| |  | | | | |  | By Megan R. Wilson | Did someone forward this email to you? Sign up here to get it in your inbox. In today’s issue: - Exclusive: The expansion of AI-run prior authorization in original Medicare is leading to delays in care for some elderly patients, physicians say
- Thin margins and negative operating income are pushing hospitals to lean on nonclinical revenue, new analysis shows
- A stronger version of Wegovy raises the stakes in the blockbuster obesity drug battle
TGIF, and welcome to Health Brief. It’s official, y’all, as the Capital Weather Gang has spoken: Winter is over. Do you have any health policy tips or industry intel for me? Reach out. I’m at megan.wilson@washpost.com. If you prefer to message me securely, I’m also on Signal at megan.434. This newsletter is published by WP Intelligence, The Washington Post’s subscription service for professionals that provides business, policy and thought leaders with actionable insights. WP Intelligence operates independently from The Washington Post newsroom. Learn more about WP Intelligence. | | | |  | The Lead Brief | The Trump administration is experimenting with an AI-driven prior authorization system for certain procedures in traditional Medicare, and it’s already causing headaches for providers, according to a new report from Rebecca Adams, lead health analyst at WP Intelligence. This is a test of whether traditional Medicare can adopt the kind of utilization management long used by the private insurers that run Medicare Advantage plans — and whether AI companies can help the federal government do it at scale. As part of the pilot project, the Centers for Medicare and Medicaid Services wants to tamp down on medical services and products that are vulnerable to fraud, including incontinence control devices and epidural steroid injections for pain management. It’s a narrow and voluntary program being run in just six states through 2031. If expanded, it could fundamentally reshape traditional Medicare and intensify battles over prior authorization generally, and also those concerning the burdens it adds to providers and the delays to patient care. → Rebecca wanted to get a pulse check on how the novel pilot, which began in January, is going so far. She spoke with more than two dozen people, including patients, providers and executives at health tech companies serving as vendors for the experiment. She details her findings in a meaty report, which we’re putting in front of the paywall for you. - Physicians report dismal approval rates — as low as 62 percent in Texas — on their first attempts to secure approval for procedures that prompted the prior authorization requests. In Texas, the approval rate increased to 84 percent after physicians on staff at one AI company reviewed information from the provider, Rebecca found.
- So far, that’s a worse record than the prior authorization approval rates among insurers in Medicare Advantage, which partially or fully approved more than 92 percent of prior authorization requests in 2024. CMS officials told Rebecca the approval rates in the pilot program are expected to improve.
The situation for providers may improve this summer, federal officials and tech company officials say. In July, physicians whose services are authorized most of the time are expected to get so-called “gold card” status so that they will no longer have to submit requests for each service before it’s delivered. The launch date has not been previously reported. What to watch: This could ultimately reshape how doctors behave, as it creates strong incentives for physicians to adapt documentation and treatment patterns to meet algorithmic thresholds. - The tech companies that have contracted with CMS share in savings from denied care, which could also create misaligned incentives.
What to watch: Lawmakers on Capitol Hill have already criticized the program, writing letters to CMS and introducing legislation to stop it. - The savings generated from the pilot during its first year are likely to be relatively modest, nonprofit KFF projects, due to the limited number of Medicare beneficiaries set to encounter a prior authorization request. The analysis estimates that there are roughly 207,500 people in traditional Medicare who received a service covered by the model and who live in one of the six states where it’s being rolled out.
|  | | Regulators approved a higher-dose version of Novo Nordisk's Wegovy weight loss medication. (Tom Little/Reuters) | | | | | | Market Moves | The Food and Drug Administration signed off on a higher-dose version of Wegovy, giving Novo Nordisk a new way to push some patients’ weight loss results further. → It represents the fourth drug approved under the FDA’s new national priority voucher, which has drawn criticism from congressional Democrats claiming it could politicize the drug approval process by favoring companies the administration likes. While serving as the top U.S. drug regulator, Richard Pazdur warned that the voucher program wasn’t sufficiently transparent and could be illegal, WaPo reported. Pazdur left the agency weeks later. → On Thursday, FDA Commissioner Marty Makary said on social media that the federal drug approval team “really hustled” to expedite the review of Novo Nordisk’s latest version of its blockbuster weight-loss medication “without cutting any corners on safety.” Makary said it was approved 54 days after the drugmaker filed for review. Why it matters: The approval adds fuel to an already-booming GLP-1 market, where manufacturers are trying to differentiate themselves on efficacy. Novo Nordisk is in fierce competition with Eli Lilly, whose GLP-1 Zepbound has shown superior weight loss results on average — causing it to become the world’s best-selling drug. In trials, patients lost more weight on the higher-dose version of Wegovy than lower doses of the drug, though side effects including nausea ticked up as well. → The move also underscores how quickly obesity drugs are evolving as demand continues to surge. Earlier this month, I spoke with Novo Nordisk CEO Mike Doustdar earlier this month about his plans to expand the company’s reach into obesity treatments and ramp up the company’s ability to compete for market share. An interesting tidbit: Weight loss drugs have proven to be so effective that participants in clinical trials realize if they’ve received a placebo and drop out of the study, Bloomberg reports. That’s creating problems for drugmakers as they race to bring new drugs to market. | | | | | | Numbers Game | 34 percent That’s the share, on average, of hospitals’ total earnings coming from net patient revenue in 2024, meaning the money a hospital actually earns from patient care after accounting for insurer-negotiated rates and discounts on patients’ bills. The data comes from a new Trilliant Health analysis of hospital revenue and expenditure data that sheds light on providers’ balance sheets. It comes at a time when hospitals are being questioned about their role in the high cost of health care and policymakers are evaluating potential legislative solutions. Hospitals, particularly nonprofit ones, derive nonpatient revenue from sources including grants, investment earnings, and real estate income and retail pharmacy operations. The report found that the fastest-growing part of the industry’s revenue growth is expansions into high-margin specialty pharmacy and infusion services. 39 percent That’s the percentage of hospitals that reported negative operating margins in 2023, according to the Trilliant Health report. About 22 percent of hospitals were operating on thin margins of between 0 percent and 5 percent. And, on the other end of the spectrum, 14.5 percent of hospitals reported operating margins of at least 15 percent. A key takeaway: “For policymakers and health system executives, distinguishing between operating margins from patient care and total hospital income is critical when evaluating reimbursement policy and hospital financial transparency,” Trilliant Health analysts write. → It’s especially acute, analysts say, with the increasing number of older Americans enrolled in the Medicare program, which pays hospitals fixed rates for services rather than the actual cost. The key question: “Will Federal and state [governments] use their power of taxation to compel funding necessary to provide sufficient Medicare and Medicaid funding to keep hospitals financially viable without revenue from non-patient activities or, at least, an increase in those revenue sources?” Why it matters: Hospitals are urging policymakers not to move forward with policies that could be a major hit to their balance sheets, particularly after Republicans enacted a law last year that’s expected to cut nearly $1 trillion from Medicaid. | | | | | | | | | | | | |
_tstmp_1756933376-1920-1080.png)
