The storm continues to pass through the US healthcare system. The pressures identified in our series of “gathering storm” articles1 first became visible in provider economics and have since moved into payer margins and patient affordability. According to McKinsey analysis, provider EBITDA fell to $241 billion in 2022 before recovering to $350 billion in 2025, while payer EBITDA fell from $60 billion in 2022 to $9 billion in 2025.2 This is not a uniform cycle: As one segment rebounds, pressure is often transmitted to another through reimbursement, pricing, utilization, or coverage.
The forces sustaining that pressure are structural. The 2026 US federal deficit is forecast at $1.9 trillion, or 5.8 percent of GDP, and US debt has crossed $40 trillion, constraining fiscal flexibility even as healthcare spending rises.3 Healthcare delivery productivity declined about 1 percent annually from 2019 to 2025, compared with 2 percent growth in the broader private economy.4 Meanwhile, national health expenditures (NHE) per capita rose roughly 3.5 times from 2000 to 2025, yet healthy life expectancy improved by only eight months.5 The system is spending substantially more without a commensurate increase in healthy life.
Industry economics are likely to remain depressed relative to their prepandemic level. EBITDA represented 10.9 percent of NHE in 2019 compared with 9.6 percent in 2025. We project nominal EBITDA growth in the coming years, but that should not be mistaken for a restoration of historical economics.
The outlook in this report assumes material management action. For providers, margins could potentially increase by 50 basis points of incremental reimbursement from payers and by up to 100 basis points from productivity gains and technology-enabled operating redesign. For payers, portfolio shifts, product optimization, and selective exits could contribute up to 200 basis points of margin improvement. For both providers and payers, these would be sizable net improvements despite continuing challenges. But without management action, the underlying trajectory shown in our projections would be weaker.
Value will continue to migrate toward business models that enable care delivery in lower-cost settings or operate the system more efficiently. Ambulatory surgery center (ASC) EBITDA is projected to grow 6.7 percent annually from 2025 to 2030 versus 3.7 percent for hospitals. During the same period, specialty pharmacy drug spending is projected to grow 9.6 percent annually versus 7.0 percent for traditional drug spending,6 while applications of AI are expected to shift toward software, platforms, data, and technology-enabled services. US healthcare is not returning to its old equilibrium; value will accrue to the organizations that find ways to turn financial pressure into increased productivity and better patient outcomes.
Several healthcare segments are expected to face financial pressure
We estimate that overall healthcare EBITDA7 will grow 7 percent annually from 2025 to 2030 (Exhibit 1). But the trajectory will be uneven. EBITDA growth is expected to slow to 4 percent annually through 2027 as disenrollment from Affordable Care Act (ACA) policies and Medicaid policy changes weigh on payer and provider economics before accelerating to 9 percent annually from 2027 to 2030. Healthcare services and technology (HST) and pharmacy services should see relatively steady growth through the period. Provider growth is weighted toward the latter half of the decade, while payer EBITDA is projected to recover from a depressed 2025 base.
Payers
Payer profitability has undergone a historic reset. Total EBITDA fell from about $62 billion in 2023 to $33 billion in 2024 and to $9 billion in 2025 as growth in medical costs outpaced premium pricing and government rate updates. The year 2025 was the trough; major risk-bearing segments collectively turned unprofitable for the first time this decade. EBITDA could increase to about $84.5 billion by 2030, although the recovery will be uneven.
The deterioration reflects higher utilization, rising provider unit costs, GLP-1 and specialty pharmacy growth, and behavioral health demand, compounded by adverse shifts in risk pools across Medicaid and the ACA and by higher-than-anticipated out-of-network payment awards under the No Surprises Act’s independent dispute resolution process.8 The year 2026 marks an inflection point as payer pricing begins to catch up with medical-cost trends, supported by substantial group and ACA premium increases and continued benefit and product optimization. More meaningful EBITDA improvement should emerge in 2028 as these actions flow through.
We expect the group commercial segment to lead the recovery, supported by improving fully insured underwriting and continued growth in higher-margin administrative-services-only (ASO) and stop-loss businesses. The Medicare Advantage (MA) segment should also gradually recover from 2025 losses, although margins may remain below historical levels. In contrast, ACA and Medicaid segments face the greatest disruptions in enrollment and risk pools, driven by subsidy expiration for ACA and eligibility changes for Medicaid.
Overall, the subsector’s recovery will depend on pricing discipline, business mix, scale, and medical-cost management, with diversified earnings streams providing greater resilience as industry profitability rebuilds through 2030. At the same time, price increases run the risk of further enrollment decline, particularly in the small group category.
Providers
Provider EBITDA continued to recover from a low of $241 billion in 2022 to $322 billion in 2024 and $369 billion in 2025 as patient volumes normalized, reimbursement rates improved, and labor and inflationary pressures moderated. Still, profitability remains below prepandemic levels. The recovery will be uneven. EBITDA will face renewed pressure through 2027 as ACA subsidy expiration and Medicaid disenrollment increase the number of those without insurance and the rate of uncompensated care, with additional downside from potential Medicaid reimbursement changes and site-neutrality policies.
Beyond 2027, margins should gradually improve as commercial enrollment recovers, annual rate increases flow through, and providers capture further operating efficiencies. But reductions in Medicaid state-directed payments could temper the recovery. Provider EBITDA continues to shift toward lower-cost ambulatory and home-based settings. ASCs are gaining higher-acuity procedures as payers steer care toward lower-cost sites and as the Centers for Medicare & Medicaid Services (CMS) expands the ASC Covered Procedures List, broadening the range of procedures eligible to migrate from hospital settings. In postacute settings, home health, hospice, and assisted living facilities (ALFs) are expected to see increased demand from aging demographics and patient preference for home-based care. Within physician practices, specialty and ancillary-rich (for example, lab and imaging services) models are emerging as growth engines, while traditional primary care remains relatively lower-margin. Together, these shifts are reducing the relative contribution of traditional acute and institutional settings to overall provider EBITDA.
Healthcare services and technology
HST is expected to remain the fastest-growing subsector in healthcare. We estimate that revenue will grow 7 to 8 percent and EBITDA 9 to 10 percent annually, increasing revenue pools to more than $500 billion and EBITDA pools to more than $120 billion by 2030. Underlying that growth is a shift in mix from legacy outsourced services toward data and analytics, software platforms, and technology-enabled services. The rapid emergence of AI is accelerating this broader trend and is expected to increase the variability of revenue and EBITDA growth outcomes for HST companies. HST players face a rising displacement risk if they do not adopt AI at scale; on the other hand, there are margin expansion opportunities for those that do.9
Healthcare has historically struggled to convert technology into productivity, with output per employee in healthcare delivery essentially flat over the past 25 years while other services industries advanced more than 50 percent over the same period.10 Early signs suggest AI may break that pattern because adoption has moved well beyond experimentation across many healthcare organizations and a growing share of implementers are beginning to show measurable positive returns. Most consequentially for HST, more than three-quarters of healthcare organizations say they intend to partner or buy rather than build the capabilities needed to capture value from AI.11 This could create substantial demand for vendors able to supply scarce talent, infrastructure, change management, and execution at pace.
Competition in the HST segment is evolving as new AI-native challengers emerge who bring speed, focus, and lower-cost delivery models. At the same time, incumbent HST players who have durable data and workflow advantages are starting to reimagine those workflows in an AI world, potentially leading to greater operational efficiencies and cost savings. The combination of more competition and incumbents’ advantages is contributing to accelerated outsourcing as providers and payers look to HST vendors as a way to augment their own workflows and benefit from the cost savings potential of AI. As competition between these HST incumbents and innovators increases, legacy services-based segments within HST, such as core administrative services, may see price pressure over the next three to five years as vendors compete to earn share.
Pharmacy services
Pharmacy remains one of healthcare’s fastest-growing segments. We estimate pharmacy value chain EBITDA will grow from $97 billion in 2025 to $138 billion by 2030, roughly 7 percent annually, with specialty pharmacy and infusion services accounting for nearly half of the 2030 pool. Hospital-owned specialty pharmacy is the fastest-growing segment, expanding about 15 percent annually, while physician office and home infusion are capturing an increasing share of care as treatment shifts across sites.
A wave of regulatory action—including pharmacy benefit manager (PBM) transparency provisions (for example, the Consolidated Appropriations Act, 2026), Medicare drug price negotiations, Most Favored Nation (MFN) pricing, a revised 340B Drug Pricing Program rebate pilot, and site-neutral payment reforms—is reshaping economics across the pharmacy value chain. Meanwhile, PBM reforms are increasing pressure on traditional rebate- and spread-based margins and are accelerating a shift toward fee-based compensation models.
The result is a sector in which aggregate growth remains resilient but in which value is being redistributed across stakeholders and sites of care. Competitive advantage will increasingly depend on the ability to manage clinical outcomes, adapt contracting models, and demonstrate differentiated capabilities beyond traditional formulary and utilization-management levers.
Let’s look more closely at subsector performance.
Payers: Pricing begins to catch up to medical-cost trends after a historic margin squeeze, setting up an uneven recovery
Total EBITDA declined from $32 billion in 2024 to about $9 billion in 2025. Across the major payer segments (group, individual, and government), EBITDA fell from about $51 billion in 2023 and $20 billion in 2024 to roughly –$4 billion in 2025. This is the first time this decade that the business of bearing medical risk has collectively generated negative EBITDA. However, the decline in the payer market has been uneven, marked by growing divergence across segments based on size and type of carrier.
The sharp deterioration reflects elevated medical-cost inflation flowing through payer claims faster than premium pricing and government rates can adjust. Higher medical utilization, rising provider unit costs, increased GLP-1 and specialty pharmacy utilization, and behavioral health demand accounted for the gap between premium growth and claims costs, leading to margin compression across risk-bearing businesses. Coverage shifts compounded the pressure. Medicaid redetermination left a smaller, higher-acuity retained population, while members moving from Medicaid into the ACA exchanges increased risk pool morbidity and contributed to the sharp deterioration in individual-market economics.
Performance also diverged sharply by payer scale and business mix in 2025: Small-size payers (those with less than 100,000 members) have 5 percent less average EBITDA margin than large-size payers (those with more than 500,000). Diversified national payers remained profitable in their core payer businesses in 2025, while nationals with narrow portfolios generated only modest earnings; other payers collectively recorded losses (Exhibit 2). In addition to performing better in the core payer business, diversified nationals also have lower exposure to the core payer business overall (Exhibit 3). Together, these results point to the recent advantages of scale and a diversified earnings base in navigating periods of elevated pressure on medical costs.
Entering 2026, payer pricing began to catch up with elevated medical-cost trends, an important inflection point after several years in which claims growth outpaced rate actions. Early 2026 payer results confirm that pricing and benefit actions are translating into medical-cost performance improvements. Commercial and ACA carriers increased premiums substantially, while improved MA funding and continued product and benefit optimization provided additional support. However, EBITDA results are expected to lag behind because higher rates will be offset by buy-downs and enrollment and risk pool pressures persist. More meaningful EBITDA recovery is expected to emerge from 2028 onward.
The outlook also varies substantially by segment (Exhibit 4). Commercial fully insured group segment and MA segment margins are expected to improve gradually through 2030 but are likely to remain below historical levels amid persistent pressure on medical costs and slowing membership. The individual and Medicaid segments face the sharpest enrollment resets from ACA subsidy expiration and Medicaid eligibility changes. Their recovery paths also diverge: The ACA segment is likely to maintain modestly positive margins through aggressive repricing, while Medicaid recovery is likely to remain slower given rate-setting lags and further eligibility-related pressure in 2027–28.
Group insurance
Group insurance is a key driver of the payer recovery. EBITDA fell to about $3 billion in 2025, but it is expected to rebound to about $28 billion by 2030 (about one-third of payer EBITDA) as sustained rate actions begin to catch up with elevated medical-cost trends and improve underwriting performance. Fully insured margins should recover gradually as premium growth outpaces claims growth. But persistent utilization and unit cost pressures as well as continued migration toward alternative funding arrangements, such as level-funded insurance, are likely to keep profitability below historical levels.
Within fully insured large and small group segments, revenue per member per year (PMPY) is expected to rise 9 to 12 percent in 2026 before normalizing to 5 to 8 percent over the longer term as payers push through rate increases to catch up with elevated medical costs. Even with these pricing actions, returning fully insured margins to the historical 3 to 4 percent range will remain challenging. In the small group segment, accelerating coverage declines and the migration of healthier employers toward alternative funding arrangements could leave a smaller, higher-acuity fully insured pool, sustaining upward pressure on claims trends.
The large group segment faces a similar structural shift as employers increasingly move toward self-insured and other alternative-funded products, reducing the fully insured risk pool. Together, these shifts increase reliance on sustained pricing discipline as well as moderation in utilization and unit cost trends to restore historical profitability. Scale provides some protection because larger carriers are better positioned to absorb underwriting volatility and spread administrative costs, while smaller carriers face a more difficult path back to profitability.
Self-insured membership
Self-insured membership is expected to increase about 1.0 to 1.5 percent annually, with stronger growth from 2027 onward as employers continue shifting from fully insured to self-funded models and as some members disenrolled from Medicaid and the ACA move into employer coverage. Margins are likely to hold steady at 8 to 9 percent, supported by attractive economics across ASO administration and adjacent offerings such as stop-loss models. Within this segment, third-party-administrator enrollment, which currently represents about 26 percent of total ASO membership, is expected to rise to 30 percent by 2030, with revenue PMPY growing 1 to 2 percent and EBITDA rising 6 to 7 percent annually over the 2025–30 period.
ACA market
ACA margins declined sharply to –3.7 percent in 2025, prompting payers to secure approved premium increases of about 26 percent for 2026 to address elevated medical-cost trends and restore profitability. However, the expiration of enhanced subsidies introduces a new headwind: Enrollment has already declined by approximately 5.0 million people in 2026, with a further 3.5 million to 4.0 million drop anticipated in 2027.12 As healthier and more-price-sensitive members disproportionately exit, the remaining risk pool is likely to become higher acuity, requiring continued repricing. A further 11 percent premium increase is projected for 2027, helping margins return to and remain modestly positive despite a materially smaller and higher-cost membership base.
These actions make ACA one of the clearest examples of payers proactively repricing for anticipated deterioration, reflecting both underlying medical-cost trends and worsening risk pool morbidity following subsidy expiration. Buy-downs are expected to offset about three to four percentage points of premium growth, moderating realized revenue PMPY growth. Despite the enrollment reset, margins are likely to remain positive at roughly 2 to 3 percent, with revenue PMPY growth normalizing to 4 to 5 percent over the longer term.
Medicare Advantage
The MA segment entered 2025 under stress. Margins were pressured in 2024, approaching breakeven overall, and slipped into outright losses in 2025. EBITDA is expected to recover from roughly –$3.4 billion in 2025 to about $11 billion by 2030, stabilizing near a 2 percent long-term target—though still below historical levels. The turn hinges on policy and pricing: CMS’s estimated average MA payment update increased from 3.70 percent in 2025 to 5.06 percent in 202613; 2026 is the final year of the CMS-HCC Version 28 risk adjustment model phase-in; and the Inflation Reduction Act’s Part D redesign continues to weigh on Part D stand-alone and MA prescription drug plan economics.
Persistent funding and utilization pressures are driving payers toward pricing actions, benefit redesign, product optimization, and more selective market participation, supporting margin recovery while moderating enrollment growth. Scale remains an advantage, with larger MA carriers better positioned to absorb volatility and optimize products across markets.
Over the longer term, utilization stabilization, improved funding, and continued product optimization should support 100 to 250 basis points of margin improvement from depressed 2025 levels, bringing margins to roughly 2 percent by 2030. MA penetration is expected to stabilize at 50 to 55 percent of total Medicare beneficiaries, with membership growth falling from 7 percent annually in the 2019–25 period to about 3 to 4 percent annually going forward, according to Congressional Budget Office estimates. CMS payment updates, along with continued risk score growth, should support near-term MA revenue growth, with revenue PMPY projected to grow about 7 percent in 2026 before falling to 4 to 5 percent annually as these factors normalize.
Medicaid
Medicaid enrollment declined by two million to three million members in 2024–25 as public health emergency measures continued to unwind, according to CMS and Medicaid.gov reports.14 An additional six million to seven million reduction is expected in 2027 due to federal actions such as community engagement (work) requirements and stricter eligibility checks, bringing total Medicaid enrollment losses to roughly seven million to nine million by 2028, with most of the reduction likely in 2027.
Revenue PMPY is projected to grow 4 to 5 percent annually from 2025 to 2030, driven primarily by state rate updates and adjustments for changes in acuity and medical costs. But margins will take time to recover because Medicaid rate adjustments typically lag behind changes in underlying acuity and utilization. A second, sharper headwind is expected in 2027–28 as eligibility changes disproportionately lead healthier beneficiaries to exit, increasing the acuity of the remaining population and placing further pressure on medical loss ratios and payer margins. As a result, EBITDA is likely to be negative again in 2028 (roughly –$1.4 billion) before recovering to about $5.7 billion by 2030. We project that margins will settle at 1 to 2 percent by 2030, still below the segment’s 2 to 3 percent historical average.
Providers: Margins recover while growth shifts beyond traditional acute care
Provider EBITDA margins grew to 10.5 percent in 2025 from 10.1 percent in 2024, continuing recovery from the weaker 2022–23 period when elevated labor costs and inflation weighed on performance. However, margins remain below prepandemic levels. Higher utilization, reimbursement rate increases, and moderating labor and inflationary pressures have supported the rebound. Patient volumes have continued to normalize following the postpandemic slowdown, while an aging population is underpinning sustained demand across care settings.
Growth has been strongest in preacute settings such as ASCs and urgent care centers, led by site-of-care shifts. Postacute care segments—particularly home health, hospice, and ALF—have also seen substantial growth, largely due to population aging. Together, these trends are continuing to shift provider growth and EBITDA toward lower-cost ambulatory and home-based settings, while traditional acute and institutional settings account for a declining share of overall provider EBITDA.
Following recovery in 2024–25, provider EBITDA is expected to decline by about 1 percent by 2027 compared with 2025, driven primarily by Medicaid disenrollment and ACA subsidy expiration. These changes are expected to increase the uninsured population and uncompensated care, putting additional pressure on provider economics. Potential Medicaid reimbursement reductions related to provider tax changes could create further downside, although this impact is not yet reflected in current estimates. From 2028 on, margins are expected to gradually improve, supported by commercial enrollment growth, annual rate increases, and operational efficiencies; proposed reductions in Medicaid state-directed payments may temper the pace of recovery (Exhibit 5).
General acute hospitals
General acute hospital EBITDA margins have recovered meaningfully, rising from 6.9 percent in 2023 to 8.9 percent in 2025. The increase can be attributed to stronger patient volumes and revenue recovery and normalization in contract labor costs from pandemic-era highs. Margins should remain broadly stable through 2030, reaching 8.8 percent, although the trajectory will vary across the period. Within not-for-profit health systems, scale generally corresponds with stronger operating performance, up to a point; this relationship breaks down among the largest systems (more than $20 billion in revenue), suggesting that scale alone does not guarantee stronger margins (Exhibit 6).
In 2025, hospitals faced headwinds from ACA subsidy expiration and broader federal policy changes and continue to face them through 2027, which could reduce EBITDA margins by about 80 basis points. From 2028 onward, a gradual improvement to about 8.8 percent will be supported by recovering commercial enrollment, annual reimbursement rate increases, cost optimization, and broader operating efficiencies. Phased reductions in Medicaid state-directed payments, alongside proposed CMS regulations implementing tighter payment limits, could temper the recovery under a proposed CMS rule, while potential site-neutrality policies add further downside risk to hospital revenue and margins.15
Despite this stabilization, hospitals’ share of overall provider profits is projected to decline from 42 percent in 2019 to about 39 percent by 2030, reflecting the continued migration of care toward lower-cost, freestanding, and ambulatory sites of care.
Office-based physicians
Office-based physician growth will increasingly be concentrated in specialty and scaled, ancillary-rich models, while traditional primary care remains relatively lower margin. Primary care revenue is expected to grow at about 4 percent annually from 2025 to 2030, supported by continued demand growth, population aging, and incremental reimbursement increases. However, primary care remains a relatively low-margin segment with EBITDA margins of 3.7 percent in 2025, and it faces near-term pressure from subsidy expirations and changes in federal funding.
Specialty care is expected to be the stronger growth engine, with revenue likely growing 4 to 5 percent annually through 2030. Growth is increasingly supported not only by higher-acuity patient demand but also by the expansion of ancillary revenue streams such as imaging, infusion, pharmacy, diagnostics, and office-based procedures. These services allow physician groups to capture a greater share of the care pathway and improve economics beyond professional-fee revenue alone.
Specialty value-based care represents an additional growth opportunity as risk-based models expand across high-cost specialties such as oncology, nephrology, cardiology, orthopedics, and gastroenterology. These models increasingly focus on managing the full episode or total cost of care through improved care coordination, site-of-care management, and reduction of avoidable utilization. As payer adoption expands, physician groups have opportunities to participate in shared savings and other risk-based arrangements, creating an additional source of earnings beyond traditional fee-for-service and ancillary revenue.
Within physician practices, growth and margin performance vary by operating model and specialty mix. Practices with greater ability to expand ancillary services, improve physician productivity, and leverage advanced practice providers can capture additional revenue while improving operating efficiency. These levers, as well as easing labor shortages and incremental reimbursement increases, can help offset near-term margin pressures.
Overall, office-based physician EBITDA margins are expected to remain relatively stable, increasing modestly from 7.4 percent in 2025 to 7.5 percent by 2030. Within the segment, however, growth and margin performance are likely to be strongest for the specialty and ancillary-rich models that can capture more of the patient journey and benefit from scale, while traditional primary care models remain more constrained.
Preacute care
Preacute care delivery is continuing to shift toward ASCs, increasingly driven by the migration of higher-acuity procedures such as knee and hip arthroplasty and select cardiovascular surgeries. CMS’s expansion of the ASC Covered Procedures List is broadening the range of procedures eligible to move into ambulatory settings, while lower costs relative to hospital outpatient departments continue to support payer steering.16 However, physician shortages—exacerbated by an aging physician workforce—could constrain capacity and limit volume growth, while reimbursement and labor pressures are projected to modestly reduce EBITDA margins from 23.9 percent in 2025 to 23.1 percent in 2030.
Urgent care continues to benefit from consumer demand for convenient, lower-cost care and site-of-care shifts from emergency departments. Growth will moderate as the market matures, while reimbursement and labor pressures could result in a slight decrease in margins from 15.2 percent in 2025 to 15.0 percent in 2030. Across preacute segments, ACA subsidy expirations and broader federal policy changes, including the One Big Beautiful Bill Act, could reduce segment-level EBITDA margins by about 120 basis points from 2025 to 2030.
Postacute care
Postacute care providers remain supported by aging demographics and continued migration toward lower-cost care settings, sustaining healthy revenue growth through 2030. Growth will be concentrated in home health, hospice, and ALFs while skilled nursing facilities remain comparatively stagnant. EBITDA for home health is estimated to expand 4 to 5 percent annually from 2025 to 2030 as care transitions to lower-cost, patient-preferred home settings, supported by aging demographics and increasing membership in MA plans. However, EBITDA margin expansion will remain constrained due to reimbursement pressure.
Hospice is expected to grow 8 to 9 percent annually from 2025 to 2030, supported by rising Medicare enrollment and continued growth in hospice awareness and utilization. Increasing CMS focus on fraud and program integrity is expected to temper this growth by tightening oversight and curbing inappropriate utilization, while continued emphasis on quality and transparency should favor established, high-quality providers. EBITDA margins are expected to remain broadly stable as reimbursement increases are largely offset by labor, clinical staffing, and other operating cost pressures.
By contrast, skilled nursing facilities face structural challenges as payers increasingly favor shorter stays and home-based recovery, resulting in relatively flat revenue. Skilled nursing facility EBITDA margins are projected to decline from 10.3 percent in 2025 to 9.1 percent in 2030, reflecting persistent labor shortages, MA reimbursement pressure, and Medicaid funding uncertainty. Together, these dynamics are shifting the postacute profit pool toward home- and hospice-based models, while traditional institutional settings such as skilled nursing facilities face continued pressure from evolving payer and patient preferences.
HST: Growth is concentrating in select segments
HST is projected to continue as the fastest-growing sector in healthcare, with an estimated 7 to 8 percent annual growth in revenue and 9 to 10 percent annual growth in EBITDA (Exhibit 7). On that trajectory, HST revenue would expand from about $360 billion in 2025 to more than $500 billion in 2030, and EBITDA would expand from about $78 billion to more than $120 billion, with EBITDA margins widening from 21 percent to 23 percent. Two factors underpin that growth: First, payers and providers are likely to continue outsourcing as they seek to take cost and complexity out of the system. Second, adoption of innovative solutions powered by agentic AI is expected to increase, spurring both margin expansion through efficiency gains and improved outcomes for providers and payers.
Growth is expected to be fastest in data and analytics (more than 11 percent annual revenue growth) and software and platforms (more than 10 percent). These segments should benefit from the tailwinds created by growing gen AI adoption as software and data and analytics platforms provide critical infrastructure support for provider and payer transformations. Over the next five years, AI is expected to add one to four percentage points of revenue growth per year to these segments through increased outsourcing rates. Software and data and analytics platforms are expected to see one to three percentage points of EBITDA growth acceleration per year from AI-related reductions in operational expenses, such as product development and labor-intensive internal processes.
However, not all segments may see net positive impact from AI. For example, in core administrative services, in which pricing has historically been anchored to headcount and transaction volume, automation is expected to compress rates as competition increases and payers demand savings that outsourced vendors generate from reduced delivery costs. These factors are expected to contribute to slowing revenue growth by two to three percentage points annually, leaving the segment roughly flat or contracting through 2030. Outsourcing models built on labor arbitrage could lose their cost advantage as AI absorbs the underlying work. Payers and providers that deploy AI tools directly in their own operations may reduce the percentage of work that is outsourced in the segments.
The net impact of these trends across HST segments is that AI is likely to accelerate the shift in revenue and EBITDA from people-heavy services segments toward software, data, and technology-enabled services. New AI-native entrants, such as ambient scribing platforms, are emerging across segments. These entrants can bring lower-cost, technology-based models that are disrupting legacy incumbents and encouraging a wave of outsourcing from providers and payers looking to benefit from the rapid pace of innovation.
AI can also shift payment integrity from retrospective recovery toward prepayment prevention that can be embedded in payer or core claims platforms. The result may be a widening divide in which technology-enabled, end-to-end platforms gain share and expand margins while labor-based services face pricing pressure and revenue contraction.
If HST players adopt AI at scale and achieve “rule of 40” growth,17 we estimate the industry-wide EBITDA pool could expand by 2.0 to 2.5 times. Conversely, while the overall HST industry is expected to expand, organizations that do not adapt to evolving market conditions and pace of innovation face growing risk of displacement.
AI: The competition to disrupt the status quo in healthcare
Healthcare as a sector has historically struggled to convert technology into productivity. Real gross output per full-time equivalent employee in healthcare delivery declined about 1 percent between 1998 and 2023, while output per employee across all services excluding healthcare delivery rose 56 percent.18 AI faces an uphill battle to disrupt the status quo in healthcare.
However, there are early signs that a step-change improvement is possible and that healthcare organizations across providers, payers, and HST players are taking a proactive approach to incorporating AI. The first wave of adoption has demonstrated tangible value in workflow-heavy areas (for example, ambient documentation and claims and administrative processes). In one of the largest published deployments to date, ambient documentation used by 7,260 physicians across about 2.6 million patient encounters saved an estimated 15,791 hours of documentation time relative to nonusers, equivalent to 1,794 working days.19 In our 2026 survey of 120 decision-makers in healthcare organizations, 92 percent said they have either implemented gen AI or are pursuing proofs of concept.20 About 74 percent report implementing or pursuing proofs of concept for multiagent workflows.21 Multiagent workflows represent the next frontier in complexity and adaptability, and they will be critical to achieving a shift from AI as point solutions to AI as reimagined workflows.
While adoption has shown rapid acceleration over the past two years, financial returns from AI investments are still being evaluated—but they show positive early signs. Among the 111 surveyed leaders of healthcare organizations that have implemented gen AI, about 38 percent noted a measurable positive ROI, with 14 percent reporting less than a twofold return, 20 percent reporting a two- to fourfold return, and 4 percent reporting greater than a fourfold return. A further 38 percent of those surveyed said their organizations were tracking to positive returns but have not yet quantified them.
What is clear is that most healthcare organizations are realizing they cannot embark on the AI journey alone, and that creates a big opportunity for HST vendors. In the survey of 120 leaders referenced above, 48 percent said they plan for gen AI adoption centered on partnerships, while another 26 percent intend to buy these capabilities; only 26 percent intend to build the capabilities themselves. As payers and providers move from AI pilots to scaled deployment, external HST partners may play a greater role in areas where organizations lack sufficient in-house capabilities, such as AI and data engineering, infrastructure, model governance, workflow integration, and change management.
Pharmacy services: Growth continues while economics shift across the value chain
Pharmacy services are projected to remain among the faster-growing areas of healthcare. We estimate EBITDA across the pharmacy value chain will grow from $97 billion in 2025 to $138 billion in 2030, a roughly 7 percent CAGR (Exhibit 8). Specialty pharmacy and infusion services will account for roughly half of the 2030 EBITDA pool. Hospital-owned specialty pharmacy will be the fastest-growing segment at 15 percent annually. Growth continues to be supported by innovation and utilization in oncology and rare disease, with provider-affiliated specialty pharmacies, physician office infusion, and home infusion capturing an increasing share of value as care migrates away from traditional dispensing and hospital outpatient settings. Beyond specialty, other pharmacy segments are expected to see more modest growth. Distributors should continue to benefit from overall pharmaceutical spending and increasing specialty distribution, while retail dispensing remains supported by prescription volume, GLP-1 utilization, and expanded clinical services. By contrast, traditional mail pharmacy may face continued reimbursement and channel mix pressure.
At the same time, the economic model underpinning pharmacy is entering a period of major change. Today, about $1 trillion of gross annual US pharmacy and medical benefit drug spending passes through a complex value chain in which pharmacies, PBMs, distributors, health plans, manufacturers, and other participants each retain a portion of value through dispensing margins, administrative fees, rebates and discounts, 340B economics, and other mechanisms.
Several regulatory and market developments are poised to reshape economics across the pharmacy value chain. Among the most significant are the PBM provisions of the Consolidated Appropriations Act, 2026; successive cycles of Medicare price negotiation under the Inflation Reduction Act; MFN pricing initiatives; the approaching patent cliff for several high-spend therapies; the revised 340B rebate model pilot; and changes to hospital outpatient reimbursement.22
Recent federal legislation increases transparency requirements. For certain markets, the measures constrain traditional rebate- and spread-linked compensation models, potentially accelerating a transition toward more-transparent administrative fees and other service-based revenue.23 Industry participants have begun redesigning their offerings accordingly. Cigna Group’s Evernorth Health Services, for example, has introduced Signature, a fee-based pharmacy benefit model that replaces retrospective rebates with upfront manufacturer discounts and explicit PBM service fees. Cigna has indicated that Signature is expected to preserve long-term PBM economics while shifting revenue away from traditional rebate and spread mechanisms toward transparent service-based compensation, suggesting a migration of value between pools.24 While regulatory changes are driving business model shifts, the need for services to manage pharmaceutical costs on behalf of plan sponsors remains strong.
Drug pricing and competitive dynamics are also changing economics across the value chain. The first Medicare negotiated drug prices under the Inflation Reduction Act took effect in 2026, affecting reimbursement and margin economics for selected drugs. In parallel, MFN agreements between the federal government and pharmaceutical manufacturers are expected to extend internationally benchmarked pricing to Medicaid, creating an additional source of pricing pressure for branded drugs.25 Beyond these policy changes, the approaching patent cliff for several high-spend therapies could accelerate generic and biosimilar competition, affecting drug acquisition costs, formulary strategies, and contracting across the pharmacy value chain.
The 340B Drug Pricing Program is evolving as well. In July 2026, the federal government announced a revised 340B rebate model pilot that would allow participating manufacturers to provide the 340B ceiling price through retrospective rebates rather than upfront discounts for a limited set of drugs beginning in 2027, increasing claims-level validation and potentially changing working capital and operating requirements for covered entities.26
Recent CMS actions could further affect hospital outpatient infusion economics. CMS finalized physician fee schedule–equivalent payment rates for drug administration services furnished in certain off-campus hospital outpatient departments beginning in 2026, reinforcing incentives to shift appropriate infusion volume to lower-cost ambulatory settings.27 Separately, CMS has proposed reducing Medicare reimbursement for 340B-acquired outpatient drugs to more closely reflect hospitals’ acquisition costs, which could materially reduce drug-margin economics for covered entities if finalized.28
These changes together could produce a pharmacy landscape in which utilization and spending continue to grow while value retention increasingly shifts among stakeholders and sites of care. Hospital-owned specialty pharmacies, physician-office and ambulatory infusion, and home infusion could benefit from specialty growth and continued site-of-care migration, while traditional mail dispensing and some hospital outpatient infusion economics could face greater pressure. Across the value chain, success may increasingly be determined by the ability to adapt contracting models, manage increasingly complex specialty therapies, demonstrate clinical and economic value, and generate earnings through differentiated capabilities rather than through traditional rebate- and spread-based economics.
Healthcare industry economics will continue to be under pressure in the coming years. Our projections of industry economics suggest that performance transformation will be a way of life for healthcare leaders in the foreseeable future. In addition, business model choices on scale and diversification are showing advantages in some areas and not in others. The difference is generally in companies’ ability to excel at unlocking value from scale or at operating diverse businesses. Finally, as we note in our article “Future of healthcare: Extinction or accelerated evolution?,” the path leading from this predicament for the healthcare industry lies in the ability to create care and business models that capture the potential from AI and the biopharma revolution.
