New margin math: what vizient’s 2026 healthcare trends report means for health tech entrepreneurs
Table of Contents
Introduction: The New Operating Reality
Demographics Are Destiny
Site of Care Migration Creates Real Opportunities
Cost Structure Problems Signal Infrastructure Plays
M&A Slowdown Opens Partnership Windows
AI Hype Meets Healthcare Reality
What Actually Works Right Now
Strategic Implications for Founders
Conclusion: Building for the Reset
Abstract
Vizient and Kaufman Hall just dropped their 2026 trends report and it basically confirms what most health tech operators already suspected but provides the data to back it up. Hospital margins remain fragile with massive variance between top and bottom performers. The 65+ population will drive 20-34% growth across inpatient, ED and observation stays through 2035. Labor costs stabilized at a permanently higher baseline while drug and supply costs keep climbing faster than reimbursement. Traditional hospital M&A collapsed 53% year over year while ASC partnerships and joint ventures exploded. AI spending will hit $100 billion by 2030 but most pilots still fail to scale. For founders, this creates specific opportunities in administrative automation, site of care enablement, physician enterprise tools, specialty pharmacy infrastructure and partnership platforms that help systems orchestrate distributed care networks.
Introduction: The New Operating Reality
Healthcare just entered what Vizient calls new margin math and the phrase captures something real happening across the industry. The old playbook stopped working. Volume growth that saved hospitals in 2024 is moderating. Reimbursement keeps getting squeezed through site neutral payments and Medicare Advantage pressure. Meanwhile cost structures reset permanently higher after COVID and keep climbing through drug prices and workforce shortages that show no signs of reversing.
The report lands at an interesting moment. Hospital operating margins hit 2% in 2025, up from 1.3% the year before, but performance divergence tells the real story. Systems at the 75th percentile posted 14.3% margins while those at the 25th percentile lost money at -2.2%. That spread represents the gap between organizations that figured out the new operating model and those still running the old one. For founders, understanding which side of that divide your potential customers sit on matters more than almost anything else when building go-to-market strategy.
The report also confirms something most health tech operators learned the hard way over the past few years. Technology alone doesn’t solve healthcare’s problems. The winners combine technology with workflow redesign, changed incentives and new organizational models. Health systems poured money into point solutions that never scaled because they didn’t address the underlying structural issues. The market is now demanding integrated platforms that actually change how work gets done rather than just automating existing broken processes.
Demographics Are Destiny
The demographic shift happening right now will define healthcare utilization for the next decade and represents the most predictable tailwind in the entire industry. The 65+ population grows at 1.87% annually through 2035 while the working age population stays basically flat. That matters because people over 65 spend 2.5x more on healthcare than working age adults. Do the math and you get massive, sustained growth in hospital-based services driven almost entirely by aging.
Vizient forecasts the 65+ cohort will drive 20% growth in inpatient discharges, 27% growth in ED visits and 34% growth in observation stays between 2025 and 2035. These numbers aren’t evenly distributed. Some markets will see double digit inpatient growth while others contract. Florida, Arizona and the Carolinas boom. Parts of the Midwest and Northeast face declining volumes. But the aggregate trend is clear and creates several specific opportunities for builders.
First, capacity becomes the binding constraint. Health systems can’t just add beds because they don’t have the staff and capital markets remain expensive. They need technology that increases throughput and lets them do more with existing infrastructure. Bed management, patient flow, discharge coordination and post-acute placement all become critical bottlenecks. Companies solving these problems with actual workflow tools rather than just dashboards will find eager buyers.
Second, the shift toward Medicare and MA as payer mix changes the unit economics of care delivery. Commercial reimbursement subsidizes Medicare losses at most hospitals, but as the 65+ population grows, that cross-subsidy stops working. Systems need to fundamentally reduce their cost to serve Medicare patients rather than just shifting costs to commercial payers. This creates opportunities for tools that redesign care pathways specifically for chronic disease management, medication adherence and preventable acute events that drive expensive utilization.
Third, chronic disease complexity keeps increasing. The report notes 28% of inpatient discharges involve diabetes as a comorbidity and 33% involve cardiac disease. These patients need coordinated care across multiple specialties and settings. The old model of episodic, facility-based care doesn’t work. Technology that enables longitudinal care management, remote monitoring and proactive intervention becomes essential infrastructure rather than nice to have.
The timing matters here. The baby boomer wave hitting Medicare already started but peaks over the next 5-7 years. Health systems know this is coming and are making investment decisions now to prepare. Founders pitching solutions need to articulate how their product specifically addresses higher acuity, chronic disease complexity and capacity constraints driven by aging demographics. Generic efficiency plays won’t cut it.
Site of Care Migration Creates Real Opportunities
