The healthcare industry is contending with simultaneous pressures that don’t resolve cleanly into a single strategic response. Organizations treating 2026 as a planning year, rather than a holding pattern, may find themselves better positioned when harder provisions of the One Big Beautiful Bill Act (OBBBA) take hold.
That framing emerged from a recent panel discussion hosted by Nixon Peabody among healthcare finance, advisory, legal, and investor leaders examining what current policy and market shifts mean for hospitals, providers, and transactions in the near and medium term.
The panelists were Alex Geier, Managing Director at GLC Advisors, who advises healthcare companies on capital structure and transaction strategy; Johnny Lee, Partner at Alix Partners, focused on financial and operational transformation in high-pressure environments; Valerie Breslin Montague, a healthcare partner at Nixon Peabody advising providers and investors on transactions and regulatory compliance; and Ming Zhang, Senior Credit Analyst at First Eagle Investments. Sharone Levy, counsel at Nixon Peabody, moderated.
Here is what the conversation surfaced.
Modeling the OBBBA impact
The financial modeling work underway at most hospitals and health systems is significant. Financial planning and analysis teams are estimating impacts across a range of scenarios, with most pointing to low to high single-digit reductions in net patient revenue, depending on geography, facility type, and payer mix. Hospitals serving large Medicaid populations in states like California and New York, and those in states already cutting Medicaid budgets such as Arizona, Iowa, and Nevada, face the steepest exposure.
The sequencing matters. Provider tax cap provisions take effect October 1 of this year, with a phase-down beginning in 2027. Medicaid eligibility changes and work requirements are expected to create the most significant operational disruption in 2027 and 2028. The contractual and infrastructure work that supports navigating those changes needs to start now.
State-directed payments and supplemental funding programs will be capped under OBBBA rather than immediately cut, but that cap will prevent states from using those mechanisms to increase provider support going forward. For facilities that have grown to rely on those funding streams, the ability to expand them is effectively gone. Skilled nursing facilities are largely exempt from the provider tax provisions, but managed care organizations and other partners are not, meaning SNFs will likely absorb some downstream rate pressure regardless.
Revenue cycle management under pressure
Well before the larger statutory changes arrive, strain is already visible in revenue cycle performance. Claim denial rates have risen, with some facilities reporting double-digit rates, particularly from Medicare Advantage payers. The cash flow impact is real, as is the operational burden of managing increased documentation requests, records reviews, and appeals.
Effective responses include more rigorous front-end eligibility verification, tighter charge capture, and closer monitoring of payer underpayments. On the contracting side, providers are increasingly pushing payers to agree to specific timelines for claim adjudication, with provisions for interest or penalties when those timelines aren’t met.
AI tools are beginning to address some of this work. Ambient scribing, which can reduce physician documentation time by 75 to 80 percent, represents one of the clearest near-term returns on AI investment in healthcare. Automation in prior authorization workflows is also gaining adoption. The returns on purely clinical AI applications remain less established, though radiology and patient flow management are among the more advanced areas. One health system reported cutting average length of stay by a full day through an AI-assisted pilot, though broader rollout will determine whether those results hold at scale.
Consolidation: Active but more constrained
Healthcare M&A activity has not slowed. Approximately 22 transactions closed in the first quarter of 2026, representing roughly $14.5 billion in combined revenues, the largest quarterly figure on record. As organizations weigh whether they have the resources and scale to manage the pressures ahead, healthcare consolidation remains a live strategic question at many board tables.
But the conditions for certain transaction structures have become considerably harder. Private equity acquisitions of nonprofit facilities face heightened scrutiny from state regulators, community organizations, unions, and local politicians who have grown more organized and more effective at opposing transactions they view as problematic. Several high-profile deals have failed in recent years, and proposed legislation would create criminal and civil penalties for private equity investors whose actions contribute to a provider’s failure.
State material transaction review laws are also expanding in scope. While some states focus specifically on nonprofit-to-for-profit conversions, others now capture pharmacy benefit managers, labs, dental practices, and certain management and administrative services arrangements. Parties to transactions need to account for state-specific filing requirements, public hearing obligations, and disclosure rules from the start of deal planning. What gets disclosed, and when, can affect deal economics, community relationships, and timing in ways that are difficult to manage if they’re treated as an afterthought.
The investor perspective
Operating performance across much of the healthcare sector heading into 2026 has been solid. Improved margins and stronger balance sheets followed the difficult years of 2023 and 2024, and credit spreads have tightened. But detailed public communication about how organizations plan to absorb the coming OBBBA impacts has been limited, a gap that investors are noticing.
Bond investors in this space are not adversaries. They can serve as capital partners as organizations invest in technology, revenue cycle infrastructure, or service line development. Management teams that communicate proactively about their risk exposure and mitigation strategies tend to find more flexibility when they need it.
Looking ahead
2026 requires holding several challenges at once: modeling policy impacts that are still phasing in, strengthening revenue cycle operations, assessing partnership and affiliation structures, and making technology investments that are increasingly necessary for operational competitiveness.
Organizations that move with clarity now, rather than waiting for the full picture to emerge, are the ones most likely to maintain their footing and their role in the communities they serve.