The Pivot: The (im)perfect storm hospitals face in 2026 and 2027

At Unlock, we spend a great deal of time and resources tracking emerging trends and connecting the dots between disparate issues in society and the healthcare industry. It is not hyperbole to say that we have not seen a period of time with more risk for hospitals, and more financial challenges, than what we are seeing right now. This is the (im)perfect storm that started brewing in 2025 and will be a full-blown hurricane by 2027.

What are all these disparate issues we need to plan for? Here’s a brief list:

• Medicaid disenrollment (and the resulting increase in uninsured) and the unwinding of matching programs
• ACA disenrollment as a result of the premium subsidy sunset (and the resulting increase in uninsured)
• Cost inflation caused by supplier consolidation, drug costs, and tariffs (maybe)
• Medicare Advantage meltdown (with yields dropping to 75%-ish of Medicare for many organizations)  
• Price caps on premium increases and rates as blunt instruments, even in heavily red states like Indiana
• Pressure on payors to reduce MLR to boost earnings and return to strong growth
• The new 913-page CMS rule including site neutral payments, 340b impacts, and….

You get the idea.

In many ways, we think 2026 and 2027 will look more like the pre-ACA environment in 2007-2008 than any year we’ve experienced since. The ranks of the uninsured will grow considerably, maybe by as many as 20 million people between Medicaid disenrollment and exchange customers losing their subsidies (and as a result, their coverage). The need for the cost shift will be greater than any year in almost two decades, at the very same time the payors are fixated on bringing down unit prices and reducing what they pay for care.

While all this is coming quickly down the pike, much of the reporting on the healthcare industry is still looking backward. Consider the recent coverage of the annual Kaufman Hall report:

“For most of the country’s largest nonprofit health systems, 2024 will go down as a year of substantial revenue growth, solid margin improvements and some noteworthy dealmaking… The increasing scale of operations was accompanied by greater expenses, though a tighter handle on pain points like labor costs helped many systems boost their full-year operating margins by an average 9% compared to the prior year… For nonprofit hospitals specifically, Fitch Ratings reported median operating margin flipping from negative to positive among rated organizations, as median revenue grew and personnel costs claimed a smaller share of total operating revenues. While the overall picture suggests increasing stability after a period of pandemic disruption, industry watchers have warned that not all provider organizations are improving. Credit agencies’ rating actions more often reflected downgrades (95) than upgrades (37) across 2024. And a performance gap among hospitals that came to the forefront in 2023 still appears to be widening… The country’s 10 largest nonprofits are, generally, catching the rising tide… As for their scale, these major systems grew their total operating revenues by a collective 10.6% from fiscal years 2023 to 2024 — outpacing the 8.4% increase between fiscal years 2022 and 2023.”

When you read this, you probably react like I did — sounds like things are pretty good for hospitals, right? Yet, the current hospital environment is a “tale of two cities,” with some systems doing reasonably well and nearly 40% of hospitals functionally bankrupt. Next year and the year after, it will be much tougher to find those systems who are doing quite well. For those of us who are old enough to remember it clearly, it feels like the Balanced Budget Act of 1997.  But on steroids, nicotine, and Red Bull.

Sifting through all the noise and preparing for the coming storm seems daunting, so let’s look at just one issue: Medicaid.

First, one source recently projected the Medicaid impacts on AMCs to be a 3% hit to the bottom line. If that’s true, it’s greater than the most recent operating margin for CommonSpirit, Trinity, Ascension, Providence, and Advocate. In fact, three of those organizations had negative operating margins for the most recent quarters. This just pours gas on the fire.

More frequent eligibility checks and the looming work requirements will produce exactly what they were designed to produce — millions of people disenrolled and billions of dollars of care shifting to bad debt. According to The Keckley Report’s sharing of the KFF analysis of Census Bureau data, 44% of Medicaid recipients under 65 were working full time in 2023 and 20% were working part time. Another 29% weren’t working because of caregiving responsibilities, school attendance, illness, or disability. About 8% were unemployed owing to retirement, an inability to find work, or other reasons. The idea that there is some large pool of Medicaid recipients who should be working, and are not, is simply fiction.

These big changes coming in the (im)perfect storm are exacerbated by the erosion of trust in institutions and experts we’ve highlighted in our new book, Authentic Healthcare Marketing. As our friend Paul Keckley outlined in his June 29 newsletter:

“Healthcare has hit a perfect storm at a time when a majority of the public associates it more with corporatization and consolidation than caring. This coalition includes Gen Z adults who can’t afford housing, 17 million at risk of losing their insurance coverage this year and next, small employers who’ve eliminated employee coverage due to costs and large, self-insured employers facing 10-20% health cost increases, state and local governments grappling with increased costs for public programs like Medicaid and SNAP, schools, the public employees in utilities, transportation, homeland security and public works seeing their co-pays and premiums go up and many more. It’s a strong, diverse coalition that’s finding its voice in local elections and national movements.”

Let’s zoom back out and consider that Medicaid coverage losses are only one of a long list of high-impact issues we outlined early in this screed. It’s clear that hospitals, health systems, and healthcare providers of all stripes have a challenging 18-24 months ahead, and new strategies will be required to navigate this period. There is a need to:

• Promote a new narrative in the media and social media
• Counter the attacks from payors and groups like Arnold Ventures
• Get people engaged
• Create strong advocacy for legislative and regulatory changes that protect consumers and providers alike.

In the coming weeks, we will unpack other issues, particularly the end of the ACA premium subsidies and the looming threats to tax exempt status for hospitals. Yet there is no time to waste preparing for the (im)perfect storm.

We have a small window of time to map new plans and adjust our marketing and managed care strategies before the real impacts start to hit. There is no time to waste.