Healthcare is entering a tumultuous phase. Many leaders have experienced budget constraints or policy shifts before, but they are happening on a different scale now. More than half of provider revenue comes from federal programs, and the basis for this support is changing. Medicaid funding is expected to decrease by nearly a trillion dollars over the next decade. Early signs suggest the cuts may not stop there.
Organizations need to adapt. Some of this work involves day-to-day operations; some involves how to support care teams; and some involves rethinking financial assumptions that have been made for years. As the year unfolds, groups starting to sort through these issues now will have an easier time adapting.
Federal support plummets
In 2026, the financial picture will become clearer. The Big Beauty Act took away approximately $911 billion from Medicaid over ten years. Federal analysts also expect significant cuts to Medicare starting in 2027 unless Congress enacts new legislation. Hospitals, clinics and senior living operators who rely on these programs to maintain stability will soon feel this shift.
The hospital will feel it first. It should be noted that once reliable repayments are generated, it will enter the bad debt column. Rural facilities are located in the most exposed locations. Their payer structures are closely tied to government programs, and many programs already operate on razor-thin profit margins. About 300 are thought to be at risk of immediate closure. Congress earmarked $50 billion to help rural providers, but the funding did little to offset the scale of the cuts.
Coverage changes add more pressure. Medicaid work requirements will narrow eligibility. ACA subsidies are set to expire at the end of 2025 unless renewed, and premiums could soar if Congress doesn't act. This creates immediate problems for patients and a second layer of complexity for senior living communities, which rely on predictable insurance coverage to manage admissions and reimbursement processes.
Reductions in food aid will widen gaps in basic health needs and force more people to visit already overcrowded clinics and hospitals.
Get ready for a year of structural change
Healthcare can produce remarkable results. It also creates inefficiencies that fade away when funding stabilizes. By 2026, these inefficiencies will be even harder to ignore. Most organizations need a clear review of what they do, how they do it and which assumptions no longer hold.
Reevaluate funding and long-term income
Federal programs will remain the primary source of support, although not all models can be supported at current levels. A helpful starting point is to determine how much income depends on Medicaid and Medicare, and then see what other options are available.
Philanthropy can close the short-term gap, but it cannot replace the size of federal funds. Some organizations are beginning to focus on unused corners of campus: continuing education partnerships, community programming, renting space for outside groups. These ideas won't solve the broader funding problem, although they can help build a more stable foundation.
The situation for rural hospitals is more complex. Some may need to revisit the old governance structures that once allowed access to local tax support.
Reintegrate into the community
Hospitals, clinics and senior living providers have an important presence in the surrounding community. As budgets tighten, this relationship becomes even more important. Some organizations are trying to play a broader role in community health: nutrition programs, activity groups, social connection efforts, small initiatives that strengthen trust and demonstrate local value. Senior living operators have long used such programs, and their experience may provide a practical template for others considering a similar approach.
Rethink operations
Operational work will occupy a large portion of leadership's attention. Staffing challenges, rising costs and management requirements are occurring simultaneously. Leaders may need to examine which technologies can remove friction, or which staffing methods can be changed. Some organizations are experimenting with automated documentation tools, regional shared services models, or selective outsourcing to ease the burden on their teams. The goal is simple: protect health services and invest limited funds where they matter most.
Use an outside perspective
Many organizations will hire outside consultants this year. Policy shifts are large and technical, and an outside perspective can help quantify the implications of these changes, outline options and stress-test assumptions. Consultants also have a broader perspective and can share what similar systems are trying, what works, and what doesn’t.
Leading through uncertainty
The team is aware of the stress in the system. Clear, steady communication from leadership helps keep people on the same page. Transparent conversations about the issues facing the organization and the steps being taken make large-scale adjustments easier to make.
2026 will reshape parts of the healthcare landscape. There's no doubt it's stressful. There is also room for organizations to rethink how they deliver care, how they support the populations they serve, and how they invest limited resources. The choices made in the coming months will impact which organizations emerge from this period and stably continue their missions in a very different environment.
Photo: rudall30, Getty Images
Kelly Arduino has over 20 years of experience working with healthcare and senior living organizations. She is an industry leader in Wipfli's healthcare practice, which combines the strengths of advisors and CPAs to provide financial and strategic services to clients. Kelly is a former investment banker with expertise in financing options and debt structuring to assist in the assessment of project feasibility and capital plan development.
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