2026 Top Trends
In 2025, healthcare saw widespread optimism around AI, driven by financial pressures, persistent labor shortages, and rising patient expectations for on-demand, digital access to care. Adoption accelerated rapidly: 22% of healthcare organizations have implemented AI tools built for specific clinical or operational tasks, outpacing adoption in the broader economy, and AI spending in healthcare has nearly tripled year-over-year. Early success stories, including Kaiser Permanente’s large-scale rollout of AI documentation tools and Advocate Health’s use of AI across imaging, call centers, and documentation automation reinforced momentum around AI’s potential to relieve pressure on care teams. At the same time, less than 10% of healthcare data is currently analyzed using advanced AI techniques, underscoring the realm of untapped opportunity.
In 2026, however, we expect a reality check. As organizations attempt to move beyond pilots and into everyday use, many are confronting practical challenges: foundational gaps in governance, issues with workflow integration, limited internal expertise, and hesitation driven by unclear risk. In one survey, only 13% of health system leaders reported having a clear strategy for AI integration, reflecting continued uncertainty around what “AI” actually encompasses and how its role should evolve within health systems. For many health systems operating under thin margins, early AI investments can strain resources during the initial implementation and learning phase. Ethical concerns, bias, AI “hallucinations”, cybersecurity risk, and misaligned implementations are also slowing scale and tempering ROI expectations.
The winners in 2026 won’t be those who deploy the most AI tools, but those who invest first in the fundamentals and targeted use cases. Leading health systems will define clear AI principles, establish guardrails to manage risk, and prioritize integration into existing clinical workflows while also reexamining opportunities for workflow optimization. Momentum will increasingly come from small, frontline teams testing and refining solutions in real time. Rather than waiting for a systemwide roadmap, successful organizations will allow focused use cases to move forward as the broader strategy evolves. Improving access, reducing administrative burden, and creating a controlled environment for patient-facing AI will be top priorities. For example, health systems can start by integrating AI through focused entry points such as the digital front door, where it can help patients find care, schedule appointments, and get answers without further straining clinical teams. In a more humbled and targeted AI landscape, alignment and execution will matter more than scale.
As we look ahead to 2026, clinician engagement will increasingly be shaped by structural shifts in how care is delivered and how clinicians are supported within health systems. Physician employment, driven by resource and financial pressures, have reduced the number of independent physician practices. While the employment model offers stability, it often reduces incentives for entrepreneurship by removing the ownership and personal stake that once drove autonomy and innovation. As staffing shortages persist and the independent model continues to decline, leaders in 2026 may need to explore hybrid employment models — blending stability with elements of independence through aligned incentives, shared risk, and opportunities for physician investments in ownership or governance that reintroduce autonomy into the physician enterprise.
At the same time, artificial intelligence is moving from pilot programs to scaled, integrated, operational deployment. In 2026, physicians will play a big role in designing and implementing AI in their care practices. By engaging with the clinician point of view, leaders hope that AI tools will assist in balancing clinician workloads and supporting the expansion of telehealth. Together, these trends underscore that promoting clinician engagement in 2026 is no longer just about retention metrics. It’s about designing workforce systems that optimize technology and incentives to reduce burnout, enable flexibility, restore professional agency, and deploy automation in ways that meaningfully support both clinicians and patients.
The current administration has pushed through a broad set of policy changes that will curtail the trajectory of federal healthcare funding and directly impact the healthcare provider sector, largely by focusing on Medicaid dollars. Each State must ultimately tailor its own approach to dealing with reduced federal Medicaid funding – but some combination of cuts to eligibility, covered services, and/or reimbursement rates is inevitable. The rural healthcare fund is intended to redirect some dollars towards rural communities, but these funds won’t come close to filling the gap, and implementation will vary by state. In parallel, lowering open exchange premium assistance will shift more financial burden to the individual, which is also likely to result in a growing number of uninsured.
This administration continues to explore policy changes that are intended to reduce the overall cost of healthcare. Site neutrality remains a hot button issue, and Big Insurance is increasingly restricting certain types of care to lower-cost sites in anticipation that the government will follow. Potential congressional action that would modify the statutory framework around the 340B drug discount program would disrupt existing health system economics. And recent updates to the ASC Covered Procedures list and physician fee schedule continue to underscore the desire to bend the specialty care cost curve and push for more preventative and value-based care.
As Medicaid covers fewer individuals and fewer services, more people will have no choice but to use the emergency room as their only portal of care. Much of the progress that had been made in narrowing the payment differences between commercially insured and Medicaid patients will gradually be reversed, creating a greater incentive for health systems to cherry-pick based on payor mix, and forcing safety net providers to cut back on services and access. Behavioral health and women’s & children’s programs – which traditionally have a much higher Medicaid mix – will be especially impacted. In parallel, site neutrality and similar policies, if they are adopted, will accelerate the shift of capital spend to the ambulatory space and force systems to reconfigure their delivery platforms in a way that lowers the unit cost of care.
In 2024, Whitecap predicted that the relative financial stability seen in 2024 would continue into the first part of 2025, driven by focus on bottom-line initiatives and optimization of existing capacity. In retrospect, hospital margins held steady and even improved in the first half of 2025 due to higher patient volumes, supplemental payments, and efficiency efforts, despite degrading payor mix and rising costs. Performance softened in the second half of the year, with slight margin declines as revenue growth slowed. Median hospital margins are razor thin compared to historical standards with wide variability between top and bottom quartile performers. Small and rural hospitals continue to struggle disproportionately compared to larger systems, demonstrating the value of scale.
Federal funding cuts, labor shortages, and expense growth that remains stubbornly higher than inflation continue to prompt more cautious behavior from hospital leadership. Although capital spending increased in total in 2025 compared to 2024 due to rising equipment costs, average age of plant continues to rise, reflecting lower levels of capital spending on facilities. Another contributing factor is the continued competition from short lifecycle technology investments, hindering facility investments that may otherwise have been prioritized. As a result, hospitals and health systems are increasingly tapping into philanthropy and developer partnerships to fund projects.
The uncertainty of 2025 has driven many systems to delay or scale back projects planned for 2026. However, we expect health systems will gain greater clarity related to the impact of federal funding cuts by the second half of the year, which coupled with a loosening credit markets will accelerate deferred strategic initiatives, including increased M&A / partnership activity and capital investment. Finally, the key enablers for health systems that successfully improve financial performance in 2026 will be leveraging increasing scale, rationalizing underperforming services / assets, pursuing innovative strategic partnerships, and mitigating labor and supply inflation.
Healthcare M&A activity across hospitals and physician groups is expected to continue in 2026, with momentum in cross-market consolidation as leading systems pursue geographic diversification, scale, and improved payer leverage. State-level oversight will be a larger factor as federal scrutiny of antitrust concerns is likely a lesser concern with the new administration.
Hospital-centric health systems are increasingly forced to focus on their ambulatory footprint as the nucleus for health care services continues to shift away from the hospital campus. Much of this investment may come through acquisition or partnership with existing physicians and ASCs. Private equity interest in physician groups and ASCs is also likely to continue; meanwhile, there are now a plethora of P/E investments that are 5+ years old and investors may be increasingly looking to exit. Recent threats of large-scale entry from big retailers have largely subsided and pose less risk to health systems looking to invest more in ambulatory assets.
2025 Top Trends
Healthcare M&A activity in both the hospital and physician group areas will accelerate throughout the new year. Cross-market merger activity will continue as markets become increasingly consolidated, and market-leading systems look to expand their geographic reach.
The Trump administration is expected to take a more lenient approach towards healthcare M&A activity, resulting in less regulatory oversight and shorter review timelines. We expect that traditional health systems will drive a growing share of M&A activity, rather than private equity (or other ‘outside’ money).
Additionally, we expect to see health systems increasingly outsource non-core segments of the care continuum, such as home health services, long-term skilled nursing, outpatient behavioral health, and reference lab services. Whether through partnerships or complete outsourcing, these strategic moves will help health systems refine their focus on core operations.
Health system leadership will focus on establishing and advancing strategic collaborations as a key priority throughout 2025 and beyond.
While demand for healthcare services continues to outpace supply nationwide, AI will increasingly show promise at augmenting or even replacing traditional care delivery and support models.
Until now, AI solutions have gained traction in healthcare to varying degrees, but haven’t fundamentally “altered the game”. That changes in 2025 – where the adoption of at least two or three significant AI use cases takes off. Early success stories will likely emerge in clinical care areas that can be digitized and face capacity issues (e.g., radiology, pathology), or critical processes where staffing constraints correlate to inefficiency (e.g., patient monitoring, patient charting, patient scheduling).
Health plans will also take advantage of AI tools to conduct chart reviews and flag billing concerns that are impacting health systems’ revenue cycle functions.
As AI’s influence expands across the industry, astute implementors will gain an edge through cost savings, improved recruitment and retention, and enhanced productivity.
After experiencing a rollercoaster of financial results from 2021 through 2023 as health systems learned to cope with volume shifts, labor shortages, supply inflation and intermittent government support, 2024 brought a period of relative stability, with average hospital operating margins near 4%. We believe this level of stability will carry forward through the first half of 2025 – with health systems continuing to focus on bottom line initiatives like reducing locums expense, outsourcing non-core services, stabilizing compensation models, and maximizing existing capacity. However, by late 2025, we anticipate a new set of shocks to the system – this time focused on top-line pressures.
While there is still much to learn regarding the personalities and philosophies which will drive the Trump administration’s healthcare policy, Medicaid cuts, site neutrality, ACA defunding, state waiver reversals, and 340B reform are all likely to be considered changes. Meanwhile, policies that could expand funding for health systems – either directly through federal and state government, or indirectly through mandates on Big Insurance or Big Pharma – are missing from the current manifesto. While it is unlikely that the financial impact of any policy changes will be felt in 2025, this uncertainty will undoubtedly contribute to additional M&A activity, even as systems try to preserve liquidity in anticipation of harder times to come.
Maintaining 2024 margins in 2025 and beyond will depend increasingly on systems’ ability to maximize revenue streams – through volume growth and/or increasing complexity – while closely monitoring the new administration’s direction on supplemental payments and payor landscape.
While most health systems still rely on fee-for-service (FFS) revenue for financial sustainability, value-based care (VBC) continues to gain traction as a growing share of total revenue. Enthusiasm remains strong in the industry for re-imagining care models that improve health outcomes while reducing the cost of care, with Kaiser Permanente’s new subsidiary, Risant Health, the latest attention-grabbing entity in this space.
CMS remains committed to having most of its Medicare beneficiaries in various VBC arrangements by 2030, and the new administration appears to be bullish on Medicare Advantage plans. While we expect more health systems to choose to go out-of-network with select Medicare Advantage plans, the pressure to expand into shared upside/downside risk is mounting. Additionally, concierge medicine continues to grow in popularity as patients face increased wait times and access challenges across the industry.
In 2025, we expect non-FFS revenue to represent a larger share of total health system revenues, with successful institutions preparing for an increasingly uncertain healthcare landscape by leveraging innovative payment models to stay ahead of the curve.
In recent years, numerous studies have highlighted the growing strains on clinicians across every area of healthcare delivery. Recently, there has been increased awareness of generational differences between newly entering healthcare providers and seasoned veterans in the workforce. Differences in expectations across generations along with increased demands have pushed many healthcare workers to leave the field, further exacerbating workforce shortages and jeopardizing the healthcare professional talent pipeline.
Employing physicians is only going to get more expensive, with the reduction to the 2025 Physician Fee Schedule requiring further subsidization from technical revenue streams. The key to success remains the same: finding the right balance of productivity and compensation. However, achieving that balance at varying productivity levels will be more critical than ever, making the right staffing model (across physicians, APP, and support roles) essential.
Service growth has kept demand for providers high, and successful recruitment and retention in 2025 will rely increasingly on packages with various benefits outside of strictly compensation (e.g., admin time, partial FTEs, etc.). With different models needed, establishing and balancing cultures will be increasingly difficult, and creative systems will have a leg up. Those unable to adapt in 2025 will begin to see increased subsidies and risk of turnover and burnout — all expensive implications.
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