Health systems faced with ever-thinning margins and uncertain financial future may be tempted to double-down on cost cutting as an immediate option relief. But for most, that’s not the best option.
Converging economic and sociological factors have impacted the health system, including workforce shortages, financial instability and elevated consumer expectations. The rapidly aging population is a factor as well; many healthcare organizations are strained by increased service demand as the Baby Boomer population grows older and needs more care.
“Amid unprecedented volatility, resource constraints, and technological disruption, how can healthcare executives rapidly adapt and transform their organizations to sustainably deliver high-value care, optimize operational efficiency, and preserve workforce resilience and empathy?” posed Craig Albanese, MD, CEO of Duke University Health System in Durham, N.C.
The question is urgent and complex. Hospital leaders are searching for connecting points with old friends, rivals, community organizations and other stakeholders to problem-solve together. They’re also pursuing larger strategic changes instead of small fixes to truly build sustainable organizations for the future.
“How do we transform an unsustainable care delivery model into one that is affordable, equitable and aligned with what patients truly need, before the system collapses under its own weight?” said Trampas Hutches, regional president at MaineHealth in Portland. “We must radically rethink partnerships, risk-based models and the role of technology – not just to cut costs, but to rebuild trust and relevance in the communities we serve. The challenge is less about innovation and more about execution at scale, across deeply entrenched systems.”
Wayne Gills, president and CEO of Gallup, N.M.-based McKinley Christian Health Care Services, has a similar view of the pending transformation. Healthcare organizations are challenged with escalating healthcare costs as employers project nearly 8% rise in healthcare costs for 2025, which would be the highest in a decade. Pharmacy expenses, including GLP-1 medications and cancer treatments, are driving the growth.
“Managing this cost inflation while maintaining comprehensive care poses a critical financial challenge,” said Mr. Gills. “The healthcare workforce crisis demands shifting from short-term retention tactics to long term strategic planning. Healthcare leaders must balance immediate staffing needs with sustainable models for workforce development and engagement, especially as AI and technology reshapes care delivery.”
Healthcare executives face pressure to adopt new technologies and AI-driven applications, but each new technology must have clear goals and demonstrate efficiency or care delivery improvements to avoid overinvestment. Technology can be the catalyst for change, but it takes much more than band-aid investments to achieve financial resiliency.
“Leaders are challenged to catalyze genuine systemic transformation in healthcare cost structure, quality and accessibility, moving beyond superficial reforms to address foundational dysfunctions in payment models, supply chains and care fragmentation,” said Mr. Gills. “How can healthcare executives design and implement effective leadership, cost management, workforce strategies and technology adoption to create sustainable, value-based care systems that improve patient outcomes while controlling escalating costs and navigating industry complexities?”
Healthcare systems and companies are focused on aligning incentives for leaders and the broader team around technology integration and transformation that will lead to long-term economic stability and care improvement.
“Our future depends on whether we can lead that transformation with urgency, humility and a clear sense of purpose,” said Mr. Hutches.
Transformation and innovation is an imperative for all organizations – including rural hospitals. James Dover, president and CEO of Sioux Falls, S.D.-based Avera Health, told Becker’s, “Innovation in the age of uncertainty isn’t just a buzzword. It’s a necessity.”
“As healthcare finances are threatened by private and public funding reductions and nonprofit healthcare is under increasing pressure, we must all lean into technologies like artificial intelligence and telehealth, and new ways to develop workforce to ensure rural and underserved communities aren’t left behind,” said Mr. Dover.
Executives are deciding whether to adopt vendor-driven tech and AI solutions, develop the capabilities internally or strike a balance between the two. Technology is changing quickly and health systems without a strong plan and partnerships will fall further behind, and risk further fragmentation, Marschall Runge, MD, PhD, executive vice president of medical affairs at the University of Michigan and CEO of Michigan Medicine in Ann Arbor, told Becker’s.
“Leaders must navigate an increasingly volatile financial landscape marked by real and potential disruptions: uncertainty around Medicare and Medicaid funding, mounting threats to 340B program revenue, and broader regulatory unpredictability tied to both federal policy shifts and election-year dynamics,” he said. “Add to that rising labor costs, payer negotiations that erode margins, and capital market constraints that limit investment in innovation.”
Forward-thinking leaders aren’t thinking small; they’re tapping into the brilliance of their teams to make sweeping changes and respond to new challenges as they arise.
“These challenges demand not just operational efficiency but also strategic agility and a willingness to lead through ambiguity,” said Dr. Runge. “Success will hinge on bold but informed decision-making, underpinned by data, collaboration, and a long-term vision for value-based, technology-enabled care.”
