Medicare drug negotiations

Medicare drug price negotiations were initiated by the Inflation Reduction Act of 2022, allowing Medicare to negotiate directly with pharmaceutical companies for high-spend drugs, aiming to reduce national drug expenditure.

According to Lohr, the policy is a "big deal" conceptually, given that Medicare, the largest payer in the country, is now negotiating drug prices directly with manufacturers. However, Lohr noted that the impact in the short term is likely to be minimal, adding that the industry is still learning about the policy effects.

Despite initial excitement surrounding it, Lohr noted that the actual savings may not be a significant as anticipated.

"CMS estimated that the rates they negotiated would've saved Medicare $6 billion in drug spend if they were in effect in 2023," Lohr said, but added that this figure has been questioned. The real savings might be lower due to factors like annual price decreases and upcoming generic competition.

Lohr also noted the potential impact of a Republican trifecta in the federal government on drug price negotiations, suggesting that while Republicans traditionally favor private sector solutions, the negative press surrounding pharmacy benefit managers makes it unlikely that Congress would revert back to the previous system.

"It feels unlikely that they would just repeal that law and we're back to where they were before," Lohr said.

Physician employment and payment

According to Roller, there were two key developments in the physician employment and payment space in 2024: the Federal Trade Commission's (FTC) ban on non-compete agreements and CMS' decision to cut Medicare physician payment rates by nearly 3% for 2025.

Roller said that FTC's ban on non-compete agreements, which affects an estimated 40% of physician employment contracts, has generated significant concern among healthcare leaders. Initially, there was fear that eliminating non-competes would hinder physician retention, but Roller noted that many organizations are now either ignoring the ban or banking on it potentially being overturned by the Supreme Court.

Roller emphasized that the focus should be on creating an environment where physicians want to work, rather than relying on non-compete agreements.

"We use these contractual levers instead of creating an environment where we are attracting the type of employees we want," Roller said, adding that this shift in focus is crucial given the competitive market for physician talent and the high rates of physician burnout.

Regarding CMS' payment cuts, Roller highlighted the financial challenges faced by physicians, particularly those in small independent practices. "When you adjust for inflation, physician pay has dropped by almost 30% since 2001," Roller said.

Despite the consistent pattern of Congress mitigating these cuts, Roller argued that the broader conversation should focus on how and how much physicians are paid, and what values are prioritized in physician compensation.

The TEAM bundled payment model

Trigonoplos also discussed the recent Transforming Episode Accountability Model (TEAM) introduced by CMS. TEAM is a mandatory bundle payment model set to launch in January 2026, and Trignoplos said TEAM will use bundle payments to pay participating hospitals for 30-day episodes of care around five high-volume procedures.

According to Trigonoplos, TEAM is a "big deal" for the 741 hospitals required to participate, given its mandatory nature and focus on high-cost, high-revenue inpatient procedures. He noted that the model targets geographic markets with less exposure to value-based care, aiming to build broader foundations in the industry.

Despite skepticism about the effectiveness of value-based care models, Trigonoplos argued that TEAM represents a significant step forward. "Value-based care, some version of it, is just going to be an element of something they're going to have to do and balance perpetually," he said.

Trigonoplos advised that hospitals start preparing for TEAM by benchmarking their performance, engaging providers in care variation reduction, and optimizing post-acute care management.