Out-Of-Pocket’s 2025 Predictions

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Fortune Telling

Another year, another set of predictions. I’m usually more wrong than I am right, but I’ll at least keep it interesting. How boring would it be if my predictions were “healthcare heals in 2025” on some kumbaya shit.

Send me one prediction for 2025 and I'll include the best ones in the next newsletter!
Let’s not waste any time and just get into it.

• Obesity drugs become ROI positive
• Generalized vs. healthcare AI models diverge as they move to enterprise
• HSA expansion
• Marketing becomes a mess 
• FDA gets split into Food and Drugs
• Advanced primary care management codes come in hot
• Liquidity hits the digital health ecosystem
• Retail pharmacy continues its collapse
• Physician strikes and unionization expand
• Cobenfy is promising with a rough start
• Out-Of-Pocket goes through a ____ life crisis

1) Obesity Drugs Become ROI Positive

The general story about GLP-1s and other obesity drugs has been that they’re too expensive. Many state health plans and employers are pulling back on coverage because of the costs. Studies are suggesting they’re not worth the cost even two years in. My hunch is that next year a few things start happening:

1. You start seeing coverage restricted to more specific pockets of patients where the ROI is more clear (e.g. very high BMIs, people with kidney disease, etc.). This is especially true if Medicaid/Medicare actually do start covering it (big if, I can see the new administration walking this one back).
2. More drugs coming to market and new formulations means more competition and specializing into specific patient subgroups (e.g. targeting less muscle loss for older patients). This means net price after rebates will push the price down. Some manufacturers or wraparound services may even push towards outcomes-based reimbursement.

3. The newer drugs will have better tolerability/less side effects, which means people are more likely to actually stay on the drug. There will likely be a significant crackdown on compounding pharmacies that create GLP-1 versions with worse side effects now that the shortage is declared officially over.

As a result, I think you’ll see downward pricing pressure on the drug itself and a better outcomes story for patients. That means we’ll start seeing a cost-effectiveness story for GLP-1s emerge in 2025. Obesity starts reversing, the economics are worthwhile for payers, and people who need it will have better access to the drug.

2) Generalized vs. Healthcare AI models Diverge as They Move to Enterprise

An assortment of AI related thoughts:

1. There will be a divergence between generalized AI models and healthcare specific models as they sell into large healthcare enterprises. Healthcare models will focus much more heavily on accuracy, explainability, and security. Healthcare models will open-source their weights/embeddings for healthcare customers to fine-tune themselves. They’ll also create their own ways to connect internal data sources to AI tooling, similar to what Anthropic has done with their Model Context Protocol except specific to healthcare data types. Or you might see more pre-built healthcare-specific tasks out of the box like generating common reports, providing synthetic data, chart summarization, etc.
2. The big wave of AI funded healthcare startups that are application layers on top of foundation models will either get acquihired into larger companies or become services companies focused on an end-to-end process.
3. You’ll see price competition from the models themselves, open-source model performance will continue to get better, and the cost will eventually come below outsourcing to other countries. This has the added bonus in healthcare since many companies have policies around data traveling offshore anyway.

4. Many large enterprises will continue to band together to create entities that try to commercialize their data internally and/or incubate their own AI companies. This will work…as well as all of the other initiatives where big companies get together to build something in healthcare.
5. I think you’ll see some big healthcare AI lawsuits next year around how copyrighted information is used (e.g. CPT codes into applications), malpractice due to a patient listening to AI for medical advice, an anti-automation suit to preserve some job that requires moving info from a pdf to a database, and even more suits against payers for using AI to deny claims.

3) HSA Expansion

Health Savings Accounts (HSAs) are one of the most tax-friendly investment vehicles we have. You put pre-tax dollars in, you don’t pay taxes on the amount as it appreciates in value, and you don’t pay taxes when it comes out in the form of healthcare purchases. 

The issue with HSAs has been that you need to have a high deductible plan to have them AND they have to be used on a “qualified medical expense” to get the full tax benefit. But what’s considered a qualified medical expense has always been a bit of a gray area - the IRS offers some guidance here. You also see some companies get into tiffs with the IRS because they have doctors write letters of medical necessity to make things like gyms, supplements, food, etc. HSA eligible.

This upcoming administration seems much more pro using the HSA for a wider aperture of things considered to be prevention. Plus, it‘s also a much more “free market” approach to shopping for healthcare.

I think you’ll see a push to decouple HSAs from high-deductible plans, increase the contribution limits for the amount you can put per year, and widen what they can be used to pay for. Next year we’ll be able to use HSAs to play minigolf with the boys (mental health).

4) Marketing Becomes a Mess 

A few things are messing up healthcare marketing next year.

• Meta is making some big changes around healthcare advertising that will make it very difficult to actually target patients and optimize conversion funnels. It’s likely that LinkedIn and Google will follow suit.
• AI generated slop is starting to mess up search engine optimization rankings. 50% of people are little content piggies that are fine with the slop though.
• While still small, a growing number of people are turning to chatGPT and large language models for healthcare queries. This makes Google ads less effective.

I think healthcare companies will end up shifting even more of their marketing focus to:

• Getting direct referrals from providers or channel partners
• Video and influencers for top of the funnel leads
• Direct mailers, tried and true
• Ground game baby - events, canvassing on the sidewalk while I pretend I can’t hear you through my headphones, etc
• Making all of the above work together vs. focusing on any one channel specifically

It’ll be interesting to see how this affects healthcare operations. Matching supply and demand is really hard (e.g. having enough clinicians that can see patients if a bunch of them sign up). Meta and Google ads make it slightly easier because you can ramp up spending incrementally. Other marketing channels have way less granular fine tuning.

5) Liquidity Hits the Digital Health Ecosystem

Thanks to lower interest rates and a generally business-friendly climate, next year the IPO window will open for some of the late stage healthcare companies that have been readying themselves (Hinge, Omada, etc.). Previously high flying companies will get acquired for much less than they were valued before.

A few second order effects of this:

• We’ll find out what kind of valuations public markets give tech-enabled services companies, what margin expansion looks like over time, etc. This is going to probably reset some valuation expectations through the ecosystem.
• Some liquidity will return to investors and founders. This will probably lead to new digital health companies getting started from alumni of exited companies and investors reinvesting in the space or leaving entirely because the juice wasn’t worth the squeeze. 
• A lot of employees and probably founders are going to be pretty disappointed in the financial outcome. If you don’t know the term “liquidation preference”, you’re gonna find out it’s not tap or sparkling.

Interlude

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• US Healthcare 101 (starts 1/28) - I’ll teach you everything you need to know about how US healthcare works. You can see the nicest testimonial someone has ever written about it here.
• EHR Data 101 (starts 1/28) - So you think you can just “get the EHR data”, eh? You’ll know pain. But through this course…you’ll also learn love. Love for EHR data and what you can do with it, plus all the things you need to watch out for when analyzing it.
• Healthcare Product 201 (starts 2/18) - This is going to be our last cohort running this course! We go through the healthcare specific aspects of the product development lifecycle, go-to-market, and business models.

6) FDA Gets Split into Food and Drugs

Idk anything about how politics occurs, but it doesn’t seem like anyone else does either. So I’ll throw a weird one out there, though it’s unlikely it’ll happen in one year.

If RFK does actually become the head of the HHS, I think one of the things he’ll try to do is separate the agency so that one agency focuses on food and another focuses on drugs. For what it’s worth, the recent FDA re-organization sort of already suggests this is happening.

One of RFK’s big talking points has been around how compromised our food system is. He’s pointed to many ingredients that are allowed in the US but not other countries, our widespread use of seed oils, the amount of sugar in kids cereals, etc. I mean I think we all knew a “Reese’s Puff Cereal” was eventually going to get banned, c’mon now. 

The US philosophy to food ingredients is that they can be brought into the market if they’re “generally regarded as safe”, and are removed if they’re found to be dangerous. In other countries, ingredients need to demonstrate safety before coming to the market. For drugs, the FDA actually does review safety and efficacy before something is brought to the market.

Maybe RFK will move to regulate food differently and take a more precautionary principle to how ingredients are brought to food.

7) Advanced Primary Care Management Codes Come in Hot

There are some new billing codes (G0556-8) on the block and they’re pretty interesting. These are codes for Advanced Primary Care Management (APCM), which is a mouthful to say primary care for sicker populations (e.g. people with chronic conditions). 

These new codes are meant to bundle together a bunch of existing codes around chronic care management, transitional care management, etc. into an administratively easier bundled payment. 

A few interesting pieces about these codes:

• You can bill these codes if you’re a physician, nurse practitioner, physicians’ assistant, or clinical nurse specialist if you take care of all your patient’s primary care needs and get written/verbal consent from the patient.
• They don’t have minimum time requirements like many other codes. This has always penalized efficiency since you’d have to make sure certain tasks were 16 minutes long to make them billable.
• It still has capability requirements for the people billing these codes, including 24/7 access, coordinating care transitions between providers, etc.

CMS estimates that $100M in total Medicare allowed charges are going to be billing in 2025. 

It’s not really fair to say they’re the fastest billing new codes since they’re sort of subsuming old codes but whatever I don’t have to justify myself to you.

My guess is that you’ll see a big uptick in the billing of these codes. I do think making the margins work under these codes will be tough, but with enough call center help you can make anything work. You’ll probably see a suite of companies that sell services/features to help with the requirements. 

I think you’ll see entire models that give the necessary capabilities to primary care practices, groups, and especially independent nurse practitioners to take advantage of these codes. It also probably means we’ll eventually see quite a bit of overbilling in this area if we look back retrospectively in like 5+ years. 

8) Retail Pharmacy Continues its Collapse

It’s been a tough year for retail pharmacies. You’ve seen massive closures of thousands of stores from Walgreens, Rite Aid, and CVS alone. Independent pharmacies are not doing much hotter. 

I think it‘ll get even worse in 2025. Pharmacies have really been getting hit with a quadruple whammy:

• The increase in petty theft seems to be harming pharmacies, both from a cost perspective but also because they need to significantly worsen the experience for everyone else to combat it (e.g. making it difficult to get items behind cabinets.)

• Pharmaceutical benefits managers (PBMs) continue to reimburse less for drugs, and pharmacies are finding it difficult to make the economics work. 
• Relatedly, PBMs continue to steer patients towards the pharmacies that they own themselves or restricts the network of pharmacies you can go to for expensive specialty drugs.
• The foray into traditionally money losing businesses like primary care inexplicably lost them money. 

If I’m being honest, it’s not super clear to me that we need this many retail pharmacies today. It’s possible that this is healthcare becoming more efficient. Maybe a combination of mail-order pharmacies for chronic care and something like Capsule/Alto that batch same-day deliveries and bring it to your doorstep works better for urban/peri-urban areas.

I think what we’ll lose though are pharmacies where the pharmacists are providing real care (e.g. complex compounding drugs, rural areas where they’re a consistent healthcare touchpoint, etc.). My hope is that in 2025 we see more models that manage to get pharmacists paid for the services they offer vs. reimbursed for commodity products they sell. 

9) Physician Strikes and Unionization Expand

In 2022/2023 we saw nurses strike across the country for better pay, staffing, etc. There were many successes - the Minnesota Nurses Association and nurses at Kaiser successfully got significant wage increases.

2023 and 2024 saw the rise in physician strikes. It seems to have started with resident physicians demanding better pay and conditions, and now you see doctors at digital health startups and Mass General moving to unionize.

I think this is going to happen at a much faster pace next year, and in fact, I’m surprised you haven’t seen physicians band together more frequently when they have the most leverage in the equation.

You’ll see the obvious demands like better pay, hours, and conditions. But I think a few terms you might see negotiated are:

• Removal of non-competes. This was announced by the FTC but then paused as it made its way through the course. I could see physicians demanding this of their employers, it’s a big sticking point for why many stay at hospitals.
• Demanding a seat at the table for vendors - A lot of times tools are bought by the admin and the frontline staff are forced to use it. I think with AI tools this is becoming a bigger sticking point, with simultaneously some groups really wanting faster rollout of things like AI scribes to make their life easier while also slowing down the rollout of AI tools that might be doing things like clinical decision support. 
• Maybe demands in having stockpiles of critical supplies? The last few years have been plagued with supply shortages of PPE, IV fluids, etc. that physicians have had to improvise around when there was a supply chain shock.
• Not needing to change passwords every 90 days. It’s not more secure when people are just rotating two passwords with one more ! or capital letter each time. 

10) Cobenfy is Promising with a Rough Start

Pharma is a bit out of my wheelhouse but I’ll try.

Cobenfy is a newly approved drug from Bristol Myers Squibb (BMS) that targets schizophrenia. It’s a new type of drug that targets muscarinic acetylcholine receptors instead of the current treatments that target dopamine receptors. It’s making a real rollout in 2025.

The drug seems to work quite well. Additionally, the side effect profile seems to be better than many of the drugs that are on the market today (e.g. doesn’t have the issue of weight gain and less movement related disorders). However, there still are some side effects - people on the r/schizophrenia subreddit mention heavy nausea that reduces over time.

While the drug seems promising, a few things stood out about it:

1. The list price is $22,500 per year. While this will come down after rebates and discounts, it’s still going to be exponentially more expensive than the current treatments which are generics like Abilify that cost <$600.
2. The label has some recommendations around how dosages should be titrated, specific times to eat meals, etc. It’s possible the real-world efficacy and adherence looks very different if the instructions are complicated.
3. According to the chief commercial officer of BMS, 85% and 90% of the schizophrenia market is covered by Medicare or Medicaid.
4. A similar drug from AbbVie had a massive failure very soon after. The drug targets similar types of receptors, but different specific targets.
5. Doctors keeping yelling “COBE!” when they put in the order.

This means generally less competition, plus waiting to see more real-world data of the drug performance. My guess is that uptake is going to be slow next year as government plans will put more rules in place around trying cheaper therapies first and negotiating down the list price. You might also see BMS try more creative financing structures for state Medicaid plans around outcomes-based reimbursement.

IMO this is a really optimistic development for schizophrenia treatment, and hopefully it’s as promising as it seems.

11) Out-Of-Pocket Has a ____life Crisis

I’m going into my 5th year of doing this, which surprises me even more than it surprises my wife, parents, and my accountant especially. 

I have no idea how long I’ll be doing Out-Of-Pocket, and the existential question that hangs over me is “what is the end game here?”. This isn’t a regular business for so many reasons - it’s deeply intertwined with me as a person, it’s not really any one product, and a lot of the value is in its ~* vibes *~ rather than the P&L. 

When people talk to me, they assume things have gotten easier as the brand has grown but if anything it’s actually gotten harder over time. Mostly because I try to keep the quality bar high on all Out-Of-Pocket stuff, which doesn’t scale well. All the content events and swag have to be novel and creative, I’m picky over our curation of partners and attendees, and I have a borderline sexual fetish for requiring an application for everything.

That kind of makes it a hard business to ever sell but also a tough business to grow. But it’s also so much fun to run and I meet such cool people through it, so this isn’t meant to be a boohoo post. 

The only thing that’s stayed consistent is that each year is totally different. Courses were a big hit in 2023 but slowed down this year as the job market stuttered. Instead, events were a bit hit in 2024 and we iterated quite a bit on that. Newsletter growth totally stagnated in 2024, but weirdly our ops podcast experiment has a lot of die-hard listeners.

Sometimes people are curious about what the business side of this is like, and when I share some tidbits about the business many of you send good feedback. And then the people with GPT-like personalities say things like “why don’t you raise money?”.

So next year, here are some of the pushes on the Out-Of-Pocket side and potential ways we can work together.

1) Do more events.

We’ve been hosting different formats of events and plan to ramp up the intimate dinners, another hackathon, happy hours, and conferences. We’ve even explored designing offsites for companies. It’s clear that people are craving in-person hangs, especially if they work remotely and need to be retrained on basic social interactions like “not standing too close to someone when they’re talking to you”.

If you have an event space or cool that can fit 80-100 people and would be down to host healthcare events, let us know. If you want to pay us to craft a really cool event for you, get in touch.

2) An enterprise push for courses.

We’re making a big push right now to bring courses to the enterprise so that when they launch new products or onboard new people, we’re right there to get them up to speed. We have 2-3 new courses coming out next year, which will bring us to 12 courses total (you can see them all here). We’ve been getting requests to come teach these courses on site at companies too.

‍If you have groups of people you need to get up to speed on a subject or your employees are asking for more healthcare content, let’s chat. Or you can stick with LinkedIn Learning and watch the PHQ-9 scores drop in real-time.

3) Building a better sales motion.

As OOP has more things to offer, I spend about 70% of my time doing sales now. While it’s given me a newfound appreciation for how hard sales is and reinforced my belief that everyone should learn it, I think I need to bring someone on. OOP is a weird product because there are so many things to sell, bundle together, get creative on, etc.‍

If you know an all around sales athlete who’s creative and can sell all kinds of things (courses, sponsorship, etc.), email me nikhil@outofpocket.health. There’s a lot of greenfield territory here, which means a creative sales person can do some real damage. Bonus points if they have a healthcare rolodex.

4) Experiment with other content mediums.

The unfortunate reality is that people just read less nowadays. Even for me, I see someone’s newsletter hit my inbox and I just know “I ain’t reading all that”. So next year is all about testing out new forms of content that people will find valuable. We’re going to test more videos (sketches and short form content) and run new experiments (testing a text-based thing, creating an explainers library). It’s time to booty pop  while explaining the economics of long term care facilities I guess.

If you think you can write funny healthcare sketches with me, let’s chat :). Or, if you have a lot of experience in video strategy.

Let’s do more fun things together next year.

Send me one prediction for 2025 and I’ll include the best ones in the next newsletter.

Thinkboi out,

Nikhil aka. OOPthsayer

Thanks to Morgan Cheatham, Ankit Patel, Payal Patnaik, and Malay Gandhi for looking at drafts of this.

Twitter: ​@nikillinit​

IG: ​@outofpockethealth​

Other posts: ​outofpocket.health/posts​

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