McKinsey Warns of 'Gathering Storm' in US Healthcare

US healthcare is bracing itself, with federal deficit pressures and fresh legislation set to squeeze industry margins by 100 basis points through 2027, according to McKinsey's latest analysis.

The consultancy is calling it "gathering storm 2.0" – a follow-up to the pandemic-era turbulence that already pushed healthcare industry EBITDA down 200 basis points between 2019 and 2024. 

This time, the threat comes from shifting geopolitical priorities, particularly NATO's recent agreement to lift defence spending to 5% of GDP. 

For the US, that means finding an extra two percentage points of GDP whilst the federal deficit already sits at an uncomfortable 6.4%, well above the 3% that most economists consider manageable.

Legislation tightens the screws

Healthcare spending is firmly in the crosshairs. The One Big Beautiful Bill Act, which became law on 4 July 2025, will strip US$1tn from federal healthcare funding over the next decade.

The act is already reshaping the American medical landscape by tightening eligibility for Medicaid and Affordable Care Act marketplaces, whilst capping provider taxes in states that expanded under the ACA.

"Healthcare industry EBITDA as a proportion of national health expenditure was 200 basis points lower in 2024 compared with 2019," the report states, painting a picture of an industry still recovering from its last crisis.

More difficulty is likely to follow, too.

Site-neutral payment policies being considered in Washington would hit hospital outpatient departments particularly hard, stripping away the premium rates they've historically commanded over independent physician offices. 

Meanwhile expanded tariffs on imported medical supplies and pharmaceuticals are adding inflationary pressure just when the sector can least afford it.

Can AI offer a lifeline?

McKinsey's forecast isn't entirely bleak, though. 

The firm estimates that AI, automation and redesigned care models could unlock improvements worth 9% to 15% of national health expenditure. That's a substantially larger opportunity than the headwinds battering the industry.

For hospitals and health systems, the low-hanging fruit includes automating the administrative drudgery – prior authorisations, clinical documentation, coding – that currently consumes enormous staff time. 

Deploy today's technology effectively and providers could see gross revenue lifts of 11% to 17%, McKinsey says.

Insurers stand to gain even more. AI-enhanced care management could cut medical costs by 5% to 11%, whilst streamlining claims processing and customer service might deliver administrative savings of 13% to 25%. 

Pharmaceutical companies, meanwhile, are already seeing AI accelerate drug development, with early data suggesting clinical development costs could eventually fall 30% to 50%.

Moving care out of hospitals

Beyond AI, there's mounting evidence that reshaping where and how care gets delivered can substantially reduce costs. 

Specialty-led care models remain largely untapped territory – just 28% of nephrology patients and 20% of orthopaedics patients are currently covered by value-based arrangements.

The numbers from chronic kidney disease programmes are instructive. 

Multidisciplinary teams using predictive analytics managed to deliver care for US$47,000 per member annually between 2018 and 2023, compared with US$54,000 for less intensive approaches – a 14% saving with better outcomes.

Ambulatory surgery centres are booming as a result. McKinsey's research suggests roughly half of all hospital outpatient surgical cases could shift to these lower-cost settings. The Centres for Medicare & Medicaid Services appears to agree, proposing to add 547 procedures to the list of those covered in ambulatory centres for 2026.

Tenet Healthcare is betting heavily on the trend, adding nearly 70 new centres last year through its United Surgical Partners International arm, with another dozen planned for 2025.

Not-for-profit systems are following suit – Ascension's US$3.9bn acquisition of Amsurg will expand its footprint from 58 centres to more than 250.

Two agendas, one crisis

Healthcare executives will need to run two strategies simultaneously, McKinsey argues. The first involves the unglamorous work of cutting costs, refinancing debt and shedding underperforming assets. 

The second requires genuine imagination – embedding AI throughout operations, personalising patient engagement and scaling new care models.

"The ideas for improving healthcare are not new, nor is the fact that the total opportunity available far exceeds the impact of the headwinds," the authors write. 

"What is new today is the impetus for change – the economic hit is both severe and multiyear, with no signs of relief from external funding."

There's a silver lining to the labour shortage that's plagued healthcare since the pandemic. Technology deployment needn't mean mass redundancies when vacancies already outnumber applicants. 

Combined with strong underlying demand for services, that creates what McKinsey describes as an unprecedented window for transformation – assuming leaders can actually execute on it.