Unexpected macro-economic developments were top of mind for the hospital and health system strategy leaders we partnered with for much of 2025, even as long-range trends continued to transform healthcare delivery.
Uncertainty about the healthcare provisions of the One Big Beautiful Bill (OBBB) dominated the first half of the year along with the impact of tariffs, much as the bill’s passage has enabled clearer focus in the second half.
Throughout the year, interest in the impact of artificial intelligence (AI) took center stage, as did the imperative for organizations to understand the value of AI investments, a theme our colleague Erik Swanson recently explored.
As we look back at our forecast for 2025, we have been reflecting on where health system strategy aligned with our thinking 12 months ago, where we might have been ahead of the market, and where significant external events and trends shifted the direction of the industry.
Midsized systems embrace enterprise strategy. We observed numerous independent health systems with less than $5 billion in revenue prioritize setting their future enterprise strategy. Many of these systems are located in midsized metro areas that are not experiencing population growth and often include rural and/or critical access hospitals in their portfolio.
Surprisingly, much of this activity began during the first half of 2025 as the OBBB was taking shape, an encouraging sign of interest in charting a strategic path even at an uncertain fork in the road.
Being “intentional and proactive” as growth strategies sharpen: The health system leaders we are advising are thinking carefully about future growth, whether within their regions or in new markets. Leading organizations don’t want growth for growth’s sake alone — a theme we explored in our smart scale blog for making the most of greater scale.
“Intentional and proactive” is an apt description of the conversations we’re seeing in many C-Suites and boardrooms when it comes time to make major decisions on new growth initiatives.
But while many health system leaders and boards may have paused or given additional thought to more transformative efforts, we also witnessed a readiness to prepare to execute in the future, exemplified by the midsized systems noted above.
Ambulatory takes off and service line strategies sharpen. In 2025, many health systems took significant steps to grow their ambulatory footprints within their existing markets and beyond, as care continues to shift beyond the four walls of the hospital. Our colleague Lauren Clementi recently explored how health systems can leverage ambulatory-focused strategies to support a move from inpatient to outpatient care.
We also saw continued interest in service line strategies and optimization to drive growth and improve care coordination for patients, especially in core service lines like cancer, cardiovascular care, and women’s health. Looking ahead to 2026, there may be opportunities for organizations to advance these efforts in other service lines, including digestive health and behavioral health.
Balancing performance improvement, growth, and transformation. As we explored in our Bigger, Better or Different blog, executing any health system strategy requires a mix of performance improvement, growth, and transformation. Many of the providers we partnered with this year have been focused on both improvement and growth activities, while another segment has been more focused on both growth and transformation.
Predictions for 2026
As we turn the page to 2026, we all are taking stock of the significant amount of change that has taken place among hospitals and health systems. “Transformation” has become an oft-used term to describe what is happening and what health systems must do going forward.
As is often the case in healthcare, definitions and applications of transformation vary widely. Given the dramatic regulatory, care model, demographic, and technological changes underway, it is critical that health systems clearly define how they will transform to remain relevant in serving their missions.
Elements of transformation will take many forms, including:
- Shifting or prioritizing (and often narrowing) the scope of clinical services offered
- Deploying AI to fundamentally evolve the work done by physicians and other caregivers, and to alter the way patients experience healthcare
- Modernizing the operating model, particularly for large health systems that have grown quickly in recent years
- Identifying new sources of financial sustainability beyond incremental growth and/or performance improvement
Simply put, transformation is fundamental to every health system’s future—and how they operate, grow, and serve their patients.
We predict 2026 will be a year for leaders to consider the breadth of transformation needed ahead—and determine both what they do and how they do it.
Share your thoughts with us on the biggest health system strategy developments of 2025 and your predictions for 2026 at dan.clarin@kaufmanhall.com and amanda.steele@kaufmanhall.com.
