66% of health care finance leaders are bracing for Medicaid cuts

Federal funding and Medicaid cuts have replaced labor as the biggest worry keeping health care finance leaders up at night, according to a new survey from Strata Decision Technology.

Two-thirds of respondents to Strata's 2026 Healthcare Financial Outlook Report, released April 21, named government funding and Medicaid cuts as their top concern for the year. Labor came in second at 48%, with payor rate negotiations (30%) and margin compression (28%) rounding out the top four.

For years since the COVID-19 pandemic, workforce costs dominated health care finance conversations. This year, policy risk pushed past them.

Strata surveyed finance professionals at U.S. health systems, medical groups, single hospitals and affiliated provider practices, with titles ranging from manager to CFO. Health systems made up 82% of responses; medical groups were 25% and affiliated practices 13%.

"Health care organizations are entering a new phase where discipline and execution matter more than ever," Frank Stevens, chief growth officer at Strata, said in a statement. "The organizations that will succeed are those that can move faster, turn data into action, and align their teams around clear performance goals."

Margin expectations inch up

After several years of volatility, the margin outlook is modestly better. About 43% of finance leaders expect margins to grow over 2026, up from 36% last year. A quarter expect margins to fall. Another 22% think performance will be flat.

Last year, 44% of leaders predicted flat performance and most treated that as a win. Not this year.

Cost reduction topped the to-do list, cited by 57% of organizations. Managing strategic and performance initiatives came in at 51%, and measuring productivity at 43%. Only 17% listed managing cash as a priority, and 10% flagged recruitment expenses.

What it looks like in practice

Strata's report generally skews toward hospitals and larger health systems, but the money problems it describes are familiar to independent practices — thin margins, rising labor costs and shaky reimbursement.

Approximately half of U.S. physicians now work for or are affiliated with hospital systems, up from under 30% a decade ago, John Pack, vice president of health care finance at Mitsubishi HC Capital America, said on a recent episode of the Off the Chart: A Business of Medicine Podcast. He laid much of that consolidation at the feet of everyday expenses.

"Practices are struggling to remain financially viable, as the costs of staffing, supplies, compliance technology with their electronic health records, malpractice insurance, all these are rising faster than even reimbursements," Pack said.

Paperwork doesn't help. Medical Group Management Association (MGMA) Senior Vice President of Government Affairs Anders Gilberg told Physicians Practice that 95% of MGMA members say their administrative and regulatory burden has climbed in recent years. Ninety percent reported a jump in prior authorization burden in the past 12 months alone.

"A full quarter percent of health care spending today in this country is spent on administrative burden," Gilberg said. "It's higher than any other part of the free world."

Enforcement is also tighter. Shannon Sumner, CPA, CHC, managing principal of PYA's Nashville office and the firm's chief compliance officer, told Medical Economics earlier this year that fraud investigations are "more data driven and pattern focused than ever before," and the government is looking harder at individual physicians.

"Last year was the largest year in health care fraud recoveries," Sumner said. "I think we look back next year, and this year is going to be the largest."

Pressure, not panic

For all the worry, 96% of survey respondents said they were at least somewhat confident in their teams' ability to adjust financial strategy as conditions change. Two years ago, that figure was 83%.

After a decade of reimbursement swings, workforce shortages and regulatory churn, finance teams have gotten used to course-correcting, and they expect to keep doing it.