Margin Compression Grows for Health Systems

Health systems are experiencing severe margin compression as the escalating costs of care delivery continually outpace reimbursement growth. While this financial impact is heavily driven by constraints initiated via reimbursement policy related to Medicare Advantage (MA) capitation rates set to be finalized in the April Final Notice and recalibration of the V28 risk model which de-prioritizes many chronic conditions tied to value-based arrangements, it is further compounded by a convergence of complex regulatory and operational barriers.

Reimbursement Policy and Risk Model Changes Intensify Pressure

On the policy front, the ongoing implementation of the Inflation Reduction Act (IRA) and the impending Medicare Part B drug price negotiations for Initial Price Applicability Year (IPAY) 2028 are introducing significant revenue uncertainties, with introductions of certain products subject to Part B reductions.  Furthermore, the American Hospital Association (AHA) has raised critical concerns regarding the Centers for Medicare & Medicaid Services’ (CMS) retrospective remedy approach for the 340B Drug Pricing Program, which threatens to disrupt crucial safety-net funding mechanisms.

Operationally, these systemic financial pressures are exacerbated by persistent supply chain disruptions, critical staffing needs, and subsequent patient access delays, creating a highly volatile and challenging landscape for health system sustainability.

What This Means for Manufacturers

These health system pressures related to the convergence of regulatory shifts and operational bottlenecks are critical to understand as pharmaceutical, device and lab manufacturers look to engage with their health system channels to drive access to evidence-based therapies and solutions that can support high value models of care. In this environment, success demands a clear understanding of health system priorities, constraints, and decision‑making dynamics, and the ability to align offerings to the operational and financial realities of care delivery today.

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To start a conversation, reach out to the team at Petauri Kinect, or email info@petauri.com.