Get ready for a reset

Health systems are running out of runway. The next few years will determine which organizations pull ahead and which fall permanently behind — and 2026 will shape that trajectory. Market forces are accelerating, converging and exposing structural weaknesses that leaders can’t afford to manage with incremental fixes or cautious pilots. Waiting for clearer signals is no longer a strategy.

The transformation has to happen now.

Our report — New margin math: The trends resetting healthcare’s financial foundation — outlines five forces in 2026 that are restructuring the healthcare landscape:

• Trend 1: The evolving health economy: Maneuvering economic uncertainty, policy changes and changing population demographics that directly impact care delivery and financial models.
• Trend 2: Financially sustainable health systems: Coping with pressure to achieve financial sustainability — optimizing costs, improving margins and investing strategically for growth.
• Trend 3: Positioning for the future: Navigating market consolidation, competition and integration — from M&A to strategic partnerships and network optimization.
• Trend 4: The future of care delivery: Improving care access, site of care strategy, quality and efficiency amid workforce constraints and evolving patient expectations.
• Trend 5: Intelligent health transformation: Harnessing digital tools, data science and artificial intelligence (AI) to improve decision-making, operations and clinical outcomes.

This report — a playbook for the reset ahead — translates what’s coming into concrete, system-level actions leaders can take now to protect margin, strengthen access and rebuild operations for a more resilient future.

The organizations that act with intention — integrating intelligence, tightening execution and aligning resources to where value is truly created — will define the next era of healthcare performance.

TREND 1

Healthcare leaders are heading into 2026 facing immediate, accelerating financial and policy pressures. The expiration of enhanced Affordable Care Act (ACA) premium tax credits and the implementation of the One Big Beautiful Bill (OBBB) are expected to reduce coverage and increase bad debt. Uncompensated care will likely rise through 2027 and beyond. Tariffs and payer retrenchment are adding strain to already thin margins, while continued movement toward value-based and bundled payment models (e.g., the CMS Transforming Episode Accountability Model (TEAM) is creating additional financial complexity).

At the same time, the industry is still navigating a fragile post-pandemic recovery. Payers are absorbing new cost pressures, employer premiums are rising faster than inflation and the cost of providing care is up nearly 50% since 2010. Workforce instability compounds these forces, with persistent shortages across primary care, behavioral health, nursing, anesthesiology and direct care roles. And while caring for the underinsured population is inherent in mission, organizations now have far less margin for error.

These pressures are accelerating overdue transformation. Leaders must stabilize financial performance, prepare for a rapidly aging population, confront workforce constraints, rebuild consumer trust and adopt a unified advocacy strategy for the future.

TREND 2

As healthcare leaders gird for impact of the OBBB’s payment and coverage provisions and other potential policy changes on already stressed finances, developing a strategic point of view on the long-term financial sustainability of their organizations and executing accordingly is imperative in 2026.

Although average margins have stabilized, the gap between the “haves” and “have nots” remains stark, and the latter group typically feels the larger effects of challenging macro-economic trends. Cost drivers — including labor, supplies and specialty drugs — continue to outpace reimbursement. Traditional performance improvement initiatives are helpful but may not fully close gaps between expenses and revenues.

As Medicaid financing changes loom, relationships with commercial payers are more important than ever. However, payers are facing their own profitability pressures, which has resulted in higher employer premiums and more contentious payer-provider negotiations, particularly in Medicare Advantage and Medicaid programs.

TREND 3

Mounting financial pressures have contributed to an increase in the number of distressed hospitals seeking a partner. In 2025, approximately 44% of announced M&A transactions involved a distressed party. The aggregate number of distressed opportunities to partner may be even larger, as we’re seeing several processes that didn’t result in an announced transaction.

As potential acquirers have become increasingly discerning, given broader headwinds, many insist that an acquisition must serve a sufficient strategic purpose and “pencil out” from an economic impact perspective. Private equity and for-profit investment in acute care remains in decline, with investments focused in higher-margin sectors.

While pre-OBBB uncertainty suppressed hospital and health system M&A activity in the first half of 2025, an uptick in the second half be a signal of an increasing appetite for transactions. Additionally, several systems are pursuing potentially transformative deals in non-acute care. Overall, health systems are examining a wide array of partnership pathways to augment their organic growth strategies for a variety of reasons, including a growing interest in health systems seeking the expertise of specialty operators or pursuing monetization opportunities of non-core assets.

These market dynamics, combined with factors such as changing care delivery models, should prompt healthcare leaders to consider what capabilities and services will be necessary to meet future needs and demands. They also present opportunities to begin building a platform for growth that proactively positions an organization for the future.

TREND 4

Care delivery is undergoing a structural transformation that will define the next decade of healthcare performance. The accelerated pace of ambulatory expansion, digital integration and workforce redesign is pushing health systems to rethink not only where care occurs but how value is created. The coming year will draw a clear line between organizations that adapt early and those that fall behind.

Hospitals are no longer the sole center of gravity for clinical or financial performance. As value-based care becomes more established — emphasizing quality outcomes and cost effectiveness — strong ambulatory services are becoming essential to both margin stability and access. OP revenue has grown 33% in the past three years, almost double IP growth. At the same time, IP services must be managed with greater precision as utilization rises with an aging population. Workforce strategy is now a central enterprise priority, not an adjunct to operations.

Success requires more than accommodating the shift: It demands designing for it. Leading organizations are reconfiguring their delivery systems to balance high-acuity IP excellence with scalable ambulatory networks supported by stronger governance, precise workforce modeling and integrated data intelligence.

TREND 5

The forces reshaping care delivery and technology adoption can’t be ignored. Clinical workforce shortages, rising patient acuity, unprecedented operational complexity and expanding payer-provider tensions demand that leaders rethink where innovation truly drives value. Organizations that thrive in 2026 and beyond will blend advanced analytics, AI-driven automation and human expertise to solve problems holistically.

Technology is central to workforce optimization, perioperative efficiency, ED throughput and revenue cycle performance. Yet systems must balance ambition with realism. Evidence around clinical AI tools remains nascent, governance structures are uneven and many organizations lack the data maturity required for large-scale transformation.

What differentiates the highest-performing systems isn’t a single tool or platform, but a systematized approach to strategy: They connect AI investments to enterprise goals, embrace continuous co-design, and align talent, data and technology to deliver sustainable, measurable impact.