Health systems across the U.S. are being confronted by four major forces during a “new era of unprecedented uncertainty,” according to a Nov. 18 McKinsey report.
The impact of the forces — which could cause margin pressures of 2 to 13 percentage points for health systems — lies largely on the implementation of certain government policies, according to the report.
Below are the four forces identified by McKinsey and what they could mean for health systems:
1. Healthcare regulatory and legislative pressure
The One Big Beautiful Bill Act, passed July 4, will lead to several changes in government-subsidized sources of health insurance coverage. Although there is uncertainty in how the changes will affect organizations across the U.S., the Congressional Budget Office has estimated the law could result in about 10 million individuals losing Medicaid coverage over a decade and as much as $1.1 trillion in federal healthcare spending reductions. A September report found the law could cost hospitals $25 billion annually.
Health system leaders recently shared with Becker’s how they believe the law will affect their organizations in 2026, highlighting a need to innovate and be prepared to pivot.
“Overall, the OBBBA is pushing our organization to innovate — optimizing technologies, leveraging provider and clinician resources, embracing integrated care models instead of siloed approaches, and eliminating all low-value cost areas,” said Joshua Michalski, COO of Kettering (Ohio) Health.
Other changes — including CMS’ expansion of site-neutral payments and potential changes to the 340B Drug Pricing Program — could also lead to negative margins, according to McKinsey.
McKinsey estimates the following approximate and nonexhaustive margin impact over the next five years for health systems:
- 340B program scope change: 0.0 to -2.0 percentage points
- Site-neutrality reimbursement changes for hospital outpatient departments: 0.0 to -4.0 percentage points
- Changes to eligibility, expiration of enhanced subsidies: -2.0 to -3.0 percentage points
- Federal and state income tax and state property tax: 0.0 to -2.0 percentage points
2. Tariffs
Depending on what tariffs and tariff levels remain in effect, McKinsey estimates that health system spending on medical supplies and pharmaceuticals could rise by 0.2% to 8.4%. CEOs are increasingly pessimistic about the global economy amid new tariffs, according to a survey of leaders at Fortune 500 companies.
3. Heightened clinical supply-and-demand shift
Heightened utilization from older Americans and workforce shortages are straining capacity, quality and access. The cohort of Americans 70 and older is projected to grow fastest of all age groups over the next five years, alongside increasing healthcare demand in this population, according to the report.
McKinsey noted that rising employer health coverage costs may translate into higher reimbursement rates — but could also reduce utilization for discretionary care. It estimated this dynamic could create up to 0.5 percentage points of margin pressure for health systems.
Health systems have begun addressing the twofold challenge of an aging population through expanded ambulatory networks, enhancing recruitment efforts and offering home health services. Specific initiatives include Houston-based Memorial Hermann’s launch of a healthcare high school to boost its workforce pipeline and Chicago-based Cook County Health’s investments in service lines expected to see increased demand as patients age.
4. Medical and technology innovation
McKinsey did not estimate the impact of innovation, given how uncertain developments in the area are. Several health systems have reported cost-saving and efficiency-boosting artificial intelligence initiatives. That includes Chicago-based CommonSpirit Health, which has deployed 230 AI applications throughout its facilities. Among them are AI and robotic process automation tools, generating more than $100 million in annual savings.
What organizations can do
Healthcare organizations should pursue a multifaceted change agenda for improved productivity, according to McKinsey. Technology such as AI could improve operational workflows to expand capacity and boost patient experience.
In addition to improving productivity by implementing automation and AI capabilities at scale, organizations should consider partnerships or outsourcing noncore administrative operations for low value-add functions.
“Navigating the uncertainty will require healthcare organizations to pursue one or more paths in parallel that emphasize transformation, business restructuring, and reimagining business models and innovation,” the report said. “Not-for-profit healthcare institutions should reflect on the trade-offs they can make and focus on the aspects of their mission that they can deliver most effectively.”
