Tag Archives: AI

Are Hospitals Sacrificing Tomorrow’s Leaders to Solve Today’s Problems?

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As hospitals and health systems flatten their organizational structures to control costs, they risk weakening the pipeline that develops future leaders.

KEY TAKEAWAYS

Leadership development has become a recurring priority in conversations with hospital CEOs as workforce challenges evolve beyond staffing shortages.

Administrative restructurings are reducing middle management roles, creating fewer opportunities for emerging leaders to gain operational experience.

Hospitals need to treat leadership development as a workforce strategy and invest more intentionally in preparing the next generation of decision-makers.

One topic that has been part of nearly every conversation I’ve had with hospital and health system CEOs over the years has been the clinician workforce shortage. But as we’ve moved further into the post-COVID-19 era and workforces have somewhat stabilized, I’ve noticed another workforce challenge emerging that is eliciting real long-term concern among organizations: the lack of a leadership pipeline.

Hospitals are being forced to reckon with the next workforce question. After recruiting and retaining clinicians through a period of unprecedented disruption, who will prepare the next generation of leaders?

I’m not talking about leadership capacity at the highest levels, although elevated hospital CEO turnover and overall C-suite churn are major threats to organizational stability in their own regard. That’s a conversation for another day. The potential leadership gap that I’m referring to resides more in the middle of organizations, where positions are increasingly being hollowed out and deemphasized, lessening opportunities for future leaders while removing layers of on-the-ground contact with frontline workers.

During my interviews with hospital CEOs, leadership development has continuously surfaced as a priority. Organizations are thinking about how to develop managers, strengthen clinician leadership, and create pathways for emerging leaders to take on greater responsibility.

At the same time, hospitals are making tough calls around their administrative structures to mitigate financial pressures, with labor costs often the biggest driver of rising expenses. Over the past year or so, I’ve covered restructuring after restructuring. The details change, but the pattern that remains fairly consistent is that the positions being eliminated often sit between frontline caregivers and the executive suite.

It’s understood why those positions are the ones on the chopping block. Having leaner organizations where the talent is concentrated on the front lines and at topmost levels makes sense when resources are limited. But while the balance sheet may benefit in the short term, the consequences of “The Great Flattening” are likely to be felt when today’s emerging leaders have fewer opportunities to become tomorrow’s executives.

Reducing waste remains a focus, but as Fairview Health Services president and CEO James Hereford recently told me, layoffs must be weighed with careful consideration.

“On the people side, we’re such a labor-intensive business, the temptation is always if you have economic issues, you look at what levers you can pull,” Hereford said. “You start to say, ‘Okay, well people, that’s a huge expense.’ It is, but if you put people in a bad system and then you blame the people, that’s not an equation for success. So we concentrate a lot more on the system.”

“That’s the that’s the danger, right, is you make too many cuts on the people side and then you actually damage your ability to do the things you’re there to do. And we’re trying to be very careful about making sure that we don’t make those kinds of changes.”

The Need for Intentional Leadership Development

That tension—between hospitals pursuing restructurings and the downstream costs on leadership—is not exclusive to healthcare, of course. This is happening across corporate America.

I’ve also wondered if the flattening of workplace hierarchies accelerates leadership development by placing more power and responsibility on all employees, not just managers.

However, the stakes in healthcare differ wildly from other industries. There’s a fine line between honing the leadership skills of a working clinician and overburdening someone who is already prone to burnout. Without specific opportunities for clinicians to willingly take on leadership duties, development can become more fragmented and random.

If flatter organizations are here to stay, there has to be more intentionality with leadership development. Without those management layers, it’s incumbent on CEOs and C-suites to more directly invest in emerging leaders. Succession planning shouldn’t be limited to the top of the organizational chart.

It also means recognizing that leadership capacity is a workforce issue. A hospital can address staffing challenges and still be on the back foot if it doesn’t have enough leaders prepared to guide employees through change.

Healthcare has spent years focused on having enough people to provide care. Going forward, I’m convinced it requires equal attention on preparing the people who will lead those teams.

Is the Payer-Provider Battle of the Bots Driving Healthcare Costs Higher?

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With commercial medical costs projected to increase 9.0% in 2027, patients are feeling the financial squeeze from administrative friction generated by the payer-provider AI arms race.

KEY TAKEAWAYS

PwC projects a 9.0% commercial medical cost trend for group plans in 2027, driven by structural inflators like AI-enabled documentation tools, rising specialty pharmacy costs, and IDR payments. 

As payers aggressively deploy AI-driven pre-payment reviews to combat rising costs, providers are automating their defenses, creating an expensive administrative arms race that fails to lower systemic costs for the consumer.

To navigate this financial squeeze without alienating their communities, health systems must shift away from back-end collections and prioritize transparent, empathetic pre-service financial clearance.

Last year, PwC projected a 8.5% medical cost spike in the commercial group market. Unfortunately, the professional services company’s forecast for the next year does not suggest there will be any relief for rising healthcare costs.  

According to PwC’s latest Medical Cost Trend: Behind the Numbers report, the 2026 group cost trend has been retroactively adjusted upward to 9.0%. Looking ahead to 2027, health plan actuaries expect that 9.0% growth rate to sustain in the group market, alongside an 8.5% increase in the individual market.

With historical deflators, like biosimilars and site-of-care shifts now fully embedded into the baseline, the cost environment heading into 2027 represents a structural shift rather than a temporary spike, according to the report. 

Five Cost Inflators in 2027

Health plan actuaries point to five distinct inflators driving medical costs higher across the commercial sector.

1. AI-Enabled Revenue Optimization 

While revenue cycle leaders may say that payers started the battle of the bots, provider use of AI-powered scribes and ambient documentation tools are leading to higher E/M levels and higher-severity DRG assignments. Consequently, health plans are seeing higher billed allowed amounts and increasing per-member-per-month trends without a corresponding change in actual care utilization or contracted rates.

2. Provider Reimbursement Pressures 

Hospitals continue to face elevated labor expenses and rising input costs for drugs and supplies. To offset these structural costs, health systems are leveraging market consolidation to negotiate higher commercial reimbursement rates.

3. Surging Pharmacy Costs 

Pharmacy trend continues to outpace overall medical trend. Spending on cancer medicines alone reached $143 billion in 2025. Additionally, high-cost GLP-1 therapies are expanding well beyond obesity treatment, securing FDA approvals for cardiovascular disease and chronic kidney disease.

4. Behavioral Health Utilization 

Between 2018 and 2024, behavioral health visit rates increased by 62.6%. Unlike other medical categories that are driven by unit cost, the behavioral health trend is actively fueled by sustained increases in patient utilization.

5. IDR Arbitration 

The No Surprises Act’s Independent Dispute Resolution (IDR) process has become a significant revenue driver for providers. Providers won roughly 88% of payment determinations in the first half of 2025. A 2025 report found that IDR had generated $5 billion in costs, including $2.24 billion in direct payments to providers. 

Looking at the Bigger Picture

While AI has been sold as a tool to improve efficiency, the technology has so far driven an expensive administrative arms race rather than acting as a systemic cost deflator. On the health systems side, providers are using AI-powered scribes and documentation tools to capture greater complexity and patient acuity. Meanwhile, health plans are deploying their own technology to auto-triage complex claims, detect billing anomalies, and flag provider outliers before funds are ever released.

Administrative friction between providers and payers ultimately causes patients to delay or interrupt necessary clinical care. It is critical that payers and providers work together to prevent this, according to Ryan Thompson, Chief Revenue Cycle Officer at Providence. 

“It’s incumbent on both payers and providers to identify what we can do differently to mitigate that friction that causes patients to interrupt or delay care,” Thompson says.

This puts revenue cycle leaders in a tricky position, where they are expected to drive collections from cash-strapped patients without alienating local communities by focusing solely on revenue optimization. 

To counteract the 2027 cost trajectory without damaging patient trust, health systems must prioritize transparent, pre-service financial clearance. Ryan Klein, Senior Director of Patient Access and Financial Experience at UW Health, emphasized that leaning into empathy and flexibility ultimately protects both the patient and the bottom line.

“An experience-first approach, I don’t think it undermines revenue goals,” Klein stated. “I think it just simply sets up the patient to contribute to their out-of-pocket liability in the way that best works for them.”

What Revenue Cycle Leaders Need to Know About the IDR Final Rule

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The Federal IDR Operations final rule introduces vital changes to fees, batching, and eligibility, but a lack of federal enforcement leaves providers battling payers for post-decision payments.

KEY TAKEAWAYS

The final rule slashes administrative fees and relaxes batching constraints to make pursuing lower-dollar claims much more financially viable for providers.

Payers must now provide essential claim details upfront to streamline eligibility determinations and reduce administrative friction.

Revenue cycle leaders should advocate for legislative action to hold payers accountable because the new rule lacks mechanisms to enforce post-decision payments.

While there is a significant administrative lift that comes with navigating the Federal Independent Dispute Resolution (IDR) process comes with a heavy administrative lift, the system has proven to be a significant driver of recovered revenue for providers.

To address operational friction for all parties, federal regulators have finalized the Federal IDR Operations rule. This update includes adjustments designed to standardize data, clarify timelines, and streamline the process.

For revenue cycle leaders, understanding these updates is essential to maintaining compliance and optimizing cash flow without adding unnecessary overhead.

Open Negotiation and Communication 

The final rule mandates that all parties use the federal open negotiation portal to initiate the dispute process.

This requires providers to submit standardized data elements, creating a uniform communication channel. By centralizing the exchange, regulators aim to move away from the chaotic web of emails and spreadsheets that have often complicated early-stage resolutions.

Clarifying Eligibility 

Determining IDR eligibility has been a time-consuming step for revenue cycle teams, but the final rule shifts more responsibility to payers.

Payers must now provide essential claim details at the time of the initial payment or denial. This includes the Qualifying Payment Amount (QPA) and specific remittance codes indicating whether a claim falls under state or federal jurisdiction. This upfront transparency allows providers to accurately assess eligibility before committing resources to a dispute.

Reducing IDR Fees 

Perhaps most notably, the final rule reduces the non-refundable administrative fee to just $15 per party, per dispute. This represents an 85% drop from the previous $115 rate.

While the final rule establishes that these fees will now be collected earlier in the workflow to maintain system capacity, the lower financial barrier to entry makes it far more viable for providers to pursue arbitration for lower-dollar claims. Ultimately, this allows revenue cycle teams to seek out-of-network reimbursements without the fear that the administrative cost of the dispute will eclipse the potential recovery.

Revamped Batching Rules 

New batching rules will help providers to more efficiently manage IDR costs and consolidate efforts by relaxing previous constraints and offering clearer guidelines for grouping claims.

Providers can now batch items and services billed under the same or similar service codes. To qualify, these claims must involve the same provider and the same payer, and they must have occurred within a specified 30-day window.

Enforcing the Cooling-Off Period 

The NSA originally established a 90-day cooling-off period following a final determination to help manage dispute volumes.

The final rule explicitly clarifies how this timeline is triggered and applied. Providers cannot continuously submit the same disputed item or service code for the same payer once a determination is made. Revenue cycle teams will need to refine their internal tracking processes to ensure compliance with the cooling-off window and avoid administrative dismissals.

Will Payers Play Nice? 

While the final rule clarifies details of the IDR process, it neglected to address comments from providers calling for an enforcement mechanism. Health systems are increasingly winning their IDR cases, only to find that payers are simply refusing to remit the owed amounts, according to Kathy Stull, manager of revenue cycle and analytics for HFMA. 

“Instead of even getting the incorrect payment, they’re not going to pay anything,” Stull noted during the recent HFMA Region 1 Annual Conference.

If payers fail to make post-decision payments, revenue cycle leaders and health system government relations teams should advocate for H.R. 4710, a proposed bill that would impose civil monetary penalties on insurers for every instance they fail to pay following an IDR loss.

Hospitals Are Operating More Efficiently, Yet Financial Performance Is Still Lagging

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Hospitals reduced expenses and improved throughput in March, but rising uncompensated care and worsening payer mix are limiting margins, Kaufman Hall’s latest data reveals.

KEY TAKEAWAYS

Hospital margins improved in March, but year-to-date performance remains below 2025 levels despite operational gains.

Expenses declined month-to-month, potentially signaling short-term stabilization, though drug and supply costs are significantly higher year-over-year.

Health systems are being pushed toward targeted resource allocation and outpatient-focused service-line strategies.

Hospitals are showing signs of stronger operational discipline in early 2026, but those gains have yet to translate into meaningful financial growth.

While margins improved modestly and expenses dipped slightly month-to-month in March, hospitals continue to face persistent pressures like an eroding payor mix and a rise in uncompensated care that are offsetting operational progress, according to Kaufman Hall’s latest National Hospital Flash Report.

The average monthly operating margin, inclusive of health system allocations for the cost of shared services, increased from 1.8% in February to 2.9% in March. That jump pushed the adjusted year-to-date operating margins to 1.7%, up from 1.3% in February. However, Kaufman Hall’s data shows hospitals are well below 2025 levels overall, highlighting that recent gains have not been enough to reverse financial headwinds.

Expenses declined across the board on a month-to-month basis, suggesting some short-term stabilization after earlier increases. Decreases were seen in total daily expenses (4%), daily labor expenses (2%), daily non-labor expenses (5%), daily supply expenses (1%), daily drug expenses (1%), and daily purchased service expenses (8%).

Still, costs remain elevated on a yearly basis, particularly related to drugs (10%) and supplies (11%). Even with the March dip, expense relief has been uneven and not yet sustained enough to materially improve margins.

At the same time, hospitals continue to demonstrate incremental operational improvements. The report found a 2% reduction in average length of stay month-over-month and a 3% drop year-over-year. Meanwhile, daily outpatient revenue stayed flat in March but rose 12% year-over-year, indicating efforts to improve throughput and shift care to lower-cost settings. Adjusted discharges increased 4% year-over-year in March, and equivalent patient days per calendar day fell 3% month-over-month and 2% year-over-year, pointing to gains in capacity management and patient flow efficiency.

Less encouragingly, hospitals are still contending with higher levels of bad debt and charity care, which jumped 18% year-over-year, reflecting a worsening payer mix and ongoing challenges with government payers relative to commercial reimbursement.

“Hospitals continue to see the effects of payor mix erosion and cost pressures,” Erik Swanson, managing director and data and analytics group leader at Kaufman Hall, said in a statement. “Proactive steps to strategically allocate resources and manage spend, through areas such as length of stay, outpatient care and growing expenses, will continue to be key.”

Regional variation is also a defining feature of the current environment. The Northeast posted margin improvement despite historically weaker financial performance, while hospitals in the West saw the most pronounced increases in drug expenses. Those two outliers showcase the uneven cost and revenue forces across markets.

For hospital leaders, the latest data is further evidence that operational improvement alone is unlikely to fully restore margins right now. Many health systems have already spent the past several years striving to improve efficiency in areas like staffing and throughput, meaning future gains may be harder to achieve through traditional cost-cutting alone.

Instead, executives must prioritize more targeted resource allocation and service-line strategy, especially as hospitals invest more in outpatient settings.

Why Atlantic Health’s CEO Is Treating Innovation as a ‘Cultural Shift’

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Saad Ehtisham says the nonprofit health system is looking beyond typical ROI benchmarks for determining worthwhile investments in AI and digital tools for operational growth.

KEY TAKEAWAYS

Atlantic Health views innovation as an organizational and cultural transformation effort rather than simply a technology initiative.

The system’s AI investments are focused on reducing friction across care delivery, including clinician documentation burden and patient scheduling delays.

CEO Saad Ehtisham sees workforce resilience and consumer access as long-term strategic returns, alongside traditional financial performance metrics.

For many health systems, innovation has become shorthand for digital expansion and AI deployment designed to create a return on investment. At Atlantic Health, president and CEO Saad Ehtisham frames that approach in another way.

“We’re looking at innovation much differently than most systems are and not as a tool, but as a cultural shift,” Ehtisham told HealthLeaders.

That philosophy is driving the New Jersey-based health system’s use of technology to improve workflows for clinicians while simplifying access for patients.

Investment, according to Ehtisham, is flowing into ambient listening tools, workflow automation, digital scheduling capabilities, and AI applications aimed at reducing friction across care delivery.

A Happier Workforce is a Better Workforce

One of Atlantic Health’s biggest strategic priorities involves workforce sustainability.

The system has emphasized upskilling employees and encouraging leaders to think beyond traditional operational silos, Ehtisham highlighted. The organization wants managers and staff members to develop enterprise-level understanding that allows them to grow internally rather than looking for opportunities outside the system.

“What we want to do is make sure our team members don’t stay in the vertical expertise that they’re framed in, but they have the ability to cross-train into a different vertical and be able to grow in their acumen,” Ehtisham said.

Technology investments have become integral to that workforce strategy.

Atlantic Health recently piloted ambient listening tools that document physician-patient conversations during appointments. While many organizations evaluate those platforms through productivity or revenue gains, Ehtisham is more interested in the impact on clinician experience and long-term sustainability.

“How does that make our clinicians’ and physicians’ lives a lot easier and their flow throughout the day?” Ehtisham said. “Does that reduce their pajama time where they can spend more time with their families instead of having to be in their computers?”

Atlantic Health is also exploring agentic AI capabilities that can respond to certain administrative patient questions through Epic’s MyChart platform. The goal is to reduce after-hours inbox management that contributes to physician burnout.

“It is increasing the resilience of our physicians and that will in turn increase their ability to want to practice longer and want to be with the system,” Ehtisham said. “So that’s our ROI. And I don’t think you can put a dollar value on that. You probably could, you get a mathematician, you can quantify that through some algorithm. I would rather not.”

That same mindset has influenced nursing operations.

Atlantic Health has deployed robots capable of retrieving supplies and handling tasks that frequently pull nurses away from bedside care, Ehtisham noted.

“Twenty-five percent of the time our nursing or any nurse in any health system is spending is non-patient facing,” he said.

By supplementing those activities through automation, the system can allow its team members to focus on taking care of the patient and performing at the top of their license.

As Ehtisham puts it, staff are more likely to produce 150% output if they’re working at 90% of their capability from a resource intensity standpoint, and happier in what they do.

Pictured: Saad Ehtisham, president and CEO, Atlantic Health.

Opening the Digital Front Door Wider

Atlantic Health’s innovation strategy extends into consumer access.

One of the earliest operational changes implemented under Ehtisham involved measuring the next available appointment within 30 days across clinics and reducing delays that prevented patients from getting timely care.

“That was one operational lever we pulled early on,” he said.

According to Ehtisham, improving appointment access generated gains in consumer experience while contributing to stronger financial performance.

“We’re beginning to see it from consumer experience,” he said. “They’re much happier being able to get in when they want to be seen.”

The system is now experimenting with on-demand self-scheduling capabilities designed to better connect patients with its ambulatory infrastructure.

Atlantic Health continues to expand outpatient locations anchored around primary care as well. Many of those sites include rotating specialty services, imaging, laboratory capabilities, and physical therapy offerings intended to create centralized outpatient destinations.

The organization’s digital ambitions also include patient-facing AI applications.

Ehtisham said Atlantic Health is looking at developing its own version of Claude or ChatGPT, capable of guiding consumers toward the appropriate level of care based on conversations occurring through the platform. He envisions systems eventually using those interactions to direct patients toward physician appointments or virtual visits while simultaneously transferring relevant information into the clinical workflow before the encounter begins.

“We know consumers are going on those platforms and typing in, ‘I have this, what should I be?’” Ehtisham said. “That’s a platform that’s being engineered by non-healthcare providers systems. We’d rather get into that technology.”

Keeping Financial Discipline in Focus

Even as Atlantic Health expands technology investments, Ehtisham acknowledged the tension many health systems face when balancing the pursuit of innovation with financial realities.

“Healthcare is the only place where you bring in technology, the cost goes up versus going down,” he said. “We’re trying to invert that thinking.”

That influences how Atlantic Health approaches vendor relationships and operational deployment. Ehtisham said the system prefers working more deeply with select partners capable of improving workflows end-to-end, rather than as a one-off.

He pointed to operational throughput as one example. The organization is evaluating how technology can reduce bottlenecks beginning in the emergency department and continuing through inpatient discharge processes. Smoother patient flow can improve experience while generating financial yield through shorter lengths of stay, Ehtisham stressed.

“It starts creating this pipeline of revenue streams and future predicted models that’s going to be coming through market share that you’re going to be gaining over time,” he said. “It doesn’t happen overnight. But you have to commit to what you’re trying to do.”

Innovation can’t happen without resourcing though, which is why Atlantic Health has dedicated annual capital dollars specifically toward technology investments tied to operational improvements.

“It’s more of a derivative,” Ehtisham said. “You’ve got to generate so much operating margin in order to invest in that,” creating a direct link between financial discipline and innovation capacity.

Why Hospitals Are Targeting Leadership, Administrative Jobs in Latest Layoffs

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As financial challenges persist and clinical labor remains difficult to replace, many hospitals are turning to restructuring for cost savings.

KEY TAKEAWAYS

Care New England, Washington Regional Medical System, and Intermountain Health all announced layoffs that prominently affected administrative functions.

Hospitals are increasingly embracing “The Great Flattening,” consolidating nonclinical roles to reduce overhead while preserving frontline care capacity.

While leaner organizational structures may improve efficiency and speed decision-making, reducing leadership layers can also create operational strain and place added burden on remaining staff.

Three notable health systems announced layoffs in recent days, and in all three cases, management and leadership roles were largely affected. Even as labor costs continue to climb, clinical talent remains scarce, making administrative jobs often the primary target of workforce reductions.

Healthcare, and hospitals specifically, are not immune to “The Great Flattening” impacting corporate America. Companies across industries have spent recent years trimming down middle management, if not outright eliminating those positions, for the purpose of creating leaner workforce structures and cutting overhead.

In the case of hospitals, many have taken the step to consolidate functions that aren’t directly tied to delivering patient care.

The trend became particularly visible over the past week with Care New England, Washington Regional Medical System, and Intermountain Health all initiating reductions.

Providence, Rhode Island-based Care New England eliminated more than 30 leadership and nonclinical positions as part of a restructuring to address financial pressures and help close an estimated $20 million budget gap for fiscal year 2026. System president and CEO Michael Wagner said in a statement that “current financial conditions have made additional cost-saving measures unavoidable.”

Elsewhere, Washington Regional Medical System announced a restructuring plan that included 86 job cuts through consolidation of management and support functions. “By restructuring our management operations and consolidating roles, Washington Regional will reduce redundancies and optimize efficiency while still providing the high-quality care our community has come to expect,” Lucas Campbell, president and CEO of Washington Regional, said in the announcement.

At Intermountain Health, the 93 positions that were eliminated amid clinic closures and operational changes in Colorado and Montana looked a little different. While clinical roles were affected as part of the restructuring, the organization also pointed to leadership and administrative consolidation to improve efficiency and better align resources.

Though the circumstances surrounding the three systems differed, the overlap across the layoffs was the emphasis on leadership restructuring and administrative streamlining.

The logic behind these restructurings is straightforward: clinical workers are difficult to replace, whereas administrative costs often represent one of the few areas where organizations can still reduce spending relatively quickly.

According to Kaufman Hall’s latest National Hospital Flash Report for March, hospitals are operating more efficiently, but financial performance is still being weighed down by rising expenses. Length of stay, for example, was down 3% year-over-year, indicative of improved throughput. However, that clinical efficiency requires adequate staffing, and that labor is costly, as seen in a 4% rise in labor expense per calendar day year-over-year.

To just maintain their thin margins, hospitals are being forced to cut costs in areas that won’t directly hinder patient flow. That’s why administrative restructuring is often viewed as a less disruptive path toward reducing overhead while sustaining operational efficiency.

The result can also be a faster decision-making structure, allowing organizations to be strategically nimbler during a time when moving slow can leave hospitals behind the curve.

Still, the benefits come at a price. The loss of leadership and management may not be felt in financial performance immediately, but over time, it can create operational strain and place additional burden on remaining leaders and frontline staff.

For hospital executives, the question they must answer is how far their organization can streamline before efficiency gains start to create new organizational pressures.

Healthcare Workforce Modernization Needed

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Healthcare Workforce Modernization Needed

Last week, the war in Iran intensified and Kristi Noem’s tenure as DHS Secretary came to an unceremonious close. Perhaps lost in the noise was the February jobs report issued Friday by the U.S. Bureau of Labor Statistics. It showed a surprising decline in job growth prompting speculation the economy might have taken a downward turn. Some headlines….

  • Payrolls unexpectedly fell by 92,000 in February; unemployment rate rises to 4.4% (CNBC)
  • Employers Cut Jobs in Sign of a Shakier Economy (New York Times)
  • Paychecks keep rising for American workers, providing boost to household budgets (Fox Business):
  • The U.S. economy lost 92,000 jobs in February, stoking labor market worries (NBC News)
  • The US economy lost 92,000 jobs in February and the unemployment rate rose to 4.4% (CNN)

Anticipation that the jobs report portends bad news for the economy followed the news cycle all day and through the weekend. And a few, like Axios, went further: “The surprise to many was where the biggest since job growth especially in healthcare and social assistance had buoyed the labor market for 3 years.” Others attributed the decline to hangovers from recent nursing strikes (USC Keck, Kaiser Permanente, MarinHealth) and layoffs by many health systems.

To industry insiders, the BLS jobs report’s capture of declines in healthcare hiring was no surprise. Operating cost reduction has been a strategic imperative in every hospital, long-term care, ancillary and medical group since the pandemic (2020). In tandem, investments in workforce productivity enhancements via technology-enabled workforce redesign and performance-based compensation have elevated human resource management to C-suite status in most organizations. It’s understandable:

Healthcare is capital intense: it needs appropriations from government and in-flows from employers and individual taxpayers to pay its bills. Most of that pays for its labor costs. Today, most Board agenda include updates on labor relations, human resource management issues and workforce adequacy—it’s standard fare. And all weigh options to outsource and devour progress reports from HR management on AI-enabled investments anticipated to reduce labor costs.

Healthcare is highly regulated, especially in workforce activities, and labor-management relationships impact organizational performance and reputation. Every sector in healthcare is regulated by combinations of federal, state and local rules, laws and agency directives that define roles, responsibilities, decision-rights and constraints of its workforce. It’s complicated by the politics of healthcare which avoids policy changes that threaten protections sought by each labor cohort in healthcare. Protecting funding and restricting infringement on scope of responsibility by unwanted outsiders is the primary rationale for professional society’ advocacy efforts. In hospital and long-term care settings, the healthcare workforce is a cast-system that keeps doctors at the top of the pyramid, licensed mid-levels in the middle and everyone else below. In other healthcare settings, executive-level designations dominate hierarchies, and in some Boards play roles in workforce structure and compensation schemes. Workforce modernization in most healthcare settings is acknowledged as a critical need but most default to layoffs and fail to enact a comprehensive strategy.

Looking ahead, technology will alter the status quo for workforce modernization efforts in healthcare:

1-Less dependence on physician recommendations. Might patients access customized clinical decision support tools more widely in the future and make more choices themselves (especially if incentives support self-care)? Might other sources of clinical counsel be more accurate, more accessible and less costly in the future, prompting acceptance (trust and confidence) by patients? Physicians and other caregivers will play key roles, but in concert with tools and processes that enable consumer engagement.

2-More access to verifiable cost, price and value information. The underlying costs and prices for healthcare services are unknown to their caregivers at the points of care so the majority of transactions require pre-authorization by a third-party adjudicator with payments that follow. Physicians bear no responsibility for advising patients about costs and prices: theirs is exclusively the domain of clinical counsel. Thus, labor costs in healthcare presume third party payments, middlemen, incapable self-care and work rules that reinforce old ways and torpedo better ways of work. Might the role and scope of insurer activity be integrated with delivery so that “costs and quality” are directly accountable to providers? Might primary and preventive health hubs (physical + behavioral + nutrition + prophylactic dentistry + self-care enablement + insurance) become the centerpieces of community health replacing traditional insurers and hospitals? Where will the workforce choose to work?

Per the Healthcare Workforce Coalition (www.healthcareworkforce.org), healthcare workforce shortages are a near and present danger to the U.S. health system: shortages of physicians, nurses and allied health professionals are significant, especially in rural areas. The 18-million who constitute the healthcare workforce today are being told to work harder with less. It’s no secret.

In the Affordable Care Act (2010), Title 5 (Section 5101), healthcare workforce modernization was authorized: “The purpose of this title is to improve access to and the delivery of health care services for all individuals…” Subtitle B authorized creation of a 15-member National Health Care Workforce Commission to recommend modernization policies. It would have coordinated workforce initiatives across federal agencies (HRSA, CMS, MedPAC, MACPAC, GAO, et al) along with states and private sector operators to address long-term issues and short-term execution challenges. The Commission never met because its funding was not authorized by Congress.

If the overall economy is dependent on healthcare to produce an appropriate share of job growth while reducing overall costs, modernizing its workforce is key. It must include unpaid caregivers, licensed and unlicensed providers and technology-enabled solution providers—not just traditional licensed professional groups and their academic partners. That’s not going to happen in the current political environment where each sector’s primary focus is protecting reimbursement and guarding against scope of practice threats.

The health system needs transformation. Workforce modernization is where to start.

Paul

P.S. My journey as a heart patient continues to teach me just how far we have to go as a “system.” Understanding what I have been billed for, by whom, when and why is like reading Russian. As best I can see, $267,490.30 has been charged by the hospital and 13 different doctors who’ve treated me in some way.  How much I end up spending after rehab et al remains a mystery but it’s not remotely close to the hospital’s “price estimator” tool. Little wonder consumers are frustrated about healthcare costs pushing its affordability to the top of their Campaign 2026 concerns.

The health care hiring boom is losing steam

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The health care job growth that’s powered the labor market since the COVID pandemic is stalling out.

Why it matters: 

Republican cuts to federal health programs, AI automation and rising costs are making health systems and other employers level off hiring — including for jobs requiring a professional license like nurses or physical therapists.

  • The results could widen gaps in care and exacerbate health disparities.

By the numbers: 

Health care employment drove most of the month-by-month job growth last year, increasing by an average of 34,000 jobs per month, according to the Bureau of Labor Statistics.

  • But that’s less than health care’s monthly average increase of 56,000 roles in 2024.

Health care hiring has essentially returned to a pre-pandemic pattern of slower growth after a post-COVID surge driven by returning patients and hospitals replacing burned-out workers, said Neale Mahoney, an economics professor at Stanford.

  • “It was only a question of when … and we’re starting to see it now,” Mahoney said.

Federal policy changes could further chill hiring.

  • Hospitals face financial pressure from the nearly $1 trillion cut to federal Medicaid spending in the GOP budget law. That’s combined with rising costs from treating more uninsured patients and other factors.
  • New caps on federal student loan borrowing could also push students away from clinical careers, many of which require pricey advanced degrees.
  • It wouldn’t be a surprise if a rise in deportations — combined with fewer foreign-born health workers opting to come to the U.S. on visas — dried up the pipeline of available help, especially in segments like home care.

Case in point: 

Alameda Health System, a safety-net provider based in Oakland, California, announced last month that it’s laying off 247 employees, including clinicians.

  • Administrators cited the system’s precarious finances: It expects to lose $100 million annually by 2030 as a result of the Medicaid cuts, per CBS San Fransisco.

AI automation is also pushing some providers to cut administrative staff.

  • Revere Health, the largest physician-owned health system in Utah, announced in September that it will lay off 177 employees, citing a partnership with a company that automates claims processing.
  • Clinical jobs in health care are more insulated from automation, and AI may actually help extend the clinical workforce where shortages exist.
  • Still, some clinicians are concerned. Almost 15,000 nurses in New York City went on strike this month, demanding new safeguards around AI use in hospitals, among other things.

What they’re saying: 

This past year represented “a repositioning of the labor market,” said Rick Gundling, chief mission impact officer at the Healthcare Financial Management Association.

  • Health systems are doing more targeted hiring, he said. They might look to downsize in revenue management but increase their clinical staff.

The intrigue: 

Demand for care is still high. The “silver tsunami” of aging Baby Boomers may keep jobs plentiful, said Laura Ullrich, director of economic research in North America at the Indeed Hiring Lab.

  • The U.S. is projected to be short some 100,000 health care workers by 2028, after all.
  • The question is whether the sector will remain near full employment, or whether circumstances will drive another surge.
  • “My opinion as an economist is that the tailwinds are stronger than the headwinds in health care,” she said.

The top 5 takeaways from J.P. Morgan’s 2026 healthcare conference

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Last week, J.P. Morgan hosted its 44th annual healthcare conference, with over 500 companies and 8,000 people in attendance to discuss health system performance, pharmaceutical trends, and new AI offerings. 

The State of the Healthcare Industry in 2026

Health systems outline current performance, future plans

According to STAT, many health systems took a measured tone at this year’s conference, focusing largely on stability and consistency, especially in the face of significant Medicaid funding cuts from the One Big Beautiful Bill Act.

“For me, it’s been about stabilizing,” said Kevin Smith, CFO of SSM Health. “Taking a look at the operations, doing a lot of blocking and tackling. Getting back to the basics.”

Separately, Paul Rathbun, outgoing CFO at AdventHealth, said that “[i]t all begins and ends with consistent financial performance.” He also emphasized sustainability and the importance of a solid foundation to handle future uncertainty.

As hospitals and health systems face financial challenges, many are focusing on boosting efficiency and reducing expenses. For example, Intermountain Health is focusing on optimizing its supply chain and simplifying healthcare with value-based arrangements.

Some health systems, like CommonSpirit Health, are planning to sell some facilities to help boost finances and expand ambulatory networks. Providence is also considering selling some of its assets, potentially including some hospitals.

“We have 51 hospitals, most of which have No. 1 market share in their communities, but we do have a handful that we may have to find a different purpose or different sponsors for,” said Providence CFO Greg Hoffman.

Other health systems, like Mass General Brigham and Hackensack Meridian, are aiming to expand their partnerships with other providers or outside organizations. Currently, Mass General Brigham has a new ambulatory care venture with Tampa General Hospital, and Hackensack Meridian is planning to add 20 new primary care clinics in New Jersey with Amazon One Medical.

Top CMS officials meet with hospital, insurance leaders

At the conference, CMS Administrator Mehmet Oz, along with four top members of his staff, hosted an event with hundreds of top hospital and health insurance leaders to discuss the Trump administration’s healthcare policies.

During the event, Oz downplayed the potential impact of upcoming Medicaid cuts, saying that they won’t be felt for at least a year and a half. “The catastrophizing over the idea that it’s going to rip the guts out of the system, I don’t think that’s fair,” he said.

CMS leaders also discussed efforts to combat fraud, the Trump administration’s focus on deregulation, recent vaccine changes, and more. 

“The catastrophizing over the idea that it’s going to rip the guts out of the system, I don’t think that’s fair.” 

According to David Joyner, CEO of Hill Physicians Medical Group, the general mood among attendees was skeptical and pessimistic, particularly about cuts to Medicaid and the impact of declining Affordable Care Act membership. At the same time, people were curious and optimistic about CMS’ potential to promote new innovation and technology that could address some of the healthcare industry’s most persistent challenges. 

AI offerings continue to expand

AI was a large focus of the conference, with many organizations announcing new tools or collaborations.

At the conference, Anthropic announced Claude for Healthcare, a new AI model that includes HIPAA-ready infrastructure for enterprise customers, native integration to commonly used medical and scientific databases, and a model specifically trained for healthcare and life sciences tasks.

The new model follows Claude for Life Sciences, which was launched last October. Anthropic also announced new capabilities for life sciences, which ranged from preclinical research and development and regulatory affairs.

According to Eric Kauderer-Abrams, head of biology and life sciences at Anthropic, healthcare and life sciences are one of the company’s largest bets.

“Anthropic is a very natural fit for the healthcare and life sciences world because our identity as an AI company is built around safety and responsibility and rigor and reproducibility, and these are all the central tenants of the healthcare and life sciences industries,” Kauderer-Abrams said.

Currently, several healthcare organizations already use Anthropic’s Claude model, including Banner Health, Novo Nordisk, and AbbVie. At the conference, Elation Health announced that it integrated Claude into its EHR to create chart summaries and clinical insights.

Other AI companies at the conference also announced new expansion efforts. For example, Hippocratic AI, which develops patient-facing generative AI healthcare agent, said it acquired Grove AI, a startup that provides agentic AI for pharma research and development and clinical trial operations. According to Hippocratic, the acquisition will help it build its life sciences division and accelerate the use of generative and agentic AI in the biopharma and med tech sectors.

Separately, Open Evidence said it plans to move toward “medical super-intelligence” by building its AI platform on top of a group of specialist medical AI models (oncology, neurology, radiology, etc.) instead of a single centralized model.

Pharma companies discuss new products, drug pricing deals

According to Johnson & Johnson (J&J) CEO Joaquin Duato, 2026 should be a better financial year for the company as it focuses on three high-growth areas for its med tech business: cardiovascular, surgery, and vision. Currently, J&J has around a dozen upcoming product launches across its med tech and innovative medicine businesses, including its new Ottava Robotic Surgical System.

Separately, BioNTech, which is most known for developing a COVID-19 vaccine with Pfizer, is turning its attention to cancer treatment. The company has an $11 billion partnership with Bristol Myers Squibb for its bispecific PDL1-VEGF antibody.

Pharmaceutical leaders also discussed the “most favored nation” (MFN) deals they signed with the Trump administration to reduce the prices of certain prescription drugs.

Paul Hudson, CEO of Sanofi, said that while it may sound like everyone won with these deals, there were compromises from both sides.

“I would say the government got what it needed, and we worked very hard to make sure that we could still deliver what we think is an attractive investment thesis for the company without breaking stride,” Hudson said. “So it was a very difficult needle to thread. I don’t want to give the impression that there’s no impact from MFN, because the question for us is: Can we manage that and deliver an attractive long-range plan?”

Christopher Boerner, CEO of Bristol Myers Squibb, had a similar view. “​​I think what we did with the agreement we signed at the end of last year is find a way to balance the interest of the administration in ‘most-favored nation’ with, obviously, what’s best for the company, but importantly, how can we find ways to provide real value to patients?”

The digital health market ramps up

In 2025, digital health investments reached $14.2 billion in funding, a 35% increase from 2024 and the highest total since 2022. Last year, there were 26 megadeals, or those that raised over $100 million, and 15 new “unicorn” companies, or those valued at over $1 billion, up from just six in 2024.

Although the digital health market is still below its pandemic-era peak, there was significant growth in the market in 2025, largely driven by excitement around AI, according to analysts from Rock Health. The analysts also noted that there is a growing concentration of power in the digital health space, with certain companies having outsized influence.

“On one side, AI-native upstarts attracted huge rounds at unprecedented speed, a handful of companies broke the IPO drought, and private equity made major moves, signaling real bets on an emerging ‘winner’ class,” wrote Rock Health analysts Megan Zweig, Jacqueline Kimmell, and Maddie Knowles. However, on the other side, “… many companies are still grappling with valuation overhangs from prior cycles while operating in a more competitive market.”

Why Main Street’s pain matters

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Illustration of a hanging sign that reads "Main St." swinging and hanging from one chain

The economic fortunes of mom-and-pop businesses are diverging from those of their larger counterparts — a pre-existing gap that now appears to be getting bigger, faster.

Why it matters: 

The evidence is in the private-sector labor market, that in recent months, has been propped up by large companies as smaller firms — typically responsible for 40% of U.S. employment — shed workers.

The big picture: 

Larger businesses have been able to adapt to a tough economic backdrop — historic tariffs, high interest rates and a more cautious consumer — in ways far more challenging for small companies with fewer resources.

  • “It’s evident that medium and large firms are better positioned to weather what’s going on,” said ADP chief economist Nela Richardson.
  • “They can set prices, they can change suppliers. They can hire contractors instead of permanent employees in a more sophisticated way. They can hire globally, not just in their local region. They have more tools in the toolbox,” Richardson said.

By the numbers: 

The hiring gap between small and big businesses is getting worse, a fresh sign that small business firings are holding down jobs growth across the economy.

  • As we mentioned yesterday, the private sector shed 32,000 jobs in November, according to payroll processor ADP. Small firms — those with fewer than 50 employees — accounted for all of the losses.
  • Those businesses reported a net loss of 120,000 jobs, the most small businesses have cut since the pandemic’s onset. Larger businesses grew, but not enough to offset the cuts elsewhere.

“Small business hiring really started to slow in April and I attribute some of this to tariffs and the higher cost of doing business that small companies are much less able to absorb,” Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, wrote in a note.

  • “The natural reaction is to cut costs elsewhere and we know that labor is their biggest cost,” Boockvar added.

The intrigue: 

Bloomberg recently reported that there are more small businesses filing for bankruptcy under a special federal program this year than at any point in the program’s six-year history.

  • Subchapter V filings, which allow firms to shed debt faster and cheaper, are up 8% from last year, according to data from Epiq Bankruptcy Analytics.
  • Chapter 11 filings — a process used by larger businesses — are up roughly 1% over the same time frame.

Threat level: 

Main Street is bearing the brunt of an economic slowdown in ways that might make it even harder for small shops to compete with larger companies.

  • One bright spot: Despite that pain, applications to start new businesses — ones likely to employ other people — remain notably higher than in pre-pandemic times, according to the latest data available from the Census Bureau.

What to watch: 

The Trump administration shrugged off the ADP data that indicated a hiring bust. Commerce Secretary Howard Lutnick told CNBC that the cuts were due to factors unrelated to tariffs, like immigration crackdowns.

  • That hints at a debate among monetary policymakers, who are trying to gauge how much weak jobs growth is a byproduct of fewer available workers.
  • But ADP had earlier told reporters that small businesses generally had less demand for workers — not that staff weren’t available for hire.