Can AI Rescue US Healthcare from a Gathering Storm?
As the US healthcare sector braces for what McKinsey dubs a "gathering storm 2.0," the industry is at a critical juncture.
Following a 200-basis point drop in EBITDA between 2019 and 2024, the sector now faces a projected 100-basis point margin squeeze by 2027. The culprits? A perfect storm of federal deficit pressures and sweeping new legislation.
The financial strain is exacerbated by changing geopolitical priorities.
A NATO agreement to increase defence spending to 5% of GDP puts additional pressure on the US federal budget, which is already grappling with a 6.4% deficit. This has placed healthcare spending squarely in the crosshairs.
Legislation tightens the screws
The 'One Big Beautiful Bill Act,' enacted in July 2025, is set to cut a staggering US$1tn from federal healthcare funding over the next decade.
This legislation is already reshaping the healthcare landscape by tightening eligibility for programs like Medicaid and the Affordable Care Act marketplaces.
Furthermore, proposed site-neutral payment policies threaten to slash the premium rates for hospital outpatient departments, while expanded tariffs on medical supplies add to inflationary woes.
Can AI offer a lifeline?
However, the McKinsey report offers a beacon of hope: AI.
McKinsey estimates that AI, automation and redesigned care models could unlock improvements valued at 9% to 15% of the national health expenditure – an opportunity that far outweighs the financial headwinds.
For healthcare providers, the most immediate benefits of AI lie in automating administrative tasks. Prior authorisations, clinical documentation and coding – historically manual and time-consuming processes – can be streamlined through AI, potentially boosting gross revenue by 11% to 17%.
Insurers, too, stand to reap substantial rewards. AI-powered care management has the potential to reduce medical costs by 5% to 11%, while automating claims processing and customer service could yield administrative savings of 13% to 25%.
In the pharmaceutical sector, AI is already accelerating drug development, with early data suggesting a potential 30% to 50% reduction in clinical development costs.
Moving care out of hospitals
Beyond AI, the report emphasises the importance of changing the location and delivery of care. Moving procedures from traditional hospital settings to lower-cost ambulatory surgery centres is a key trend.
McKinsey’s research indicates that nearly half of all hospital outpatient surgical cases could be transitioned to these centres.
This change is supported by the Centers for Medicare & Medicaid Services, which has proposed adding 547 procedures to the list of those covered in ambulatory centres for 2026.
Two agendas, one crisis
Healthcare leaders are urged to adopt a dual strategy.
The first is a pragmatic approach focused on cost-cutting, debt refinancing and divesting underperforming assets. T
he second, more transformative agenda, involves embedding AI across operations, personalising patient engagement and scaling innovative care models.
The current labour shortage in healthcare, a lingering effect of the pandemic, presents a unique opportunity.
With more vacancies than applicants, the deployment of AI and automation can be positioned as a solution to workforce challenges rather than a threat to jobs.
As the report concludes, the impetus for change has never been stronger.
The economic challenges are severe and long-term, with no external relief in sight.
The ideas for improvement are not new, but the urgency to implement them is.
For healthcare leaders, the time to execute on a transformative, AI-driven agenda is now.
