US Healthcare 2025 and Beyond: Part I

 

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Dynamic shifts in market forces, regulatory landscapes, and consumer expectations have long marked the US healthcare industry. Yet, since 2019, these changes have intensified, culminating in one of the most significant periods of economic and operational turbulence in recent memory. Building upon industry data—such as the decline of EBITDA as a proportion of the National Health Expenditure by an estimated 150 basis points—the sector’s multifaceted challenges have touched nearly every stakeholder group: payers, providers, health services and technology (HST) firms, pharmacy services, and, most importantly, patients. In this review, I synthesize insights from an article from McKinsey & Company titled “What to Expect in US Healthcare in 2025 and Beyond” (Singhal & Patel, 2025).  The core argument is that while the present environment is replete with financial and operational hurdles—such as workforce shortages, constrained reimbursement growth, and a shifting payer mix—there are also compelling opportunities. Industry segments like non-acute care delivery, specialty pharmacy, and healthcare analytics exhibit rapid growth potential, signaling a reorientation of healthcare’s center of gravity. Below, I examine the principal challenges and opportunities facing US healthcare in the coming years, spotlighting four major focal points: (1) the continuing stressors on payers and providers, (2) the expansion of outpatient and home-based services, (3) the rise of advanced technologies and healthcare software solutions, and (4) the transformative potential of specialty pharmacy. I integrate relevant peer-reviewed literature, ensuring an evidence-based foundation for understanding healthcare’s evolving trajectory.

Persistent Stressors on Payers and Providers: One of the most prominent stressors is the systematic shift in the payer mix—from a predominantly commercial membership to a growing share of Medicare and Medicaid. In particular, Medicare Advantage (MA) has risen markedly in recent years, spurred by the aging population and the attractiveness of enhanced benefits. The share of MA enrollment reached 45 percent of Medicare beneficiaries in 2023 and is projected to climb even higher (Definitive Healthcare, 2024). However, margin pressures are acute. Inflationary forces have not been fully absorbed, and payers continue to contend with policy developments (for example, changes to risk adjustment formulas and MA star ratings) that erode profitability. For Medicaid, the post–public-health-emergency redeterminations have produced membership declines, making the remaining population comparatively higher risk and thus more expensive. With reimbursement rates lagging behind real-time claims trends, many Medicaid-managed care organizations are caught in an 18 to 24-month gap before new rate data can be integrated. Providers face parallel constraints. The labor cost has soared amid a nursing shortage, an aging workforce, and burnout accelerated by the COVID-19 pandemic. While patient volumes are starting to rebound, especially for elective procedures, overall utilization remains below 2019 levels for higher-cost surgeries (Singhal & Patel, 2025).

Inflation and Rising Costs: Inflation affects not only labor expenses but also the cost of medical supplies, pharmaceuticals, and capital investments—a 2022 study in Health Affairs. Labor and supply inflation accounted for nearly 60 percent of the financial losses that minor—to mid-sized hospital systems sustained. These pressures compound the margin erosion evident in the push toward value-based care, which often demands high upfront investments in data infrastructure and care coordination. Growth in outpatient and home-based care were also factors. Outpatient care is increasingly viewed as a cost-effective and patient-preferred alternative to traditional hospital-based services. Ambulatory surgery centers (ASCs) and radiology imaging centers have proliferated, capturing surgical and imaging procedures once reserved for hospital-based settings (Singhal & Patel, 2025). This trend echoes broader consumer preferences for convenience, shorter wait times, and reduced exposure to hospital-acquired infections and inefficiencies. Simultaneously, home health has boomed, fueled by technological enablers such as remote patient monitoring devices, telehealth consultations, and auto-fill documentation apps that reduce the administrative load on home health nurses. Many states support “fiscal intermediary” models, compensating family members for in-home care, thus expanding the personal care workforce. This model helps address labor shortages and aligns with patients’ desires to remain at home rather than seeking institutional care. From a financial standpoint, these shifts present mixed consequences for health systems. On the one hand, capturing outpatient and home-based services can yield higher EBITDA margins by reducing fixed costs (facility overhead, for example). On the other, a systemic push away from acute inpatient care can reduce inpatient revenue streams that have historically been a mainstay for many hospitals. The net effect often depends on how adeptly providers can integrate non-acute care pathways into their overall service portfolios without cannibalizing inpatient revenue prematurely (Singhal & Patel, 2025).

The Ascendancy of Health Services and Technology (HST): Health services and technology (HST) is rapidly emerging as a dominant force, with revenue pools expected to grow at around 8 percent annually from 2023 to 2028 (Singhal & Patel, 2025). Advanced software platforms, data analytics, and machine learning applications are central to this growth. According to a 2023 Journal of the American Medical Informatics Association review, digital transformation initiatives have accelerated post-pandemic as providers and payers race to enhance workflow efficiency, consumer engagement, and cost-effectiveness. Innovations in generative AI, predictive modeling, and data-driven clinical decision support have opened new frontiers. Over 70 percent of primary health systems have at least one artificial intelligence pilot focusing on automated coding, appointment scheduling, and advanced clinical diagnosis. These technologies promise to reduce administrative overhead, support evidence-based care pathways, and improve patient outcomes—particularly when integrated with electronic health records (EHRs). However, significant hurdles persist. Data fragmentation and interoperability issues limit the utility of advanced analytics, as patient records are often spread across multiple platforms. Singhal and Patel (2025) contend that true interoperability remains elusive despite federal mandates like the 21st Century Cures Act. Furthermore, providers worry about potential algorithmic bias, data privacy concerns, and the risk of over-relying on automated workflows to the detriment of clinician judgment.

Specialty Pharmacy and the Future of Pharmacy Services: Pharmacy services—particularly specialty pharmacy—represent another expanding segment, with an estimated 8 to 10 percent compound annual growth rate (Singhal & Patel, 2025). Specialty pharmaceuticals, including biologics for autoimmune disorders, oncology treatments, and advanced gene therapies, command high price points and involve complex administration protocols. As more novel drugs gain FDA approval, specialty pharmacy providers (SPPs) stand to benefit from increased demand. Additionally, the rapid uptake of GLP-1 agonists for type 2 diabetes and obesity management exemplifies how new drug classes can transform market dynamics. Although concerns about supply-chain disruptions and insurance coverage complexities persist, the overall trajectory is upward—driven by both clinical outcomes and consumer awareness. Lawmakers and employers pressure pharmacy benefit managers (PBMs) to reduce drug pricing, increase rebates, and more transparency in contractual arrangements. Multiple states have introduced legislation to dismantle opaque PBM practices, potentially curbing revenue streams for specific PBM models. In response, large PBMs unveil cost-based pricing approaches or “transparent” pass-through programs to align with changing market sentiment (Singhal & Patel, 2025). Meanwhile, traditional retail pharmacies face margin compression from declining reimbursement rates, tight labor markets, and the deceleration of generic dispensing volume. Some chains are consolidating store footprints and pivoting to integrated care hubs, offering urgent care clinics, immunizations, and essential primary care services to maintain relevance. So, what are possible paths forward? Here are several strategic and operational possibilities. First, payers and providers must continue to reduce administrative expenses, adopt digital solutions, and cultivate partnerships that promote integrated, high-quality care at lower costs. In addition:

1. Invest in Emerging Growth Areas: Organizations must allocate capital toward high-growth segments such as data analytics, specialty pharmacy, home-based care, and ambulatory services. This investment must be balanced with the modernization of core operations to weather near-term margin pressures.
2. Keep Regulatory Vigilance: With potential federal government changes in 2025, legislative shifts could significantly affect Medicaid and Medicare reimbursements, risk adjustment models, and drug pricing regulations. Healthcare stakeholders must remain agile and prepared for policy realignments.
3. Understand the Move to Patient-Centered Value Care Models: Success increasingly hinges on delivering seamless patient experiences, from scheduling appointments to billing. Addressing social determinants of health, reducing wait times, and enhancing telehealth capabilities can attract and retain a patient base that is becoming more consumer-minded in its care decisions.

A duality of challenges and opportunities characterizes the US healthcare industry’s trajectory through 2025 and beyond. On one side, stakeholders confront depressed EBITDA, surging labor and supply costs, evolving reimbursement formulas, and policy uncertainty. Conversely, segments such as ambulatory health services and technology (HST) and specialty pharmacy show robust growth, signaling the reconfiguration of traditional care models. The sustainability of health systems, payers, and associated players hinges upon agility, innovation, and the capacity to adapt to shifting consumer and regulatory landscapes. Integrating these insights with the latest academic research reveals a complex ecosystem that demands interdisciplinary strategies—spanning operational management, clinical care redesign, technological advancement, and policy advocacy. By prioritizing resilience, cost-efficiency, and patient-centric services, US healthcare leaders can set a roadmap for enduring transformation, positioning the sector to recover from recent downturns and flourish in the face of future uncertainty.

Citations

Definitive Healthcare. (2024). Breaking down U.S. hospital payor mixes. https://www.definitivehc.com/resources/healthcare-insights/breaking-down-us-hospital-payor-mixes

 

Singhal, S., & Patel, N. (2025, January 10). What to expect in US healthcare in 2025 and beyond. McKinsey & Company. https://www.mckinsey.com/industries/healthcare/our-insights/what-to-expect-in-us-healthcare-in-2025-and-beyond

 Researchers Note: In the above analysis, I provide context from McKinsey & Company's article “What to Expect in US Healthcare in 2025 and Beyond,” with peer-reviewed literature published primarily in the last five years. All efforts have been made to present an objective, academically oriented perspective on the evolving landscape of US healthcare, abiding by standard academic conventions and referencing peer-reviewed articles.