenges, particularly the impact of the 2025 U.S. Tax and Spending Bill, which introduces significant changes to Medicaid and is expected to pressure operating performance starting in 2027.
Strata's June monthly hospital benchmarks showed the following trends: |
Finally, as noted on Tuesday, Kaufman Hall's latest Hospital Flash Report noted broad revenue and volume increases, particularly on the outpatient front while expense inflation in supplies, purchased services, and professional fees present upward pressure on margins. Still, operating margins held steady through June at ~3%. Walgreens and its healthcare subsidiaries (yes, that former Walgreens care coordination healthcare asset) will continue operations as standalone private companies under the Sycamore Partners umbrella. This is healthcare related so I had to include it - Warby Parker is teaming up with Arch Manning for a 3-year deal! #HookEm |
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SPONSORED BY ARBITAL HEALTH Value-based care doesn't have to be this hard. Period. Payors and providers aren't working in lockstep. Shocking. The data lags and the math diverges. Why? In my latest deep dive, I discuss the infrastructure layer VBC desperately needs, touching on topics such as: Data becoming continuously ingested and enriched. Claims classified the same way across markets. Clinicians getting data they trust in time to act. Risk contract management at scale. Seriously, VBC does NOT have to be this hard. Take 5 minutes to learn a better way. |
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HOT TAKES IN HEALTHCARE AI |
OpenAI just made two healthcare hires who don't give a damn about hospital IT departments. They brought on Nate Gross (Doximity cofounder) and Ashley Alexander (Instagram's former co-head of product). Alexander spent 11 years at Instagram mastering direct-to-consumer (D2C) growth - getting users hooked through great UX, then monetizing via partners. Gross built Doximity the same way, just with physicians instead of consumers (= Product-Led Growth or PLG). What this tells us: OpenAI has zero interest in selling to hospital IT departments. No - they want to build products that users (clinicians and physicians) discover and adopt themselves, with revenue coming through partners (for instance - most of Doximity's money comes from pharma). We're seeing this direct to provider growth strategy play out with Doximity, OpenEvidence, and now OpenAI. This comes right after Sam Altman called GPT-5 "a legitimate Ph.D. expert" that can "help you understand your healthcare." Meanwhile, Illinois just banned AI therapy tools after some chatbots gave dangerous advice. How many headlines of teen deaths by suicide have you seen stemming from malicious use of AI? So it's notable OpenAI is doubling down on consumer health AI while regulators are getting spooked. Keep converging trends in mind as the next battleground over the coming years - it's a big threat to AI and consumerism in healthcare. So where do we go from here? Three likely directions: - Medical research assistant (UpToDate meets ChatGPT aka OpenEvidence competitor)
- AI therapy chatbot (risky given Illinois ban, but Microsoft's hiring suggests they're building here too)
- AI scribe (boring but safe - they already have been spotted running LinkedIn ads for this)
To summarize: most healthcare AI companies spend months wining and dining hospital procurement committees. OpenAI is betting they can build something so good that doctors and patients will demand it themselves.
Cool stuff! Finally, just keep in mind how these direct to consumers / providers monetize. How does the saying go? If it's free, you're the product. |
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| Alright fam. College football is here. Here's my prediction for the Texas vs. Ohio State game: Texas falls behind early behind some crowd noise rattling and a talented Ohio State team. But then come the third quarter, ARCH MANNING starts slinging DARTS all over the field to lead the Horns to victory. A mid-4th quarter TD puts Texas up 27-21 and Arch closes out the horseshoe in victory formation. You heard it here first. |
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Thanks for the read! Let me know what you thought by replying back to this email. I promise I read them...it just takes me a minute to get to them :) — Blake |
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