Key takeaways
- Medicaid cuts will put new financial pressure on healthcare organizations in 2027, forcing hospitals and other providers to find new revenue or reduce spending.
- Better technology, partnerships with other organizations and alternative funding sources can help providers soften the impact of Medicaid cuts and become more resilient.
- Over the next 12 months, healthcare CEOs should build — and begin executing — a strategic plan to improve their organization’s long-term financial trajectory.
Medicaid cuts will hit healthcare budgets hard in 2027. The pressure is real, but it isn’t the whole story: providers willing to adapt still have room to build resilience and find new opportunities.
Read our 2027 healthcare industry trends guide to learn more, including key industry challenges ahead, opportunities worth pursuing and practical steps CEOs should take over the next 12 months.
What are the top challenges for the healthcare industry in 2027?
Medicaid cuts are the industry’s biggest challenge. Providers will also have to contend with a 340B revamp and growing consumer pressure on pricing. Here’s what leaders need to know:
- Medicaid cuts: States must implement new federal Medicaid work requirements no later than January 1, 2027, in most cases. These requirements are part of an ongoing series of cuts that will reduce total Medicaid spending by an estimated $1 trillion over a decade. The work requirements are projected to push 5.3 million people off Medicaid.
- Proposed 340B revamp: The 340B program allows hospitals to bulk-purchase certain prescription drugs at a 25-50% discount. Under pressure from pharmaceutical companies, HHS is pushing to revamp it. The change could affect $100 billion in annual drug purchases and create steep new costs for hospitals and other eligible participants. A group of hospitals is suing to stop it.
- Consumer pricing pressures: Healthcare organizations will have to compete more on price to avoid losing patients. A high cost of living and rising insurance premiums are making consumers more cost-conscious and greater pricing transparency has made it easier to shop around.
These are serious hurdles. But don’t assume the industry’s outlook is bleak.
What are the biggest opportunities for the healthcare industry in 2027?
Flexibility will be a major advantage in 2027. Healthcare organizations that pursue new revenue streams, partnerships and efficiencies will be better positioned than those that stand still.
The opportunities below work best as connected parts of one financial strategy, not as a checklist.
Rural health transformation funds
The same legislation that authorized roughly $1 trillion in Medicaid cuts also created a $50 billion funding pool to help rural hospitals and other qualifying organizations adapt to the loss of Medicaid funds. This money is disbursed by the federal government to individual states, which will then set up their own processes for distributing funds to healthcare organizations.
Despite the name, organizations don’t necessarily need an exclusively rural patient base to qualify. The money can be used for technology, innovation, workforce development and improving care outcomes, making it a logical starting point for funding the investments discussed below.
Partnerships with other healthcare organizations
Partnerships can deliver new efficiencies or revenue streams. Where two providers in the same area offer similar or complementary services, leaders should discuss whether collaborating would let them serve more patients or cut costs.
Alternative state and local funding
Even as Medicaid cuts squeeze budgets, state and county health agencies may have other funding to draw on. For example, ask the local health department whether it has a maternal health or vaccine program that local providers could deliver services for.
M&As
In some cases, a partnership may make sense to develop further through a merger or acquisition. More FQHCs, in particular, are taking this route, which lets two organizations doing similar work benefit from economies of scale, more efficient administration and more resources for patient care.
Revised payment mix
More Medicare or private insurance revenue can help offset lost Medicaid dollars. Leaders should review their organizational structure to identify where the payment mix could shift toward Medicare and private insurance.
Better technology
Pursuing any of these opportunities starts with clear financial data. Large hospitals are experimenting with AI, virtual visits and other advanced technologies, but many organizations still lack the modern digital foundation that’s needed to operate efficiently and effectively.
A practical first step toward building that foundation is transitioning to an up-to-date enterprise resource planning (ERP) platform. An ERP can improve financial performance by making it easier to understand costs, compare them to industry baselines and find efficiencies or revenue leakage. It can also connect to procurement, asset monitoring and budgeting systems, giving CFOs the data they need to control expenses.
Embedded behavioral health
Embedding behavioral health into frontline medical care can also open new funding sources, especially for providers that achieve certification as a Certified Community Behavioral Health Clinic (CCBHC). Emergency rooms and other care settings that may meet qualifying criteria are experimenting with implementing this model, as patient behavior affects both other patients and a hospital’s ability to deliver care.
Action steps: How should healthcare CEOs take action to help their organizations succeed in 2027?
The next 12 months call for strategic planning and resiliency. Here’s how to get started building both. These steps build on one another, moving from understanding where your organization stands to acting on it:
1. Find out what inaction looks like
Start with the cost of standing still. Use forecasting to see where your organization will be in five years under business-as-usual, with Medicaid cuts factored in. Leaders need to know whether they can afford not to change.
2. Establish an organizational baseline
Assess current costs, finance capabilities and technology. Then compare that baseline with peers and with your organization’s strategic goals.
3. Create a strategic plan
Use the forecast and baseline to build a plan for improving your organization’s financial trajectory. That plan will typically include a stronger technology foundation, experimenting with AI, better financial systems like an ERP, partnerships and new revenue streams.
4. Look for partnerships
Identify healthcare organizations in your area that could share resources. If it would allow both organizations to operate more efficiently, consider whether a merger or acquisition makes sense.
5. Build stronger community relationships
Before Medicare and Medicaid, hospitals were largely supported by community dollars. With Medicaid funding under pressure, now is a good moment to deepen those relationships again. That can include delivering specialty services beyond traditional hospital care or even offerings like cooking classes or childcare — anything that provides value and puts underutilized facilities to work.
6. Be proactive about Medicaid cuts
Don’t wait for the Medicaid cuts to take a toll. Act early when possible — for example, by helping current Medicaid patients learn how to meet the new work requirements so they can keep their coverage.
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We advise healthcare organizations on performance, financials, resiliency, technology and growth. Let’s talk about the challenges ahead and how we can help in 2027. Start a conversation.