🏥 August Recap

Hospital margins, prior auth denial data, and other news and trends that caught my eye ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Blake Madden Aug 27th, 2026 Read in browser

In partnership with Happy Thursday, Hospitalogists. You guys continue to love the month-end recaps so I’m hitting you with another one! This edition includes announcements from me, Hospitalogy-original content, and then the top key themes from August. Oh... and a big product announcement we've been working on for months. Hope you guys enjoy! Was this email forwarded to you? Subscribe Here Sponsored by SmarterDx Most health systems already have more data than they can use. What's missing is the truth buried inside it. Right now, that evidence gets scattered across documentation, coding, billing, and denials. Real diagnoses, revenue, and quality opportunities go missed, or they only turn up after final billing, when they're much harder to recover. SmarterDx brings that evidence together. Our clinical AI reads the full patient chart, analyzing more than 30,000 data points per encounter to find what other systems miss while there's still time to act. That means health systems can capture what they earned, protect what they billed, and recover what was denied. More than 85 health systems partner with SmarterDx. On average, they see a 5:1 ROI starting Day 1, with $3.5M in annualized net new revenue per 10,000 DRG discharges. See what SmarterDx finds in your charts. See for Yourself BIG NEWS: You can now publish newsletters in HIHpoint. Meaning… you can publish and share articles alongside me and build your readership in the network and beyond! This is your opportunity to start your own newsletter and write for other health system execs, payor leaders, and digital health operators who get it. We’ve made it easy with a free newsletter platform, a built-in audience of healthcare pros, and the fastest way to share your expertise with the world. If you've got something to say about healthcare and want the right people reading it, check this out: https://hihpoint.com/newsletter-creator Things I’m Paying Attention to in Healthcare: August Edition HATCo published an update on its tech stack as Summa Health transformation work continues, one of the most fascinating experiments in health system innovation and transformation. Yes I just used the word transformation twice. No I’m not going to have the AI correct it. The companies included are all GC-backed: Aidoc, Clarium, Commure, Fabric, HippocraticAl, Judi Health, Transcarent, and Verse Medical. HATCo is also working with Percepta, which is the Palantir clone working on broad enterprise transformation efforts and unifying data into an intelligent operating system. Systems of intelligence. I swear I have heard that at some point before in 2026. A busy month for Epic between UGM and antitrust scrutiny. I thought this was a thoughtful overview of UGM announcements as Epic begins its foray into attempting to be both the system of record and system of intelligence. Epic went live with real-time prior authorization checks using the HL7 Coverage Requirements Discovery API at Ochsner Health, Froedtert ThedaCare Health, Denver Health and Summit Health, with UnitedHealthcare, Aetna and Network Health on the payor side. 16 additional payors are in testing. CMS-0057-F requires most MA, Medicaid, CHIP and marketplace plans to support prior authorization APIs by January 1, 2027. Relatedly, on August 18, R1 announced an agreement to acquire Humata Health, folding touchless prior authorization into Phare OS and moving the Humata team into R1's R37 lab. R1 cited Humata metrics of up to 96% first-pass approval, a 30% reduction in write-offs and an 83% reduction in rescheduled appointments. As some of the only buyers of large physician and services assets, McKesson acquired Precision Medicine Group for $2.25B, then made another multi-billion dollar services acquisition of Spectrum Vision Partners, per Healthcare Dealflow. Look at this slew of deals in drug distributor vertical integration land: The transaction is the latest in a series of recent private equity-backed MSO exits to strategic acquirers, including: Cencora’s acquisition of the retina business of EyeSouth Partners from Olympus Partners (announced March 2026) Cencora’s acquisition of OneOncology from TPG (announced December 2025) Cardinal Health’s acquisition of Solaris Health from Lee Equity Partners (completed November 2025) McKesson’s acquisition of PRISM Vision Holdings from Quad-C Management (completed April 2025) Cardinal Health’s acquisition of GI Alliance from Apollo Global Management (completed January 2025) Cencora’s acquisition of Retina Consultants of America from Webster Equity Partners (completed January 2025) By the way, Healthcare Dealflow is an excellent newsletter and JC Lupin is doing a lot of great research, both on healthcare deals shaping the landscape but also breaking news on deals like these, or investors involved (like in the case of Humana’s delayed divestiture of Gentiva to BlackRock and CD&R). I especially enjoy his PE deals of the month and the newsletter aggregates all of the timely M&A and finance news across verticals. Definitely give him a subscribe here. I haven’t seen this news publicly, but I’ve received word that Baylor CFO Jenn Mitzner has stepped down effective a few weeks ago, with Pete McCanna to assume interim duties. Jenn Mitzner had been CFO at Baylor since 2021. Journalism! DaVita expanded a chronic kidney disease value-based care partnership with Humana - 10K members. Amazing innovations: Moderna and Merck’s breakthrough in cancer vaccines, plus the FDA approved a new pancreatic cancer drug proven to double the lifespan of patients. Health Tech M&A: Sword is acquiring Headspace for $300M (a far cry from what was once a high flying behavioral health unicorn valued at over $3B back in the peak ‘Rona days when they merged with Ginger). Hinge acquired Cylinder (GI player) for $105M. And Switchboard acquired Livara Health in the MSK space. Plain to see consolidation in this space as employers look to drill down into costs. Plus one news story that hits close to home: Myocardial Solutions partnered with Prenuvo to include its proprietary, bleeding edge heart scan to Prenuvo’s whole-body MRI offering. Shout out to my dad and the rest of the Myocardial team looking to transform heart health. Trends and Macro Themes Hospital medians improved Fitch published its 2026 medians on audited fiscal 2025 data covering 222 rated nonprofit systems. Median operating margin rose to 1.5% from 1.1%, a third consecutive year of improvement off the 0.2% trough in fiscal 2022. 67% of the portfolio posted positive operating margins, up from 50% in 2022. Personnel costs fell to 52.6% of operating revenue from 53.5%. Balance sheet metrics set records: cash to debt of 188.0% from 169.2%, debt to capitalization at a historical low of 28.9%, days cash on hand roughly flat at 212. Capital spending hit a near-20-year high at 143% of depreciation expense. Individual operating margins ranged from 34.4% to negative 17.3%. Fitch's characterization of the year: fiscal 2025 "may represent a brief operational peak" which if you’ve been reading Hospitalogy you already knew that. Still, the 1.5% median remains below every pre-pandemic point in Fitch's 20-year data set. Hiring flattened in the same window. July BLS data showed healthcare adding 22,000 jobs against a 36,000 monthly average over the prior 12 months, down from 42,000 in June and 35,000 in May. Hospital payrolls declined by roughly 400. Ambulatory services added 18,100, including 4,600 in home health. Total nonfarm payrolls fell 23,000. Some notable M&A and capital allocation decisions by health systems: Regional density. Intermountain Health continues to reshape its portfolio and agreed to acquire Surgery Partners' ownership interests in Mountain View Hospital and Idaho Falls Community Hospital plus more than 60 affiliated clinics, valuing the facilities at approximately $1.15 billion with roughly $795 million in consideration to Surgery Partners. Facilities generated about $740 million of revenue and $100 million of EBITDA last year per TD Cowen's read of AHA directory data. Erlanger signed a non-binding LOI to join Prisma Health, which would produce a 27-hospital, roughly $9 billion revenue nonprofit across South Carolina and Tennessee, with $2 billion of strategic capital committed over 15 years. Non-operating harvest. Bon Secours Mercy Health continues to reap rewards from its Ensemble deal, recording ~$1.1 billion of 2026 distributions from its minority stake in the RCM player: $426.6 million in February and $670.8 million tied to Ensemble signing a new private equity sponsor. Physician practice pullback. PitchBook counted 105 physician practice management deals in the first half of 2026 against 851 in all of 2021. Huge, massive drop-off. Deals granting PE control of practice management services fell from 111 to 71 year over year in Q2, and total healthcare services deal count fell 18.5% while first-half deal value fell only 7.3%. At least 25 states have proposed or passed transaction-review requirements or corporate-practice-of-medicine restrictions. Washington and the Fifth Circuit both moved money CMS finalized the FY2027 IPPS rule on July 31, effective October 1. Net update of 2.3%, built off a projected 3.2% hospital market basket less a 0.9 percentage point productivity adjustment. Aggregate IPPS payments rise roughly $2.1 billion, with another $779 million flowing to new technology add-on payments. Uncompensated care payments land at $7.94 billion, up $230 million, while empirically justified DSH falls $200 million to $3.94 billion. Same rule nationalized joint replacement bundles as CJR-X, mandatory from January 1, 2028, covering hip, knee and ankle replacements across inpatient and hospital outpatient settings. 340B reform talks continued too. HRSA published a revised rebate model pilot on August 3, expanding scope from 10 drugs and 8 manufacturers to 25 drugs and 13 manufacturers. Manufacturer rebate plans were due August 24, HRSA approvals follow by September 24, implementation begins January 1, 2027. Mechanically, covered entities purchase selected drugs at WAC and collect the difference to the 340B ceiling price as a retrospective rebate. HRSA framed the program against 15,249 covered entities, more than 49,000 associated sites and $100 billion in 2025 purchases. August 10 brought an executive order, "Delivering Gold Standard Childhood Vaccine Recommendations," cutting universally recommended childhood vaccines from 17 to 11, directing MMR to be split into separate shots once domestically available, and directing childhood vaccines to be administered at separate appointments. RSV and hepatitis A and B move to high-risk recommendations. CDC attempted the same schedule change in January and a federal judge blocked it in March. Smh. No Surprises Act Buffoonery continues. August 11, the Fifth Circuit vacated portions of the July 2021 interim final rule governing qualifying payment amount calculation. Insurers may no longer include "ghost rates" (AKA $0 reimbursement) for services a provider does not perform, and bonus and incentive payments must be included. The court noted IDR awards exceeded the QPA in 85% of arbitrations. CMS data cited in coverage of the ruling puts IDR awards to out-of-network providers at $14.9 billion in 2025, up from $4.1 billion in 2024. Existing QPAs remain in use under enforcement discretion while replacement rules are written. Enjoy your time in the sun while it’s still there, scalpers. Employer affordability sees its usual August news cycle Three separate 2027 pricing datasets landed in August, covering three different risk pools, and all three came in near or above 10%. Small group. KFF put the median proposed 2027 increase at 14% across 295 insurers in all 50 states and DC, up from 11% requested going into 2026. 59% of insurers asked for 10% to 20%. Across 82 filings reviewed in detail, median underlying medical trend was 10.8%. Insurers also cited migration to level-funded arrangements thinning the fully insured pool, with one Massachusetts filing showing level-funded adoption moving from 2% in 2021 to over 11% in 2025. ACA marketplace. Preliminary filings showed a median proposed increase of 14%, which the updated Peterson-KFF read moved to 15% across 276 insurers. Second consecutive double-digit year. Median finalized 2026 change was 20%. Employer. Aon projected 9.5% for 2027, pushing average cost above $19,000 per employee, a fourth consecutive year approaching double digits. Aon's own series runs 3.7% in 2022 to 8.8% in 2026. Data set covers more than 1,100 employers, 7.9 million employees and $135 billion of 2026 spend, stated before plan design changes or care management programs. Key commonalities across rising costs: utilization intensity, chronic condition prevalence, high-cost claim volume, specialty pharmacy and GLP-1s. Both Aon and the 2026 Milliman Medical Index flagged provider adoption of AI for clinical documentation and coding as a contributor to billed charges, which is the first time that variable shows up in mainstream trend commentary. Payor Q2 highlights Centene reported $1.09 billion in net earnings against a $253 million loss a year earlier, with a consolidated health benefits ratio of 89.6% versus 93.0%. Commercial HBR moved from 90.6% to 79.2%. Marketplace membership fell to 3.49 million from 5.86 million. CVS posted an Aetna medical benefit ratio of 87.4% versus 89.9%, Health Care Benefits adjusted operating income of $2.43 billion (up 85.5%), and raised full-year revenue guidance to at least $414 billion from $405 billion with adjusted EPS to $7.90–8.10. Humana said on its July 29 call that 2027 plan exits will affect approximately 600,000 members, about 8% of its 7.2 million MA membership, cutting what management described as the lower tail of profitability and return. Majority of affected plans carry 3.5 stars or lower for the 2027 bonus year. Humana expects to recapture roughly 40%, consistent with its 2025 experience, against a stated goal of a sustainable 3% pretax margin in 2028. As of early August, other national carriers had not confirmed their own 2027 exits, with bid details becoming public October 1. Providence went all the way out. After negotiations with a national carrier for its Medicare Advantage book failed, the system moved from exiting most insurance lines to shutting the plan entirely: more than 260,000 commercial members, more than 58,000 Medicaid enrollees, roughly 64,000 MA members and 1,150 employees, on a $102 million net loss against $2.5 billion of 2025 revenue. Meanwhile, Costco and SCAN Group announced co-branded Medicare Advantage products in 2 states and a Medicare supplement in a third, pending CMS approval, across markets containing roughly 5 million Medicare enrollees. Makes me wonder whether we’re coming out of the MA trough with new deals seeking opportunities. Rural supports came out within 48 hours of each other Garden County Health Services in Oshkosh, Nebraska filed Chapter 9 on August 19, seven months after converting to rural emergency hospital status in January 2026. REH designation carried a stipend of nearly $300,000 per month, which CEO Sam Pennington credited for consistent cash flow while pointing to legacy contracts from a prior health system affiliation. Hospital, clinic, EMS and nursing home operations continue through the restructuring. Garden County has roughly 1,800 residents. Two days earlier, Dartmouth Health confirmed it had begun conversations about sunsetting Tele-ICU and Tele-ED, services covering 13 rural hospitals across New Hampshire and Vermont. Both sit inside a 14-year-old Connected Care program running nearly 20 telehealth service lines. Spokesperson Audra Burns described them as "two services whose costs, at our current scale, without external support, are simply unsustainable." No sunset date set, and Dartmouth said it will work with affected hospitals on alternatives first. Dartmouth declined to disclose what the services cost. Venture capital moved on the same population from the other direction. Cityblock agreed to acquire Homeward in an all-stock deal and closed a $116 million Series E led by General Catalyst, bringing total funding to roughly $1 billion. Homeward contributes a rural-first Medicare Advantage model covering close to 50,000 members across 50 counties with about 5,000 providers. Combined membership lands near 250,000. Sponsored by Capacity Health Boarding is more than a bed problem. It's an information problem spread across every patient, handoff, and disposition decision. Capacity Health is the Clinical Action Engine for acute care. It brings each patient's clinical picture, evidence, and hospital context into one traceable view, so care teams spend less time piecing together the record and more time moving care forward. That patient-level intelligence scales up into department and system-wide optimization of flow, boarding, and length of stay. A new class of AI for the ED, built by emergency physicians and AI researchers at Stanford. Request a Demo Prior authorization got measured, built, and bought In mid August, KFF published the first year of federally mandated prior authorization metrics, covering calendar 2025, required under CMS-0057-F and due March 31, 2026. Standard request denial rates came in at 12% in Medicare Advantage, 14% in Medicaid managed care and 18% in the ACA marketplace. Expedited requests ran 10%, 12% and 16%. Plan-level range spanned 2% to 25%. Within Medicare Advantage alone, Elevance sat at 5% and UnitedHealth Group at 17%. Overturn rates on appeal reached 67% in MA, 47% in Medicaid managed care and 43% in the marketplace, with appeal volume low. Data is aggregated across all items and services with no service-type breakdown and no reported denial reasons. Data control drew regulators from three directions Reuters and STAT both reported on August 14 that the FTC opened an antitrust investigation into Epic Systems, with civil investigative demands going to other health technology companies seeking information on how Epic grants or withholds access to patient data. Reporting also describes questions about employee non-compete agreements. Epic's response: "We're leaders in interoperability to support patient care, and we do not engage in anticompetitive behavior." Texas Attorney General Ken Paxton's December suit and Particle Health's private antitrust action both remain pending. Epic's products serve providers treating more than 280 million people in the US. Consumer-side data movement ran on a parallel track. OpenAI made Health in ChatGPT broadly available to US adults in late July, connecting Apple Health along with records from hospital systems on Epic and Oracle Health through b.well. OpenAI's own documentation states the consumer product is not intended for covered-entity use and offers no BAA. Patient-directed transfer rights under the 21st Century Cures Act are what enable the connection; HIPAA does not follow the data into the consumer app. On July 29, the FTC, joined by California and Utah, sued Hims & Hers over sharing customer health information with Meta and Snap through customer-list uploads and website tracking code, alongside allegations on billing and cancellation practices. Company called the allegations baseless. And UnitedHealth confirmed in its August filing that it is contesting IRS Notices of Proposed Adjustment issued March 6 covering intercompany transfer pricing with a foreign subsidiary for tax years 2017 through 2020. IRS is seeking to "significantly increase taxable income" for each of those years and may propose similar adjustments for later years. UnitedHealth says its positions are properly supported and that it will "vigorously contest" the adjustments. Subsidiary, jurisdiction, transactions and dollar amount all remain undisclosed. A quick pod plug... I have a favor to ask you guys: if you’ve listened to my Claims Denied podcast (Apple, Spotify), would you mind subscribing to it and leaving a review for it? It helps me immensely with the algorithmic gods that be. Appreciate you fam. Hospitalogy Top Reads and Resources An overview of state directed payments and Medicaid provider taxes. Freeman Health CEO: "the days of 5%-7% margins are gone" As CMS moves toward encounter-based validation, health plans and provider organizations must rethink risk capture. In this Navina + RISE discussion, experts with decades of experience across compliance, VBC law, and VBC operations unpack how to operationalize prospective risk adjustment—from real-time RAF visibility to audit readiness and point-of-care capture.* Employers brace for 9.5% healthcare cost increase in 2027 R1 acquires Humata Health to power AI-driven prior authorizations Kaleida Health's $170M Epic rollout drove its Q2 deficit *This resource is brought to you by one of my brand partners who help make this newsletter possible! Miscellaneous Maddenings The time is almost here. Blake Madden season preview coming next week. Enjoy Week 0! Thanks for the read! Let me know what you thought by replying back to this email. — Blake

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