Health systems are heading into 2027 with less room for spending that doesn’t pay for itself. Medicaid work requirements under HR 1 take effect Jan. 1, 2027, in most states, and the Commonwealth Fund has estimated the requirements could cut operating margins by an average of up to 13.3% for hospitals in Medicaid expansion states.
At Becker’s 14th Annual CEO + CFO Roundtable this month in Chicago, health system leaders described how that pressure is shaping AI purchases: tighter return requirements, a closer look at hidden costs and more pressure on vendors to share the risk.
The stakes are sharpest at safety-net systems. At Chicago-based Cook County Health, about half of patients have Medicaid coverage, and the system expects charity care costs for uninsured patients to rise $100 million between this year and next, said Alexandra Normington, chief communications and marketing officer. Cook County’s funding for the system is set to rise about $40 million in 2027, pending a board vote.
“We need to keep people insured,” Ms. Normington said.
She said that squeeze also limits how quickly safety-net organizations can adopt new technology, including the AI her small team uses for data analysis.
“I think that’s a challenge for a lot of safety-net organizations, from marketing to rev cycle, to any other kind of function, it’s often safety-nets that are the least positioned to invest resources to be on the cutting edge of different interventions, of different strategies.”
Jim Whitfill, MD, senior vice president and chief transformation officer of Scottsdale, Ariz.-based HonorHealth, said AI’s capabilities are clear but its financial return is harder to find on the general ledger.
“I’m worried that when you look at the hit that [HR 1] brings and the return that AI brings, I don’t know that they balance out yet,” Dr. Whitfill said.
HonorHealth’s clearest returns so far have come from predictive tools rather than generative AI, he said, including its EHR vendor’s deterioration index, technology that has helped cut excess inpatient days and operating room optimization.
Lisa Stump, executive vice president and chief digital information officer of New York City-based Mount Sinai Health System, said a room of CEOs and CFOs at an executive breakfast during the conference took a practical view: Start in the back office, where the risk is lower, and show the return.
“Definitely not a blank check. Most health systems can’t afford that,” Ms. Stump said.
Mount Sinai looks for a return of five to 10 times on its technology investments, she said, though leaders also count gains such as higher net promoter scores and employee engagement.
Pricing models are adding to the uncertainty. At Atlanta-based Emory Healthcare, Chief AI Officer Nabile Safdar, MD, said the health system expects Epic to move its AI tools to consumption-based pricing by 2028, and he expects per-seat licenses to become harder to get from vendors generally.
“Whenever we can, we like to be on a license model per seat because it’s predictable,” Dr. Safdar said. “Just turning things on and not knowing exactly what the clear value is is not an option for us.”
Tinu Tadese, MD, who until recently was vice president and chief medical informatics officer of Boston Medical Center Health System, said safety-net budgets forced her team to calculate the full cost of ownership, including the hours IT, informatics and physician informatics staff would spend on a tool, before taking a purchase to executive leadership.
“The hidden cost is what most people never look at. … It’s not what you sign. It’s not that vendor contract,” Dr. Tadese said.
She also required an operational owner for each tool.
“We can do this in our sleep. We’ve done so many implementations we can do it, but once we’ve done it, who measures the return on investment?”
HonorHealth has built a similar check. Leaders who argue for a technology investment now need financial projections the finance team agrees with, along with a look-back six to nine months later, Dr. Whitfill said.
“It’s not to punish anybody to say, ‘You sold us a bad bill of goods,’ but to say, ‘Are we making good decisions when we’re adopting technology?'”
For Ms. Stump, the push for savings comes down to the one lever health systems hold.
“Healthcare is that weird industry where we don’t control what we get paid. We can charge whatever we want, but the payer decides what they’re going to pay. The only thing we do control is our cost.”
