Amid industrywide uncertainty, health system CEOs are not shelving their five-year plans. They are reprioritizing them.
At the start of 2026, 1 in 3 U.S. health system leaders told Deloitte they were uncertain about the year ahead, up from just 3% a year earlier, according to the firm’s “2026 Global Health Care Outlook.” Twenty percent said their outlook was negative outright. The financial backdrop explains the anxiety: the median hospital operating margin closed 2025 at just 1.3%, based on Kaufman Hall analysis of more than 1,300 hospitals, a fragile footing that makes the stakes of every capital decision more consequential.
Across conversations with health system leaders, a consistent pattern has emerged: where executives once pursued multiple strategic bets in parallel, they are now sequencing them, proving one initiative before funding the next.
Erik Wexler took over as president and CEO of Renton, Wash.-based Providence in January 2025. He inherited a system that had come through what he calls the “polycrisis,” a period of simultaneous economic, regulatory and environmental disruptions, and spent the first part of his tenure focused on returning to financial sustainability. That focus came with deliberate trade-offs.
Providence had been planning an acute skilled nursing program in conjunction with Select Medical. The system pushed it back.
“We have been very, very selective about what we pursue, especially as we have been coming out of what I have called the polycrisis and getting our organization back to financial sustainability,” Mr. Wexler told Becker’s. “We felt that the focus that was necessary during our turnaround necessitated pushing this off just a little bit.”
The delay tempered Providence’s progress on length-of-stay reductions and care transitions for patients needing acute rehabilitation, Mr. Wexler said, though alternatives for those patients do exist. What the delay bought was harder to quantify but more consequential: Providence has posted three consecutive quarters in the black, with a fourth expected to follow.
“What we gained was keeping our eye on the ball of returning to sustainability and moving beyond break even,” he said. “Fortunately, we have had three consecutive quarters of being in the black. We believe the next quarter will be in the black as well, and so we think the delay allowed us actually to move forward with the investment.”
The bar for what qualifies as a sound bet has also shifted. When ideas surface at Providence, they move through an evaluation process that weighs utilization projections and gauges alignment with the system’s 2030 strategic direction, then escalates from a CEO council to the board of directors for commitments above $250 million. In calmer times, Providence had more appetite for risk. Now, the test is different.
“We are much more focused and disciplined on the places where we will invest,” Mr. Wexler said. “We are coming out of a retrenching mode, and even a period of shrinking a bit, and we are now moving into a growth mode, and so as we evaluate where we can grow, it’s really got to be very specific to meet our strategic objectives in the organization. Now, we’re more focused on ensuring that the core is supported and that the risk is within reasonableness, given the challenges that healthcare faces in the years ahead.”
Now in growth mode, Providence has three ambulatory priorities: diagnostics, including radiology; ambulatory surgery centers, where the system is actively seeking a partner for expansion; and virtual care, which Mr. Wexler said is expanding into behavioral health alongside an already-established primary care presence.
The system’s partnership with Compassus, structured as a 50-50 joint venture for home care, hospice and private duty services, was put in place during the turnaround itself. Mr. Wexler described it as “mission critical” as it supported the system’s core and ensuring patients are not lingering in hospitals, which drives up the cost of care.
Dover, Del.-based Bayhealth structures capital commitments around a parallel financial discipline: major projects have built-in exit points, and investments must clear formal fiscal tests before advancing. President and CEO Terry Murphy told Becker’s the system runs its strategic plan in direct coordination with its financial plan.
“Our major building expansion on our Kent Campus has natural off ramps to use if fiscal conditions deteriorate more than expected,” Mr. Murphy said. “Our fiscal tests are tied with our Standard & Poor’s financial profile (financial performance, liquidity, and debt and liabilities), but also considers return on investment and improvements in access or quality when deciding to advance an initiative.”
Eric Dickson, MD, president and CEO of Worcester, Mass.-based UMass Memorial Health, made a similar call: delaying the addition of inpatient beds at one campus while redirecting toward home-based programs instead.
“Like many health systems across the country, we are navigating significant financial headwinds, so we are prioritizing investments that help us sustain and strengthen operations in today’s environment,” Dr. Dickson told Becker’s. “At the same time, we have prioritized programs designed to meet people where they are and reduce unnecessary inpatient admissions, including remote patient monitoring and mobile integrated health.”
Those programs run at a financial loss, he said, but the loss is significantly lower than the cost of caring for the same patients in a hospital setting. Dr. Dickson has a name for the underlying logic.
“We’re calling this ‘shrinkenomics,'” he said. “Improving our finances by shrinking inpatient admissions. Most importantly, patient outcomes and satisfaction are significantly better when caring for conditions like congestive heart failure and chronic obstructive pulmonary disease in the home.”
Tulsa, Okla.-based St. Francis Health System is taking a similar approach: finishing committed hospital capacity projects over the next 18 months before redirecting new capital to its next phase, President and CEO Cliff Robertson, MD, told Becker’s in December.
The pattern is instructive. Systems with the financial stability to sequence are executing the current phase before committing to the next. Those still working through financial distress are running the same playbook out of necessity, deferring expansion until the core can support it.
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