5 Healthcare Trends To Watch in 2026

As healthcare organizations enter 2026, they face a landscape shaped by persistent uncertainty, evolving regulations, and accelerating technological change. From shifting transaction dynamics and heightened policy risk to new tax legislation, AI adoption, cybersecurity threats, and financial reporting regulations, leaders must navigate more variables than ever before.

We are highlighting key trends we are watching in 2026 and why they matter – offering practical insights to help healthcare executives, investors, and operators anticipate risk, identify opportunity, and make informed decisions in a complex environment.

1. Deal environment and transaction trends

Transaction activity showed signs of stabilization in 2025, with momentum varying by subsector and deal type. Buyers demonstrated a preference for smaller, more targeted transactions, including tuck-ins, carve-outs, and adjacency plays. Sponsor participation remained selective, with an emphasis on assets offering clear operational improvement opportunities and strong near-term cash flow visibility.

Valuation expectations appeared more aligned between buyers and sellers compared to prior periods of market volatility. Assets with stable and predictable revenue profiles, scale benefits, and visibility into reimbursement dynamics continued to attract strong interest. Deal structures increasingly reflected shared-risk considerations, often incorporating rollover equity and performance-based earnouts.

Strategic buyers remained focused on transactions that reinforce core capabilities, improve efficiency, and support long-term positioning. Portfolio rationalization and selective divestitures continued to play a role in funding targeted acquisition strategies. Financial sponsors emphasized disciplined underwriting, downside protection, and operational execution as central drivers of investment decisions.

Regulatory scrutiny remained an important factor in healthcare transactions, influencing deal structure, timing, and diligence scope. Buyers increasingly incorporated regulatory and reimbursement considerations earlier in the transaction evaluation process, often engaging specialized advisers to assess compliance and policy risk, as state-level review requirements shaped transaction planning in certain segments of the market.

In 2026, strategic buyers are expected to lean in where market conditions and asset quality improve, particularly across health services and technology-enabled business models. As practical use cases for AI continue to develop, strategists are likely to prioritize acquisitions that credibly support more efficient operations, better workforce utilization, and more reliable revenue performance. Portfolio refinement is expected to continue, with strategists selectively divesting noncore assets while acquiring businesses aligned with long-term positioning.

For financial buyers, market sentiment suggests increased deal activity in 2026, with many sponsors preparing to re-enter deal processes earlier in the year. As seller valuation expectations continue to adjust and narrow the gap between bid and asking price, sponsors are expected to become more active, particularly related to assets demonstrating sustainable earnings and clear levers for operational improvement. Interest in AI-related themes also is increasing, typically where technology can be tied directly to value creation initiatives such as productivity enhancement, sales effectiveness, revenue cycle management, and compliance.

What buyers and sellers should expect:

• Faster processes for top-tier assets as strategic and financial buyers compete for high-quality, cash-generating platforms
• Deeper diligence on reimbursement, labor, and compliance alongside more rigorous requirements to prove narratives about growth and margin
• Deal structures to continue doing heavy lifting in 2026, with risk-sharing and staged economics remaining common, particularly in policy-sensitive areas

Deal activity is expected to remain selective, with continued emphasis on asset quality and strategic alignment. Midmarket transactions are likely to remain a focal point for both strategic and financial buyers. Valuation outcomes are expected to remain differentiated, reflecting variability in asset quality, growth visibility, and operational complexity.

2. Regulatory landscape updates

Healthcare policy became headline news in 2025 as a source of disagreement between the two political parties in both the One Big Beautiful Bill Act (OBBBA) and the lead-up to a shutdown of the federal government. A core policy in the OBBBA included cuts to federal funding of Medicaid (health coverage for low-income Americans), and 2025 was the last year for an expanded tax credit for Affordable Care Act (ACA) insurance users. Democrats in Congress demanded that Congress extend the refundable premium tax credits to users of the ACA insurance exchanges. Republicans resisted, claiming the cost of the credits was too high, but ultimately conceded that Congress should hold a vote on the question of extending the credits. This policy fight, and the uncertainty it creates in the marketplace, continues well into 2026.

According to the Congressional Budget Office, possible impacts of the legislation include:

• The number of individuals without health insurance would increase by an estimated 7.8 million in FY34 due to the Medicaid provisions.
• Medicaid provisions would reduce federal outlays by $840.2 billion over the 10-year period from FY25 to FY34.
• Private health insurance provisions would reduce outlays by $131.8 billion over 10 years.

Until an agreeable solution is enacted, customers, physicians, hospital groups, and other healthcare-related entities will need to plan for additional uncertainty when preparing their 2026 accounts receivable and revenue models. For example, patient volumes could be affected by changes in the number of insured individuals, and significant fluctuations in payer mix could occur. Even a last-minute solution could create confusion, as properly modeling insurance premiums or customer revenues midyear is difficult. A dramatic pullback of users in the health insurance pool likely will create many unpredictable stressors on the providers.

The American Hospital Association published a fact sheet outlining the impact on patients and providers of the lapsed ACA enhanced premium tax credits. The reduced financial support for premiums could disrupt provider cash flows and threaten the financial stability of healthcare organizations. This should be a significant consideration for management teams in evaluating their entity’s ability to remain a going concern (see “5. Financial reporting regulations”).

3. New tax legislation

The OBBBA, enacted on July 4, 2025, is packed with tax changes that especially affect for-profit healthcare businesses navigating complex financial, operational, and technological demands.

Following are four key tax provisions that could have a meaningful impact.

100% bonus depreciation

The OBBBA revives 100% bonus depreciation for qualifying property acquired after Jan. 19, 2025. This allows for full expensing in the year the asset is placed in service rather than spreading deductions over several years.

Examples of assets that might be eligible for bonus depreciation include:

• Medical and surgical equipment
• Technology infrastructure (such as servers and hardware)
• Certain leasehold improvements and facility enhancements 

Bonus depreciation can help healthcare businesses that are planning capital investments – such as expanding outpatient facilities or upgrading diagnostic equipment – reduce taxable income immediately and preserve cash flow.

The OBBBA also includes a special depreciation provision for qualified production property used in manufacturing or refining tangible personal property, providing expanded opportunities for healthcare-adjacent businesses. 

Section 179

Section 179 provides an alternative expensing method, which is especially beneficial for smaller-ticket items purchased throughout the year.

Key updates regarding Section 179 include:

• Deduction limit increased to $2.5 million
• Phase-out threshold raised to $4 million
• Both figures indexed for inflation and applicable to tax years beginning after Dec. 31, 2024

From a strategic planning perspective, note that Section 179 can be used only to the extent the taxpayer has taxable income. For an organization that operates at a loss or low profitability, the deduction might be limited in the current year, though excess can be carried forward.

Examples of assets that might be eligible for the deduction include:

• Medical exam tables and X-ray machines
• Computers and software systems
• Dental chairs and lab equipment

In some cases, it might be more beneficial to elect Section 179 instead of bonus depreciation, especially for tax planning purposes. One key reason is that many states conform to federal Section 179 expensing but do not conform to federal bonus depreciation rules. By using Section 179 in those states, healthcare businesses can take advantage of immediate expensing at both the federal and state levels, avoiding the timing differences and deferred tax liabilities that bonus depreciation can create at the state level.

Business interest expense

Under prior tax law, for tax years beginning after Dec. 31, 2021, the Section 163(j) business interest deduction limitation was based on earnings before interest and taxes for most taxpayers – a restrictive formula that excluded depreciation and amortization. Effective for tax years beginning after Dec. 31, 2024, the OBBBA restores the use of earnings before interest, taxes, depreciation, and amortization (EBITDA) in computing the limitation, allowing more interest to be deducted.

Leveraged structures are common in healthcare, particularly in private equity roll-ups, surgical centers, and hospital businesses with significant debt from real estate or acquisitions. A return to the use of EBITDA to determine the interest deduction limitation can increase a business’s interest expense deduction and improve after-tax cash flow.

Additionally, for tax years beginning after Dec. 31, 2025, elective capitalization of interest expense to avoid Section 163(j) limits no longer will be allowed. Interest capitalized under Section 263A (self-constructed property) or 263(g) (investment debt) are excluded from the limitation.

Full expensing for domestic R&E expenses

The OBBBA enacted a new Section 174A to permanently restore immediate expensing of domestic research and experimental (R&E) expenses beginning with tax years after Dec. 31, 2024. This change marks a significant shift for healthcare organizations, presenting new opportunities to accelerate investment in technology, innovation, and patient-centered solutions.

Foreign R&E expenses still are required to be capitalized and amortized for 15 years under Section 174.

Examples of R&E expenditures could include:

• Clinical process development and improvements
• Diagnostic algorithm design to improve patient outcomes
• Software development, which remains a qualifying R&E expenditure
• Patient portal or electronic healthcare records enhancements

Taxpayers may continue capitalizing domestic R&E expenses by electing to capitalize and amortize them over at least 60 months or by electing under Section 59(e) to amortize them over 10 years. A special transition rule allows taxpayers to choose whether to deduct any remaining unamortized pre-2025 domestic R&E costs fully in their first tax year beginning after Dec. 31, 2024, or over two years (that is, either as a single deduction in 2025 or ratably over 2025 and 2026). Small businesses (those with average annual gross receipts under $31 million) can apply the new rules under Section 174A retroactively to 2022-2024 via amending returns or through an accounting method change for the 2024 tax year.

Looking ahead

The OBBBA gives for-profit healthcare companies tools to accelerate deductions, reduce taxable income, and support growth. However, these benefits require proactive tax planning, including:

• Reviewing planned capital expenditures for depreciation opportunities
• Evaluating debt structure and future interest expense
• Revisiting R&E amortization schedules and exploring retroactive or prospective expensing opportunities

Companies should consult their tax advisers to evaluate OBBBA opportunities, model tax impact, and implement appropriate elections and documentation.

4. Cybersecurity breaches and AI trends

Technology is almost always an issue for hospitals and healthcare systems, but cybersecurity and AI challenges will increase the related risks significantly in 2026.

Cybersecurity breaches

Cybersecurity breaches are becoming increasingly prevalent. The Department of Health and Human Services Office for Civil Rights maintains a list of all “large” cybersecurity breaches – those affecting 500 or more individuals. In 2025, more than 500 healthcare-related breaches were reported, affecting more than 50 million individuals.

Breaches often are focused on theft of protected health information, which can have implications for both providers and the patients they serve. Breaches also can involve direct theft of funds. As perpetrators begin to use AI for more sophisticated attacks, this trend is likely to continue.

Increasing use of AI by payers to deny claims

According to the American Medical Association, 61% of physicians in a 2024 survey said they are concerned that health plans’ use of AI will increase prior authorization denials.

Although the denials frequently are inappropriate, they still require providers to correct simple clerical errors or file appeals. Many healthcare providers do not have the scale or resources necessary to keep up with the larger payers. Management teams should consider adding resources or engaging a third-party vendor to assist with responding to denied claims.

5. Financial reporting regulations

Because of external pressures, such as the enactment of the OBBBA, potential cuts to the ACA, and rising use of AI by third-party payers to deny claims, uncertainty regarding healthcare providers’ cash flows likely will increase when it comes to estimating contractual allowances, implicit price concessions, and bad debts. Related to financial reporting, many management teams focus on revenue collections, but it is important to remember the balance sheet as well. For example, as denials increase, entities’ accounts receivable composition can become considerably more aged, adding to the likelihood that collections will be lower than what the companies have collected historically. As a result, the number of write-offs related to aged receivables is likely to increase.

The trend of uncertainty about cash flows also might lead to a heightened awareness of liquidity and net working capital positions for certain providers. Management teams should get ahead of their going concern analyses immediately. As a reminder, according to Accounting Standards Codification 205-40, “Going Concern,” substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued.

Step one of an analysis includes assessing whether conditions exist that could raise substantial doubt. Such common conditions include low levels of cash on hand, negative cash flows, a historical reliance on capital infusions to fund operations, growing net working capital deficits, debt covenant noncompliance, or upcoming debt maturities. In addition, future projections should be analyzed to assess whether any concerns about liquidity or debt covenant noncompliance are expected for the 12-month period following the date the financial statements are available to be issued.

If such conditions exist, management teams should evaluate the plans in place to mitigate the going concern risk. Plans might include securing additional equity contributions, renegotiating the entity’s debt structure or covenant terms, or divesting noncore service lines to enhance cash flow. Such plans typically need to be implemented prior to the issuance of the financial statements in order to alleviate the conditions raising substantial doubt.

Foresight: A key advantage for healthcare leaders

As 2026 unfolds, healthcare organizations will need to balance caution with conviction as policy, capital, and technology forces converge. Success will depend on disciplined planning, rigorous analyses, and the ability to adapt quickly as facts and assumptions change. Leaders that invest early in insight, governance, and execution will be better positioned to manage risk, protect value, and pursue growth amid ongoing uncertainty.

FASB materials reprinted with permission. Copyright 2026 by Financial Accounting Foundation, Norwalk, Connecticut. Copyright 1974-1980 by American Institute of Certified Public Accountants.

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