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What You Should Know

• The Reality: The U.S. healthcare system is in a “structural pressure” cooker. While patient outcomes are improving (mortality down 33%), the financial model is fracturing under the weight of an aging population and rising supply costs.
• The Shift: 2026 marks the end of the “Megadeal” era. Hospital M&A has pivoted to distressed asset acquisitions, while successful systems are moving toward vertical partnerships rather than buying more hospitals.
• The Future: AI is the only viable lever left to reduce waste, with investment projected to grow from $20B to $100B by 2030—but only if workflows are redesigned to match the tools.

New Margin Math: The Trends Resetting Healthcare’s Financial Foundation

A sweeping new report from Vizient, the nation’s largest provider-driven performance improvement company, suggests the industry has reached a “perfect storm.” The report, titled New Margin Math: The Trends Resetting Healthcare’s Financial Foundation, paints a picture of a sector where traditional levers for growth—like raising prices or acquiring competitors—are failing.

“The current moment requires leadership that can deliberately guide their organizations through critical choices,” said Byron Jobe, President and CEO of Vizient. The choice is no longer about growth for growth’s sake; it is about “redesigning operating models” to survive a structural reset.

The Demographic Time Bomb

The primary driver of this “New Margin Math” is an inescapable demographic reality. The U.S. population is aging, and the bill is coming due.

According to a joint analysis by Vizient and Sg2, the 65+ population will drive the majority of hospital-based utilization growth by 2035. This includes a projected 20% increase in inpatient discharges and a 34% jump in observation stays.

• The Problem: This shift moves demand toward lower-margin government payers (Medicare) just as operational costs are exploding.
• The Paradox: Quality is actually improving. Since 2019, patient mortality has declined by one-third and hospital-acquired infections have fallen by 20%. Hospitals are saving more lives, but they are losing money doing it.

The End of the Megadeal

Perhaps the most startling finding comes from Kaufman Hall, a Vizient company, regarding the state of mergers and acquisitions. The era of the “Megadeal” (transactions over $1 billion) has collapsed, declining by more than 60%.

Instead of healthy systems buying healthy competitors to corner a market, 2025 saw a pivot to distressed assets. M&A is no longer a growth strategy; it is a rescue mission. Deal revenue fell nearly half year-over-year as organizations focused on “capital-light” vertical partnerships rather than heavy asset acquisitions.

The $100 Billion AI Bet

With labor costs stabilized at a “new high” and drug/supply expenses continuing to outpace reimbursement, where can leaders turn? The report points to one remaining frontier: Artificial Intelligence.

Vizient projects that U.S. healthcare AI investments will skyrocket from $20 billion in 2025 to approximately $100 billion by 2030. This surge is driven by the potential to address nearly $300 billion in annual waste, specifically in administrative complexity.

However, the report offers a crucial caveat: “Realizing value depends on redesigning workflows and operating models, not simply deploying tools”. The message is clear: You cannot buy an AI tool to fix a broken process. You must fix the process, then apply the AI.