Planning for 2026+: Strategic Resilience for Non-Profit Health Systems

The resolution of the shutdown without an extension of the ACA enhanced premium tax credits (PTCs) topples the first of a series of dominoes put in place by H.R. 1 () that will have severe impacts on hospitals and clinics.

Without the enhanced PTCs, individuals will see sharp increases in their health insurance premiums, leading some to drop coverage or select lower coverage or high-deductible plans and leaving higher risk people in the ACA risk pool, driving premiums up further. Given this trend, providers should expect increased numbers of underinsured and uninsured patients, along with a deterioration in their wellbeing, putting added stress on already strained ER and ambulatory capacity.

The next H.R. 1 dominoes and their implications for health systems are summarized in the .

The question facing many health systems is how to pursue financial sustainability strategies while maintaining core commitments to communities, vulnerable populations, and essential services. H.R. 1 includes more than $1 trillion in cuts to the social safety net and will result in a projected individuals losing health insurance coverage in the next 10 years. Add rising costs, labor shortages, and aging demographics, and the message for most provider organizations is clear: you cannot “revenue maximize” your way out of this situation. Traditional revenue enhancing strategies such as expanding into commercially insured markets, renegotiating payer contracts, and expanding scale through acquisitions will be necessary to preserve margins and credit ratings, but not sufficient to address the shifting financial landscape.

Leading edge health systems are viewing H.R. 1 as an imperative, or even an opportunity – to transform their models of care, and are proactively implementing the following five “no-regrets” strategies to meet the moment:

1. Ensure Highest and Best Use of Scarce Assets to Lose Less Money

Avoidable emergency room visits and low acuity inpatient admissions lose money unless covered by private insurance. Proactive management of longitudinal episodes of care — involving engaging with chronic patients before they present in the ER — reduces losses. A dollar not lost is as valuable as a dollar earned.

has for years managed chronically ill Medicare beneficiaries, lowering ER use and reducing avoidable inpatient admissions. has operated an equally successful program focused on a socioeconomically vulnerable cohort of the Richmond population. More recently, has invested in a range of in-home services, with a positive return measured in reduced losses on avoidable utilization. UMass Memorial has successfully incorporated EMTs in its care in the home initiative, with net savings exceeding overall program expenditures.

What these programs have in common is targeting high-risk chronic patients. They focus on hundreds, not thousands, of patients who have had multiple ER visits and/or avoidable inpatient admissions. This is not a revenue strategy. In the case of UMass Memorial, for in-home services not covered by a third-party payer there is no bill. They provide the care at their own cost to avoid what they would have lost had they not intervened. These cost avoidance initiatives have the secondary benefit of generating incremental capacity with no added capital investment.

Another opportunity to minimize losses is by reducing avoidable variations in resource utilization. Analyses conducted by Manatt subject matter experts have identified enormous variation in the use of high-cost resources within health systems. For example, we found a four-fold variation in the use of major imaging across hospitals within a given system for patients with the same clinical indicators. As ballooning insurance premiums and related affordability issues drive millions of people into the ranks of the uninsured, such intra-system variation in resource consumption becomes unreimbursed expenses.

2. Accelerate the Move to Sub-Acute Care & Advocate for Recuperative Care Models

Health systems are commonly reluctant to invest in sub-acute care because it struggles to operate profitably. By viewing sub-acute care as an investment in capacity management rather than a business subsidiary, health systems can ensure their main acute business loses less money. Even so, the current shortage of skilled nursing facility (SNF) and short-term rehabilitation beds coupled with severe workforce shortages in skilled nursing, long term care, and home care make this strategy difficult to implement.

Health systems and state and federal policy leaders will therefore also need to identify creative alternatives to traditional discharge protocols. Hospitals may seek to lease beds in SNFs and manage their own dedicated post-acute units, develop sub-acute and post-acute care at home programs, expand tele-rehab programs with remote monitoring, establish relationships with assisted living facilities (including co-locating continuity clinics), develop new partnerships with long-term acute care hospitals (LTACs) or seek regulatory changes to expand access, and develop new palliative and hospice care programs and partnerships.

Housing instability, lack of familial caretakers, behavioral health needs, and other issues can result in an inability to discharge certain patients (so-called length-of stay (LOS) “outliers”), an issue that is becoming increasingly difficult for hospitals to manage. Some states have developed “recuperative care” models that allow non-profit programs to provide holistic support to patients who need housing after discharge. These models support recovery and ongoing treatment while case managers facilitate access to primary care, behavioral health services and other supportive social services, such as transportation, food and housing.

3. Modernize Operations With Artificial Intelligence (AI)

AI has applicability across the priorities outlined above – in capacity management, reduction of clinical variation, expansion of home-based care, and extending the workforce in the clinical setting. It also has applicability in automating and expediting revenue cycle tasks and myriad other administrative activities, such as supply chain and triaging. in clinical settings to support imaging, risk prediction, clinical decision-making, surgery, and precision medicine. They are also deploying ambient scribes, AI agents for call centers, and self-service clinical education tools to support the patient journey.

As coverage churn and high-deductible plan enrollment rise because of H.R.1, robust support systems will be critical to help patients maintain coverage and manage out-of-pocket costs. Patient health insurance and financial navigation is also an area ripe for AI innovation – one that may not be receiving as much investment and attention yet.

Successful transformation depends on having a vision and execution capability to re-imagine workflows with the benefit of AI and redeploy the workforce that may be impacted – including by actively reskilling them into new roles that can drive efficiency gains.

4. Optimize Relationship with States to Tap into Potential Revenue Sources

 H.R. 1’s $50 billion Rural Health Transformation Fund (RHTF) will be distributed to States starting in 2026 to execute initiatives that support chronic disease management, access, workforce development, innovative care models and the use of technology to support remote care. and CMS is statutorily required to make a decision on distribution of funds by December 31, 2025. Health systems with rural initiatives should engage with states on supporting these efforts as well as securing state funding to back-fill the impacts of H.R. 1 changes to state directed payments and provider taxes.

5. Challenge Legacy Regulations that Perpetuate Care Silos; Advocate for Smarter Resource Use

 Regulatory reform should focus on enabling efficient care transitions, flexible facility use and expanded access to post-acute care. Now may be a unique moment in time to advance fundamental systemic changes that alter the “four walls” definitions of care delivery sites – for example, permitting flexible use of beds in more facilities with underutilized capacity (particularly to support post-acute and sub-acute needs) with appropriate safety and quality guardrails and fair reimbursement, or making it easier for acute care hospitals to lease space in other facilities. Hospital-at-home models should become a standard model of care with standardized quality and reimbursement guidelines and clearer paths for alignment with partners, including home health.

As scrutiny of nonprofit health systems intensifies—from tax exemptions to executive compensation—leaders have an opportunity to demonstrate a renewed commitment to fiscal stewardship. H.R. 1 presents a formidable challenge, but it also offers a chance to lead with vision, to build the workforce and work tools of the future, and to deliver better care to more people. Revenue maximizing strategies can only yield so much. This is not about choosing between mission and margin—it’s about finding new ways to align them—with a healthy focus on smart expense reduction and modernizing the care delivery system.