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- 2025: Healthcare’s Great Separation: What Every Executive Needs to Know
2025: Healthcare’s Great Separation: What Every Executive Needs to Know
Signal over noise: H2 favors platform scale, disciplined buyers, and the $4.91T biotech tailwind.
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Good morning, ! This week we’re diving into UnitedHealth’s $3.3B home health power play, why 2025 is a year of healthcare separation—hype vs. utility, how AI adoption remains cautious but full of upside, and why margins and medical costs are reshaping the system’s next chapter.
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DATA DIVE
Mid-Year in Healthcare, Growth, Plateau, and the Great Repricing
2025 isn’t a boom year — it’s a sorting year. Across the board, healthcare is transitioning from explosive growth to strategic consolidation. Online doctor consults? Growth slows as platforms shift from acquisition to infrastructure. Healthtech startup deals? Down 33% since the 2021 peak — but what’s left is a leaner, more disciplined market.
Biotech is the exception. It’s in full expansion mode, set to triple to $4.91T by 2033, powered by platform tech and cross-sector use cases. Meanwhile, PE/VC healthtech deals have cratered — just 164 YTD, down 88% from 2021 — but fundamentals-focused buyers are quietly building the next wave. And wearable health devices? Still climbing, but now clinical sensors are growing faster than fitness trackers.
Key takeaway: 2025 is the year of separation — hype vs. utility, scale vs. stickiness, product vs. platform. The second half will reward those playing the long game.
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TREND OF THE WEEK
Healthcare Déjà Vu
The medical cost trend is back at levels we haven’t seen in 15 years — and not in a good way. Actuaries expect 2026 trends to stay flat at 8.5% (Group) and 7.5% (Individual), the same as 2025. “Flat,” of course, means “still high.” The main culprit? Pharmacy costs, running 2.5 points hotter than medical. Meanwhile, federal policy is set to squeeze government spending, leaving commercial payers holding the bag. Translation: employers and individuals pay more while waiting for a long-promised “system transformation.” The takeaway — incremental cost programs aren’t enough. The system is heading toward bold reinvention, with payers shifting from claims administrators to health architects who steer care, manage provider costs in real time, and invest in preventive, predictive ecosystems. Rising costs aren’t a blip; they’re the signal flare. (More)
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HEALTHTECH CORNER
Healthcare’s Generative AI Catch-22
Other industries are sprinting into generative AI—healthcare is still stretching on the sidelines. Despite clear potential for workflow automation, patient engagement, and diagnostics, adoption remains slow. Just 17% of organizations use AI to personalize content, and only 12% leverage it for content creation—well below cross-industry averages. The hesitation is driven by sector-specific stakes: 59% of providers cite misinformation and reputational risk as major barriers. In healthcare, a wrong recommendation isn’t just embarrassing—it’s dangerous. The paradox? The upside is enormous. Smarter workflows, tailored journeys, and AI-assisted decisions could cut costs and improve outcomes. The sector now faces a strategic choice: stay cautious—or start piloting low-risk, high-impact use cases to build trust without compromising safety. (More)
DEAL OF THE WEEK
UnitedHealth’s $3.3B House Call
UnitedHealth finally closed its $3.3B acquisition of Amedisys, after a two-year bout with regulators that resembled more of a 12-round heavyweight fight than a corporate merger. The DOJ sued to block the deal, but settled once UnitedHealth agreed to divest 164 home health and hospice locations. With Amedisys now tucked under Optum, UnitedHealth becomes the heavyweight champ of U.S. home health, adding to its LHC Group purchase last year. Analysts say the earnings impact will be modest, but strategically, UnitedHealth is doubling down on vertical integration—owning the care and insuring it too. Politicians, meanwhile, are already sharpening knives, warning the settlement green-lights higher prices and less access. (More)
REGIONAL FOCUS
Margin Medicine Goes Regional
U.S. hospitals are on the road to profitability recovery, with operating margins up 63% since 2022. But April 2025 brought a pause: 1–2% monthly dips and 3–4% year-over-year drops. Under the surface, it's a regional grab bag. The West and Midwest took it on the chin—double-digit margin declines year-over-year—while the South and Northeast eked out YTD gains, thanks to denser urban markets and better payer mixes. The Great Plains? Stuck in a will-they-won’t-they limbo.
The takeaway: profitability isn’t just about inflation and labor—it’s about geography. Expect state-level Medicaid expansions, demographic shifts, and rural hospital closures to remain key margin determinants. One CFO’s margin is another's stress test. (More)
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