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The Strategist in Brief: February 13, 2025 · The Strategy Catalyst Dispatch

• 0:00
  This is the audio version of the strategist in brief for February 13th, 2025.
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  This week's edition begins with some breaking news.
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  The NIH announced a steep cut in the indirect cost rates that are paid to universities and medical centers to cover their administrative and facility costs.
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  Major research institutions, including top academic medical centers and children's hospitals, say the reduction could leave them with shortfalls greater than 100 million dollars.
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  A federal court has temporarily blocked the cuts nationwide, following lawsuits from universities and state attorneys general.
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  Even if the proposed across the board cut is reversed, research institutions should expect the federal government to take a more aggressive approach when renegotiating indirect rates for future years.
• 0:47
  In the longer run, research institutions might seek to replace some of this funding by seeking alternative arrangements with pharmaceutical companies or private foundations.
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  And now, our market scans.
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  At the time of writing, President Trump has signed 46 executive orders in this term, far outpacing the 24 orders he signed during the first month in his previous term.
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  An order giving the green light to immigration enforcement in sensitive areas, including hospitals, could affect health systems relationships with their local communities and lead some patients to avoid routine care.
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  Enhanced visa vetting could impact health systems ability to recruit staff, such as nurses, from abroad.
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  Proposed tariffs on Canada, Mexico, and China could increase prices and exacerbate shortages of drugs and medical devices, but they could also eventually be a boon for domestic manufacturing.
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  Some health systems are pausing gender affirming care for minors and re evaluating DEI efforts in response to related executive orders, but providers are also facing backlash from advocates and democratic state policymakers.
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  Other executive orders address AI regulation, WHO withdrawal, Abortion, a broad regulatory freeze, and drug pricing.
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  Our second market scan looks at the VC market.
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  General Catalyst is seeking buyers for new stakes in its holding company as the firm looks to expand beyond its VC roots.
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  The firm has created a new division focused on helping legacy healthcare organizations accelerate AI adoption and tech modernization.
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  These organizations would be buyers of the new stakes, making them both strategic and financial partners for General Catalyst.
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  While General Catalyst arguably has some expertise to offer health systems on AI, the potential for conflicts of interest, given their ownership of related portfolio companies, could leave health systems wondering if General Catalyst truly sees them as a partner or customer.
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  In the wake of its Summa Health acquisition, General Catalyst is arguably acting more like a PE firm, which could create competitive concerns for some health systems.
• 2:58
  In other news, Cigna announced a new initiative to tie executive compensation to measures of customer satisfaction following in the footsteps of other companies like Microsoft and Ford.
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  Several major payers have pledged to reform their business practices in response to a wave of anti insurer sentiment following the shooting of UnitedHealthcare CEO Brian Thompson, and Cigna is the first to outline specific steps.
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  Assuming that patients or employers care, improved brand perceptions could help Cigna maintain or grow market share.
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  The company stock rose on the news.
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  In another piece of news, 340B Health and two safety net hospitals have filed to help the federal government defend against Johnson Johnson's lawsuit over proposed 340B rebates.
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  The intervention could add additional legal heft to the federal government's defense, but J& J's lawyers oppose the move and say their lawsuit only concerns HRSA.
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  If J& J's lawsuit is successful, hospitals participating in the 340B program would face substantial upfront costs and financial risks.
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  If drug makers reject legitimate claims for rebates, smaller providers could also face an outsized impact from compliance costs.
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  That concludes this week's strategist in brief.
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  Be sure to check out the full version on the web at hmacademy.
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  com.
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  Thanks for listening.