As health systems face persistent margin pressure, CEOs are taking a more deliberate approach to capital deployment — not pulling back altogether, but scrutinizing more than ever how and when investments are made.
According to Kaufman Hall’s “National Hospital Flash Report,” released Feb. 10, hospitals closed out 2025 with an adjusted year-to-date operating margin of 1.3% as rising expenses, growing bad debt and a greater share of revenue from government payers rather than commercial insurers continued to strain finances.
The response to that pressure varies. Some systems are accelerating expansion plans while others are restructuring projects in phases to preserve flexibility without stopping capital investment entirely. Across the board, leaders say the environment demands greater discipline, clearer strategic alignment and more intense scrutiny of which investments cannot wait.
At the same time, many organizations are also addressing capital projects delayed during the COVID-19 pandemic while investing in ambulatory expansion, technology and high-performing service lines.
Becker’s spoke with Christopher O’Connor, CEO of New Haven, Conn.-based Yale New Haven Health; Saad Ehtisham, president and CEO of Morristown, N.J.-based Atlantic Health; and Shane Strum, president and CEO of Fort Lauderdale, Fla.-based Broward Health, about how their organizations are navigating capital decisions in 2026.
The posture: Leaning in
Broward Health is in a strong financial position. In 2025, Fitch revised the system’s outlook to positive, which it said highlights the organization’s strategic initiatives to expand service lines and improve access via outpatient sites. Broward has an “A+” rating with the agency. Broward Health’s rating was also upgraded to “A3” from “Baa1” by Moody’s last year. Additionally, S&P delivered a rare double-notch upgrade as well, raising the system’s bond rating from “A-” to “A+” in April 2025.
That financial position has allowed the system to remain aggressive in its capital strategy, said Mr. Strum, who also serves as interim CEO of Memorial Healthcare System in Hollywood, Fla., where Broward Health has partnered on several community initiatives.
“Compared to the past few years, I would say we remain aggressive and very strategic, but always mindful of our safety-net mission.”
He cited multiple examples, including the Broward PACE Program, a healthcare initiative for older adults launched in 2024 as a joint venture between Broward Health and Florida PACE Centers at Miami Jewish Health. The health system also finalized its partnership with Miami-based Nicklaus Children’s Health System, with the former Salah Foundation Children’s Hospital at Broward Health Medical Center officially transitioning to Nicklaus Children’s Hospital at Broward Health on March 1.
“We have always had a strong pediatric program and a robust graduate medical education program, but our physicians wanted to grow pediatrics further to serve more families in our community of more than 2 million residents,” Mr. Strum said.
With those initiatives underway, Broward Health is continuing to take an aggressive but strategic approach to capital investments.
“In terms of capital deployment, we are not pulling back. We are doubling down,” Mr. Strum said. “We understand the potential implications of Medicaid uncertainty and sustained labor costs, but we are ensuring investments produce returns. We are being more strategic and more focused.”
He noted the system’s $250 million transition to an Epic EHR, completed in 2024, as a significant capital investment that has improved care delivery. He also pointed to years of deferred maintenance addressed since his arrival in 2021, including HVAC systems; end-of-life equipment within imaging, cardiac and respiratory spaces; as well as roof, garage and other infrastructure.
“Those investments are not glamorous, but they strengthen the foundation of the organization,” he said.
Now the system is focused on growth. This includes freestanding emergency departments targeted to open in the city of Lighthouse Point in spring 2026 and another in the summer 2026 in the city ofSunrise, as well as a third being developed in partnership with the city of Fort Lauderdale and the YMCA of South Florida at Holiday Park, expected to be completed in fall 2027.
Broward Health is also constructing two new medical office buildings – one eight-story facility with a parking garage at Broward Health’s flagship Broward Health Medical Center in Fort Lauderdale and another six-story structure at Broward Health North in Deerfield Beach, with both buildings expected to open in 2027.
Overall, Mr. Strum said the system’s board of commissioners has approved spending approaching $1 billion over the next two to three years. That includes freestanding emergency departments, medical office buildings, technology investments and physician practice expansion. He said Broward Health remains committed to those projects even as leaders monitor industry pressures.
“We are not delaying or reconsidering capital projects,” he said. “We are committed to the growth initiatives already approved. Capital deployment remains disciplined and aligned with long-term financial stability. We prioritize liquidity and risk-adjusted return, whether short-term or multi-year investments, and remain focused on sustainable cash flow.”
Yale New Haven Health, a five-hospital system, reported a $197 million operating loss (-2.6% margin) for the fiscal year ended Sept. 30, 2025, and Mr. O’Connor acknowledged the volatility is not going away. Yet the system is also leaning into capital investment.
Since 2023, Yale New Haven Health has averaged capital spending equal to about 180% of depreciation — meaning it is investing significantly more in facilities, technology and infrastructure than it spends maintaining existing assets. In 2025, that figure peaked at 194%.
Mr. O’Connor said part of the current investment reflects capital projects that were deferred during the pandemic and are now advancing. He pointed to the Adams Neurosciences Center at Yale New Haven Hospital’s Saint Raphael Campus in New Haven, an $838 million clinical and research facility currently under construction. The project was announced in 2019 but delayed during the pandemic before breaking ground in 2022. It is on track for completion in 2027.
Mr. O’Connor said the system also continues to push forward with significant investments in ambulatory expansion and other growth initiatives.
“Despite the volatility, we’re leaning into these investments and pushing forward with some real dramatic growth initiatives,” he said.
In terms of deciding which expansion plans, service lines or capital projects move forward, Mr. O’Connor referenced the system’s joint strategic plan with the Yale School of Medicine. He said both parties have collectively agreed to pursue this plan, “and that basis is how we view the requests that are coming forward or interests that we have.”
“That strategic plan has become a real tie factor for us to ensure that we’re putting dollars into the right space,” Mr. O’Connor said. “In our case, that’s a lot of our differentiated services, but it also includes significant investments in population health and primary care, for instance. So it’s pretty balanced, but there is no doubt that it has a significant destination-service bent to it as well.”
Structure over instinct
Atlantic Health is taking a similarly structured approach to evaluating capital investments.
Mr. Ehtisham, who has helmed the system since July 30, said the organization evaluated current and the next five years of major projects.
“We said let’s reevaluate each of those projects for alignment with the strategic plan and financial performance to see if those projects in their entirety still make sense or if we need to modify those plans,” he said.
For example, one project the system evaluated was the addition of operating rooms at Atlantic Health Overlook Medical Center in Summit, N.J. The $90 million project aims to meet high demand in the market for increased inpatient and outpatient surgical volume.
If the system moved forward, he noted it had to determine whether completing the entire project as originally envisioned was the best plan.
“Market conditions are very fluid, and things will change. In 12 to 18 months, with policy changes coming fast and furious, we don’t know what’s coming around the corner,” Mr. Ehtisham said. “We evaluated the project through that lens. There’s also a shift to outpatient services, and this project is within the hospital, so we needed to evaluate that as well.”
In the end, Atlantic determined the project should move forward, but with modifications.
“We structured it so we conduct phases one, two, three and four over four years,” Mr. Ehtisham said, adding that “if we see market conditions change to a point where there is greater adverse impact from a reimbursement standpoint, we can finish a phase and stop there. It will still be efficient enough for us to operate without having to go to phases two, three or four.”
He said this approach allows the health system to add operating rooms while holding off on some pre- and post-expansion components if conditions shift. The first phase entails construction of the new operating rooms, which is slated to move forward this year.
Mr. Ehtisham said the system used the MoSCoW prioritization framework to guide the project. The acronym stands for must-haves, should-haves, could-haves and won’t-haves.
“The must-haves are the nonnegotiables. The should-haves are important initiatives or portions of the project that add significant value,” he said. “The could-haves are the nice-to-have items. In the past, when reimbursement challenges were not as significant; we did more of those nice-to-have investments. The won’t-haves are initiatives or phases that we really don’t need, so we cut those out.”
The discipline behind capital decisions
Mr. Ehtisham said several broader factors are shaping capital allocation decisions across health systems.
These include addressing capital projects delayed during the pandemic, continuing to invest in high-performing service lines, expanding ambulatory care platforms and evaluating technology investments such as AI with clear return-on-investment expectations.
He also emphasized the importance of balancing systemwide priorities with local hospital needs and maintaining a disciplined capital allocation process.
Most health systems, including Atlantic Health, are looking at structured, data-driven approaches to capital allocation, Mr. Ehtisham said. Some projects will not have a straightforward return on investment, but strong governance processes help leaders determine which investments should move forward and which should slow down or pause.
Looking ahead, he said organizations must examine investment strategies to ensure they can fund future capital without depleting cash reserves. This can also involve restructuring debt to free up capital for growth initiatives.
Atlantic Health, for example, is evaluating several projects totaling between $700 million and $1 billion in investments that leaders believe will position the organization for long-term growth.
“In my opinion, we can’t just close the water spigot and say we’ll wait this out,” he said. “What’s going to happen is you’ll fall so far behind with aging plant infrastructure and strategic positioning that you’ll never be able to recover.
“The health systems that will continue to thrive in the future are the ones taking a rigorous, structured approach to capital allocation but not completely stopping the flow of capital just to preserve cash on hand.
“Every allocation management process incorporates an organization’s unique components that drive how capital should be allocated among competing priorities. The successful processes, in my opinion, are founded on consistent adherence to the fundamentals for that organization. If you know what those fundamentals are and stick to them, you’ll be very effective in the capital allocation process.”
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