The State of Transformation for U.S. Healthcare Providers
Market dynamics for health systems are shifting. The most significant driver is the federal Medicaid mandate, which expired at the end of December 2025 and is now pending legislation. This uncertainty is prompting health system leaders to rethink strategy and operations. In this context, we’ll share how other health systems are responding and what these changes mean for organizations like yours.
The Picture is Clear: The Need for Change is No Longer Debatable
Across the provider landscape, leaders agree: the status quo is no longer viable. Every health system recognizes the need for change—what’s different now is the intensity and urgency of the pressures.
In recent years, many organizations treated transformation as a gradual, programmatic effort focused on optimization and incremental gains. The environment has changed. We’re moving from a “transformation” pace to a “restructuring” pace.
The core drivers are:
- Persistent revenue shortfalls, even after pursuing revenue diversification strategies such as 340(B)
- Tightening reimbursement and increasing payer mix volatility
- Cost inflation outpacing revenue growth
- Workforce and labor instability
- Structural declines in commercially insured patients
The question is no longer whether to transform—it’s how quickly you can move and how bold you’re willing to be.
Provider Responses: More Proactive, More Integrated, More Urgent
We’re seeing a markedly different response nationwide than we were just three months ago.
Tightening Shared Services and Integrating Operations
Organizations—especially those that have completed acquisitions over the past five years—are accelerating efforts to fully integrate IT, HR, finance, revenue cycle, and clinical service lines.
The mandate is clear: if you bought scale, you must now leverage it.
Leaders are eliminating redundancies, aligning governance, standardizing platforms, and centralizing functions that have long remained fragmented.
Labor Strategy Reassessment
With federal funding waning and insurance eligibility growing more uncertain—particularly for Medicaid and Medicare Advantage—many systems are reassessing their entire labor model:
- How many FTEs can the system sustainably afford?
- Which roles must remain in-house, and which can be outsourced or automated?
- How can operations be maintained if the payer mix deteriorates?
This is not about short-term flexing; it is about long-term, structural labor redesign.
Balance Sheets Are Driving Strategy—More Than Ever
Balance sheets are increasingly separating the “haves” from the “have-nots.” Boards nationwide are asking the same question: How do we secure solvency and relevance over the next five years?
- Stronger systems are pursuing growth—through acquisitions, partnerships, and new service lines such as ASCs, home-based care, and ambulatory expansion.
- Weaker systems are taking a different path—shoring up liquidity, driving deeper cost reductions, and rationalizing services, including selective service line closures, to prepare for what’s ahead.
