Healthcare executives today face a rapidly evolving policy and economic environment, marked by reimbursement reforms, research funding cuts, and inflationary pressures. As health systems prepare for the next 12 to 18 months, leaders are weighing difficult trade-offs while seeking innovative ways to sustain operations and deliver high-quality care.

In a panel discussion for the upcoming Transform Hospital Operations Virtual Summit (Sept. 16–17), Cecelia Moore, Chief Financial Officer and Treasurer at Vanderbilt University Medical Center, and Greg Hoffman, Chief Financial Officer at Providence, will share their perspectives on the challenges and opportunities ahead. In this Q&A, we spotlight a select few of their responses from this conversation.

Question: What do you see as the biggest financial pressures health systems will face in the next 12–18 months?

Cecelia Moore: The most pressing challenge is the potential for change. For us, the greatest uncertainty lies in indirect cost recovery for research grants – we have a large grant portfolio, and shifts here could be significant. Medicaid policy changes are also concerning, particularly around patient re-enrollment burdens, which could hit both reimbursement and patient access. Finally, changes to exchange-based plans may push younger, healthier patients out of coverage, shifting them into the uninsured population and raising uncompensated care.

Greg Hoffman: I echo much of what Cecelia noted, especially around Medicaid and the exchanges. At Providence, we’re also heavily impacted by inflation – both labor and supplies – as well as tariffs. With 70% of our patient volumes government-reimbursed, reimbursement reforms will have a major effect on us. That reality is pushing us to double down on transformation to ensure long-term sustainability.

Q: How large is the financial impact hospitals should expect from these policy changes?

CM: It depends on payer mix, but we could see a 3% to 8% shift in revenue, coupled with significant labor cost increases. That majorly impacts contribution margins that hospitals cannot offset by holding expenses flat.

GH: We’re bracing for wide-ranging impacts. For us, 10% to 17% of our Medicaid population could lose coverage. Systemwide, that could mean hundreds of millions of dollars annually in lost margin by the latter half of this decade.

Q: What will these changes mean for rural hospitals?

CM: I think many rural hospitals will no longer be sustainable as full-service facilities. We’ll likely see them shift toward emergency-only care, which leaves rural populations highly vulnerable. We’ve already seen examples where patients had to be airlifted from small hospitals to larger centers for critical care.

GH: In rural areas, it’s not just economics – it’s also staffing. Even if you can fund certain services, physician and nurse shortages make it hard to maintain them.

Q: How will delayed or avoided care affect hospital operations?

CM: We already see this in Tennessee, which did not expand Medicaid. Patients often present later with advanced disease, which increases emergency department (ED) utilization and inpatient admissions. Outpatient care is also impacted – oncology is one example, where patients often arrive at a later stage, requiring more intensive and expensive treatment.

GH: In three of our larger states, which were Medicaid expansion states, Providence saw measurable improvements in outcomes: patients were able to access preventive services, conditions were caught earlier, and long-term outcomes improved. With coverage rollbacks, we expect the reverse – patients presenting later and sicker, which will drive more acute episodes, crowd EDs, lengthen inpatient stays and increase costs.

Q: What tough trade-offs will health system leaders face in the years ahead?

GH: In the near term, we’re focused on inflation, productivity and discretionary spend. Longer term, we’re modeling the sustainability of different services. Some ministries may require partnerships or divestitures. For example, we formed joint ventures in home health and hospice and divested skilled nursing facilities to partners who could operate them more effectively.

CM: We’ve made similar decisions, such as pruning our hospital-at-home program and partnering for our durable medical equipment (DME) business. But our biggest focus is labor efficiency. Technology plays a critical role, and we’re piloting tools like ambient documentation and virtual nursing. If a pilot shows rapid, sustainable ROI, we invest and scale.

Q: How are you approaching capital investment and capacity planning?

GH: With financial pressure, we’ve avoided major facility expansions, focusing instead on solutions that increase throughput within existing capacity – such as leveraging LeanTaaS to optimize patient flow. At the same time, we’re shifting care to outpatient and lower-acuity settings, while strengthening high-acuity service lines like oncology and cardiology.

CM: Nashville is a fast-growing market, so we’ve had to add capacity – new operating rooms (ORs), a children’s tower and expanded bed space. But even as we expand, we’re careful to prioritize high-acuity services that only an academic center can provide, such as transplants. Efficiency remains essential, since demand continues to outpace capacity.

Q: What advice would you give peers preparing for these pressures?

CM: Prioritize labor efficiency and scenario planning. We’ve built multiple five-year plans under different assumptions so we’re ready to pivot as the environment shifts.

GH: I’d add that it’s critical to identify decision points early. Scenario plan now so you don’t get caught in 2027 realizing you should’ve acted in 2025. The pressures are real, but with planning and careful execution, we can navigate them.

Want to hear the full conversation? LeanTaaS Founder and CEO Mohan Giridharadas will moderate this critical discussion between Cecelia and Greg at Transform Hospital Operations Virtual Summit, September 16–17. Register here to secure your spot.

The post How health systems are navigating financial headwinds: A Q&A with Cecelia Moore and Greg Hoffman appeared first on Becker’s Hospital Review | Healthcare News & Analysis.