Baptist Memorial’s Strategy on OBBBA: Insights From the CSO
In this episode of the “Achieving Health” podcast, host Chad Mulvany shares the latest healthcare policy and legislative updates for the week of December 14, 2025. He’s then joined by special guest Zach Chandler, executive vice president and chief strategy officer at Baptist Memorial Health Care Corporation. Drawing from Zach’s experience, they explore the healthcare impact of the One Big Beautiful Bill Act (OBBBA) and discuss how organizations can respond. Zach also shares his perspective on strategic leadership in a complex and evolving industry.
Transcript
CHAD MULVANY
On today’s episode of “Achieving Health,” I’ve got the latest policy and legislative updates from Washington, D.C. for the week of December 14th, 2025. Then, I’ll be joined by special guest Zach Chandler, Executive Vice President and Chief Strategy Officer at Baptist Memorial Healthcare Corporation. Zach will share strategic leadership insights, including how his organization is responding to the impact of the One Big Beautiful Bill. Stay tuned.
ANNOUNCER
This is Achieving Health, a podcast from Forvis Mazars, where we delve into the topics that matter most to healthcare organizations across a continuum of care. Our goal is to help you navigate the dynamic healthcare landscape and achieve health at your organization. Here’s your host, Chad Mulvany.
CHAD MULVANY
Welcome to Achieving Health. I’m Chad Mulvany, director in the Healthcare Practice at Forvis Mazars. With this being our last episode of 2025, I want to start by thanking everyone for tuning in. Whether you’re joining us for the first time or you’ve been a regular listener since we started back in June, we really appreciate the opportunity to share these insights with you, and I hope you’ve taken something away that’s helped your pursuit of achieving health in the communities you serve.
I also want to announce some exciting program changes for the new year. We’ll continue to share the same kinds of updates and insights you’ve come to expect from the podcast, but with shorter, more digestible episodes that we hope will fit nicely into your day-to-day routine. So, what will these changes look like? First, our Washington Watch episodes will be moving to a standalone format starting January 7th and continuing every other Wednesday.
As usual, I’ll provide a brief update on the most recent actions and discussion topics among federal policymakers and their anticipated impact on healthcare providers and payers. I’ll also bring on some of my Forvis Mazars colleagues for their quick-hit perspectives on policies as they relate to their day-to-day work with our clients. Second, our deep-dive conversations with special guests will be moving to once a month also as standalone episodes.
With this change, we aim to bring these fascinating discussions into the spotlight and give them the air that they deserve. Coming up first in January, I’ll be joined by Melinda Hancock, CFO of Sentara Health, to hear her outlook on the industry for 2026. The best way to keep up with new episodes is to follow Achieving Health wherever you listen to podcasts. You can find us on Apple Podcasts, Spotify, Amazon Music, Audible and all the major podcast platforms. We’ll also continue to share new episodes on our website, forvismazars.us.
With those announcements out of the way, let’s begin with today’s Washington Watch segment. Today’s Washington Watch reflects information as of 2 p.m. Eastern Time on Friday, December 12th, 2025. My comments on these discussions are based on what’s being reported by the D.C. trade press at the time of recording, mixed with a lot of judgment about where things may go based on my experience in D.C. So, today’s remarks reflect information as of this moment and will change.
As far as our agenda is concerned, I want to touch on the enhanced exchange subsidies and Congress’ efforts to address affordability issues. The Senate failed to pass both a straight extension of the enhanced exchange subsidies favored by Democrats, and a Republican alternative package aimed at addressing those affordability issues on Thursday.
Separately, Speaker Johnson has promised a vote next week on a Republican affordability package in the House that, as of this time, does not include the enhanced exchange subsidies. However, all things subject to change there.
Also, I want to cover last week’s draft discussion of the MedPAC, Medicare Payment Advisory Commission, payment update recommendations that the commissioners will vote on during their January meeting. The draft recommends Congress provide Medicare safety net hospitals an increase in uncompensated care payments, and also an increase to physician payments. However, the commission’s draft recommendation, as has been for the last prior years, recommends reducing payments to SNPs, home health agencies, and inpatient rehab facilities.
Also, I wanted to flag that CMS has provided more details on the survey it will use to set payment rates for outpatient drugs in calendar year 2027, and we’ll certainly get into that.
And then I also wanted to touch on the 340B rebate model. A recent survey of provider pharmacy leaders finds that nearly 60% of respondents believe their organizations are not prepared for the 340B drug rebate model, which is scheduled to start with nine drugs on January 1st, and an additional drug on April 1st. And certainly we think that the impact of that could be fairly significant as a percentage of covered entities’ savings.
And then finally, I just wanted to touch on trends in AR. Nonprofit health systems are facing rising accounts receivable balances driven by claims denials, inflation, and patients paying more of their out-of-pocket costs, with some systems reporting increases of over 20% since late 2024. And then on the patient side of the equation, Politico is reporting that charities that help individuals cover their medical bills are already seeing an uptick in requests for help. And with that, without further ado, let’s get into it.
Related to the enhanced exchange subsidy extension, or legislation to address healthcare affordability, the votes on competing bills in the Senate, on a Democrat-backed bill to extend the enhanced exchange subsidies, and on a Republican bill to address healthcare affordability, failed as expected. Separately, Republicans in the House are, at this point, planning to put a healthcare package on the floor next week that will likely fail as well.
In terms of the state of play, maybe starting first with the Senate, the Democrat bill that was a straight three-year extension of the enhanced Affordable Care Act subsidies that the Democrats created in 2021 failed on a mostly party line vote of 51 to 48. Those subsidies made plans free for many low-income people and also offered subsidies for the first time to individuals earning more than four times the poverty level and capping premiums at 8.5% of income. That three-year straight extension would have cost $90 billion, according to the Congressional Government Office.
The competing Republican bill would let the enhanced exchange premiums expire and create incentives for Americans to enroll in high-deductible exchange plans. Americans earning less than 700% of the poverty level under the Republican plan would receive a deposit in tax-advantaged health savings accounts, $1,000 for people ages 18 to 49, and $1,500 for those 50 to 65, if they purchased a bronze or catastrophic product on the exchange. That bill also failed 51 to 48. Both bills were well short of the 60 votes needed to advance a bill in the Senate.
The impact of either bill would depend on the customer. The GOP plan would save money for healthy, better-off enrollees. For sicker, lower-income enrollees, the Democrat plan was the more affordable option. The other interesting thing to note about the GOP plan is that you likely would see some changes in the composition of the exchange risk pool, as you would see individuals who were healthier and knew that they didn’t have, or didn’t think that they had, upcoming health needs, purchase the lower cost but higher out-of-pocket Bronze and catastrophic products, while those that knew that they had health needs in the coming year would likely purchase more expensive products that came with lower cost sharing.
Probably the most interesting news out of the Senate is that Majority Leader Thune has suggested he may be opening to extending the enhanced exchange subsidies. Moving over to the House, Republican leaders are preparing to vote on a package of healthcare bills next week, but have not committed to including, and are unlikely to include an extension of, the enhanced Affordable Care Act subsidies that are slated to expire at the end of the year.
Instead, Republicans are considering a variety of alternative measures. These include site-neutral Medicare reimbursements as an offset, new high-risk pools that would be outside of the ACA rules, and also expanding health savings accounts. To provide a little bit more detail as to what may be in the plan and what may receive a vote, again, none of this is set in stone.
There would be, potentially, a piece of legislation that would expand association health plans. There would be a piece of legislation that would fund choice accounts, which would direct enhanced exchange subsidies into HSAs for individuals purchasing a bronze or copper product. And, granted, I haven’t seen the price tag for this, but there is also some question as to whether that might be a barrier.
And even if it is included, certainly the offsets that would need to be included would likely be significant. It would fully fund the cost sharing reductions for the second-lowest-cost silver product. There is a bill with language that would increase price transparency. There would likely be a site-neutrality bill for Medicare payments, and then a PBM reform bill that would likely include preventing spread pricing and requiring 100% of the discounts to be passed on to employers.
There might be a bill with language that would allow further expansion of physician-owned hospitals outside of certain select circumstances. What I would say is, even if this package were to pass the House, it is unlikely to clear the Senate under a 60-vote threshold. The other thing I will note in the House is that, separately from this effort that we just talked about, a bipartisan group of moderate House members is attempting to go around Speaker Johnson and bring a bill to the floor that would extend the enhanced exchange subsidies via a discharge petition.
And so, this would bring the bill to the floor without the Speaker sort of getting involved. The bill would also add income caps, require minimum payments, expand open enrollment, impose stricter broker rules, and create new health savings account options. So, it’s kind of a hybrid blend of what the Dems are looking for and what the Republicans are looking for in a package.
The petition has already gained support from nine Republicans and three Democrats but would need 218 signatures for this bill to reach the floor. You know, the outlook at this point for the enhanced subsidies isn’t particularly good. However, as I talked about the discharge petition, the failed bills may contain the seeds of what I’d like to think of as a miracle in the New Year that could result in a compromise bill being passed.
In kind of the way I could see this coming together is if the president were to backtrack and support a package that extends the enhanced exchange subsidies with some income limits and de minimis premiums for those that are currently receiving $0 plans, if the package also provided HSA funding, the HSA funding option, and is paid for by PBM reform, I think I can squint hard enough to see a path to a deal, especially now that if Senate Majority Leader Thune really is open to extending the enhanced exchange subsidies, as some are reporting that he’s suggested. In terms of the MedPAC recommendations, MedPAC met during the first week of December to discuss their draft payment update recommendations to Congress for a range of Medicare payment systems.
And again, the Commission, when it meets in January, will vote on these recommendations. In terms of hospitals, just as a little bit of background, in 2023, the Medicare margin for MedPAC’s cohort of relatively efficient hospitals was -2%. What the commission has done through its analysis for the data for 2024 to inform the 2027 recommendation, is that it has changed the criteria around the efficient hospital definition.
And so that has increased the margin to -1% in its analysis, the cost report data. And what the Commission has found is that, overall, for PPS hospitals, the margin, the Medicare margin has increased from -12.6% in 2023 to -12.1% in 2024. MedPAC believes that the Medicare efficient margin, or the Medicare margin for relatively efficient hospitals, will increase to 1% in 2026, driven by CMS’ increase in uncompensated care payments and growth in separately payable Part B drugs.
That efficient hospital cohort is those hospitals with low Medicare cost per discharge, high scores, and quality measures. And it’s the thing that MedPAC sort of uses as its guidepost when it makes recommendations to Congress. As a result of the changes in criteria and CMS’ increases in uncompensated care payments, MedPAC’s draft recommendation to Congress is that hospitals receive the current law Medicare updates, so the market basket that you would get in current law and only increase payments to Medicare safety net hospitals by $1 billion in FY 2027.
Just to put that in context, earlier this year, the recommendation that MedPAC approved for Fed fiscal 2026 was that Congress should increase hospital market basket update by one percentage point over current law and increase Medicare payments to safety net hospitals by $4 billion.
Separately, as part of the recommendation for hospitals, or the draft recommendation for hospitals, MedPAC reiterated its support for site-neutral payments. In terms of physicians, MedPAC’s draft recommendation to Congress for calendar year 2027 is that Congress should increase physician payments by a half a percentage point over current law. The combined effect of the recommendation, if Congress were to act on it, assuming that it is finalized, in current law, would result in an update of 1.25% for clinicians that qualify for the Advanced Alternative Payment Model bump, and then for all other clinicians, it would be 0.75%.
In terms of skilled nursing facilities, MedPAC analysis shows that the median Medicare margin for SNPs was 24.4% in FY 2024, and projects them to increase to 25% in FY 2026. Therefore, similar to prior years, the Commission’s draft recommendation for FY 2027 is that Congress reduce the 2026 SNF-based Medicare payment rates by 4%. In terms of IRFs, MedPAC analysis shows that the IRF margin was 17.1% in 2024 and projects them to increase to 18%.
Therefore, similar to prior years, the draft recommendation is that for FY 2027, Congress reduce the 2026 IRF base Medicare payment rates by 7%. Finally, for home health, the draft MedPAC recommendation is that for calendar year 2027, Congress should reduce the 2026 Medicare base rate for all home health services by 7%. This is in response to MedPAC analysis showing home health agencies have a 21.2% Medicare margin in 2024 and are projected to have a 19% Medicare margin in 2026.
Just as a bit of context on the draft recommendations or even MedPAC final payment recommendations when they vote on them in January, you know, they typically end up being used when Congress needs an offset for a policy change it wants to make. So, I don’t think Congress is going to suddenly increase payments to safety net hospitals. You know, physicians may fare a little better given that, historically, sometimes Congress has intervened and increased the conversion factor.
And certainly we saw that as part of OB3 for 2026, which was a one time only bump. So, there may be some hope for physicians when it comes to 2027. It will just depend on kind of the current political situation. The other thing I will say is that CMS is obviously under no obligation to consider the MedPAC recommendation when it sets rates for a fiscal year.
However, I do think the Commission’s recommendations are an important gauge of how the various providers are doing financially because it does send a signal to the policy community, and it should be sending a signal to legislators. The thing that I will say is that the commission isn’t in the business of recommending Congress give away taxpayer dollars to providers willy nilly. So, when the commission raises its hand and suggests that a certain group of providers and, in this case, safety net hospitals and physicians, need more Medicare funding to maintain beneficiary access to care, policymakers should stand up and take notice of that.
I think what’s frustrating is that despite the klaxon sounding, if you will, from MedPAC, Congress is content to more or less sit on its hands and even cut healthcare funding, as evidenced by the Medicaid changes in OB3 and the exchange changes in OB3.
Moving on to the CMS Drug Acquisition Cost Survey, CMS finalized a hospital Outpatient Drug Cost Acquisition survey in the calendar year 2026 final rule. CMS in that rule has said that it will use the survey results to set reimbursement rates for separately payable Part B drugs and likely inform packaging policies beginning with the 2027 rule. What CMS has announced is that it will conduct the survey from January 1st to March 31st, 2026.
Hospitals that received OPPS payments for outpatient drugs from July 1st, 2024 through June 30th, 2025 should complete the survey and report on data on all payable outpatient drugs purchased during this period. CMS has reiterated in its announcement that to prepare for the survey, hospitals will need to have confirmed its point of contact for the survey at [email protected].
And CMS has also offered a couple of training webinars that were earlier this week on December 9th and 11th. My guess is that what this survey signals is that the 340B separately payable Part B drug reduction will be back for calendar year 2027. CMS is using this survey, or at least I’m assuming CMS is using this survey to cure the procedural defect which led the Supreme Court to overturn the agency’s first attempt at payment cut for separately payable Part B drugs.
As you may recall, there were response rate issues when the prior Trump administration attempted to field a similar survey in the spring of 2020. The proposed rule also discussed approaches to account for non-responses to ensure sufficient sample size given this experience. Based on commentary in the proposed rule, CMS may assume that if a hospital does not respond to the survey, its outpatient covered drug costs are not significant.
As a result, it discusses assigning these hospitals the lowest reported acquisition costs for its peer group. The rule notes that CMS may consider expanding packaging in some instances, as lower response rates might indicate insignificant outpatient drug costs. The final rule also clarifies that CMS has made no decision on how, if at all, it will account for no responses.
This will be left, I’m assuming, to the 2027 proposed rule when it discusses the results of the survey. In terms of the 340B rebate model, a recent survey of provider pharmacy leaders finds nearly 60% of respondents expect drug makers to shift to a rebate-based model by 2030, replacing the current system of upfront discounts that provide safety net hospitals and clinics with 25 to 50% savings on prescription drugs.
However, a similar share of leaders have noted that their organizations are not prepared to operate under such model, raising alarms as HRSA prepares to launch the pilot program in January that would allow manufacturers to pay rebates after providers purchase drugs rather than that discount upfront. And certainly, the shift could significantly alter how hospitals manage cash flows and access the discounted medications.
When we look at this, we think it’s possible that as the rebate model is currently constructed, it could impact as much as 10 to 15% of a covered entities’ 340B savings. And certainly unless a court issues a stay in response to the AHA’s lawsuit, the model is still scheduled to start on January 1st for nine drugs and April 1st for the 10th drug. 10 to 15% is a significant number in light of what’s coming in 2027 and 2028 as a result of OB3. One of the main challenges is the additional medical claims data HRSA is requiring providers to submit to secure the rebate model. What we’re hearing is that is proving difficult to integrate with the pharmacy data.
Last thing I want to cover is an item related to AR increasing at health systems. Nonprofit health systems are reporting that they’re facing rising AR balances, driven by growing claims denials, inflation, and more patients paying out of pocket, with some systems reporting increases of over 20% since late 2024. Despite investments in technology, staff, and third-party revenue cycle management, hospitals are struggling to offset pressures from Medicaid cuts, higher premiums, and the expansion of high-deductible health plans, leaving patients financially strained.
One of the commonalities around the system’s reporting on this trend is insurer denials. Claims denials are prolonging payment timelines, with 34% of receivables now extending beyond 90 days, which is well above the historical 20% target, and certainly creating heavy administrative burden. On the patient side of the equation, Politico is reporting that charities that help individuals cover medical bills are already seeing an uptick in requests for help, and this is before OB3’s coverage provisions kick in in 2027. Or the enhanced exchange subsidies are scheduled to expire at the end of the year.
Providers need to take steps now to improve the effectiveness of their revenue cycles. This includes improving upfront cash collections for non-emergent procedures, scrubbing the uninsured and underinsured to see if there are other possible sources of coverage, and when that’s not available, connecting those individuals with financial assistance if they’re eligible.
And then the last piece of this speaks to that denials issue, where taking steps to reduce sources of denial upfront and then aggressively managing them on the back end when they occur. As you guys are probably aware, my colleague Deb Kozlowski and I had an interesting discussion as part of a recent podcast episode. So, if you didn’t have a chance to catch that, I would highly recommend that you do.
This concludes today’s Washington Watch. Up next, I’ll be joined by Zach Chandler of Baptist Memorial Health Care to talk about his organization strategy in the wake of the One Big Beautiful Bill Act.
I’d like to welcome our guest for today’s episode, Zach Chandler. Zach is Executive Vice President and Chief Strategy Officer at Baptist Memorial Health Care Corporation, a nonprofit health system based in Memphis and serving communities across Tennessee, Arkansas, and Mississippi. Zach leads development of the organization’s strategic direction, facilitates business opportunities and partnerships, and fosters external relationships with professional societies, government agencies, and the communities Baptist serves.
Zach, I really appreciate you joining me today. Looking forward to the conversation.
ZACH CHANDLER
Thank you. I appreciate being here.
CHAD MULVANY
So maybe we could start a little different from our topic, which is the OBBBA, and could you share a little bit about your career path and how you came to the industry in your current role?
ZACH CHANDLER
Sure, happy to. You know, I think a lot of administrators out there really felt a calling into healthcare and that ability to serve others and make a difference in our communities and individuals’ lives. And, for healthcare administration, I just think it’s a great opportunity where you’re able to live that out each and every day, but at the same point in time utilize, really, your business skills. And, I think it’s just a great opportunity to serve in many different ways, given our skills.
CHAD MULVANY
And I think that spot on, and that’s certainly a common theme to your point that we hear. And I think the other thing that is appealing beyond the ability to serve is if you think about the complexity of the opportunities and challenges facing us. Like, you’ve got to come to the office every day with your game face on, ready to tackle just about anything that pops up.
So, I think beyond, you know, what I’ve found from my conversations with the folks that I know in the field, is that it’s one part very mission driven, but another part, you know, I have the things that I want to do today, but here’s what’s going to pop up and I may have to reschedule. So, it’s that ability to flex on the fly and problem-solve that I think it attracts people too.
ZACH CHANDLER
I would absolutely agree with that. I will never forget the very first administrator I ever met, and spent over an hour with him really complaining, him complaining about what was broken and wrong at the industry. And I left out of his office knowing exactly that I wanted to go into the field of health administration and a lot of those challenges and broken parts and pieces that he described to me were problems to be fixed.
And I think that still motivates me today. When we look, you know, how do we make the healthcare industry better? How do we economically make it better? How do we, from a quality of care, make it better? How do we make it better from a customer service standpoint? And really just fills my cells each and every day.
CHAD MULVANY
So, Zach, we’ve known each other for a while, but I just recently found out that you serve on the St. Louis Federal Reserve Bank’s Health Care Industry Council. How did that opportunity come about?
ZACH CHANDLER
Really, they had reached out and asked for a member from the Memphis market to serve on the Health Care Industry Council. And each of the 12 reserve banks across the country has advisory councils, and each of them is set up a little bit differently. But St. Louis sets up four industry councils, with representatives from the branch offices. And the four industry councils represented are agribusiness, transportation, real estate, and healthcare. And they use these councils really to provide insights into what’s really happening in real time in the industry.
CHAD MULVANY
To the extent that you can share, what has your experience been serving on that council? What are those meetings and conversations like?
ZACH CHANDLER
I think it’s a great opportunity to one, hear about federal policy, but to understand how it affects different parts of the country differently. And so, while you may study across the nation, the roll up of the numbers, different parts or regions of the country have different assets in them, different investments from types of industries that exist in those regions, to even the workforce makeup of the regions, the education levels, the trade that exists in that region just because of its geography.
So, it has unique assets and strengths and weaknesses, both, and how those portray, or how they play out economically, are all different. And so, being around a council where you can talk about, you know, how is, within your industry, workforce being impacted? How is inflation impacting your business? How are demand and sales and revenues, are they up? Are they down? How is pricing? Are you able to move price and influence price? And how are you able to manage expenses within your industry?
I think it’s tremendously interesting to hear not only about healthcare, but to hear about these other industries and then how we’re doing as a nation as a whole.
CHAD MULVANY
Now, that is, that’s fantastic. And I suspect that the insights that you’re providing to the bank are crucial just given that healthcare is a little bit different than everything else we do in the economy, particularly on the revenue side. Well, and also on the expense side, as you and I have discussed, too, given that in a lot of instances, there are a limited number of suppliers for things that hospitals absolutely have to have.
ZACH CHANDLER
I think it’s really unique in healthcare. You know, our ability as inflation or expenses go up to immediately just raise prices, when you hear the other industries present, that is the go-to move. And of course they’re then waiting to see if customers continue to buy or not with that increased price and with healthcare, we’re just not able to go out and immediately raise prices.
We either have government agreements, where it is the government telling you what they’re paying you through Medicare. Or, we are in typically multiyear contracts that don’t allow that just immediate movement. As your expenses go up, you can’t change the price of gas, you know, on the sign each day as many of you remember through the years, and we’re just not able to do that.
And at the same point in time, so many of our expenses are inelastic. You have to, no matter what the cost of the drug is, you’re having to purchase that drug or that supply in order to render care. So, it’s a unique industry, comparative to all of those.
CHAD MULVANY
But, and to your point on the expense side, and this has been one of my longstanding complaints about the Medicare productivity adjustment that was part of the payfor for the ACA, that assumes that hospitals can improve productivity at the same rate as the general economy, but with, you know, the general economy has improved productivity, mostly by either automating , large portions of their labor. So, you think about a bank, when was the last time you actually went into the window to see a teller? Or offshoring things to lower cost localities? Basically, labor cost arbitrage. You can’t do that with a nurse.
ZACH CHANDLER
I think that’s absolutely correct. I tend to think of it as, you know, things that we can automate in healthcare are transactional. So, I think it’s important for us as an industry to step back and think, you know, what are functions out there that may be transactional. To your point, in banking it’s an ATM or electronic click-click on your phone or computer to make that transaction occur.
So, where we can make something automated or transactional, we will. But to your point, the majority of what we do really requires physically hands-on care to be delivered by a person face-to-face.
CHAD MULVANY
Yeah. And I think that’s absolutely right. You know, switching gears a little bit and kind of getting back to Baptist Memorial, we talked about the states where it’s in. But could you please tell us a little bit more about the system, just to give the audience a better sense of the organization for those who may not be familiar.
ZACH CHANDLER
Sure. So, Baptist Memorial is a multistate healthcare system with 24 hospitals. We’ve got about 1,700 members in our medical group, in our employed medical group, and we serve the states of Arkansas, Mississippi, and Tennessee.
CHAD MULVANY
Thank you. I think that’s going to be helpful for the remainder of the conversation as it relates to the One Big Beautiful Bill Act. I guess, how significant, just kind of as a topline, is the OBBBA on Baptist Memorial?
ZACH CHANDLER
It’s very significant, I think, to all of us just in the healthcare industry across the nation, and it impacts both the providers, but also, our customers, our patients, as far as who has coverage, who doesn’t have coverage. But the one thing that really has become apparent is the variation that exists, state-by-state across our nation, and how economically it is impacting the healthcare systems and the patients, both, in those states.
CHAD MULVANY
And I think that’s exactly right into your point. You know, it’s not even as clean of a cleave of expansion state versus non-expansion state, right? It’s what rates are you taxing at, as a provider tax, for the different providers within sort of a state sector? Like, what state-directed payments do you have? And based on the conversations that I’ve had with executives across the country, depending on where you are, that colors the conversation significantly.
ZACH CHANDLER
Absolutely. You know, I think with Medicare, we look and just the reimbursement for Medicare itself, right out of the gates you have a divide that occurs with just the area wage index. And it impacts, kind of creates a fork in the road right there over the compensation and rates. But even more so, do we see variation between the states and the decisions that each state made as it relates to Medicaid.
And of course, with the One Big Beautiful Bill Act, you know, that is impacting directly, you know, did your state choose to expand Medicaid or not? What were the FMap rates for your state? And were they maximizing the reimbursement backs, the matching back taking full advantage of the FMap rates? Did your state approve state-directed payments and so that they’re being paid at average commercial rate?
All of those things cause huge variation. If we look for us, Arkansas expanded Medicaid but did not move ahead with state-directed payments. We’ve got two other states in Tennessee and Mississippi that had just recently approved state-directed payments, but did not expand Medicaid. And so, you know, depending on what state you’re in, it kind of toggles on, toggles off each of these different factors that really impact and determine how much money, you know, would be taken away with the One Big Beautiful Bill Act. But then again, for states that didn’t ever turn those on, you’ve got states, providers that have been operating without that reimbursement for a number of years now.
CHAD MULVANY
But, you know, you hit on an important point because, when you sort of look at it in the abstract, generally the eligibility, the two main eligibility and enrollment provisions, the work requirements and the more frequent redeterminations for the expansion population, don’t go into effect until roughly ’27. Your provider tax phasedown and your changes to state-directed payments don’t happen until roughly ’28.
And so, in theory, there’s a window there that provides organizations some lead time to adjust, except that ignores the fact that the states are going to have to respond to that, probably coming up this next legislative session for them. So, it’s a matter of, you’re going to have to, and kind of this is where your role comes in given that you’re sort of targeting or you’re responsible for GA, government affairs.
You know, how do you sort of follow what’s going on at the state level and then sort of adjust based on how the state tries to manage the impact to its budget? And I think that’s kind of the big unknown for a lot of folks out there.
ZACH CHANDLER
I would absolutely agree. And again, it varies by state. Do you have some states that are? Right now it appears they may be giving the nod to make up that difference. So, federal dollars are not coming in. Does the state step up and fill that gap? And then we have other states in the nation that are saying, no, we’re not going to fill that gap.
We’re not interested in doing that, from a policy standpoint. So, all of this, I guess, to me, is really calling out just the importance or the challenge, really, that there is so much variation in reimbursement across the nation. And part of that is driven by decisions made at the federal level and policy part of it is driven by what each state is choosing to do or not do, and their policies.
And with that, that creates a lot of noise really across the industry, because so many folks are being affected differently. But at the same point in time, one final point is that, you know, when I look at expenses, it seems to be going the opposite direction. So, we’re seeing greater variation in revenues, but we are seeing expenses transition from 20 and 30 years ago where they were really the price of supplies, or devices, and implants and things were really driven in price locally by regional distributors.
And what we have seen a shift in is really a shift of companies to develop national based pricing for so many of those supplies, expenses, purchase services, technology, our medical records to our software that we use in our organizations, to even scanners and MRIs and so forth that we’re purchasing from national vendors. That pricing and expense is really based on national pricing. So, huge variation in revenue, expenses being standardized across the country.
CHAD MULVANY
You’re obviously, your revenues aren’t adjusting to reflect that expense base. And that’s, I mean, that’s the key pain point. When you think about the OBBBA, what provision or provisions do you think will be most challenging for health systems?
ZACH CHANDLER
You know, I think it, again, varies by state as to what is the economic impact it will have on you. And if you’re in a state to where they were really maximizing the potential reimbursement from the federal government and taking all that was available to them, there’s high risk that those dollars will be significantly reduced.
And so folks are advocating between now and then, between now and ’27 and ’28, now as these phase in, you know, to potentially change that, whether that’s at the federal level, changes that can exist, or at the state level for those states where you had providers not receiving all of those funds, you’ve got continued financial pressure as reimbursement is low comparative to the national perspective or benchmark out there. But at the same point in time, expenses are tending to follow more of the national average of reimbursement or even higher. You know, I think about MedPAC itself and as it releases the reports each year talking about the profit margin of just hospitals.
And of course, in the report this past year, it showed that the average hospital in the country had a -13.1% operating margin, for taking care of Medicare inpatients. And so it just, I think, the macro level picture is you’ve got, in essence, funding that is not necessarily in alignment with, from a revenue standpoint, with what expenses are to provide the care.
CHAD MULVANY
And I think your point about MedPAC’s recommendations to Congress are an important one, because anytime MedPAC raises its hand and says we’re concerned about access for a certain group of, for a certain segment of the industry, and in the in this case, hospitals, and says we need to give them more money or else. I mean, I think you need to take that as Congress or a policymaker incredibly seriously, because they’re not just sort of in the business of willy nilly giving out additional dollars because they like you.
And that’s key. You know, I think one of the interesting things about, you know, your comment about state variation is it is a key one and was having conversations with a CFO from a state where they just got an increase in state-directed payment from average Medicare up to average commercial, and they were just able to get that through. At least they think they were, through the grandfathering based on the recently released pre-guidance, I guess we’ll call it, that CMS issued earlier. And you know it was kind of a good news/bad news story. They were happy that the state increased it. They’re sad to see it go away.
But just given the timing of it, they’re in a unique situation where they can take the incremental delta between the Medicare and the average commercial, and they’re just going to put it on the balance sheet, and it’s not baked into the expense base or the revenue base assumption supporting the expense base. And that’s going to provide them with a little bit of flexibility. But I think it’s going to be much harder for organizations that have been up to ACR to figure out how to transition that down year-over-year.
ZACH CHANDLER
You know, as healthcare providers, I think it’s important that we look at it, not only from the perspective of the healthcare systems and how do we ensure sustainable care in our state, but we also take into account the budgets of our states and the budgets of our federal government. And how do we make sure that we’re great stewards of those dollars, and being able to deliver care in the most efficient and effective way possible, while simultaneously delivering the best quality possible for our patients and for our country.
CHAD MULVANY
Yeah. No, I think, Zach, that’s a that’s a great point. And I guess that kind of leads me into the next question, which is what steps is Baptist taking to mitigate the financial impact, both on the on the revenue side and the expense side?
ZACH CHANDLER
It really is both. And, you know, from a revenue side, I think what we are continuing to do with discussions and advocacy. Discussions where we provide education to our elected officials, I think, are critical for them to understand kind of how the healthcare industry is working, the economics of the healthcare industry so that we are making informed decisions.
And at the same point in time, just traditional strategic initiatives as an organization to be able to grow revenue and profitable services. But at the same point in time, we never stop working to become more and more efficient and reduce cost. That is, I can think over the last, you know, 10 years for us as an organization, it has been year after year of taking out a good $75 to even $150 million a year in expenses. And you do that many different ways.
We, as we look from economies of scale as a system, to just buying power and discounts and negotiations and discussions with vendors. But at the same point in time, you know, I think when we look into the future, we are all counting on how we can really leverage technology to be able to provide services and care in a more efficient and effective way.
CHAD MULVANY
How I think that makes sense, both on the managing the cost structure side and then also educating policymakers as well. And I think, historically, a lot of provider organizations that I have had the opportunity to work with have been somewhat reticent to have conversations with their congressional representatives, their senators, MedPAC, and kind of show them, to your point, what they’re doing to take out expenses.
But then also the inflationary pressures they’re facing for, to your point, supplies, labor, equipment, etc. And I think that education is going to become more and more important, particularly as we I don’t know how else to describe it, but combat some of the disinformation that’s out there about how healthcare is delivered and financed.
ZACH CHANDLER
I would absolutely agree. I think of very early on in my career, folks would almost make jokes about, you know, what does an aspirin or a box of Kleenex potentially cost, say, in a hospital. But the reality of it is, we see care that is expensive. But at the same point in time, when you look across the country at the actual margins of the providers, you can see how thin they are.
And important for us, though, is to never stop innovating and finding new ways to one deliver the care more efficiently, but in a different light, in a different manner, and in a better way. You know, I’m grateful we look at how, what I would call it, more of from managing loose to managing tight.
And I think still a transformation we are seeing across the country that’s opportunistic is really from just seeing that patient, say, every five years when they show up in an emergency room or in urgent care, or have a critical issue that may occur, to really how do we engage with them and living life and their overall health, day in and day out, where we are much more engaged with them and managed much more tightly together, and providing them resources and services that can be preventative in nature, that can head off that more costly event itself, but also make them more productive in their own life and their quality of life is drastically improved.
CHAD MULVANY
Yeah. No, I think that’s a key point. And I think it, you know, that’s the position we need to be moving towards, you know, starting from zero all the way too.
ZACH CHANDLER
One of the things that I see just nationally, and I’ll go back to the HITECH Act, and I look at the funding that was provided to create really electronic and adopt electronic health records across the country. And, you know, a couple of the tremendous benefits that I think we are really just starting to recognize has been one is that information was put into a digital format.
You know, we’re able to share that information consistently across providers and identify variation that is occurring, or would have occurred without having that shared information. At the same point in time, we’re having and creating large data sets, that from a research perspective, are really, I think, going to put a spotlight on what are the best practices, what are the best care paths for our patients.
And so, I think it is really lifting the veil and really allowing us to use some of the AI and the analytics, to work through these large data sets to identify opportunities to improve the quality of care.
00;48;52;21 - 00;49;20;29
No, I think that’s a great point. And particularly as we look at eliminating unnecessary variation, understanding what’s triggering ambulatory sensitive utilization, and being able to either clinically work with that or work the communities to sort of mitigate some of those factors that drive spending result in people being less healthy than they should be. What other opportunities do you see, or do you see any opportunities for providers in the OBBBA?
ZACH CHANDLER
Oh, I think it causes all of us, as you see funds reduced, to be innovative and to really challenge ourselves on how do we deliver care in a different way. And so patients who may be losing their health insurance or seeing a cost difference in their healthcare insurance, it causes us to step back and say, you know, how can we provide that care, but do so in a different way, at a different cost level that really ensures that they are provided what they need, but in a more economically efficient way.
So I think, you know, as we face challenges, whether it’s in life, or in work, or as a country, it creates opportunities for us to step back and really challenge ourselves to be innovative and come up with new approaches that can deliver even better results.
CHAD MULVANY
Yeah. You know, I think that’s spot on because nothing focuses the mind and creativity like a budget crisis, unfortunately. You know, one of the interesting provisions that has gotten a lot of attention from the OBBBA was the Rural Health Transformation program, and we saw CMS release the notice of funding opportunity for that. Curious as to how, to the extent that you can share, Baptist is thinking about that and what you’re hearing from the various states that you are partnering with, just as to how they’re thinking about using those funds.
ZACH CHANDLER
I think it’s a great opportunity for us as a country to really transform rural health. And I think it really creates a moment to kind of pause, and again, step back and say here is an economic model that has been in place for 20, 30, 40, 50 years in rural healthcare that has been increasingly challenged year after year to be sustainable.
And I think it gives us an opportunity to say, with this kind of bolus investment of funds, how do we transform that rural delivery system of care? We’ve got people in need. There are critical services to be provided, you know, for us in the three states, a large portion of our organization provides or requires us to provide care in rural communities. I’ve lived and worked in many of those communities, and you see the impact that having healthcare locally can make.
CHAD MULVANY
No, I think that’s spot on. And one of the things that was interesting to note, you know, and to your point about transformation, that’s really where CMS is driving for. One of the purposes or uses of the funds that is permissible under the statute is to make provider payments. And I think kind of to the point about sort of really encouraging transformation, CMS has come out very clearly in the application in the FAQs to say, look, we’re not going to, you can’t use these funds to pay for anything that you’re already getting another payment for.
And I’m paraphrasing, but also, you know, if we’re going to if you’re going to use the funds state for provider payments for things that we currently don’t get paid for, it can only be 15% of the state allotment. So, I think they are really trying to limit the financial support and really more drive those investments towards things that will truly be transformative, or hopefully be transformative.
ZACH CHANDLER
Yeah, I think about early on in my career, I became CEO of a hospital that would have an average daily census between 10 and 20 patients, and yet was in a building that could house, you know, 100 licensed beds, and so healthcare has changed dramatically as we are able to provide more and more of the services on an outpatient basis.
We still have to make sure we provide those emergency services. But I am very hopeful and inspired by the future in how technology is allowing us to provide access to specialty services in rural communities, with support of a larger health system and the technology that they can enable and tap into. And I think it’s really going to transform rural healthcare into the future.
I think our technology, the development of our workforce in those communities, as we see staffing challenges around the nation. So I am appreciative of support to be able to invest in the next generations of healthcare providers, but also to really leverage those healthcare providers in those communities to really leverage technology to gain the access and knowledge and the monitoring and just things that can be done with economies of scale from a larger system, to really be able to push services out into those communities. It’s allowing, at one of our hospitals I can think of today, we’ve got over 28 different specialties being supported through virtual medicine, out to that community. And that’s a tremendous asset.
CHAD MULVANY
Yeah. No, I think that’s exactly right into the, your earlier point, you know, given the demographics, the trends that we’ve seen, particularly in rural communities over the last 10 to 15 years, I think this type of funding is long overdue. It’s just unfortunate that the vehicle that it came on.
ZACH CHANDLER
I think each state, one of the challenges is each state’s approaching it a little bit differently. And then so, I do think there’s going to be some experimentation around the country. But I am very hopeful and really counting on one of the things I do think we do a great job, in the healthcare industry is sharing our learnings, sharing our experiences, sharing what is working well. And so I look for that to continue to really transform rural healthcare across this country.
CHAD MULVANY
Yeah, I think that’s exactly right. And I think hopefully, you know, there will be best practices shared so that we can figure out what works. And, you know, all rural communities are different. But to the extent that there are exportable lessons that we can pull out of this, I am hopeful as well. And I do think, to your point about better use of technology, you know, having that seed funding to help organizations connect to larger entities that can support them, support access to care, it’s going to look a little different, but it has to, by definition, because we can’t afford to keep doing what we’ve done.
So, you mentioned earlier about individuals potentially losing coverage as a result. What steps can health systems take to help those folks in their communities, in their catchment areas, maintain eligibility in light of the new work requirements and other changes as a result of the OBBBA?
ZACH CHANDLER
First thing I would say we do is just education. So, as we provide navigators and support staff that really can hands-on work with them, whether it’s our social workers in case management, but also our financial counselors that can help them and to be able to give them access and guidance as to where they can go to provide that coverage.
At the same point in time, our caregiving teams, looking at ways that we can deliver care in different ways, to be able to engage with them and avoid, let’s say it’s the uninsured patient. What are ways that we can engage with that patient to minimize the chance they’re going to come in for that costly emergency room visit?
So, I think you’re going to see a lot of just transformation occur in ways that we can really provide care for certain patient populations, given their limited resources and support. But at the same point in time in all of this, I think we have to continue to provide education to our elected officials and understanding, and really, as they have responsibility for looking at the care and the funding available, for the lives in each of those states or in our nation.
CHAD MULVANY
Thank you for sharing that. You know, you raised a great point that I hadn’t thought about in terms of managing the newly uninsured. We’ve obviously, over the last 10, 15 years learned a tremendous amount about pop health management through MSSP and all of the other, you know, Medicare pilots, private commercial sector pilots and on total cost of care management. And so, kind of applying those lessons to this new population could be one way to do that. And so I think that’s a great call out.
ZACH CHANDLER
Yeah. Well, I’m appreciative of continued support by CMS. And then really diving into social determinants of health. And I think the more that we understand those, the more that we’re able to document those, I think it will continue to provide data and information that allows us to create better policy, but also as a healthcare delivery system, how to provide better care, a more effective care for those patients.
CHAD MULVANY
You know, to close this out and maybe shift gears one more time, as you think about the arc of your career, what’s one piece of advice you’d give to someone who recently has moved into a more formal leadership role?
ZACH CHANDLER
First and foremost, listen and learn. Learn all that you possibly can. Really working with your team, working with your staff. But I also encourage us leaders to never stop taking bold steps for transformation. Continue to ask your staff, your team. You’ve got to have a natural, I think, curiosity of how can you problem solve or how can you make things better and really unlocking some of that innovation skills that many of your team members will have that your organization, both inside the organization and reaching out externally and networking with others, to bring that creativity. I think you’ll see tremendous benefit for the system, for the organization and doing so.
CHAD MULVANY
Yeah. No, thank you for sharing that. You know, and I think your point’s fantastic that, you know, we are fortunate to work in organizations that are top to bottom, full of talented people. So, let’s make sure we’re taking advantage of all of that talent every day. You know, as you think about Baptist Memorial, what’s something that you and your colleagues have recently accomplished that you’re proud of?
ZACH CHANDLER
I think it’s really continued improvement across the board. And just wearing the hat of a chief strategy officer, probably one of the things that excites me most is when you see the team come together and have a clearer and clearer vision for the healthcare system as we think out into the future, the next five and 10 years. And the clearer that vision becomes, the easier or more quickly you’re able to deploy those initiatives that really support and align you to that vision and adopt it.
And you see greater traction being made by the healthcare system. And I think, you know, as we look out into our vision of the future, it’s really about providing that that connected care of a healthcare system. And if I think about over the last 10 years, we’ve acquired a lot of assets. Whether that’s outpatient, and developed a lot of outpatient centers, a lot of physician clinics and practices, along with hospitals.
But those are simply assets. But when you put them together, that’s where you really see beautiful, kind of the magic happen. That it’s not just one plus one plus one equals three, but putting them all together, having that equal 10 to 12, that multiplier effect that occurs when they’re working in synergy together. And I think it’s allowing us to really be able to deliver what I believe is a better-quality product, better quality of care for our patients in the region.
CHAD MULVANY
Now, that’s great. And I think I think you’re right, kind of locking those pieces into place to create that system of care that improves outcomes, improves access, basically makes people’s lives better, that’s got to be incredibly motivating, to your point earlier at the top of the conversation, to come into work every day with your problem solver head on to get ready to make things better for the community.
ZACH CHANDLER
Well, it’s better for the providers, they feel confident and feel that they’re providing better care, but also for our patients and being able to come into a system of care that you’re not just having to, by yourself individually, navigate across, but you have an entire system dedicated to taking care of you.
CHAD MULVANY
Yeah, that’s fantastic. Zach, thanks again for joining us today and sharing your insights with our listeners. And thank you to our listeners for tuning in and following Achieving Health wherever you listen to podcasts. If you want to learn more about the topics we discuss here, be sure to check out the show notes for related content and information about how to get in touch with me and the team at Forvis Mazars. I hope you’ll join me January 7th for the next Washington Watch episode of Achieving Health. Until then, hope you have a safe and happy holiday.
ANNOUNCER
You can follow Achieving Health on your favorite podcast platform or visit forvismazars.us/AchievingHealthPodcast to learn more.
Achieving Health is produced by Forvis Mazars LLP, an independent member of Forvis Mazars global, a leading global professional services network. Ranked among the largest public accounting firms in the United States, the firm’s 7,000 dedicated team members provide an Unmatched Client Experience through the delivery of assurance, tax and consulting services for clients in all 50 states and internationally through the global network.
The information set forth in this podcast contains the analysis and conclusions of the panelists based upon his, her, or their research and analysis of industry information and legal authorities. Such analysis and conclusions should not be deemed opinions or conclusions by Forvis Mazars or the panelists as to any individual situation as situations are fact specific. The listener should perform their own analysis and form their own conclusions regarding any specific situation. Further, the panelists’ conclusions may be revised without notice, with or without changes in industry information and legal authorities.