Hello, and welcome back to this week’s edition of the Gist Weekly, where we deliver executive-level commentary and insights from the healthcare industry right to your inbox. As always, we appreciate your continued readership and invite you to forward this email to friends and colleagues—please encourage them to subscribe as well!
In the News
What happened in healthcare recently—and what we think about it.
- OMB memo causes widespread confusion. On Monday, the White House Office of Management and Budget (OMB) issued a memorandum that stated: “Federal agencies must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance.” The memo declared the order would take effect on Tuesday at 5PM and specifically exempted Medicare and Social Security spending. Confusion ensued, particularly in healthcare. Medicaid portals in every state went down despite subsequent messaging from the White House indicating Medicaid funding would not be affected. Shortly before the order was to take effect on Tuesday, a federal judge temporarily blocked the funding pause. On Wednesday, OMB withdrew the memo, but White House Press Secretary Karoline Leavitt reported that the funding pause was still in effect.
- The Gist: The fallout from this sudden halt of federal assistance and grants will likely continue to have wide-ranging, significant effects on people’s lives and the healthcare industry. While the memo never officially took effect, some Head Start programs did not open on Wednesday due to the ongoing confusion. This is likely the beginning of a contentious legal battle as President Trump tests the powers of the presidency and tries to bypass Congress. The Constitution specifically grants Congress the power of the purse, and the Impoundment Control Act of 1974 specifically bars the president from blocking appropriated funds. The White House argues the pause is legal because of its temporary nature, but the action is aligned with Trump’s “flood the zone” strategy as he seeks to quickly deliver on his campaign promises through a deluge of executive actions.
- Change Healthcare hack affected 190 million people. Last Friday, UnitedHealth Group (UHG) announced that 190 million people were affected by last year’s disruptive cyberattack on its health payments platform Change Healthcare. This is a stark increase from UHG’s latest estimate that 100 million people’s data had been exposed, which the healthcare services conglomerate reported in an October filing with the Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR). UHG said it would file an update with OCR “at a later date.” UHG also reported that most people who had been affected by the attack had been notified since this process began in July. The Change Healthcare hack surpassed the 2015 Anthem cyberattack as the largest healthcare data breach in history.
- The Gist: It has taken months to understand the true magnitude of this breach. Affecting more than half of the US population, the cyberattack’s impact cannot be overstated. The number of data breaches continues to rise, leaving consumers’ data exposed by a variety of industries. Individuals may find it challenging to trace blame as notices pile up and believe that data breaches are inevitable. This “data breach fatigue” remains a serious concern when vigilance is still needed. The fallout of the Change Healthcare cyberattack also has transformed how providers evaluate their risk management. Change Healthcare processes about half of all medical claims, which is why this hack and the ensuing operational pause caused so much disruption. More providers are pursuing redundant systems, ensuring operations can continue should one system go down. While breaches remain a serious threat to healthcare, there is some relief knowing that the industry is trying to increase its resiliency.
- Cigna announces plan to limit out-of-pocket drug costs. On Wednesday, Evernorth Health Services, a subsidiary of The Cigna Group, announced that it would take steps to lower out-of-pocket drug costs for consumers. Specifically, patients will be protected from high list prices and able to access the lower prices that Express Scripts, the company’s pharmacy benefit manager (PBM), negotiated. Additionally, for patients in employer-sponsored plans, the new policy will ensure that an employee’s cost burden for a prescription is not more than their employer’s contribution. Cigna’s announcement came on the heels of Optum Rx’s similar commitment to pass on all rebates to patients.
- The Gist: PBMs have been in the hot seat lately and are in need of good press. While PBM reform was ultimately cut from the year-end spending deal, President Trump has stated he wanted to “knock out the middleman” in order to reduce prescription drug costs. Cigna is trying to reduce the industry’s opaqueness and let patients directly see how PBMs can reduce their drug costs. Overall, these actions might help some individuals, but the macro impact of these changes is uncertain. Cigna did not announce their estimation of how many patients would be affected or what the estimated savings might be, nor did it specify if these changes will apply to often-critiqued PBM fees. Should these changes substantially increase employers’ cost burden, employers could be more likely to increase their employees’ premiums in the future.
Plus—what we’ve been reading.
- Living with late-stage cancer—for years. Published in late December in The Washington Post, this piece introduces us to “cancer thrivers”: patients with metastatic cancer who manage diseases that were recently considered “immediate death sentence[s].” Advances in medicine such as immunotherapy and precision treatments have dramatically changed what it means to live with late-stage cancer. Some patients live years or even decades after their initial diagnosis and have come to regard their cancer as a chronic condition rather than a death sentence. However, there is still a steep learning curve as providers adjust standard care practices to this transformed landscape.
- The Gist: For decades, a “cure for cancer” was considered the pinnacle of scientific achievement. That hasn’t been reached yet; but new cancer therapies are a testament to what science can accomplish and to its impact on patients. The personal stories of patients who outlived what oncologists once thought was possible are extremely moving. There are, of course, very real implications for what extended life for cancer patients means for hospitals, the U.S. healthcare system and patients themselves in terms of costs, utilization and the devastating impact that cancer can have on a patient’s finances. The effects on both providers and patients themselves are not yet well understood; but to give cancer patients additional time with their loved ones is an unmitigated good.
Graphic of the Week
A key insight illustrated in infographic form.
The state of rural healthcare
This week’s graphic illustrates the challenging operating environment many rural hospitals find themselves in. In 2024, there were 5 rural hospital closures. This is a decrease from 2023 when there were 8 closures, but an increase from the pandemic years when Covid aid buoyed hospitals nationwide. However, since January 2023, 36 rural hospitals secured rural emergency hospital (REH) designations. This program keeps communities better connected to emergency services, but also comes with a significant care access loss. Uptake of this program has been limited, but the REH pathway likely prevented some complete or converted closures during this period. Rural hospitals still face a tough financial landscape. About one-third of all rural hospitals are at risk of closing due to their financial woes, with nearly half of these hospitals at immediate risk of closure due to the severity of their financial distress. Additionally, at least half of rural hospitals in 10 of the 48 contiguous states are at risk of closure. Every rural hospital closure represents a critical loss to a community where the extra time required to access care could be the difference between life or death. Unfortunately, many payment models do not account for the higher cost of delivering care in these communities. While current federal efforts may help these communities retain the most critical care access, rural communities would be better served by a new model for care, with reimagined facilities, supported by enhanced virtual connections to specialists and higher-acuity services.

This Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
Since the Centers for Medicare & Medicaid Services (CMS) created observation patient status in the 1980s, the incidence and duration of observation stays at hospitals have expanded significantly. Intended to offer providers a short period of time to determine patient status before inpatient admission, the observation classification now regularly covers patient stays longer than 24 hours.
In a new article, Barbara Vandegrift, Connor Loftus and Monica Hong offer five key steps health systems should consider implementing to improve their observation management strategies and ensure appropriate reimbursement for services provided. A successful observation management program, involving the coordination of multiple initiatives across an entire organization, is not an easy undertaking. Therefore, it’s important to emphasize the significant benefits realized by health systems once they’ve improved their observation management processes.
On Our Podcast
The Gist Healthcare Podcast—all the headlines in healthcare policy, business, and more, in ten minutes or less every other weekday morning.
Last week on the Gist Healthcare podcast, we heard the first part of host J. Carlisle Larsen's conversation with Modern Healthcare's Michael McAuliff about a document making the rounds on Capitol Hill outlining trillions of dollars in potential federal spending cuts that could have a big impact on healthcare. This week, we hear the second half of the conversation, addressing some proposed policies that could impact hospitals and physicians.
To stay up to date, be sure to tune in every Monday, Wednesday and Friday morning. Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.
As a note to our readers, our team did not miss that two Senate committees held confirmation hearings for HHS nominee Robert F. Kennedy Jr. this week. These hearings have significant implications for the industry, and we look forward to providing comprehensive insight into his nomination and potential confirmation in the Gist Weekly as well as the Gist Healthcare podcast once there is a clearer resolution.
Thanks for reading! We’ll see you next Friday with a new edition. In the meantime, check out our Gist Weekly archive if you’d like to peruse past editions. We also have all of our recent “Graphics of the Week” available here.
Best regards,
The Gist Weekly team at Kaufman Hall