Charleston, W.Va.-based Vandalia Health is taking a disciplined approach to financial management as it continues integrating its operations and managing rising costs in a state where reimbursement growth remains limited.
The nonprofit system was created in 2022 through the merger of Charleston Area Medical Center Health System and Mon Health System and later expanded with the addition of Elkins, W.Va.-based Davis Health System. Today, Vandalia Health includes 17 hospitals and more than 200 ambulatory locations serving primarily rural communities across West Virginia and parts of Ohio, Pennsylvania, Maryland and Virginia.
West Virginia health systems operate with some of the highest Medicaid utilization rates in the country, limiting the ability to offset inflation through commercial reimbursement. For rural nonprofit systems, that payer mix creates heightened sensitivity to rising labor, pharmaceutical and technology costs, even during periods of relatively stable utilization.
“If you’re a mostly Medicare and Medicaid state like West Virginia, rates are fixed and the costs are high. We have to manage our costs, manage our revenue, our expenses, and our levels of investment to be very proactive,” David Goldberg, president and CEO of Mon Health System and Davis Health System and executive vice president of Vandalia Health, said during a recent “Becker’s Healthcare Podcast interview.”
Financial pressures mount
Labor remains one of the most persistent cost pressures for Vandalia Health, despite its rural footprint. The system competes for clinical and nonclinical talent across state lines, requiring compensation levels that mirror surrounding markets. The communities are especially in need of specialists, including oncologists and pulmonologists, to serve the rural communities.
“While we’re rural, we have to pay competitively, like the states around us to get people to live in our state,” Mr. Goldberg said. “While they’ll come to a rural state, they still want to get paid the going rate, and we want to be competitive to do that.”
Vandalia Health is leveraging telehealth to create additional access points into the community without placing too much pressure on the current team.
“We still need to make ourselves frictionless and make it easier for patients to get in to see their doctors or their healthcare professionals and take care of them in the moment they need our care so we can reduce costs and improve outcomes,” said Mr. Goldberg.
Employee health benefits represent another area of growing expense, particularly for systems committed to covering employees and their families in communities with higher chronic disease burden.
“While our employees and colleagues might be healthy, some of their dependents, where we call them beneficiaries on the health plans, are a little costly, and we want to take care of our families, but it’s also a cost that we’re trying to manage,” Mr. Goldberg said.
Technology investment has become one of the fastest-growing components of Vandalia Health’s budget. Like many health systems, the organization is balancing the need to invest in EHRs, cybersecurity and artificial intelligence with the reality of limited reimbursement growth.
“The fastest growing part of the budget in most healthcare providers besides the medicines and the benefits is the investment in technology, whether it be artificial intelligence or electronic medical records or other investments. They’re very costly,” Mr. Goldberg said.
Hospitals are reporting that IT and digital infrastructure now rival labor and pharmacy as top expense growth areas. For systems with little pricing flexibility, technology investments must be carefully sequenced and justified.
Heading into 2026, Vandalia Health plans to continue balancing cost containment with targeted investments that support access, quality and operational efficiency. The strategy comes as the organization prepares for a planned leadership transition, with continuity in executive leadership and integration efforts already in motion.
“Those prices are relatively fixed, but whether it be a tariff, whether it be inflation, are going up,” Mr. Goldberg said. “We have to make sure that we’re being good stewards of the dollars that we get for fee-for-service and or arrangements with our payers.”
Integration as a core financial strategy
A central pillar of Vandalia Health’s financial strategy is continued integration following its 2022 formation. Leadership views scale as an opportunity to reduce duplication, standardize operations and redirect savings toward strategic priorities. As with many post-merger systems, integration is a multi-year effort that requires upfront investment before efficiencies are fully realized.
“We’re still merging all of our assets into an integrated delivery system,” Mr. Goldberg said. “As many of us know, when you build scale, you want to take out waste to the system, reduce your costs so you can take those excess dollars that you generate and invest them into your people, invest them into technology, invest them into programs that benefit our community.”
Vandalia Health is also weighing financial decisions through the lens of long-term community benefit rather than short-term margin expansion.
“As a 501(c)(3) or a tax-exempt organization, we want to be very careful with the dollars we invest so we could benefit our communities and make them more livable and healthy,” he said.
Beyond internal cost pressures, Vandalia Health is monitoring federal policy developments that could further affect reimbursement, particularly around Medicaid and the 340B drug pricing program. For systems with limited financial cushion, policy shifts can have immediate operational implications.
“From a macro perspective, there’s a lot of trials and tribulations related to what is or isn’t coming out of Washington related to Medicaid reimbursement, reductions that’ll come from that, 340B,” Mr. Goldberg said.
At the same time, the system is preparing for continued movement toward value-based care models. For rural systems, improving access, care coordination and follow-up is not only a clinical priority but also a financial one, as preventable utilization and delayed care can quickly erode thin margins.
“The nation is moving to value,” he said. “That means we have to be Johnny on the spot related to getting those people that need care in, getting them taken care of, following up with them timely, and getting to own their healthcare and make it a less difficult environment.”
There is good news. The $50 billion Rural Transformation Fund created by the White House will funnel additional money to rural healthcare organizations, including Vandalia Health. Mr. Goldberg said the funds will “make a dent” in driving success for the future.
“’26 is going to be an incredible year. I’m excited for it,” he said. “What keeps me going every day no matter what any of us do in healthcare is that we’re improving peoples’ lives and the trajectory of their healthcare. That’s exciting to be able to help people in need, make sure we stay true to who we are, and make people more healthy and hopefully give people a little bit more spring in their step.”
