STATE OF THE MARKET

6 key trends shaping the healthcare industry

Several industry-specific and broader macro trends are driving conversations about risk and people strategy for healthcare organizations entering 2026.

01

Financial strains mounting

Since the end of the pandemic, hospitals and other healthcare organizations have contended with consistently tight margins, a challenge that shows no signs of abating. For those organizations that have made some progress on financial turnarounds, margin recovery has slowed of late because of rising supply and drug costs. For hospitals, for example, 200 to 300 days’ worth of cash on hand is ideal, but many are operating with less than 100 days’ cash on hand even as the cost of care continues to grow.

Policy changes are adding to the burdens for healthcare providers. The end of enhanced tax credits under the Affordable Care Act (ACA) means more patients may forgo health insurance coverage, while changes to Medicare and Medicaid are expected to reduce reimbursement by the government.

Meanwhile, younger generations are less healthy than prior generations, and Americans are less healthy than people in the rest of the world. The United States falls below the average for Organisation for Economic Co-operation and Development (OECD) member nations on life expectancy, obesity rates, and diabetes prevalence among adults, leading Americans to more frequently require curative care. New drugs and other therapies are positively impacting patient health, but they often come with a high price tag.

For health systems, all of this is leading to the growth of uncompensated care, which puts even more pressure on their bottom lines.

02

Staffing gaps remain persistent

Persistent staffing shortages are challenging organizations across the healthcare sector. Projections by the Association of American Medical Colleges indicate the United States will face a significant shortage of physicians over the next decade, which could be as large as 97,000 in 2031. (See Figure 1.) The Health Resources & Services Administration, an agency within the Department of Health and Human Services, projects a shortage of more than 267,000 registered nurses by 2028.

For healthcare systems, experienced nurses are retiring in large numbers, and fewer younger workers are entering the workforce to replace them. Those who do enter the market are often not staying for long: In 2024, more than 22% of newly hired registered nurses left their jobs within a year, according to a report from NSI Nursing Solutions, accounting for nearly one-third of all RN separations.

After years of being asked to do more with less, doctors and nurses are burned out. The pandemic contributed to significant turnover in the industry, but even post-pandemic, healthcare professionals continue to contend with inadequate compensation, high patient loads, limited work-life balance, and threats of workplace violence. These worker concerns have come into focus amid several high-profile strikes by nursing unions at the start of 2026.

03

Traditional care models coming under pressure

Historically, hospitals and other providers relied on high-margin specialty service lines for revenue, but that business model is no longer sustainable. At the same time, patients — especially older ones — have more complex care needs, and patients of all ages have greater expectations than ever before. Convenience, cost transparency, self-service tools, and more are shaping nearly every aspect of life, and healthcare is no exception.

Healthcare consumers have become accustomed to new standards for how they access and consume care. Patients also now have access to crowdsourced information sources, which has reduced their price tolerance.

It is especially difficult for healthcare providers to attract and retain younger patients. While loyalty is still key for older generations, the younger population is quicker to switch if perceived value is higher elsewhere, putting pressure on the concept of “lifetime value.”

Americans are also growing more skeptical and less trusting of medicine and public health norms. An annual Gallup poll found that, as of 2025, just 32% of Americans have “a great deal” or “quite a lot” of confidence in the American medical system, down from a high of 51% in 2020 and just above the all-time low of 31% seen in 2007. (See Figure 2.)

All of this is prompting providers to explore new methods, including ambulatory care, to attract and retain patients and maintain profitability.

04

Economic uncertainty lingering post-shutdown

Healthcare senior leaders, like senior executives in other industries, are growing more pessimistic about the economic outlook. A chief area of concern is inflation, which has proven to be a stubborn challenge for policymakers.

In December, “headline” inflation — the topline Consumer Price Index (CPI) figure reported monthly by the U.S. Bureau of Labor Statistics (BLS) — was at 2.7% year over year, unchanged from November and down from 3.0% in September. (October figures were not published because of the government shutdown.) “Core” inflation — which excludes volatile food and energy costs — was at 2.6% in December, unchanged from November and down from 3.0% in September. (See Figure 3.) Despite intervention by policymakers — including recent reductions in interest rates — these remain above the Federal Reserve’s long-term target of 2.0%.

Although tariffs introduced in 2025 have, to date, not had as drastic an impact as originally feared, they could have substantial effects on the cost of care, medical supplies, and pharmaceuticals; in addition to potentially higher drug costs, tariffs could contribute to drug shortages. The effects of tariffs on the healthcare space may not be fully known until provider contracts with networks are renewed.

Many of the tariffs imposed by President Trump in 2025 under the International Emergency Economic Powers Act (IEEPA) could ultimately be invalidated as the Supreme Court weighs two tariff cases challenging whether a president has such authority under the statute. Oral arguments on the cases were held in November; it is unclear when the court will issue its ruling.

Also unclear is the practical impact if the tariffs are struck down, both for tariffs imposed under IEEPA and for those brought into effect under other authorities. For example, in the short-term, it is an open question as to whether pharmaceutical companies will reduce costs if the tariffs are reversed. In the longer term, it remains unclear whether pharmaceutical companies and others will follow through on promises to onshore production if the threat of tariffs no longer exists.

The record-long federal government shutdown that ended on Nov. 12 introduced additional anxiety for healthcare industry leaders. That anxiety is likely to spike with each government funding deadline, as sharp political divides and narrow majorities in Congress make the outcome of every funding battle uncertain.

05

M&A & litigation shaping C-suite & board agendas

Hospital consolidation continues to alter the competitive landscape, with a high volume of deals involving financially distressed parties. Private equity investments in healthcare — which have exceeded $1 trillion over the last decade — have played a particularly sizable role in driving consolidation through add-on acquisitions to meet expense reduction goals. Organizations are also making strategic acquisitions to develop new specialties and in-house diagnostic capabilities in an effort to achieve patient growth.

Litigation risk represents another focus area for boards and senior leaders. Social inflation is driving ever-larger jury verdicts and settlements, particularly in jurisdictions deemed “judicial hellholes” by the American Tort Reform Foundation, with an outsized impact on healthcare industry defendants. A key factor is the growing influence of litigation funding, which is empowering plaintiffs to take more aggressive stances and complicating defense strategies. Although healthcare organizations face a variety of litigation threats, sexual abuse and misconduct claims remain a particular concern for professional liability insurers.

At the same time, healthcare providers and systems must also navigate an increasingly complex — and, sometimes, conflicting — web of federal and state regulations. Notably, several states have begun to enact legislation to fully block or significantly limit investment, ownership, and activity by private equity funds and investors in healthcare. These and other regulatory initiatives are adding to healthcare organizations’ legal costs and senior executives’ time commitments.

06

Healthcare embraces AI while battling cybersecurity concerns

Healthcare organizations are exploring a wide range of applications for artificial intelligence, including in the delivery of care and as a management and administrative tool. While healthcare has historically been slower to adopt AI than other industries, rising costs and operational pressures are pushing healthcare organizations to embrace it for the sake of business performance.

Skeptics have cited various ethical concerns; for example, the use of AI in decision-support tools and ambient listening systems is introducing privacy, evidentiary, and compliance challenges. Like other employers, healthcare organizations also face risks in using AI to make hiring and other workforce-related decisions.

At the same time, healthcare data breach incidents affecting 500 or more individuals have increased in frequency over the last decade, according to a HIPAA Journal analysis of HHS Office for Civil Rights data. (See Figure 4.) Ransomware and social engineering attacks, meanwhile, can lead to significant unauthorized system access, financial losses, and operational disruptions. And, like organizations in many other industries, healthcare organizations have become increasingly reliant on third-party vendors, presenting significant operational risks.