Health Policy and Regulatory Updates: Implications for Health Systems

May 2026

Policy and reimbursement dynamics in 2026 are placing sustained pressure on health systems—eroding coverage, compressing margins, and reshaping care delivery and operations. Collectively, these forces are compelling health systems to reassess service‑line profitability, access strategies, and payer‑mix exposure, leaving far less room for experimentation or misalignment.

Policy and Reimbursement Pressures

Coverage and payer‑mix shifts are emerging as a central challenge this year. The expiration of enhanced Affordable Care Act (ACA) subsidies on December 31, 2025 has driven higher uninsured rates in 2026, increasing uncompensated care and bad debt for many health systems, particularly in Southern and non‑expansion states.

At the same time, Medicaid expansion incentives have ended, while work requirements and more frequent eligibility redeterminations are taking effect. The result is greater coverage churn and increased administrative complexity for provider organizations.

These dynamics are further compounded by several Medicare and CMS policy changes:

• Medicare payment updates remain below the cost of care for hospitals and physician groups, with many organizations continuing to report margin erosion despite modest IPPS and OPPS increases
• Expansion of site‑neutral payments is accelerating the shift of procedures from inpatient settings to outpatient and ambulatory surgery centers, placing additional strain on traditional hospital‑based service lines
• 340B budget‑neutrality recoupment, initiated in 2026 at 0.5%, is prompting health systems to plan now for deeper reimbursement reductions beginning in 2027

Collectively, these pressures are reducing financial flexibility and increasing the urgency for disciplined portfolio and access decisions.

Clinical Implications

Clinical leaders are facing mounting pressure to align care pathways, utilization management, and outcomes measurement in ways that are both clinically sound and financially sustainable. As value‑based care moves from aspiration to operational reality, priorities are tightening around outcomes, appropriateness, and cost stewardship.  Key trends include:

• Value‑based care models such as MSSP, ACO REACH, ACCESS, and Kidney Care Choices now requiring demonstrated, continuous performance—not participation alone—with financial accountability tied directly to outcomes and equity metrics
• Expansion of quality and readmission measures that incorporate Medicare Advantage data, raising expectations for population health management and care coordination
• Heightened access and treatment challenges, as higher patient cost‑sharing and insurance churn increasingly affect treatment initiation, adherence, and follow‑up—particularly in chronic disease and specialty care

In response, health systems are standardizing care‑pathways more agressively, accelerating biosimilar adoption, and enforcing tighter formulary discipline to manage drug spend under constrained reimbursement..

Operational Impacts

Operationally, health systems are shifting from growth‑oriented strategies toward resilience, precision, and cost control. There is little tolerance for initiatives that do not demonstrate clear operational or financial impact. Persistent reimbursement shortfalls are driving:

• Labor and infrastructure strain, including hiring freezes or slower workforce expansion, greater reliance on productivity tools, AI, and automation, and delayed capital and technology investments
• Increased revenue‑cycle and administrative burden, as Medicare Advantage denials and prior‑authorization requirements continue to rise, extending time to payment and increasing back‑office workload
• Growing compliance complexity, driven by expanded price‑transparency mandates and electronic prior‑authorization requirements

To adapt, many systems are reassessing service‑line rationalization and prioritization, pursuing network consolidation and site‑of‑care optimization, and evaluating the long‑term viability of provider‑sponsored health plans amid sustained financial losses.

What This Means for Pharma–Health System Engagement

Against this backdrop, health systems in 2026 are becoming significantly more selective about who they partner with and how those partnerships deliver. They are looking for collaborators who can:

• Support access and affordability amid coverage volatility
• Align therapies to outcomes, care pathways, and total cost of care
• Reduce operational friction rather than add to it
• Speak fluently about risk, performance, and sustainability

Engagement strategies most likely to resonate with health systems include:

• System‑level orientation (not brand‑level selling): Demonstrating a deep understanding of enterprise priorities—margin pressure, site‑of‑care shifts, workforce constraints, and risk exposure—and positioning therapies within care pathways, population strategies, and broader system goals, rather than isolated product discussions. Health systems are elevating pharmacy into enterprise strategy alongside finance and ambulatory care, and they expect partners to do the same
• Outcomes‑aligned value beyond efficacy: Framing value in terms of total cost of care, downstream utilization, adherence, and operational fit—not clinical endpoints alone. This includes a willingness to engage in discussions around real‑world evidence, implementation considerations, and performance metrics as value‑based accountability becomes the norm
• Support that reduces operational burden: Offering services and solutions that simplify workflows—such as care‑pathway enablement, access navigation, implementation playbooks, and data‑integration support. Tools that help pharmacy and clinical teams manage biosimilar adoption, formulary transitions, and site‑of‑care optimization are particularly meaningful at a time when health systems are already stretched thin

In summary, with financial and coverage pressures converging and value-based accountability accelerating, partnership expectations are rising. Success requires moving beyond traditional engagement models toward partnerships grounded in operational relevance, measurable outcomes, and system-level alignment.

Connect with Petauri Kinect to learn more about how we can support your Health System strategy.