The LevinPro HC team recently sat down with Alex Schumm of Chartis to discuss and explore the state of the healthcare market in 2025.
LevinPro HC: Would you mind giving us a brief overview of your background and your role at Chartis?
- I started at Chartis as an intern in 2007 in the Strategy Practice, and am now a Partner and Vice President of Research. I oversee research activities supporting client engagements, thought leadership, and internal education and training.
LevinPro HC: We just wrapped up our Q1:25 quarterly report this month, and we found that deal activity has remained stable, but it still feels underwhelming given the positive sentiment we heard about in the beginning of 2025. How would you rate the healthcare M&A market and industry from your perspective?
- The market is volatile and there is much uncertainty. Also, many healthcare organizations are still climbing back from the financial throes of Covid. This impacts all capital-intense strategic moves, including M&A. If and when the dust settles and the market resets, we may see an uptick in healthcare M&A activity. For now, most organizations seem to be taking a conservative position.
LevinPro HC: To follow up on that, what trends are catching your attention?
- Policy is in flux, and seems to be changing fast – by the day, if not the hour. From issues surrounding Medicaid to funding cuts at NIH, many healthcare organizations face myriad challenges, especially academic medical centers and other hospital providers. They have a lot of tough choices ahead. Do they reduce headcount and cancel some research projects? Or do they pause and hope the funding returns at some point? And do they seek other non-governmental entities to be partners in research, and to help support funding? These are providers and organizations that were already constrained by the continued impact of the pandemic, so it is a really stressful time.
- Questions surrounding site neutrality have emerged again. Will Hospital Outpatient Department (HOPD) regulations go away or be changed? It’s been a driver of outpatient revenue, so any changes in policy or reimbursement could have a dramatic effect on a health system’s margins.
- There’s also new attention on the 340b drug pricing program, which is a huge portion of hospital margin for those qualifying for the program. For example, one organization said that nearly 60% of their operating margin is from the cancer infusion drugs they procure through this program. That’s a lot of reliance on a particular service and the related revenue stream.
- A.I. is moving fast, and we need to make sure it’s being implemented right. Administrative, back-office tools such as Robotic Process Automation (RPA) for revenue cycle activities have been successfully used for several years. But AI has a lot of potential to help with clinical diagnoses and treatment recommendations. However, algorithms are not always trained on diverse populations and communities. That can lead to missed or misdiagnoses – an incorrect recommendation for the physician overseeing a patient’s care. It is critical to train these tools on population data representative of those to which they will apply if we want to ensure safety and advance health equity.
- Consumers and patients want healthcare services yesterday. In the past, patients typically would stay with the same set of providers, even if appointments took months to schedule. That’s no longer the case. Patients are more willing to hop around to different clinics and doctors, and so the question becomes, how does the industry adapt to that new behavior? Patients behave just like consumers now, and providers need to be in front of that – understanding and meeting consumer-patients’ holistic needs and preferences.
LevinPro HC: This is more of a big picture question; we were reading some of the Chartis Top Reads, and we found them really insightful. A recent one focuses on Dr. Oz’ confirmation and the recent rate increases for Medicare Advantage, which contrasts the cuts to physician pay. The flow of healthcare spending, premiums, and reimbursements seems to be out of whack. Providers are getting paid less, insurance companies are getting paid more, and patients are spending more, especially women and others in marginalized groups. There is no easy answer to this, but from your perspective, what would be the first step to tackling this?
- I think one of the first steps we need to take to lower health expenditures is to keep people healthy. The problem is that it’s really hard to do. That’s one of the core tenets of value-based care models but moving from fee-for-service (FFS) to VBC is complex and challenging, partly because, for providers, FFS is a more familiar, predictable income stream. It also requires extensive care coordination systems and networks, and organizations just aren’t equipped with those technologies and procedures. In many markets, despite some growth of these models, there is no overwhelming incentive to change.
LevinPro HC: You also wrote about labor issues recently for Chartis, focusing on how half of healthcare executives are planning to leave their organizations within a year. What impact do you think this will have on the organizations and on patient care?
- Churn at any level creates instability within an organization. At the executive level, high turnover can hinder the strategic momentum of the organization. Many executive changes result in a positive reset, but too much turnover can require time to rebuild a cohesive dynamic, and institutional knowledge risks getting lost.
- On the clinical side, workforce shortages in part due to turnover have persisted, though not at the acute levels experienced during the pandemic. Churn among the patient-facing workforce can inhibit operational efficiency and negatively impact patient care. To fill staffing gaps, some organizations are redesigning the make-up of care teams, leveraging more advanced practice providers (APPs), with APP and physician roles designed to match their unique skillsets. This not only fills staffing gaps but enables top-of-license practice for all providers and supports efficient deployment of resources.
LevinPro HC: In the Chartis Top Reads edition from March 21, it was all about rising healthcare costs and insurance premiums, and this line caught my attention: “A key driver behind these rising costs is market consolidation,” especially in the health insurance market. Would you be able to dive into this more and how it trickles down into the rest of the market? And why do you think consolidation among health insurance companies doesn’t get nearly as much attention as other industries consolidating?
- The consolidation in the insurance industry can have a significant impact on prices. When one payer holds a high proportion of the insurance market in a state, it is difficult for providers to negotiate rates.
- To your second point, any macro dynamic, including market consolidation amongst healthcare entities, will draw government [anti-trust] attention, and will attract public outcry if provider M&A activity is purported as something that will drive up direct out-of-pocket costs to consumer-patients. If health insurance company M&A activity is being reported to drive up consumer costs, it will also get attention.
LevinPro HC: What should we be looking for throughout the rest of 2025 in the healthcare space?
- In a recent survey, Chartis asked C-suite executives at health systems what they’re thinking about for the year, and I think the answers are telling. Of course, AI was top of mind, in addition to topics like how health systems can better align with physicians. Physicians are one of your biggest referral sources, whether they’re employees or not. So, it is important to ask how to strengthen alignment, to better ensure they’re sending patients to your hospitals, and not to a competitor’s. There’s also a need for some restructuring within organizations, especially at the executive levels, to account for new advances in medicine (e.g., establishing a Chief Digital and Technology Officer). Finally, creative approaches will be needed to continue to move the needle on labor shortages and turnover, and to reduce burnout. Those are just some of the challenges health systems want to put front and center in 2025.
